Greenhouse emissions permit trading and auctions

Frontier is assisting the UK's National Audit Office in its assessment of the UK Government's emissions trading scheme (ETS). Through a reverse auction last year, the UK Government provided incentive money in exchange for which companies committed themselves to reductions in greenhouse gases (GHG's). A market for trading the resulting emissions permits was established at the same time. The NAO is carrying out a "value for money" study of the scheme and will report to Parliament next year.Frontier, in association with Byrne O'Cleirigh (a firm of environmental/engineering consultants with whom Frontier has collaborated successfully before) was awarded a contract to advise the NAO on the economics of the auction design, on the "additionality" of any GHG emissions reductions achieved by the scheme and on the operation of the permit market. Frontier's work will inform, and will probably be published in, the NAO's public report.GHG permit trading is an area of increasing interest for all major businesses. The EU has established a mandatory trading scheme, to come into operation in 2005. The UK's scheme (which will continue when the EU scheme is introduced) is voluntary. Frontier published a bulletin on the economics of voluntary schemes in 2002: "Paying for hot air?"