EU fails to find an auction monitor for carbon ETS allowance sales

Commission pushes ahead but receives no proposals for the position of auction monitor.

The European Commission has given the European Energy Exchange (EEX) the green light to begin auctioning carbon emission allowances for the EU’s emissions trading scheme (ETS) even though a legally required monitor for the process has not been appointed.

The Commission’s Directorate General, Environment and Climate Action last week [Sept 11] said that until a permanent platform was found for phase three of the ETS, the EEX would auction at least 250m allowances.

The Leipzig-based exchange, which is owned by Deutsche Börse, is to start the process at the end of October. Phase three of the ETS is slated to end in 2020.

Under EU law, the process requires an auction monitor, who, according to the Commission’s Directorate-General for Climate Action, oversees the timing, administration and other aspects of the allowance auction. Yet since the Directorate began searching for the monitor last May, it has received no requests to participate.

Despite this, the EEX is pressing ahead with the auction – in effect overseeing itself.
Asked about the anomaly, the Commission told Responsible Investor: “Where reasons of force majeure prevent the auction monitor from performing its tasks inrespect of a given auction, in full or in part, the auction platform concerned may decide to conduct that auction provided that it takes appropriate measures to ensure adequate monitoring of the auction itself.” EEX declined to comment.

“The auction platform may monitor the auction itself”

This self-monitoring on the part of EEX may continue until July 2013 at the latest. “By then we are confident that a monitor will be found,” said a spokeswoman for the EU executive.

The Commission had said in a tender document that it was looking for a senior expert with experience monitoring the auctioning of, or trading in, financial instruments, energy products or allowances.

Beyond Germany, the UK and Poland have been given permission by the Commission to select their own transitional auction platform. The UK intends to appoint ICE Futures Europe, while Poland has yet to announce its option.