On Friday the EU Commission formally adopted the necessary regulation for introducing auctioning of EU Allowances (EUAs) within the European Trading Scheme (ETS).  Until now the vast majority of allowances have been provided free to the 12,000 or so large carbon emitting installations in the Community. For phase 3 of the ETS, covering the period 2013 – 2020, most allowances will need to be purchased at auction, making it more expensive to pollute and, hopefully, having a greater environmental impact.

The regulation allows for the creation of a central auctioning platform for the whole EU but, due to pressure from a couple of large members, also allows countries that wish to develop their own auctioning platform to do so, within specific guidelines.

The next steps in the process are to select and build the central auctioning platform and for those countries wishing to opt out to formally announce their intention of doing so. It had earlier been hoped to begin auctioning of phase 3 allowances in 2011. That will not now be possible due to the work still to be done.

The regulation and supporting documentation from the Commission can be found here.

The outage on Tuesday 2^nd November of London Stock Exchange’s new Millennium Exchange system at its Turquoise MTF (see FT articles here and here) has elements of the mystery thriller about it.  LSE’s announcement that “human error” which ”may have occurred in suspicious circumstances” was to blame has intrigued us all but there are other open questions to ponder.

The announcement talks of “necessary network upgrades to address ultra low latency and high flow inherent in the new platform” but it is not clear whether these upgrades are a direct result of the human error discovered on Tuesday or unrelated problems which have emerged in parallel.  What does seem clear, however, is that they are non-trivial, since LSE has not specified a date by which the upgrades will be completed.

If LSE is to re-establish confidence in the Millennium system and its market development programme it is vital that these mysteries are cleared up and a credible revised migration plan put in place rapidly.