European Union Energy Commissioner Guenther Oettinger said he’s willing to support measures aimed at boosting carbon prices in the bloc’s market to 10 euros ($13) or more to encourage investment in clean technologies.
“With 6 to 8 euros there’s no relevant signal to investors in the market,” he told reporters in Brussels today. “Nobody knows at this moment whether we’ll get growth in our European economy, what the development will be in 10 years, so we need the best level of flexibility to follow market developments.”
EU permits for December rose as much as 3.4 percent to 6.95 euros a metric ton following Oettinger’s comments. The 27-nation bloc is considering options to improve the world’s biggest cap-and-trade carbon market after a recession cut industrial output and prices in the region’s emissions trading system slumped to a record low of 5.99 euros last month on oversupply.
Oettinger said temporarily withholding a certain number of permits is his “preference” for now, adding that more expertise is needed on the impact of potential measures to curb supply.
His comments indicate he’ll probably back a proposal planned by EU Climate Commissioner Connie Hedegaard to delay some sales of carbon permits starting in 2013, when the bloc begins auctioning most allowances after giving most of them to companies for free in the first two trading periods since 2005.
The EU may submit a draft proposal by the middle of July to member states to revise the auctioning timetable, with a view to voting in September, an official with knowledge of the matter said last week.
After a vote in the Climate Change Committee, which includes representatives of member states, EU measures that are subject to this procedure need to undergo a three-month scrutiny by the European Parliament and national governments. The process typically takes about five months from a vote to adoption.
The 62 percent decline in carbon prices in the past year prompted calls on the EU from companies including Royal Dutch Shell Plc (RDSA), Europe’s largest oil company, and EON AG, Germany’s biggest power generator, to improve the cap-and-trade system.
“It needs to be revitalized and I may even say re-engineered in the future,” Klaus Schaefer, the head of EON Ruhrgas and EON Energy Trading, told a conference in Brussels last month.
1.1 Billion Tons
The emission caps that the EU program imposes on more than 12,000 facilities were set before the debt crisis and economic slump. The market will be oversupplied by permits covering about 1.1 billion tons of CO2 by 2012, according to Bloomberg New Energy Finance. This surplus may be transferred into the eight-year Phase 3 starting in 2013.
The planned review of the auctioning rules would change the timing of sales, while keeping intact the amount of allowances to be sold in the next phase, according to the European Commission, the EU regulatory arm.
Separately, EU member states and the European Parliament are in talks about amending a draft energy savings law by including in it an option for the commission to propose a temporary set-aside of carbon permits as of 2013. The amendment is unlikely to pass after national governments have signaled they object to a link to the ETS rules in legislation on a different policy area.
Any eventual permanent cancellation of permits that could be temporarily withheld under a set-aside proposal would require a revision of the ETS law in a separate process.
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