European Union regulators pledged to guarantee “fair and equal” access for market participants to a planned proposal on delaying auctions of some carbon allowances to curb oversupply.
The European Commission is planning to propose in the middle of next month a review of the carbon-permit auctioning regulation to postpone some sales of allowances in the early phase of the next trading period of its carbon program that runs from 2013 to 2020, Jos Delbeke, director general for climate at the EU regulatory arm, said earlier this month.
The EU will “in good time” inform the market and the general public of the submission of any proposal to revise the auctioning regulation to the Climate Change Committee, composed of representatives of national government, the commission said on its website.
“At the time the proposal were to be submitted to the Climate Change Committee, it would in parallel be posted” on the directorate for climate’s regulatory news website, according to the commission.
A delay in the auctioning rate would be a short-term fix to the EU emissions trading system, also known as the ETS, and would amount to a temporary withholding of allowances, without changing the 2013-2020 pollution cap, the commission said.
The emission caps that the EU ETS imposes on more than 12,000 facilities owned by manufacturers and utilities were set before the debt crisis and economic slump. The program will be oversupplied by permits covering about 1.1 billion metric tons of carbon dioxide by 2012, according to Bloomberg New Energy Finance. This surplus may be transferred into the eight-year Phase 3 that starts next year.
In Phase 3 the EU will auction more than 50 percent of permits after giving most of them to companies for free since the system began in 2005. While the overall cap for 2013-2020 is set in the ETS directive, setting the foundation for emissions trading in the EU, the amount of permits to be sold to companies is defined in the auctioning regulation, adopted in 2010.
The regulation specifies in Article 10 that the annual volume to be auctioned is the difference between the total number of permits, lowered every year in line with the provisions of the directive, and the amount of allowances to be handed out for free, based on benchmarks designed by the commission. The number of free allowances hasn’t been determined yet because of delays in calculations by some member states.
“The ongoing review assesses whether the time profile decided in 2010 is still appropriate in the light of changed circumstances, in particular the severe macro-economic crisis, or whether some of the allowances planned for auctioning in the early years of Phase 3 should be back-loaded toward the final years of Phase 3,” the commission said.
The number of allowances to be auctioned within a calendar year is not subject to the review, it said.
The revision of the regulation will be done in the so-called comitology procedure, in which a measure proposed by the commission needs qualified-majority support from representatives of national governments in the Climate Change Committee to pass. Then it becomes subject to a three-month scrutiny by the European Parliament and ministers, a process that typically takes about five months.