* Commission hopes for fast-track process
* Market rallies after steep fall
* More detail expected after EU August recess
(Adds detail, background)
By Barbara Lewis
BRUSSELS, July 20 The European Commission
confirmed on Friday that it will announce plans next week to
withhold carbon allowances to support the struggling Emissions
Trading Scheme (ETS), which has suffered a collapse in prices
under the burden of oversupply.
It has decided on a two-step process to reinforce the
legality of what is meant to be a relatively quick fix to the
market's weakness. Concerns about possible delays and lack of
detail about next week's announcement drove ETS prices sharply
lower earlier in the week.
At a meeting on July 25, the EU's executive will adopt a
proposal clarifying an article of the ETS law on the timing of
auctions of permits.
Commission spokeswoman Pia Ahrenkilde Hansen said the
Commission would also "transmit to member states a draft for a
future adaptation of the timing when emissions allowances would
She added that all interested parties would be able to
express their views on the proposal for the delaying of carbon
allowance auctions, referred to as backloading.
The Commission would not say how long the process will take,
but EU sources said that it hopes the use of a streamlined EU
procedure -- known as comitology -- for the backloading proposal
will allow it to be completed within months. Other methods of
passing EU legislation can take substantially longer.
The legal amendment could also be agreed through an
accelerated procedure, lasting months rather than years,
provided that there was political will, the sources said.
Next week's announcement follows a pledge from Climate
Commissioner Connie Hedegaard that she would come up with a plan
before the August recess in Brussels, when the European
Parliament and the Commission suspend work for up to a month.
She is under pressure to deliver a solution in time for the
next phase of the ETS, which begins in 2013, when more
industries will become part of the scheme and fewer free
allowances will be handed out.
Fears about a delay to the Commission's effort to support
the carbon market pushed it down to a low of 6.67
euros per tonne on Thursday. On Friday it rose by about 4
percent to more than 7 euros, but this is still far below the
level of 20 to 50 euros that analysts say is necessary to
support low-carbon investment.
Traders said that the market was also eager for firm numbers
on how many permits should be withheld, which EU sources said
they did not expect to emerge on Wednesday. More detail could be
released after the August recess, when the Commission is
expected to publish a review of the carbon market.
European Parliament committees threw their weight behind the
idea of market intervention in a series of votes last year, but
these were a signal of the desire for action rather than a
guarantee it would happen.
Most member states are also said to back the idea of a fix,
and an Energy Efficiency Directive agreed in June was
accompanied by a declaration of intent that there was a need to
support the carbon market.
Poland, however, which is heavily dependent on
carbon-intensive coal, has said there is no justification for
meddling. It says that the ETS was set up to cut emissions,
rather than establish a carbon price, and that a weak market is
helpful in difficult economic times.
From the business sector, oil and gas companies including
Royal Dutch Shell have called for intervention because
carbon prices are too low to drive technologies, such as carbon
capture and storage.
Heavy industry is resistant to intervention and some have
questioned the legality of the Commission's proposal; doubts
that the legal clarification is designed to quash.
Even if the Commission succeeds with its proposal to delay
the auction of some permits, many analysts say that the real
need is to remove allowances permanently, which would require a
much more detailed EU process.
(Additional reporting by Jeffrey Coelho in London and Francesco
Guarascio in Brussels; Editing by Luke Baker and David Goodman)