* Verified emissions at 1.889 bln tonnes, down more than 2
* Carbon permit supply glut grows to 900 mln
* EU to propose structural reform options by summer recess
(Adds more detail, comments on ETS reform)
By Barbara Lewis and Nina Chestney
BRUSSELS/LONDON, May 15 Carbon emissions in the
European Union's Emissions Trading System (ETS) fell by more
than 2 percent in 2011 but an oversupply of permits key to
driving greener energy use
worsened, European Commission data showed on Tuesday.
The glut in pollution permits has grown to 900 million, data
showed, which could put further pressure on low carbon prices.
"ETS emissions decreased by more than 2 percent in 2011,
despite an expanding (economic) recovery. This good result shows
that the ETS is delivering cost-effective emissions reductions,"
the Commission said in a statement.
"It also emphasises why the ETS remains the engine to drive
low carbon growth in Europe."
However, some carbon analysts said the decline in emissions
was due to lower power generation due to weak industrial output
towards the latter end of the year and a slowing economy.
The EU's emissions trading scheme (EU ETS) limits the carbon
dioxide emissions of the 27-nation bloc's factories and power
plants and covers nearly half of EU emissions.
Preliminary data in April showed a fall of 2.4 percent in
carbon emissions in 2011, suggesting the bloc is on track to
achieve its 2020 climate target to cut emissions 20 percent
below 1990 levels.
Carbon prices were unmoved by the data but by 1414
GMT had edged down 1.35 percent at 6.59 euros a tonne.
"The EU data was not much different to what came out in
April so there is minimal reaction on the market," an emissions
Less than 1 percent of installations taking part in the EU
carbon scheme did not surrender allowances covering all of their
2011 emissions by a April 30 deadline, the Commission said.
Only 2 percent of installations failed to submit verified
emissions for 2011.
Tuesday's data also points to a growing oversupply of carbon
units, thanks to a record use of international carbon credits in
the EU carbon scheme at a time of stagnant EU economic growth
and flagging industrial output.
"Last year's record use of international credits has
increased the buffer of unused allowances by some 450 million.
This means more than 900 million more allowances have been put
into circulation than were surrendered for compliance use over
the period 2008-2011," the Commission said.
Carbon permits are handed out to installations in each
reporting year. Each company must surrender enough allowances to
cover its emissions by the end of April in the following year,
otherwise fines can be imposed.
Polluting plants in the ETS can also use a certain number of
U.N.-backed carbon credits for compliance, most of which are
certified emission reductions (CERS) - credits issued to
qualifying emissions-reduction projects in developing countries.
Cumulatively, the EU ETS has been responsible for the use of
456 million CERs, of which over half came from projects located
in China and 17 percent from India.
European carbon prices have shed around 60 percent of their
value over the past year due to market worries about the growing
supply glut and weak demand.
The benchmark carbon price hit a low of 5.99 euros a tonne
in April, well below the level needed to spur green investment.
To prop up low prices, the Commission said last month it
would review its auctioning rules for the ETS, a proposal which
would have to be approved by member states.
This could involve changing the timing of auctions, or
delaying them, to limit supply in the short term, a process
referred to as "backloading".
Before the Commission breaks for summer in August, it will
outline more ways to boost prices and reform the ETS, with a
legal decision expected by the end of the year, EU Climate
Commissioner Connie Hedegaard told reporters on Tuesday in
"It's not that one should expect backloading in itself will
do the whole trick and then suddenly the price will be very much
bigger," Hedegaard said.
"Options to a more structural addressing of the problem of
the too-low price in the system...that's a more complicated
Such structural reform options would be part of an annual
ETS review. They could include discussion on a lower emissions
cut target and/or setting aside carbon permits from the third
trading phase of the scheme which runs from 2013 to 2020.
EU officials, member states and lawmakers have been debating
if and how to intervene in the market for some time, including a
one-off move to withhold a certain number of carbon permits for
the 2013-2020 period. Many in the market are expecting a
decision on that this year or next.
($1 = 0.7789 euros)
(Reporting by Barbara Lewis, Nina Chestney and Jeff Coelho in
London; editing by Rex Merrifield and Jason Neely)