Temporary fix to ETS a "no brainer": EU climate boss

DUBLIN Tue Oct 30, 2012 12:20pm EDT

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DUBLIN (Reuters) - A temporary fix to the EU's Emissions Trading Scheme (ETS) is "a no brainer", EU climate chief Connie Hedegaard said on Tuesday, and reiterated her plea for political agreement on the issue before the year-end.

The Commission is expected in November to publish plans to bolster the ETS, which earlier this year saw allowances collapse to a record low, far below the levels needed to spur green energy, chiefly because of a surplus of allowances generated by recession.

On Tuesday allowances were trading around 8 euros a metric ton, up from the low of 5.99 euros hit in April.

The short-term proposal, referred to as backloading, would remove temporarily a certain number of permits from the next phase of the ETS beginning 2013.

"To stop over-flooding a market that is already over-flooded, that should be a no-brainer really and I hope that most member states can support that," Hedegaard told Reuters during a visit to Dublin, which takes over the EU presidency in January.

"I think that many countries understand that this is needed and why we have to stop continuing over-flooding."

The Commission is hoping to get agreement on the backloading proposal through a fast-track EU process.

So far, the most outspoken opponent to reform of the ETS has been Poland, which is heavily dependent on carbon-intensive coal and says intervention could have negative economic consequences.

Aside from a short-term proposal, the Commission is expected to lay out plans for more far-reaching reforms, such as the permanent removal of carbon allowances, which would take longer under EU process.

Reiterating the need for political clarity before the end of the year, Hedegaard said some detail could be finalized later.

"That does not mean that you have to have all things set in stone when it comes to the legal issues, but you need to know where are the countries, are they willing to backload yes or no? And that should be do-able within the next couple of months."

CRUMBLING CORNERSTONE

The ETS is meant to be the cornerstone of the EU's policy on combating climate change, but allowances are so cheap that it costs less to burn coal for power than natural gas, which only emits around half as much carbon as coal.

Another problem is the international row stirred by the EU decision to make all flights using EU airspace buy allowances on the ETS to cover their emissions.

The law has led to threats of a trade war and legislation in the U.S. Congress that would shelter U.S. airlines from compliance.

To resolve the row, the European Commission is looking to the U.N.'s International Civil Aviation Organization (ICAO) to come up with a global scheme for curbing airline emissions and provide a justification for modifying the EU law.

ICAO is expected on November 9 to debate the issue, but cannot take a final decision until its triennial general assembly. The next one will be in November 2013.

"We think that there is a will on the part of the leadership of ICAO and we have people up there now seeing how much progress can be achieved this November paving the way for substantial decisions to be taken at next year's ICAO general assembly," Hedegaard said.

"That is what we are aiming at, that next year at the general assembly, we should really have substantial progress and we will test whether countries are really willing to engage on that."

(Writing by Barbara Lewis; editing by Keiron Henderson)

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