Finance Bill Tracking Service 2007 | Budget 2007 | Budget Notes

BN65 Auctions of emission allowances under the EU Emissions Trading Scheme

Who is likely to be affected?

1   The European Union Emissions Trading Scheme (EU ETS) is a scheme for trading allowances of carbon dioxide (being the main greenhouse gas) from permitted installations. It covers approximately half of the UK and EU's carbon dioxide emissions, including emissions from electricity production.

General description of the measure

2   In August 2006, the UK published its National Allocation Plan for allowances under Phase 2 of EU ETS. This set out the Government's intention to auction 7% of allowances as well as allowances from closures and surplus allowances from the New Entrants Reserve (NER). The remaining allowances (the majority) are to be allocated for free.

3   Legislation will be introduced in Finance Bill 2007 to put in place the legislative basis for auctioning (the term "auctioning" should be taken to mean any disposal for a price, including sale).

Operative date

4   Phase 2 of EU ETS begins on 1 January 2008.

Current law and proposed revisions

5   There is currently no legislation to provide for auctioning EU ETS allowances in Phase 2 of the Scheme

Further advice

6   If you have any questions about this change, please contact Katherine Mansfield on 020 7270 5377 (email: Information about Budget measures is available on the HM Revenue & Customs website at