April 23, 2014

Regulations on Emissions Auctions in Phase Three to Come into Force

On October 23, 2012, the Community Emissions Trading Scheme (Allocation of Allowances for Payment) Regulations 2012 (SI 2012/2661) (ETS Regulations) were made.  The ETS Regulations deal with the administration of auctions under Phase Three of the EU Emissions Trading Scheme (EU ETS) and will come into force in the UK on November 14, 2012.

Operation of the EU ETS will change significantly in Phase Three. The most significant changes include:

  • A reduction in free European Union Allowances (EUAs);
  • A move of the decision making process on allocations of EUAs from Member States to the European Commission (EC);
  • The appointment of ICE Futures Europe (ICE) as the preferred platform to conduct the auctions scheme; and
  • The imposing of the requirement for certain firms to apply to the Financial Services Authority (FSA) for a variation of an existing authorisation, or requirement to seek authorisation to perform an activity regulated by the Markets in Financial Instruments Directive (MiFID).

During Phase Three, fewer free EUAs will be allocated.  Any additional EUAs that are required by market participants will have to be purchased through auctions.  Over the course of Phase Three, an estimated 50% of EUAs and 15% of European Union Aviation Allowances (EUAAs) will be auctioned, compared to 10% of EUAs in Phase Two

The auction process was previously operated by the UK Debt Management Office (DMO). In late 2011, the UK commenced an EU-wide open procurement process.  In April 2012, ICE was selected as the preferred platform to conduct auctions on behalf of the Department of Energy and Climate Change (DECC) during Phase Three. The last auction of Phase Two conducted by the DMO took place on October 25, 2012. 

Certain market participants will now have to apply to the FSA for a variation of permission to participate in the auction process, as ‘bidding in emissions auctions’ is now a regulated activity pursuant to MiFID.  Undertaking a regulated activity requires FSA authorisation. Market participants who will not seek authorisation from the FSA, or a variation of an existing permission, will have to use an authorised broker or an ICE member if they wish to participate in the auctions.

On July 19, 2012, the FSA published a policy statement covering the bidding process for EUAs under Phase Three. The policy statement sets out the Emissions Allowance Auction Bidders Instrument, that implements the measures regulating to participation in the auction process, which came into force on July 27, 2012. On the same day, the FSA started accepting applications for variations of existing authorisations.

Phase Three auctions are scheduled to begin in November 2012, subject to completion of the EC’s approval process of the ICE auction platform, which is expected to happen in early November 2012.

The following are the provisional forthcoming auction dates: November 21, 2012 and  December 5, 2012 for EUAs and November 26, 2012 and December 10, 2012 for EUAAs.

Those wishing to participate in the auction process in the UK must, inter alia, be members of ICE, or must conduct their trading activities through an intermediary registered with ICE.

About the Author


Simone Goligorsky is an associate in the law firm of McDermott Will & Emery UK LLP, based in its London office.  She is a member of the Energy & Commodities Advisory practice where her practice focuses on advising banks, financial institutions, corporate institutions, hedge funds, energy companies and utility groups on a variety of matters, including cross-border regulatory and compliance matters.

During her training contract, Simone completed a six month secondment to the Firm’s Paris office, and also completed a secondment to the commodities legal desk of a...

+44 20 7577 6985

Boost: AJAX core statistics

Legal Disclaimer

You are responsible for reading, understanding and agreeing to the National Law Review's (NLR’s) and the National Law Forum LLC's  Terms of Use and Privacy Policy before using the National Law Review website. The National Law Review is a free to use, no-log in database of legal and business articles. The content and links on are intended for general information purposes only. Any legal analysis, legislative updates or other content and links should not be construed as legal or professional advice or a substitute for such advice. No attorney-client or confidential relationship is formed by the transmission of information between you and the National Law Review website or any of the law firms, attorneys or other professionals or organizations who include content on the National Law Review website. If you require legal or professional advice, kindly contact an attorney or other suitable professional advisor.  

Some states have laws and ethical rules regarding solicitation and advertisement practices by attorneys and/or other professionals. The National Law Review is not a law firm nor is  intended to be  a referral service for attorneys and/or other professionals. The NLR does not wish, nor does it intend, to solicit the business of anyone or to refer anyone to an attorney or other professional.  NLR does not answer legal questions nor will we refer you to an attorney or other professional if you request such information from us. 

Under certain state laws the following statements may be required on this website and we have included them in order to be in full compliance with these rules. The choice of a lawyer or other professional is an important decision and should not be based solely upon advertisements. Attorney Advertising Notice: Prior results do not guarantee a similar outcome. Statement in compliance with Texas Rules of Professional Conduct. Unless otherwise noted, attorneys are not certified by the Texas Board of Legal Specialization, nor can NLR attest to the accuracy of any notation of Legal Specialization or other Professional Credentials.

The National Law Review - National Law Forum LLC 4700 Gilbert Ave. Suite 47 #230 Western Springs, IL 60558  Telephone  (708) 357-3317 If you would ike to contact us via email please click here.