The first auction of the UK’s Emissions Trading Scheme (ETS) is to open in May 2021, with the auction calendar now published.
Intercontinental Exchange (ICE) - which was appointed to host the emissions auctions on behalf of the Department for Business, Energy and Industrial Strategy - plans to launch the first ICE UK Allowance (UKA) auction on Wednesday 19 May 2021, with auctions to then run every two weeks.
ICE UKA Futures contracts will also launch on 19 May 2021, with UKA Daily Futures following on 21 May.
ICE UKA Futures will trade on ICE Futures Europe and clear at ICE Clear Europe alongside ICE’s global environmental complex, including European Union Allowances (EUA), California Carbon Allowances (CCAs) and California Carbon Offsets (CCOs).
The UK ETS is replacing the EU Emissions Trading System following the UK leaving the European Union. It sets a cost for emissions over a designated cap, with large industries such as the power sector then having to pay for any emissions produced above this. Gradually the cost of these emissions will be increased, encouraging a reduction in emissions.
Details of the ETS were first outlined in June 2020, outlining how the cap will initially be set at 5% lower than the EU ETS cap in recognition of the country’s net zero emission ambitions. This was then reaffirmed in the energy white paper published at the end of 2020.
Energy minister Anne-Marie Trevelyan lauded the UK ETS as "even more ambitious than the EU system it replaces", with the publication of the auction schedule to give "businesses and operators clarity over this year’s supply of emissions allowances, enabling them to plan ahead, build back greener and better prepare for the transition to a low-carbon economy”.
More than 14 gigatonnes of carbon trades on ICE annually, the marketplace infrastructure, data services and technology solutions company said. ICE currently operates regulated marketplaces including the New York Stock Exchange for the listing, trading and clearing of a range of derivatives contracts and financial securities across major asset classes.
Gordon Bennett, managing director of utility markets at ICE, said the company is "excited about the addition of a new carbon market", adding there is "an enormous opportunity for cap and trade programs to take an even greater role in supporting the goals of the Paris Agreement, whether it is increasing their sector coverage or encouraging international linking".