Public Policy: Using Market-Based Approaches - Department for ...

consultants to Defra of £11 per tonne, although this estimation was ‘subject to
major uncertainties’.
In summary, experience suggests that the price paid by Defra in the initial
auction to obtain commitments to reduce emissions was significantly higher
than the underlying price of the allowances. A different auction design (such as
perhaps a closed-bid auction) might have allowed Defra to obtain a higher level
of reductions for the same cost or the same level of reductions at a lower cost.
However, when measured against the stated objective of achieving emissions
reductions in a cost-effective manner (in terms of costs incurred by the
participating organisations) the scheme appears, on the basis of the evidence of
its first few years, to have been highly successful. It has delivered emissions
reductions in a cost effective way, by providing incentives for emissions
reductions to take place in the industries and organisations with the lowest
abatement costs.
EXPERIENCE IN EMISSIONS TRADING
Section 11 – Emissions Trading
The second objective of the UK-ETS was to provide early experience in
emissions trading for UK organisations and in so doing to provide firms with an
advantage over their international competitors in future international trading
schemes.
Interviews with direct participants performed by NERA, NAO and LECG suggest
that this objective has been achieved. According to the NAO, all respondents in
their study agreed that the scheme had improved their understanding of the
benefits emissions trading could bring to them and, although some direct
participants did not use the market because they had achieved their emissions
target for that year, most of the participants said that their confidence in the use
of the market for emissions had improved.
In addition, of eleven participants that have sites that will fall within the scope of
the EU-ETS, most felt that they are better prepared to take part in this international
scheme than they would have been in the absence of the UK scheme.
The majority of brokers and verifiers interviewed by NERA considered that their
experience in the UK-ETS had left them well placed to provide services to
companies participating in the EU-ETS. However, the verifiers also noted that the
full benefits of the UK experience would only be realised if the EU-ETS integrity
standards are similar to those used in the UK-ETS. Some verifiers expressed
concerns that the lack of guidance on verification standards or requirements for
accreditation under the EU-ETS would lead to different standards of verification
across EU members, which can threaten the integrity of the programme, as well
as presenting obstacles to the trade of verification services. 177
177 NERA Economic Consulting (August 2004) Review of the First and Second Years of the UK Emissions Trading
Scheme, a report prepared for the UK Department for Environment, Food and Rural Affairs, Department for the
Environment, Food and Rural Affairs: London.
163