Commissioner Connie Hedegaard

Directorate General for Climate Action

European Commission

Single Process for Auctioning

29 March 2010

Dear Mrs Hedegaard,

The Commission is currently finalizing a proposal for an implementing regulation for the
auctioning of EU emission allowances for phase III of the European Union’s Emissions
Trading Scheme (ETS).

IETA strongly prefers a single, EU-wide auction process as this would limit the risk of
competitive distortions by establishing a level-playing field. It would also reduce complexity
and transaction costs, and increase transparency making it particularly attractive to SMEs.

An EU–wide tendering process should be set up by the Commission to award the right to
carry out the auction to one or more entities. IETA supports the Commission’s approach of
making use of existing infrastructure, meaning particularly existing exchanges, which have
established solid relations with auction participants, are already covered by appropriate
regulation and legislation, and have adequate capacity to carry out Know Your Customer
checks.

If setting up this tendered process overruns, the Commission should coordinate a temporary
process whereby Member States use existing routes to markets in advance of the main
commencement date. In this case, carbon auctions should be harmonised in terms of their
auction methodology and design, rules, credit evaluation, payment terms and auction
participation criteria across Member States. The schedules of Member State auctions should
be coordinated, and it is of critical importance that individual auction information is
communicated throughout the EU.

The principles of transparency and liquidity must be upheld. A binding schedule should be
part of the auctioning regulation for implementing a centrally conducted auctioning process.

We would be happy to discuss further with your staff how these principles could best be
implemented.

Yours sincerely,

Henry Derwent, IETA President

IETA – Making markets work for the environment

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