Poland may curb utility CO2 trade from 2013

WARSAW (Reuters) - Poland may ban utilities from selling European Union carbon emissions permits many of them will get for free from 2013 as a way of curbing windfall profits, a government source said on Wednesday.

At present, installations under the EU’s Emissions Trading Scheme, the 27-nation bloc’s main weapon against climate change, are given most of their carbon permits for free.

That will change under an EU climate plan agreed last December which forces most utilities to buy all their permits at auction starting in 2013.

But Warsaw fiercely opposed the plan arguing it would hurt its coal-reliant economy.

Poland and other east European states finally agreed the package after their utilities were promised most of their permits for free from 2013, but eventually would have to pay for all of them by 2020.

“It would be logical to ban trade in those free permits utilities would get. Otherwise somebody could, for example, sell the permits the moment he gets them and close down the power plant,” the source said.

“We have negotiated such a possibility with Brussels and we plan to use it. The open questions are when and how we distribute the free permits. And how we achieve full auctioning in 2020.”

By giving utilities carbon permits for free, the EU risks handing them windfall profits as it did in previous years, analysts said.

Windfall profits are generated when companies pass on the cost of the permits to customers regardless of whether they were free or not.

In 2013, Poland will get as much as 70 percent of its permits for free based on historical emissions, the Polish government source added.

But analysts said this would have little impact as an overall shortage of permits throughout Europe would make trade unlikely.

“It’s an almost zero impact. They (the Polish utilities) will probably be short from day one in 2013,” said Trevor Sikorski of Barclay’s Capital. (Reporting by Gabriela Baczynska and Gerard Wynn; Editing by Michael Szabo and Peter Blackburn)