* EU ETS not sending out strong enough price signal
* ETS has to be flexible, withstand economic shocks
(Adds quotes, background)
By Barbara Lewis
COPENHAGEN, April 16 The European Commission is
likely to prepare a legal proposal on reforming its emissions
trading scheme (EU ETS) before the end of the year, EU Energy
Commissioner Guenther Oettinger said on Monday.
Speaking at a European Wind Energy Association conference in
Copenhagen, Oettinger said the 27-nation bloc's trading scheme
was failing to set a strong enough price to encourage investment
in low carbon energy.
"At the moment, there is no price signal. We have to prepare
a proposal. There is an expectation from the European
Parliament," Oettinger said. "We hope to come to a conclusion
before the end of the year."
Prices for carbon permits under the EU ETS are trading at
around 6.90 euros ($9.03) a tonne. They hit a new record low of
5.99 euros on April 4, well below the level needed to encourage
The trading scheme caps emissions from industrial plants and
utilities, forcing them to buy carbon permits to cover their
By investing in low-carbon technologies, such plants could
reduce the number of permits they need to buy.
However, the financial crisis and recession have reduced
industrial output and therefore demand for permits, with
over-issuance of the permits exacerbating excess supply.
The European Parliament has called on the commission to draw
up a plan to withdraw a certain number of permits from the
scheme, but there is still division among member states.
An informal meeting of environment ministers hosted by the
Danish EU presidency on Thursday is expected to hold a
lunch-time debate on the issue.
Oettinger did not specify what the commission would propose
but said the the trading scheme needed to be more immune to
shocks, referring to the fact that caps on emissions were set
too high and the system's design failed to properly account for
the effects of recession.
"The question is, 'Can we develop our ETS so it will be
flexible to react to economic developments?'," Oettinger said.
One way of introducing tighter caps would be for the EU to
target a 30 percent cut in carbon dioxide emissions by 2020
instead of the current aim of 20 percent.
Poland, which as a heavy user of carbon-intensive coal
fiercely opposes anything that could drive up the price of
carbon permits, in March vetoed an attempt by the Danish
presidency to get agreement on more ambitious milestones for
Responsibility for reform of the ETS falls under the EU
Commission's climate division, rather than energy, although it
has ramifications for energy policy.
"The commission is looking at different options on the
table," Isaac Valero-Ladron, EU spokesman for climate action,
($1 = 0.7644 euros)
(Writing by Nina Chestney; editing by James Jukwey)