GRETAGREENHOUSE GAS REGISTRY FOR EMISSIONS TRADING ARRANGEMENTS

Introduction of the GRETA software, EU ETS and the ITL

Workshop on CDM Trading Systems – UK/EU – China best

practice exchange19th November 2007

Guohong Hotel, Muxidi, Beijing

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Agenda The Greta Software and Collaboration Overview of the EU ETS Overview of the ITL and Kyoto

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The Greta Software and Collaboration

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Registry SystemsAnnex to Decisions 19/CP.7

National Registry’s Hold Assigned

Amount Enable Parties to

issue, acquire and transfer all units

and to retire or cancel units or carry an surplus over to further periods

Transaction Log Required to check

application of rules to all processes and units

Issuance, External Transfer, Cancellation, Retirement and Carry Over

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Background UK ETS Registry used as template for

developing EU / UN compliant GRETA Registry software

Used previous developers from the UK Registry Why do Defra license a Software?

Policy objective to facilitate emissions trading throughout EU

Economies of scale Benefits of knowledge sharing Potentially more influence at EU & UN meetings

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Our Licensees Bulgaria Cyprus Estonia Finland Hungary Iceland Ireland Italy Latvia

Lithuania Malta Netherlands Norway Romania Slovenia Sweden UK

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Key Functionality Compliant with EC

Regulation Account Management Retirement and

Surrender Internal and External

transfers Cancellation,

Replacement and Carry over

Reports and compliance tables

Compliant with UNFCCC requirements

UN functionality developed and in the final step of testing

ITL testing complete CITL testing not

complete due to technical issues between ITL and CILT

ITL go live for Greta registries to be decided

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Service and Fees Licence fee - One off payment

Provision of licensed Software Source code for public software (customisation) Installation services and helpdesk Registry Administrator Training User manuals and other Documentation

Service fee - Annual payment Help desk services Central Management Services Collaboration Forum and Wiki

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GRETA Collaboration Transparency over development and management Licensees members of Steering Committee

Meets quarterly or more frequently as required Provides forum for interpretation, sharing technical

expertise Supportive network with online Forum and Wiki

Working groups for Legal/Requirement Technical Management

Decisions taken in conjunction with Licensees to ensure transparency and control

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Software Enhancements Designed and agreed process by GRETA

licensees Incident Review Board Future enhancements voted on by licensees

and approved by Steering Committee Driven by demand Goal to have no more than 2 releases per

year Fair system – all licensees have a voice

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GRETA International Ltd The intention is that GRETA International Ltd. will take

over responsibility for the Registry software in 2008 Company Limited by Guarantee Jointly owned by the Members (all Licensees invited)

Retention of a strong GRETA group for future collaboration Opportunity for members to have a say over the choice of IT

supplier Opportunity for members to have further influence over future

arrangements Currently ongoing discussion with licensees on

structure and operational rules Initially no substantive change to licence and service

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Future structure

ITsupplier

DefraIPR

Licensees

CEO and staff

GRETA Int. Ltd.

Members

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Vision and objectives To secure a well working Emissions Trading Registry

and meeting changing external and internal demands and needs by maintaining and improving the collaboration around a Greta registry software

Being in compliance with all current EC and UN regulations To work actively to adapt to future needs Using the Greta collective as a “one voice” power in policy

and commercial situations Using the Greta budget effectively and sensibly to provide

shared services to all licensees Provide a good IT service at a reasonable price though

contracted supplier/s

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Advantages of GRETA COLLABORATION

Sharing Legal / Policy Expertise Representation in important forum (EU and UNFCCC) Support from other GRETA Member States

Joint Development Central Software testing Shared costs for communal development Centralised system knowledge Centralised project management Relative Ease of Upgrade

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Overview of EU ETS

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EU ETS The EU ETS is one of the policies to

tackle climate change Why Emissions Trading?

Way of reducing emissions at least cost to industry – offers industry more flexibility than ‘traditional’ regulation

Offers incentives for industry to go beyond what is expected of them

Overall environmental impact the same

GRETAEU and the Kyoto Protocol EU as whole is a Party to the Kyoto Protocol and

agreed to 8% reductions In 1998 the then EU 15 agreed a burden sharing

agreement All 25 MS have ratified Kyoto, 23 have emission

targets as Cyprus and Malta are non-Annex 1 Parties Ranging from a 21% reduction for Germany, 12.5%

reduction in the UK and a 15% increase for Spain Most new Member States have set a target of 8%

below base level, with the exception of Hungary and Poland – 6% below

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Relevant EU Decisions EU Emission Trading Directive Registry Regulation Linking Amendment (CDM and JI) Monitoring Mechanism (Kyoto

Reporting and Registries) Monitoring Guidelines

GRETAHow does the EU ETS work? “Cap and trade” system with Carbon

dioxide as the only Green House Gas First phase runs until December 31st 2007 2nd phase in line with 1st Kyoto Protocol

commitment period Mandatory for certain activities as energy

activities, ferrous metals, mineral industry and pulp and paper

Allowances freely tradable throughout EU One allowance = one tonne of CO2e

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Monitoring and reporting Calendar year reporting of emissions 28th February each year - each participant

receives allocation of allowances (year X) End of March final report of Emissions (X-1) By end of April following year- each

participant must surrender number of allowances equal to annual reportable emissions (X-1) these allowances then cancelled

Operator needs sufficient allowances in account to cover emissions

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Options for Participants Annual emissions exactly equal to the

number of allowances given each year Decrease emissions and sell surplus Let emissions remain high and buy extra

allowances needed to cover the gap Penalty per tonne of excess emissions

€40 (2005-2007) €100 (2008-2012)

Still have to bring account into compliance

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Current EU ETS

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EU ETS Market Price volatility Prior to 2005 driven by political

dimension First Phase Market to understand and

come into line with fundamentals Uncertainty regarding CDM credits, EU

connection to ITL and EU Phase II

GRETAReview of EU ETS Directive Commission Review to improve function and

design post 2012 Priority areas include

expansion to other sectors and gases the most appropriate process for setting the cap; harmonised allocation methodology (including CHP); linking to other schemes at national and regional level; robust compliance; streamlining – small emitters and harmonised definitions

Report from the EU Commission, surveys and papers

GRETAGREENHOUSE GAS REGISTRY FOR EMISSIONS TRADING ARRANGEMENTS

EU under Kyoto and ITL

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EU Trading Directive

EU-25Trading

sectorNon trading sector

UK

Trading sectorNon

trading sector

Sweden

EUA

GRETA

EUA ERU

EU-25

Annex I countries ratified the Kyoto protocol

Non-annex I countries ratified Kyoto protocol

Countries that haven’t ratified the Kyoto protocol

CER

CDM

JI

JI

Linking Directive

GRETAFuture Kyoto communications

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Connection to the ITL In order to be able to connect to the ITL,

each Party must pass Initialisation process All of the Greta registries have passed the

test - handful other countries remains Japan the first party to connect to ITL on

the 14 of November Other countries will follow, with Switzerland

and New Zealand scheduled to start real-time operations in November or December

CDM registry is connected as well

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EU ETS Go-Live Go Live is a point in time when the all the

EU ETS registries switch from the CITL to the ITL

Data migration - CITL to the ITL - as well as work at each of the 25 national registries

This is a major activity involving many stakeholders (EU MS, UNFCCC and EU COM)

Planned go-live not yet decided Planning is essential and Greta is currently

working close with UNFCCC and EU COM