Public procurement notice: Prior Information Notice Without Call For Competition
Published: 2016-02-06
Buyer: Department of Energy and Climate Change (DECC)
Country: UK
Region: UNITED KINGDOM
Contract type: Services
CPV classification: 48470000 | 66133000 | 66150000 | 66171000 | 66172000
Estimated value:  GBP

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 carbon dioxide 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.
Commission Regulation (EU) No 1031/2010 of 12.11.2010 on the timing, administration and other aspects of auctioning of greenhouse gas emission allowances (the ‘Auctioning Regulation’) sets out the regulatory framework for auctioning general allowances (EUAs) for phase III of the EU ETS (2013-2020) and for aviation (EUAAs).
Pursuant to Article 30(1) of the Regulation, the UK has opted to retain its own national auction platform to auction its share of allowances upon expiry of the contract with the national auction platform current supplier in November 2017.
a) auctioning of allowances for the UK pursuant to Article 31(1) (which in turn refers to the obligations in article 27) of the Auctioning Regulation;
The contract will cover auctions of the UK's share of both EUAs and EUAAs and will initially be expected to run for three years, with an option to extend for a further two years, subject to satisfactory performance of the supplier and Ministerial consent. This is in line with the current provisions in the Auctioning Regulation.
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.