* EU officials propose plan for ETS auctions from 2013
* Draft foresees two platforms, early auctioning from 2011
* Plan says to cancel auctions if prices "abnormally low"
(Adds reaction, details)
By Pete Harrison and Michael Szabo
BRUSSELS/LONDON, March 3 The European Commission
is considering auctioning emissions permits from 2011 over
centralised platforms and might cancel auctions if carbon prices
are "abnormally low", two leaked documents seen by Reuters on
Officials in the EU's executive, pressured by industry
calling for longer-term visibility on carbon permit prices, are
deciding how to arrange auctions ahead of the third phase of
bloc's Emissions Trading Scheme (ETS), which starts in 2013.
The scheme is the EU's main tool for reining in carbon
dioxide emissions, blamed for warming the planet. Companies
above their emissions cap must buy carbon permits from firms
that have a surplus.
The scheme's first two phases have been dogged by teething
troubles that included low prices, stemming from an overall
permit surplus and the economic slowdown, as well as windfall
profits for industry as a result of receiving free permits.
As a result, from 2013 the EU will force utilities to buy at
auction most of their permits under a steadily tightening
"Two central auctioning platforms are to be developed and
established ... a provisional central platform, the purpose of
which would be to auction in 2011 and 2012 allowances required
for 2013," read a letter seen by Reuters. "The other platform
will be the definitive central platform," it added.
A centralised platform, either a regulated market or a
multilateral trading facility, would be a setback for Britain
and Germany, which had pushed for linked national platforms, and
had successfully lobbied Spain and Poland to support them.
At present, trading is mainly done over regulated, private
exchanges like London's European Climate Exchange CLIE.L.
There will be no active price management but if prices are
too low, auctions might be cancelled, both documents show.
"In case the auction clearing price is abnormally low, the
auction shall be cancelled forthwith and the auctioned volume
shall be distributed evenly over the next four scheduled
auctions," the leaked draft regulation said.
It said the commission will determine what amounts to an
abnormally low price using a confidential methodology that can
"If something goes wrong in an auction for whatever reason
and the price goes below the secondary market price the auction
would be cancelled," Yvon Slingenberg of the EU's Climate Action
division said on the sidelines of a conference in Amsterdam.
Auctions will occur at least weekly using a "uniform, single
round, sealed bid," and will be mainly limited to ETS
participants and regulated financial institutions, the draft
To prevent market manipulation, a maximum bid of 25 percent
of allowances could be implemented, and to ensure the auctions
are protected against fraud or abuse, a monitor will be
appointed to supervise.
For a FACTBOX on the draft's details, click [ID:nLDE6221QF]
GETTING IT RIGHT
A spokeswoman said the Commission was finalising its
proposal before seeking the approval of the EU's 27 countries,
and it regretted the details had been leaked.
Emissions traders and market observers praised the plan.
"Getting this right is absolutely vital for the integrity of
the EU's climate policy," said Sanjeev Kumar of environment
think-tank E3G. "The Commission's position is quite solid. There
should be one central platform and no more loopholes."
Seb Walhain, head of environmental markets at Fortis
Netherlands, said: "A centralised platform is good for the
market as it is more transparent and guarantees the proper
distribution of revenues."
By starting auctions from 2011, the Commission will keep
industry happy, particularly utilities which, instead of
receiving them for free, must pay for their permits from 2013.
Auctioning permits from 2011 will allow utilities to hedge
their forward power sales.
(Additional reporting by Nina Chestney in Amsterdam; Editing by