EU Plan to Delay Carbon Sales Violates Law, Law Firm Says

A European Commission plan to temporarily delay carbon permits sales starting next year is in breach of the law, said Luther Rechtsanwaltsgesellschaft mbH, a German law firm representing energy-intensive industries.

“The emissions-trading directive only grants the European Union commission the right to interfere with the market in case of CO2 prices that are too high, to reduce the burden on businesses,” said Stefan Altenschmidt, head of the environment, planning and regulatory practice group in Dusseldorf. “The directive does not allow the commission to work towards a price increase in case of CO2 rates that are too low,” he said today in a statement on the firm’s website.

The opinion was commissioned by lobby groups, including from the steel, cement, glass and paper industries, as they attempt to head off higher carbon prices. Permits have jumped 17 percent this month as the European Commission considers temporarily reducing supply in the market in response to record low prices.

The commission today declined by e-mail to comment on Luther’s statement. Permits for December rose 0.4 percent to 7.54 euros ($9.49) a ton in London on the ICE Futures Europe exchange as of 4:56 p.m.

Poland has already questioned the commission’s ability to act. A decision to temporarily withhold supply would violate the law, which requires auctions to be predictable, a Polish government official said in April. He declined to be identified, citing government policy.

Within Sovereignty

A commission decision to change supply permanently would overstep the regulator’s mandate, while temporary changes to supply would not, said Bryony Worthington, founder of Sandbag, a London environmental group, speaking today by phone.

“A scheduling proposal is completely within the sovereignty of the European Commission,” said Jos Cozijnsen, a Dutch consulting attorney specializing in energy and emissions trading.

“Only cancellation needs an amendment of emissions-trading law,” he said today by phone.

The commission doesn’t have a mandate to adjust volumes in the auctioning regulation and needs one, said Luther’s Altenschmidt. “It would be illegal to amend the auctioning regulation.”

Poland could, in theory, “very easily” challenge any auctioning decision by the commission in the EU general court in Luxembourg, he said. “I think the market should be very careful with this. This game has just begun.”

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