Four governments offer early support for EU carbon market reforms

BRUSSELS, Feb 26 (Reuters) - France, Italy, Denmark and Sweden back plans to reduce the amount of permits in the European Union carbon market to drive deeper CO2 cuts, supporting one of the key reforms proposed by the European Commission, EU documents show.

But EU governments, which agreed to make the 27-nation bloc neutral in terms of greenhouse gas emissions by 2050, appeared less supportive of the Commission proposal to add transport and buildings to the emissions trading market.

The Commission published on Thursday EU member countries’ responses to a consultation on the policy, along with hundreds of other responses from companies, lobby groups, NGOs and citizens.

The emissions trading system (ETS) is the EU’s main policy for cutting greenhouse gas emissions, requiring power plants, factories and airlines operating European flights to buy increasingly costly CO2 permits when they pollute.

The European Commission will propose a major overhaul of the ETS in June, as it seeks to meet more ambitious climate goals.

France, Italy, Sweden and Denmark all backed a plan, mooted by Brussels, to cut the overall amount of CO2 permits available in the ETS, in their responses to the EU consultation.

“A substantial reduction of the level of allowances available to the market should be the main instrument to strengthen the ETS,” the Danish government said in its response.

The ETS caps the amount of new permits entering the market each year. This cap decreases each year, to ensure emissions keep falling.

The Commission has said a faster cut in the cap could be enforced through a higher annual reduction rate, a one-off supply cut, or both. France, Denmark and Italy all voiced support for combining a one-off cut with a faster reduction rate.

While the four governments backed plans to expand the carbon market to cover maritime emissions, only Denmark explicitly supported the option to do the same for road transport and buildings.

Sweden and Italy said further analysis of this was needed, while France said it had not yet taken a position.

Estonia said in its consultation response that including transport and buildings was unlikely to speed up emissions cuts. No changes should be made to the carbon market before 2026, to give stability to businesses, Estonia said.

Europe’s wealthier western and northern states typically favour tougher climate policies than central and eastern countries, and the Commission’s plan may face opposition from countries which fear the impact on energy-intensive industries or fossil fuel-based power systems. (Reporting by Kate Abnett; editing by Jan Strupczewski and Susan Fenton)