London monopolises 90% of EU carbon trade market
The UK's first auction for Phase III allowances of the EU Emissions Trading Scheme (EU ETS) took place in London yesterday, confirming its global reputation as a centre for carbon trading.
According to the Department of Energy and Climate Change (DEC C), London is now the hub for 90% of EU carbon trading and 80% of the £90bn global carbon trading market.
Minister of State Greg Barker said: "The UK is really leading the way in carbon auctioning, and today's sale reaffirms London's position as a global hub for the market.
"Not only does this help incentivise significant emission reductions and behaviour change amongst businesses, but it also generates millions of pounds in revenue each year for the Treasury, at little or no cost to the taxpayer. This is a win-win, which makes both environmental and economic sense".
The auction sold 6.5 million EU allowances (EUAs) with an Auction Clearing Price of €6.62 (£5.33), raising approximately £34m for the exchequer.
Each EUA represents an entitlement to emit one tonne of carbon dioxide equivalent gas.
During Phase II of the EU ETS, which will end this year, the UK held 30 successful competitive auctions, selling almost 123 million EUAs and raising approximately £1.3bn for the exchequer.
The UK will sell approximately this number of allowances every year during Phase III (2013-2020).
DECC claims that auctioning provides the most efficient way of distributing allowances to the market and reinforces the 'polluters pay' principle which encourages businesses to factor in the cost of carbon into the decision they make.
"The UK has been a leader in the development of carbon auctioning, being one of the first countries to auction in phase II and one of the Member States to sell the most allowances during that phase. This latest auction reaffirms London's position as the leader in this expanding market," said DECC.
However, concerns over dwindling carbon prices have been surfacing recently.
According to research carried out by environmental campaign group Sandbag, EU ETS has been "overwhelmed" with spare European allowances since 2009.
According to Sandbag's Rob Elsworth: "Offsets are contributing significantly to this oversupply and are now depressing prices so low that the EU ETS almost ceases to have a function. Europe can afford to be much more selective in the offsets it allows and must now increase its climate ambition."