Major firms urge removal 1.4 bln EU carbon permits
* Carbon market too weak to drive low-carbon energy
* Commission proposal soon to be made public
* Commission ponders delaying up to 1.2 bln permits-sources
BRUSSELS, June 27 (Reuters) - Major companies including Royal Dutch Shell, Statoil and commodities giant Bunge have written to top EU officials calling for the urgent withdrawal of 1.4 billion carbon permits to support the market and green investment.
A huge surplus of permits because of recession has depressed their price, making it cheaper to pollute and cutting the incentive to invest in low-carbon technology.
"A fully functioning EU ETS (Emissions Trading Scheme)" is the main policy tool to achieve the EU's long-term goal of cutting greenhouse gas emissions by 80 to 95 percent by the middle of the century, compared with 1990 levels, said the letter, signed by a total of 13 firms and associations and dated June 26.
"We also believe that auction revenues from the ETS need to play an important role in funding low-carbon innovation and the transition to a green economy."
European Commission draft proposals currently being discussed envisage a delay in the sale of up to 1.2 billion carbon allowances, EU sources said earlier this month.
The delay would be part of a rescheduling of allowance auctioning in the next phase of the EU ETS from 2013 to 2020.
On Thursday, the permits traded at around 8 euros, above an April low of 5.99, but still far off the 20 euros ($24.94) or more analysts have said is needed to spur low-carbon investment.
To bolster the market sufficiently, the letter sent to all 27 EU commissioners, including Commission President Jose Manuel Barroso, said the Commission's plan should reflect a proposal by the European Parliament late last year to withdraw 1.4 billion allowances.
Signatories to the June 26 letter include Acciona, Alstom, Dong Energy, E.ON, Enel , as well as Shell, Statoil and Bunge.
Major oil companies need higher carbon prices to justify investment in carbon capture technology. Natural gas producers have also said the carbon price is so low it has made burning carbon-intensive coal more economic than lower-carbon gas.
The European Parliament's proposal was not binding but served as a political signal to the Commission, which has said it will publish its plans before the August summer recess.
Apart from the Commission's plans to reduce the surplus of allowances by adjusting the auctioning timetable, the letter said the Commission needed to "come forward with structural, long-term predictable and market-based measures to strengthen the EU ETS".
More sweeping changes would take much longer under the EU process than a relatively simple delay to the auction timetable.
Members of the European Parliament also wrote to the Commission president and Climate Commissioner Connie Hedegaard on June 18.
British Liberal Democrat Chris Davies, Dutch Green Bas Eickhout and British Labour politician Linda McAvan called for "an immediate, effective and significant intervention" and the removal of at least 1.4 billion allowances.
Prior to official publication, the Commission will not comment on the details of its proposal.
Commission spokesman Isaac Valero-Ladron on Wednesday reiterated the Commission planned to publish its auction review over the coming weeks as part of a wider aspiration to spur a green economy.
"The Commission will present before the summer break a review of when allowances are auctioned in the third phase of the EU ETS. We will also present long-term structural options to strengthen the carbon market," he said.
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