The United Kingdom’s Experience and Perspective

1. The United Kingdom’s Experience and Perspective The Way Forward on Registries Martin Hession International Climate Policy DEFRA UK

2. The Way Forward on Registries • Pt 1 Timetable and Milestones for UKPt 2 UK Experience and Lessons

3. The Way Forward - A Tight Timetable ? 2003 2004 2005 2006 2007 2008 ITL and Data Exchange Specs Dec 2003 Working ITL By Nov 2004 Transfers of AAU, ERU, and CERs Submission of initial report to establish the AA Prior to 1st January 2007 ERT Review 16 months Jan 2008 July 2006 National Registry Development and Testing Dec 2003- July 2006 Possibility to Rectify Problems Feb 2003

4. Issues: CDM,Upgrade, Links, and Units ? Kyoto ITL 2004? Kyoto compliant National Registry – 16 months after submission of initial report Assigned Amount Units EU compliant registry July 2004-Jan 2005? EU ETS Allowances Euro- ITL 2004? UK ETS registry Jan 2001-April 2002+ UK ETS Allowances UK ETS Credits CDM Registry 2003-4? CERS

5. Milestones - Administrative Checklist ☑ UK ETS Registry – Working from Apr 2002 ☑ COP 8 Technical Standards - Nov 2002 ☐ EU Technical Specification EU ITL Sept 2003 ☐ UN Technical Spec Data and ITL Dec 2003? ☐ UN - CDM Registry Jan 2004? ☐ EU ETS Registry Regulation Spring 2004 ☐ Test Version EU ITL (From) July 2004? ☐ Test Version UNFCCC ITL (From) Nov 2004? ☐ EU ETS Trading and CDM Link Jan 2005 ☐ Para 6 Report (latest) July 2006 • Eligibility to Trade (latest) Dec 2007

6. UK Starting Point – the ETS Registry • Designed for the UK ETS • Generic issues: • Formats,Records/Serial No’s -Marrakech • Availability, Efficiency, Security • Reliability, Resilience and Adaptability. • UK specific issues: • Gateway mechanism for the absolute and relative sectors

7. UK Development Logistics • Time to ETR.1 • Specification - consultants - 6 months • Development – in house - 9 months • Money • Hardware – secure server only - 100k • Development - 600k • Further ETR.2 ETR.3 • Development Since ETR1 • Upgrade to EU and UN Requirements ?

8. UK Experience - 10 months since April 2002 • UK ETS Registry a registry and not a trading platform • Around 1500 registrations, and some 3000 Accounts (Trading and Compliance) Some thousands of transactions to date of which there have been 300-350 trades • Many trade off-line and reconcile registry accounts later • Volume 28mt of which 1.5 mt CO2e has been traded • Peak in activity in run up to compliance (now) • Small Businesses particularly need user support

9. UK Outline Strategy on Registries • Many Decisions still to be made ☑ Work Co-operatively with others on development of international registry systems - options ☑ Continue to share expertise • Consider selling/joint venture our registry • Consider offering registry services to others • Plan for and resource EU Compliant Registry for start of EU ETS Trading • Plan for and Resource UN Compliant Registry for international trading in time for submission of paragraph 6 report

10. Conclusions • Tight timetable for EU and International Trading • Secretariat lead on ITL needs proper resources • Facilitating EU linking and Fast Track CDM needs some careful thought • Need to plan and dedicate significant resources national now (EU and outside) • Complex coordination questions need to be resolved with EU

11. The Way Forward : A Complicated Future EU Emissions Trading Scheme 1 Jan 2005 International Emissions Trading and Joint Implementation EU ITL End 2004 NR NR NR UK Emissions Trading Scheme April 2002-2007 NR ITL 2004/5 Clean Development Mechanism UK NR NR CDM-R 2004/5

12. Initial Design Questions: Answers • Flexibility - Future Inter-Compatibility of Systems • XML Language • Balance Security and Transparency • Internet, SSL, Encryption, Secure/Non Secure Elements • Availability, Reliability and Resilience, Efficiency • Internet, 24/7, Backup, Secure/Non-Secure Elements • Flexibility and Upgrade • Modular design • Usability System and User Support • Simplicity Proved important in Practice

13. Decisions on Technical Standards COP 8 • For Data Exchange between Registry Systems • Includes National Registries, the ITL and the CDM Registry • Applies to Registries operation • Three Levels of Detail for Registries • General Design Requirements – the Decision • Detailed Functional Specification • Detailed technical Specification • Timetable – Experts and Intersessionals • Committee of NR Administrators for continuing cooperation

14. COP 8 Decision Clarifies • Architecture : the hub principle • General Principles for Implementation • Security Measures • Data Consistency • Availability • Minimum message sequences and content • Message to ensure ability of buyer to avoid buyer liability – EU had to insist on • Flag of Invalid Units • internal procedures to prevent problems including internal registry checks

15. COP 8 Leaves for Technical Specification • Specific Common Language Formats • Specific Encryption Techniques • Precisely when a Transaction is Final - Finality • When a message in a message sequence –times out and queuing

16. COP 8 Principles for Standards – “promote” Para 5. Principles for elaboration and implementation facilitate the mechanisms and the accounting of assigned amounts allow the independent design of individual registry systems consistent with the technical standards promoteefficiency in transaction procedures; promote the maximum resilience and availability of registry systems;

17. COP 8 Principles for Standards – “ensure” Para 5. Principles for elaboration and implementation ensure the accuracy of data and of the exchange of data; ensure the security of data storage and data exchange; ensure the transparency and auditability of transaction processes; ensure the transparency of non-confidential information;

18. COP 8 Security Measures for Registries Registries and Data Exchange measures to ensure (a) Confidentiality: data to be encrypted so as to be unreadable by any other party (b) Authentication: registries to be uniquely and securely identified and identifiable. (c)Non-repudiation: a single full and final record of all actions so that actions cannot be disputed or repudiated; (d) Integrity: data exchanged shall not be modifiable by any other party (e) Auditability: a full audit trail for each message and message sequence to document all processes, actions, messages and when they occurred.

19. COP 8 -System Architecture • ITL to act as the central reference database for authentication information 20(b) • ITL to maintain a publicly accessible list of units, and transaction records, that are subject to un resolved discrepancy • Daily reconciliation's to establish whether there are inconsistencies • Registry systems: to keep scheduled downtime of shall to a minimum. • Registry systems: To have systems in place to isolate problems and minimize the interruption of functions.

20. COP 8 - Preventative Measures • Registry system shall implement measures, including automated internal checks, to • Prevent inconsistencies and, • Halt transactions until the inconsistencies have been resolved • Prevent discrepancies from occurring. • Ensure data records and transactions are accurate; • Ensure that it has robust systems for safeguarding data and recovering data and registry service in the event of a disaster; • data are protected against unauthorized manipulation • it is protected against exposure to security compromises