The Community Emissions Trading Scheme (Allocation of Allowances for Payment) Regulations 2008

EXPLANATORY NOTE

(This note is not part of the Regulations)

These Regulations make provision for the Treasury to impose charges by providing for Community tradeable emissions allowances to be allocated in return for payment. The Regulations set out provision as to who will conduct allocations, the payment for and transfer of emissions allowances, the consequences of late or non-payment and of breaches of the Regulations or of the Treasury’s Scheme, the consequences of a transfer of excess allowances, the appointment of an independent observer, the opportunity to obtain a review of decisions made under the Regulations and provisions relating to the giving of notice.

Part 2 of the Regulations sets out the provisions relating to allocation of allowances in return for payment by auction.

Regulation 3 provides that the Treasury may conduct auctions, or may appoint another person to conduct auctions.

Regulation 4 provides that the person conducting an auction may collect a deposit and may use it to satisfy payment for the allowances.

Regulation 5 provides that an account holder must pay for allowances in full by the settlement date. Payment must be made to a bank account nominated by the person conducting the auction.

Regulation 6 provides that once full payment has been received and the Environment Agency has received such information from the person conducting the auction as is necessary to effect transfer, the Environment Agency must transfer allowances to the nominated holding account of an account holder.

Regulation 7 provides that if, following a review under regulation 13, the decision of the Treasury is to allocate allowances to an account holder, the account holder must pay the auction clearing price for those allowances. The account holder must pay for those allowances in full by the date specified by the Treasury. Upon late or non-payment by the account holder, the Treasury may charge interest on the late payment, or decide not to transfer the allowances to the account holder.

Regulation 8 provides that, upon late or non-payment by an account holder, the person conducting the auction may charge interest on the late payment, or decide not to provide to the Environment Agency such information as is necessary to effect the transfer of allowances to the account holder.

Regulation 9 requires the account holder to notify the Environment Agency of any excess allowances that are transferred. If a transfer of excess allowances comes to the notice of the Environment Agency and the nominated holding account is administered by the Environment Agency, then the Environment Agency must transfer the excess allowances from that account to the Party holding account. If the account holder has dealt in the excess allowances, or in an interest in them, the person conducting the auction may require the account holder to pay the auction clearing price for those allowances.

Part 3 of the Regulations sets out provision relating to allocation of allowances in return for payment where the allocation method is not an auction.

Regulation 10 provides that the Treasury may conduct allocations other than auctions, or may appoint another person to conduct allocations other than auctions.

Part 4 of the Regulations sets out general provisions relating to all types of allocation of allowances in return for payment.

Regulation 11 permits the Treasury to publish details of any breaches of the Regulations or of the Treasury’s Scheme.

Regulation 12 sets out provision relating to the appointment of an independent observer to oversee allocations and includes a requirement for the independent observer to provide a report to the Treasury on the conduct of allocations.

Regulation 13 provides for the review of any decision of the Treasury under the Regulations or a decision of the person conducting an auction or other allocation. Provision is made permitting the Treasury to appoint an independent person to make a report before the review decision is made.

Regulation 14 sets out provision relating to notices.

Regulation 15 provides that any money received under or by virtue of the Regulations is to be paid into the Consolidated Fund.

These Regulations provide the framework for allocating Community tradeable emissions allowances in return for payment, and as such no administrative impact in the private sector is foreseen. The administrative impact of allocations in return for payment will depend on the detailed design of the auction or other allocation method. The Government consulted on auction design and other allocation methods at the end of 2007 and that consultation was accompanied by a full Impact Assessment, which can be found at www.defra.gov.uk. Treasury will publish a Scheme, which will cover the conduct and terms of allocation, along with the detailed design of the auctions or other sales methods, and the requirements in order to participate. An updated impact assessment will be published along with the Scheme.