Legal plan for EU carbon market on agenda for July 25

Tue Jul 17, 2012 2:27pm EDT

Related Topics

* Fuller detail, ETS market review expected later in year

* Sources say still time to get a deal before 2013

* Amendment aims to ensure legislative certainty

By Barbara Lewis and Francesco Guarascio

BRUSSELS, July 17 (Reuters) - The European Commission will on July 25 debate a legal framework to revise the timetable for auctioning carbon allowances to bolster prices on the EU's weakened Emissions Trading Scheme, a document seen by Reuters showed.

Detail on the number of allowances that could be withheld and a carbon market review is now not expected until after the Commission returns from its summer recess in September, three separate EU sources said on Tuesday, speaking on condition of anonymity.

Carbon allowances have collapsed to record lows under the burden of surplus supply following recession.

The Commission had said it would announce before its August summer break plans to hold back some allowances beginning in 2013, a process referred to as backloading.

An internal calendar seen by Reuters says the Commission, the EU's executive arm, will debate an amendment to the EU ETS law "to clarify provisions on the timing of auctions" on July 25.

The amendment will make clear that "the Commission is able to modify (the) auctioning time profile," it adds.

The document does not mention figures on how many allowances could be withheld or a review of the carbon market, originally expected next year, but which Climate Commissioner Connie Hedegaard has said she was bringing forward.

Commission spokesman Isaac Valero-Ladron said he could not confirm the date when the Commission would publish its proposals to support the carbon market, but he said the intention was still to make an announcement before August.

"The Commission reaffirms its plans to come up with proposals this month," he said.

Hedegaard announced in April the Commission's plan to delay the auction of some allowances at the start of the next phase of the ETS in 2013.

She said then the idea was to deliver a quick fix, avoiding the full-scale EU process and difficult political argument linked with deeper reforms, such as a permanent removal of carbon allowances.

STILL TIME

The sources said even if details did not emerge until after the Commission resumes business in September, there was time to get agreement before the ETS enters its next phase, when new industries join and far fewer allowances are doled out for free.

Sanjeev Kumar, senior associate at non-governmental organisation E3G, said tackling an amendment first was "the right thing to do".

EU sources said in June draft proposals looked at the possibility of delaying the sale of anywhere between 400 million and 1.2 billion carbon allowances.

Kumar said even 1.2 billion allowances would not be enough, favouring instead "anything in the region of 2 billion".

Prices on the EU ETS hit a record low of 5.99 euros per tonne in April. They have recovered to above 7 euros, helped by the anticipation of action to support the market.

The EU parliament and some sections of industry have called for urgent intervention, arguing the ETS is too weak to provide an incentive for investment in low carbon energy.

Others say an increase in the carbon price would be a burden in difficult financial times.

Equally, while many governments are keen to provide support for renewable energy, Poland, which is reliant on carbon-intensive coal, has been at the forefront of opposition to anything that would drive up the price of ETS allowances.

"The 'backloading' proposal is probably buying time until some economic improvement in 2-3 years, which will push up demand and production," Graham Van't Hoff, executive vice president of CO2 and alternative energies at Royal Dutch Shell .

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