The bidding process must be completed in October 2001 in order for the first targets to be in place for the calendar year 2002. This gives a period of only 6 months from the time firms are clear about what the incentives bidding mechanism is to the time the bidding is over. Clarification of the incentive payments is also needed, including the total budget that firms will be bidding for, whether the 2001 bidders will be able to bid in any future auctions, and whether the incentives payments will be taxed. Commission confirmation that the option selected meets State Aid requirements will also be needed. 5.2.2 Inform bidders Encouraging sufficient numbers of firms to bid is the most important issue that must be addressed in preparing for this auction.
Entry is a key concern.
If there are too few players, the incentives money could go to just a few companies, or to companies in one sector. This could significantly damage the credibility of the scheme. In addition, with few bidders the potential for anti-competitive bidding is higher. A firm that expects to have stable or increasing emissions will find an absolute reduction from a base period difficult. Firms will also face resource issues in deciding whether to bid and preparing their strategy for bidding.