10 July 2012
Quick fix to EU carbon scheme expected in weeks
A planned quick fix to the European Union's Emissions Trading Scheme is expected to emerge over the coming weeks as a first step to the deeper reforms urgently sought by environmental and some business campaigners, writes Reuters.
© Oliver Sved
The European Commission has yet to confirm the date when it will publish details of a review of the EU ETS, including delaying the auction of some allowances to reduce a huge surplus that has kicked carbon prices down to record lows.
It has said only that the intention is to release them before the EU institutions' summer break in August and has declined to comment on speculation that they will not be published until September.
The benchmark carbon price fell to a low of 5.99 euros per tonne in April. It has since recovered to around 8 euros, partly because of expectations the Commission will act to support it.
The carbon price needs to be in the 18-20 euro range for it to start spurring low-carbon investment, Mark Owen-Lloyd, head of carbon trading at CF Partners in London, said.
"You've got to get the price out of the 6 to 8 euro zone; otherwise it's just a play thing for traders," he said.
The Commission has declined to discuss the details until they have been published, but EU sources have said up to 1.2 billion allowances could be held back at the start of the next phase of the ETS, beginning in 2013, in a process known as backloading.
Many carbon market analysts expect an EC proposal to call for around 700 million carbon permits to be backloaded, but the allowances would eventually need to be removed permanently, not just delayed, to ensure carbon prices stay above 10 euros.
Deeper structural reforms could also include tightening the cap on how much carbon dioxide polluters can emit.
"Backloading is a way to kickstart a bigger process. In and of itself, its value is mainly as a signal that action is being taken," Jesse Scott, head of Eurelectric's environment and sustainable development unit, said.
In EU terms, the benefit of an auction timetable review is that it is a small enough change to avoid a long, complicated EU process - and in theory heated debate.
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