BRUSSELS (Reuters) - Around 1.65 billion permits were in circulation in Europe’s carbon market last year and almost 265 million of those will be withheld from auctions in 2019 as a step to curb oversupply, the European Commission said on Tuesday.
The European Union’s Emissions Trading System (ETS) caps the emissions of about 11,000 power plants, factories and airlines, but prices have tumbled due to excess supply of the permits, known as EU Allowances (EUAs), since the financial crisis.
The EU executive said 1,654,574,598 carbon permits were in circulation in the ETS last year and 16 percent of those - or about 265 million - would be placed in a reserve next year rather than be sold in next year’s auction.
These figures do not include aviation permits.
Under reforms to the ETS that take effect in January 2019, the Market Stability Reserve (MSR) will withhold 24 percent of surplus permits from auctions next year if the permits in circulation exceed 833 million.
The Commission said next year’s auctions would see 265 million allowances withheld, amounting to 16 percent of the total in circulation.
Although permits in circulation exceed 833 million, the amount withheld is not the full 24 percent, or 397 million permits, because the reserve covers the first eight months of 2019 initially.
Under the system, if the total number of permits in circulation falls below 400 million, then 100 million more will be released at auction.
The next assessment of permits in circulation will take place by May 15, 2019. This will determine how many permits will be withheld or added by the reserve in auctions for the 12-month period, running from September 2018 to August 2019.
The number of permits in circulation is based on supply since 2008, and the number of permits surrendered, canceled or held in reserve.
Reporting by Julia Fioretti and Nina Chestney in London; Editing by Robin Emmott and Edmund Blair