Commission seeks to speed up EU carbon market remedy

BRUSSELS Fri Oct 5, 2012 1:33pm EDT

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BRUSSELS (Reuters) - Talks are under way to hasten a deal to prop up the European Union's ailing carbon trading scheme, a senior European Commission official said on Friday.

Traders of allowances on the EU Emissions Trading Scheme (ETS) have been waiting for months for details and decisions on Commission plans to hold back some of the massive surplus of carbon allowances that has depressed the market.

To reinforce the plan's legality, the Commission has also announced a legislative amendment, on which the parliamentary environment committee is scheduled to vote on February 19 next year, far later than advocates of taking action foresaw.

"We are not entirely thrilled with the timetable the European Parliament has proposed," Jos Delbeke, director general of the Commission's climate department, told a conference in Brussels on Friday.

"We are continuing to discuss with the European Parliament and we hope to bring the timetable forward."

He said he could not be more specific, while parliamentary officials said a vote by the year-end was technically possible.

Delbeke insisted the "Emissions Trading Scheme is here to stay" and the Commission was not flinching in the face of international opposition to the inclusion in the ETS of all airlines flying in and out of Europe.

Requiring all flights to pay for emissions via the ETS has triggered threats of a trade war and draft blocking law in the U.S. Congress, which would shelter U.S. airlines that breached the EU legislation.

To try to resolve the row, all sides are looking to U.N. body the International Civil Aviation Organization (ICAO) to agree an alternative global way to tackle airline emissions.

Asked whether the EU had a plan in the event ICAO - as many suspect - cannot deliver a compromise, Delbeke said: "The contingency plan is that the ETS is in place."

"We say we are open to modifying our system in the light of an agreement in ICAO. If there is no agreement, our system continues," he told reporters on Friday.

ETS PHASE THREE LOOMS

The aim of the Commission is to get agreement on withholding allowances in time for action at the start of the next phase of the ETS (2013-2020), when many more permits will be auctioned rather than handed out for free and new sectors join it.

While the Commission is urging parliament on, those keen for action say it too has to move more quickly.

It outlined proposals in July, but has yet to publish the detail on them, which is expected later this year.

An internal memorandum seen by Reuters confirmed comment from an EU source a carbon market report, together with outline plans for long-term reforms would be published next month.

The memorandum said the intended finalisation date was November 14.

It did not specify, however, when the Commission's legislative proposal on short-term plans to withhold allowances would emerge.

"Certain carbon-intensive industries claim that any measure could be economically damaging," the document said. "An impact assessment will be prepared before any concrete proposal is tabled."

An impact assessment, which examines the consequences for all parties affected, can take months, but the Commission stated earlier this year the assessment would be "tailor-made" and "proportionate" and could be carried out quickly.

The market is in urgent need of support if it is to provide an incentive to green energy, analysts have said.

On Friday it traded below eight euros a tonne, up from a record low of 5.99 hit in April.

Among those who are happy with a low carbon price is Poland, which is heavily dependent on carbon-intensive coal and has argued intervention in the carbon market is inappropriate in times of economic weakness.

The Commission document seen by Reuters said there was "wide support" from the majority of EU member states "for action in the short and long term, with notable opposition expected from Poland."

(Editing by James Jukwey)

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