Businesses push for decisions on EU carbon scheme

LONDON (Reuters) - The European Union is under pressure to finalize details on its emissions cap for industry from 2013, how carbon permits will be auctioned and the amount to be given to airlines when they join the EU’s scheme in 2012.

Businesses say they urgently need clarity on these still undecided elements surrounding the EU’s Emissions Trading Scheme, the bloc’s main weapon to fight climate change, in order to minimize compliance costs in its third phase (2013-2020).

“There is no clarity after 2012. No installations in Europe know how many carbon permits they will get and this is adversely affecting their investment decisions,” said Folker Franz, a senior advisor at Europe’s biggest lobby group BusinessEurope.

The EU Commission expects to publish the absolute annual emissions caps for Phase 3 on Friday, an EU spokeswoman told Reuters by phone. The announcement had been due on June 30.

A decision on “opt-ins,” or new sectors, installations and greenhouse gases to be covered by the scheme in Phase 3, is set for September, while an assessment on the emissions cap for the aviation sector when it joins in 2012 will likely come in October, she added.

This could coincide with an EU verdict on whether to increase its bloc-wide emissions cap to 30 percent below 1990 levels by 2020, up from 20 percent now, observers said.

Member states are also due to vote on the latest carbon permit auctioning proposal at a July 14 EU climate change committee meeting.

In the scheme’s first two phases (2005-2012), most carbon permits were given to industry for free. From 2013, the majority will be sold to companies through auctions, the details of which have been delayed for months.

On Tuesday, three trade groups urged officials to support a plan to create a central auction platform while allowing some countries to “opt-out” with their own platforms.

Although most states are happy with a central platform, a group led by Germany is pushing for the opt-out clause.

BusinessEurope, European utilities lobby Eurelectric and the International Emissions Trading Association (IETA) called for quick adoption of the proposal, saying it would help prevent spikes in emissions and power prices.

The revised proposal, sent to member states by the commission last week, also includes regulatory consistency across the platforms and frequent reviews of the process.

“Regulatory consistency and total control over the schedule of the auctions by the EU prevents platforms from doing whatever they want, which could have huge implications for the process,” said Sanjeev Kumar of green group E3G.

Trevor Sikorski, a director at Barclays Capital, said on Monday any further hold-up would likely push the vote into the autumn and delay the tendering process for platforms.

European utilities that have begun selling forward 2013 power say clarity on auctioning is needed to help them hedge.

Over 3,000 airline operators will be included in the EU’s trading scheme from 2012, their first year cap set at 3 percent below the sector’s average CO2 emissions between 2004 and 2006.

Carbon permit allocations will then be based on each airline’s share of passenger miles in 2010.

Reporting by Michael Szabo; Editing by Keiron Henderson