COPENHAGEN (Reuters) - A European Commission plan to boost the carbon market is unfeasible and could bankrupt Polish companies, Poland's environment minister said on Thursday.
European Climate Commissioner Connie Hedegaard announced a review of the auctioning profile for the EU's Emissions Trading Scheme (ETS), which could limit the number of allowances available and help tackle a glut that has kicked the market to record lows.
EU ministers said there was widespread support for action, but Poland, which is heavily reliant on carbon-intensive coal is worried about the rising cost of offsetting emissions.
Asked what impact the Commission's proposal would have on Poland, the nation's Environment Minister Marcin Korolec told Reuters: "Bankruptcy of companies."
He said the EU executive should not be considering taking "administrative decisions" that would increase power prices in times of economic austerity.
"I don't think we have a mandate to artificially increase the price of electricity in times of crisis, in times of austerity measures, higher unemployment, etcetera," Korolec said.
"We simply do not have a mandate for manipulation in the market mechanisms," he said. "I think you can ask some countries which are in extremely difficult economic situations what their position on that is."
Korolec said the proposal looked unfeasible, although he said he was waiting for more details.
A lunchtime debate at the informal council on the ETS was inconclusive, he said.
"This discussion today was completely preliminary because we don't have papers, documents to study, we have just a vague description about the idea, and I am not sure it is legally feasible and economically viable."
The collapse of prices on Europe's ETS has led to concern among environmental campaigners and some in business that the market is nowhere near strong enough to encourage low carbon investment.
Korolec said intervention would amount to a departure from the original intention of the ETS.
"The main purpose of the ETS was to reduce CO2 emissions. There was no objective to send a price signal," he said.
"It is one thing to introduce a mechanism. We don't have a right to manipulate it," he said. "How can you guarantee that this first manipulation will work and actually produce results?"
Poland's objections alone would not be enough to block any legal proposal, but might not make Poland popular within the EU.
Asked whether Poland, the biggest recipient of EU aid, was worried about a backlash, Korolec said he was not.
"I am not running those budget negotiations, but I don't see why the two elements should be linked together... They are simply two different processes," he said.
Hedegaard told reporters that there was "total unanimity" among the ministers that the ETS remained the cornerstone of the EU's climate policy.
Korolec said that he understood "cornerstone" to mean something that does not amending.
"A cornerstone is a cornerstone," he said.
Poland has come up with a different plan for the carbon markets. It wants to be able to use some of the government-held Kyoto emission rights to meet its EU ETS obligations.
Others in the EU are keen to tackle the glut of Kyoto carbon permits, as well as the surplus supply on the ETS, to preserve the environmental integrity of the Kyoto process on tackling climate change.
(Additional reporting by Barbara Lewis in Horsens and Gabriela Baczynska in Warsaw, editing by William Hardy)