* Carbon market too weak to drive low-carbon energy
* Commission proposal soon to be made public
* Commission ponders delaying up to 1.2 bln permits-sources
By Barbara Lewis
BRUSSELS, June 27 Major companies including
Royal Dutch Shell, Statoil and commodities
giant Bunge have written to top EU officials calling for
the urgent withdrawal of 1.4 billion carbon permits to support
the market and green investment.
A huge surplus of permits because of recession has depressed
their price, making it cheaper to pollute and cutting the
incentive to invest in low-carbon technology.
"A fully functioning EU ETS (Emissions Trading Scheme)" is
the main policy tool to achieve the EU's long-term goal of
cutting greenhouse gas emissions by 80 to 95 percent by the
middle of the century, compared with 1990 levels, said the
letter, signed by a total of 13 firms and associations and dated
"We also believe that auction revenues from the ETS need to
play an important role in funding low-carbon innovation and the
transition to a green economy."
European Commission draft proposals currently being
discussed envisage a delay in the sale of up to 1.2 billion
carbon allowances, EU sources said earlier this month.
The delay would be part of a rescheduling of allowance
auctioning in the next phase of the EU ETS from 2013 to 2020.
On Thursday, the permits traded at around 8 euros,
above an April low of 5.99, but still far off the 20 euros
($24.94) or more analysts have said is needed to spur low-carbon
To bolster the market sufficiently, the letter sent to all
27 EU commissioners, including Commission President Jose Manuel
Barroso, said the Commission's plan should reflect a proposal by
the European Parliament late last year to withdraw 1.4 billion
Signatories to the June 26 letter include Acciona,
Alstom, Dong Energy, E.ON, Enel
, as well as Shell, Statoil and Bunge.
Major oil companies need higher carbon prices to justify
investment in carbon capture technology. Natural gas producers
have also said the carbon price is so low it has made burning
carbon-intensive coal more economic than lower-carbon gas.
The European Parliament's proposal was not binding but
served as a political signal to the Commission, which has said
it will publish its plans before the August summer recess.
Apart from the Commission's plans to reduce the surplus of
allowances by adjusting the auctioning timetable, the letter
said the Commission needed to "come forward with structural,
long-term predictable and market-based measures to strengthen
the EU ETS".
More sweeping changes would take much longer under the EU
process than a relatively simple delay to the auction timetable.
Members of the European Parliament also wrote to the
Commission president and Climate Commissioner Connie Hedegaard
on June 18.
British Liberal Democrat Chris Davies, Dutch Green Bas
Eickhout and British Labour politician Linda McAvan called for
"an immediate, effective and significant intervention" and the
removal of at least 1.4 billion allowances.
Prior to official publication, the Commission will not
comment on the details of its proposal.
Commission spokesman Isaac Valero-Ladron on Wednesday
reiterated the Commission planned to publish its auction review
over the coming weeks as part of a wider aspiration to spur a
"The Commission will present before the summer break a
review of when allowances are auctioned in the third phase of
the EU ETS. We will also present long-term structural options to
strengthen the carbon market," he said.