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ICE, EEX Compete to Supply 10 Billion Euro Carbon Platforms

ICE Futures Europe, the biggest exchange for greenhouse-gas trading, and European Energy Exchange AG in Germany will compete to provide platforms selling carbon allowances to airlines and other emitters.

The European Commission, the Brussels-based regulator of the world’s biggest carbon market by traded volume, said Jan. 11 it plans to open a tender for a temporary auction platform by this month, keeping the region on track to start early sales of allowances for the 2013 phase of the system in the second half of this year.

Germany, the U.K. and Poland are also setting up systems as the European Union seeks to sell most allowances starting next year instead of giving them away for free, as it has since 2005. The exchanges may sell more than half of the 2.3 billion metric tons of allowances next year, valued at about 10 billion euros ($13 billion) at benchmark prices.

“We intend to bid for the U.K. one,” and will probably bid for the temporary EU platform, ICE Futures Europe President David Peniket said Feb. 3 in an interview in London. ICE has applied with Britain’s Financial Services Authority for status as a recognized auction platform, he said. “We are going through the process now.” ICE would also review tender documents from Germany and Poland before making a decision on those opportunities, he said.

The exchange is a unit of IntercontinentalExchange Inc. in Atlanta, the second-largest U.S. futures market.

‘Bidding For All’

“EEX will submit bids for all tender processes,” Manuel Moeller, a spokesman for the Leipzig, Germany exchange, said today in an e-mailed response to questions. EEX already handles auctions for Germany, Lithuania and the Netherlands.

Green Exchange LLC, with offices in London and New York, will probably bid for all platform contracts, Sara Stahl, managing director of global marketing in London, said today by phone. “We look forward to seeing final details of the tenders.”

BlueNext SA in Paris also will bid because such big opportunities are rare, Chief Executive Officer Francois-Xavier Saint Macary said today by phone. “We feel we have a good chance.”

EU allowances for December rose 2.4 percent today to close at 8.70 euros a ton on ICE. The contract reached a record low of 6.38 euros on Jan. 4, as the region’s sovereign-debt crisis help curb economic production and exacerbated an oversupply of permits through this year and beyond.

The EU cap-and-trade program expanded this year to include the aviation industry, which is due to buy a part of its allocation at auctions.

Draft Documents

While 24 of the EU’s 27 nations agreed to have a common auctioning platform, Germany, the U.K. and Poland opted to develop national systems. The temporary common platform will remain in place until a permanent one becomes operational.

The contractor will be required to submit to the commission within two weeks from the entry into force of the agreement a draft auction calendar for 2012 and 2013 and will have to start conducting auctions within a month, according to draft tender specifications published on the EU website.

As a default, the chosen platform should carry out two auctions of general allowances per week and one auction of aviation permits per month, the document shows. For auctions in 2012, the commission may require more frequent sales, according to the draft.

In 2013, the EU will auction about 60 percent of all CO2 permits and that proportion will increase in later years. Airlines will get 85 percent of their allocation for free and will have to buy 15 percent at auctions in the first year.

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