Introduction of the GRETA software, EU ETS and the ITL

1
Introduction of the GRETA software, EU ETS and
the ITL

• Workshop on CDM Trading Systems UK/EU China
  best practice exchange
• 19th November 2007
• Guohong Hotel, Muxidi, Beijing

2
Agenda

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

3
The Greta Software and Collaboration
4
Registry SystemsAnnex to Decisions 19/CP.7

• National Registrys
• 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

5
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

6
Our Licensees

• Bulgaria
• Cyprus
• Estonia
• Finland
• Hungary
• Iceland
• Ireland
• Italy
• Latvia

• Lithuania
• Malta
• Netherlands
• Norway
• Romania
• Slovenia
• Sweden
• UK

7
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

8
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

9
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

10
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

11
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

12
Future structure
13
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

14
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

15
Overview of EU ETS
16
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

17
EU 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

18
Relevant EU Decisions

• EU Emission Trading Directive
• Registry Regulation
• Linking Amendment (CDM and JI)
• Monitoring Mechanism (Kyoto Reporting and
  Registries)
• Monitoring Guidelines

19
How 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

20
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

21
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

22
Current EU ETS
23
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

24
Review 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

25
EU under Kyoto and ITL
26
EU Trading Directive
EU-25
27
Linking Directive
Annex I countries ratified the Kyoto protocol
EU-25
Non-annex I countries ratified Kyoto protocol
CDM
Countries that havent ratified the Kyoto protocol
EUA
ERU
CER
28
Future Kyoto communications
29
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

30
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