KPMG and Macquarie Bank Limited have joined forces to create a carbon trading simulation to assist businesses prepare for the CPRS.
Jennifer Westacott, head of KPMG’s climate change, sustainability and water practice, said participating in the simulation would reduce the risk of making costly errors when it came to the real CPRS auctions.
“With the CPRS set to go live in less than two years and a potential first permit auction in early 2010, business can’t afford to be sitting on its hands,” Westacott said.
The simulation would help identify the gaps in strategy and the areas that require greater focus.
The auction simulation will be run by KPMG professionals who have experience in conducting similar programs in the UK in the lead up to the introduction of the EU Emission Trading Scheme.
Macquarie Bank has designed and built the online auction platform for the simulation in line with the Government’s proposed auction design.
Participants will receive feedback on their performance against the ‘market’ as a whole.
An auction simulation conducted in the UK revealed many traps for new traders:
· a poor understanding of emissions levels by participants.
· participants not purchasing enough permits to cover emissions.
· participants paying too much for permits – beyond the marginal cost of emissions
· buying permits when they had meant to sell them.
The simulation will run over a five month period and be run in stages beginning with the submission of emissions data, cap setting, three auctions and a debrief process. Participants are anonymous and all participating companies act as themselves using their own strategies and make decisions based on their own strategies and make decisions based on their real emissions data.