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CRC Consultation Workshop – Northern Ireland

CRC Consultation Workshop – Northern Ireland. Market Design & Performance League Table. 26 March 2009 Rob Davis Policy Advisor, CRC. Agenda. Cap and Trade Scheme Distribution of allowances: Fixed price introductory phase Auction

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CRC Consultation Workshop – Northern Ireland

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  1. CRC Consultation Workshop – Northern Ireland Market Design & Performance League Table 26 March 2009 Rob Davis Policy Advisor, CRC

  2. Agenda • Cap and Trade Scheme • Distribution of allowances: • Fixed price introductory phase • Auction • The Safety Valve, the Secondary Market and Banking & Borrowing • Revenue recycling • Performance League Table and metrics

  3. Introductory Phase • Three year period • No market cap set by Government • Unlimited purchase during month-long sale • No sale in first year - 1st sale in April 2011 to cover 2010 and 2011 emissions • Allowance price of £12/tCO2 • Learning by doing • Establish accurate emissions cap

  4. Sales/Revenue Recycling Timing First year of scheme: 2010/11 Second year of scheme: 2011/12 Third year of scheme: 2012/13 Jul 2012 Report on and surrender allowances for 2011/12 Jul 2011 Report and surrender allowances for 2010/11 April 2010 April 2011 April 2012 Oct 2012 Oct 2011 etc Spot Trading • 2nd Sale takes place • Participants pay for forecast 2012/13 allowances • 2012/13 allowances released to participants • Government holds 1 year of scheme revenue • 2nd Recycling payments made • Revenue from April 2012 sale recycled back from Government to participants • Government holds £0 of scheme revenue • 1st Sale takes place • Participants pay for both actual 2010/11 and forecast 2011/12 allowances • 2010/11 and 2011/12 allowances released to participants • Government holds 2 years of scheme revenue • 1st Recycling payments made • All revenue from April 2011 sale (i.e. 2 years’ worth of revenue) recycled back from Government to participants • Government holds £0 of CRC revenue

  5. Capped Phases • First capped phase and auction in 2013 • Fixed quantity of allowances (the absolute market cap) & variable price • Auction Type: Sealed bid, uniform price • Auction restrictions • Limited to scheme participants • Limit on % of total allowances to any one participant

  6. Market Features • The safety valve • Buy-only link to EU-ETS • Administered by EA • Banking and borrowing • Unlimited banking of allowances between scheme phases (except between intro and capped phases) • No borrowing of allowances from future years • The secondary market • No restrictions

  7. Revenue Recycling • Auction revenue recycled back to participants • Payment proportional to 2010 CRC emissions • Bonus or penalty based on position in league table For example: Total CRC emissions in 2010: 100 tCO2 Organisation X emissions in 2010: 1 tCO2 = Organisation X receives 1% of revenue raised in sales or auctions This is then adjusted by the bonus or penalty

  8. Revenue Recycling • Six month gap between sale and revenue recycling • 2011 – Double recycling • Bonus or penalty payment based on position in league table Year 1 maximum bonus or penalty of +/-10% Year 2 maximum bonus or penalty of +/-20% Year 5 maximum bonus or penalty of +/-50%

  9. League Table • Published performance league table at the end of each year • 3 metrics: • Compulsory absolute metric (60%) • Change in annual emissions relative to preceding 5 year average • Voluntary early action metric (20%) • Extent of voluntary AMR • Extent of Carbon Trust Standard • Voluntary growth metric (20%) • Change in emissions per unit turnover/revenue expenditure • Important trade-off between perceived ‘fairness’ and simplicity • Inclusion of 3 tick box questions

  10. Absolute Metric • Absolute emissions reductions – compulsory • Change in annual emissions relative to average annual emissions over the preceding 5 years (or since start of the scheme): • Recognises ongoing absolute emissions reductions • In line with overall objective of scheme • Measure of change – not absolute

  11. Early Action Metric • Combination of measures: • Extent of non-mandatory automatic metering: • Metric measures proportion of emissions not covered by mandatory meters, that are covered by automatic metering • One off calculation – same score in 2010, 2011 & 2012 • Extent of emissions covered by EEAS or CTS • Early Action Metric to be ended after introductory phase

  12. Growth Metric • To provide credit for organisations that decouple economic and carbon growth • To provide context to performance in absolute metric • Based on: • Change in annual emissions per unit turnover (rev. exp) relative to average emissions per unit turnover (rev. exp) over the preceding 5 years • Measure of change – not absolute

  13. Formulating league table • Participants awarded points score for each metric • Weighted combined score determines position in Performance League Table • Weighting of metrics • 60% Abs: 20% Early Action: 20% Growth

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