EU Report on Carbon Market Due Before August: Hedegaard

The European Union will present a report on its emissions trading system and a proposal to delay auctions of some carbon permits before the summer recess that starts in August, EU climate Commissioner Connie Hedegaard said.

The report, which is being brought forward by a year, will include some long-term options to improve the EU cap-and-trade program, Hedegaard told reporters after a meeting of the bloc’s environment ministers in Luxembourg today. The price of permits in the European carbon market dropped to a record low earlier this year due to oversupply caused by the economic slowdown.

“There will be a proposal on how we can backload the auctioning profile, which is a short-term measure,” Hedegaard said. “We will also give different options as to what could be longer-term, more structural things you can do with the carbon market, and ministers can come back and discuss that later.”

A reduction in the auction volumes from 2013 would temporarily curb the excess amount of permits in the EU emissions trading system, also known as the ETS, without changing the total pollution cap in the eight-year trading period that starts next year. The emission limits that the world’s biggest cap-and-trade program imposes on more than 12,000 facilities owned by manufacturers and utilities were set before the debt crisis and economic slump.

Auctioning Regulation

The planned proposal will come in the form of a revision to the carbon auctioning regulation, which will be carried out through the so-called comitology procedure, where a measure needs qualified-majority support from representatives of national governments in the Climate Change Committee to pass. It then becomes subject to three months of scrutiny by the European Parliament and ministers. The whole process typically takes about five months.

Hedegaard said she expected work on the regulation to be finalized by the end of this year. European governments and the European Commission, the EU regulatory arm, have come under pressure from companies including Germany’s largest utility, EON AG, and the region’s biggest oil company, Royal Dutch Shell Plc, to strengthen the ETS and spur investment in clean technologies.

“More and more member states, more and more ministers, including finance ministers, have started to realize that it’s also in their interest to have a robust carbon price, because it means something for how much revenues they will have from different carbon activities,” Hedegaard said.

Similar Solution

The commission proposal will offer a solution similar to the one sought by the European Parliament to strengthen the EU emissions trading system. The assembly wants to enshrine in a planned law on energy efficiency the commission’s right to propose a temporary set-aside of allowances in the ETS next trading period, also known as Phase 3.

EU governments have opposed the amendment, objecting to a link to the bloc’s carbon trading system in a law on a different policy area. Denmark, the holder of the EU rotating presidency that represents member states, and negotiators from the Parliament are due to meet on June 13 for the last round of talks to iron out differences on the law.

“My mandate on the Energy Efficiency Directive right now doesn’t include the wording on the ETS,” Danish Climate Minister Martin Lidegaard told reporters today. “I don’t consider it as realistic to put it in.”

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