EU energy chief favors carbon at 12-18 eur/t

LONDON Wed May 16, 2012 1:20pm EDT

LONDON (Reuters) - European carbon prices should be at least twice their current value of just over 6 euros ($7.66) a metric ton (1.1023 tons) in order spur investment in cleaner technology, EU Energy Commissioner Guenther Oettinger said on Wednesday.

Europe's recession and fiscal crisis has crippled prices in the European Union's Emissions Trading System, meaning carbon prices are providing little incentive for utilities and other heavy polluters to move to greener production of electricity, steel or cement.

"A (carbon) price of 6 to 8 euros is not a price signal for anything, not for investors and not for consumers," Guenther told Reuters' Global Energy and Environment Summit on a conference call from Brussels.

"At the moment, looking at the investment crisis, 20 (euros) and more is not really a cost level for our industry to be more competitive," he said.

He added that a price range of 12-18 euros a metric ton was his personal choice for the moment.

The European Commission has been reluctant to name a level for carbon prices, although the EU executive is reviewing how to tackle a massive supply of pollution permits that have built up since the 2007/2008 recession.

The glut in pollution permits has grown to 900 million, the Commission said on Tuesday.

Coupled with weak demand, the oversupply has spurred about a 60 percent fall in European carbon prices over the past year.

To try to reduce the surplus, the Commission said last month it was bringing forward a review of the carbon market and reassessing its auctioning rules to control when new allowances become available.

Before the Commission breaks for summer in August, it plans to publish its review. Any legal proposals would then have to be debated, with a view to deciding a course of action before the end of the year, EU Climate Commissioner Connie Hedegaard told reporters on Tuesday.

Speaking at the Reuters' Global Energy and Environment Summit, she would not specify a preferred price level for the carbon market.

Oettinger added that the ETS needed to be made more flexible, so it could respond to unexpected changes in economic growth.

"Our ETS scheme was born before the financial crisis, before Lehman Brothers and before our public budget problems," he said.

To try to improve the economics of low-carbon energy, he said predictable subsidies were useful.

Asked whether Britain, for instance, could be seeking aid for its nuclear plants, he said such power sources should in principle rely on market forces, but was willing to listen to the debate.

"I'm open. If member states want to debate, we have to be ready," he said.

($1 = 0.7828 euros)

(Additional reporting by Barbara Lewis in Brussels and Karolin Schapps; editing by Jason Neely)