EU Starts Five Battles to Resuscitate Carbon Market, SocGen Says

The European Union, already facing criticism after expanding carbon trading this year to airlines, has opened five battlegrounds in its bid to resuscitate its flagging market, according to Societe Generale SA.

“It’s very clear their primary goal is to increase prices,” Emmanuel Fages, an analyst in Paris for the bank, said today by phone. “It’s the result of their political ambition.”

EU permits today rose to the highest in a month after Climate Commissioner Connie Hedegaard said yesterday the bloc may propose a delay in supply at carbon auctions starting next year. Lawmakers would also continue to consider another plan to temporarily cut supply, known as a set-aside, she told reporters in Horsens, Denmark.

There are three other policy initiatives that could also boost prices, Fages said. The bloc is considering installing a 2030 target for the first time, tightening its 2020 target and even expanding the market to include cars and trucks. The bloc should consider expanding its emissions trading system to cover the region’s transport industry and shouldn’t judge the effectiveness of the program by a decline in carbon-permit prices, Poland said in a report this month obtained by Bloomberg News.

“I’m surprised Poland put on the table this uphill battle,” since it has argued against the set aside, Fages said. “Maybe that’s a way to show they have proposals and are not always blocking things.”

Permits for delivery in December were little changed today at 7.47 euros ($9.86) a metric ton on the ICE Futures Europe exchange in London at 11:42 a.m. They earlier rose to their highest level in a month, trading at 7.64 euros after reaching a record low of 5.99 euros on April 4.

‘Market Manipulation’

Poland, which gets about 90 percent of its electricity from coal, yesterday upheld its objection to any measures that are aimed at boosting the price of EU carbon allowances, saying they would amount to “market manipulation.”

“My first reaction is that I’m skeptical,” Environment Minister Marcin Korolec said in an interview. “We’d need to see the details of such a proposal.”

The commission’s plan is the first step in a process to strengthen the ETS and the EU will continue to explore “longer- term structural issues,” including the set-aside of carbon allowances, or withholding a number of permits from the market, Hedegaard said.

The inclusion of flights to and from EU airports in the European carbon cap-and-trade program triggered opposition from countries including China, the U.S. and Russia, which said Europe should let the United NationsInternational Civil Aviation Organization decide on greenhouse-gas limits for the industry.

To contact the reporter on this story: Mathew Carr in London at m.carr@bloomberg.net

To contact the editor responsible for this story: Lars Paulsson at lpaulsson@bloomberg.net

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