Public procurement notice: Corrigendum
Published: 2016-04-20
Buyer: Department of Energy and Climate Change (DECC)
Country: UK
Region: UNITED KINGDOM
Contract type: Services
CPV classification: 48470000 | 66133000 | 66150000 | 66171000 | 66172000

Technical requirements: EU Emissions Trading System: Procurement of an opt out auctioning platform and related services by the UK Government.
(i) inform the market of a prospective contract opportunity in connection with the procurement of an auction platform and related services by the UK government for the auctioning of greenhouse gas emissions allowances from late 2017 as part of continued implementation of Phase III of the EU Emissions Trading System (EU ETS); and
(ii) request information that may be relevant to the procurement strategy that may be adopted by the contracting authority.
The EU ETS is at the heart of UK Government policy to tackle climate change. The system covers sectors responsible for around half of the UK's CO2 emissions. The EU ETS works on a ‘cap and trade’ basis. A cap is set on EU Member State's emissions, which declines over time. Allowances can be allocated for free or auctioned by Member States.
The Auctioning Regulation also sets out the detailed requirements for the auctioning of aviation and phase III general allowances. The preferred supplier will be expected to follow the provisions set out in that Regulation. Potential bidders should note however that a review of the Auctioning Regulation is due to take place during 2016 and that there could be changes to the requirements set out in the Regulation. Whilst the tender document when published (anticipated to be in the week commencing the 4.4.2016) will reflect any changes to the extent that they are known at the time, the supplier will need to accommodate any changes to the Auctioning Regulation.
The auction platform must also be a regulated market pursuant to EU financial markets legislation and is governed also by such legislation. The supplier will also need to accommodate any forthcoming changes to the financial regulations such as the Market Abuse Directive and the Market in Financial Instruments Directive.
Auctioning of EU ETS allowances is now a well-established practice. The UK currently auctions approximately 10 % of the EUA allowances available for auction. In 2016, this will amount to approximately 84 million EUA allowances (approximately 3 500 000 allowances per auction). In addition, the UK will hold one aviation auction of 921 000 EUAA allowances. The number of allowances to be auctioned is determined annually with the European Commission and the supplier will be engaged in publishing the annual auction calendar.
From 2019, the Market Stability Reserve (MSR), a mechanism designed to manage the supply of EUA allowances entering the market through variable auctioning volumes, will become operational. New arrangements will need to be agreed by Member States and the Commission on how to manage this process and the supplier will need to adhere to these new rules. This will also have an impact on the number of allowances available for auctioning.
If there is agreement from UK Ministers to extend the contract for a further two years, this would extend the contract into Phase IV of the EU ETS and the supplier may need to accommodate additional rule changes to meet the requirements of the revised EU ETS Directive.
Following the expiration of regulation (EU) No 421/2014 of the European Parliament and of the Council of 16.4.2014 amending Directive 2003/87/EC of the European Parliament and of the Council establishing a scheme for greenhouse gas emission allowance trading within the Community, the Contractor may need to assist in the development and implementation of a mechanism for auctioning of aviation allowances in view of the implementation by 2020 of an international agreement applying a single global market-based measure to international aviation emissions.
At this stage, we are interested to hear from parties who may wish to be considered for any future contract to provide auctioning and related services for an auction platform. This will allow us to include those parties in the circulation of further information and seek their input in order to inform the process for any future procurement of the services. As set out above, interested parties should note that eligibility for running these auctions is tightly defined within EU Regulation 1031/2010.
Pending any potential changes to the Auctioning Regulation, potential bidders should take note of the following provisions in the current Regulation:
The service of auctioning of allowances pursuant to Article 27 of the Auctioning Regulation will be paid through fees paid by the persons admitted to bid in the auctions and successful bidders in the auctions, pursuant to Articles 51 and 52 of the Auctioning Regulation.
— pursuant to Article 27(2) ‘[…] the auction platform shall be connected to at least 1 clearing system or settlement system’,
— pursuant to Article 35(1) ‘Auctions shall only be conducted on an auction platform authorised as a regulated market whose operator organises a market in allowances or allowance derivatives’. In addition, Articles 35, 36, 43, 55 and 56 of the Auctioning Regulation provide further requirements on authorisation, notification, supervision and enforcement of the auctioning activity.