EU Shouldn’t Intervene in CO2 Market, German Minister Says

The European Union should avoid actions aimed at boosting carbon prices, Germany’s economy minister said, highlighting the political controversy over a plan by EU regulators to strengthen the bloc’s emissions market.

“Prices should be established by the market,” Philipp Roesler told a press conference in Warsaw. “Some don’t like it, some say that prices are too low, but artificial boosting of those prices is in our view absolutely inappropriate and those mechanisms should be left to the market.”

His comments followed a proposal last month by the European Commission to amend EU legislation to clarify the right of the bloc’s regulator to delay some auctions of carbon permits as of 2013 to curb oversupply. That would help support prices in the world’s biggest emissions trading system after they slumped to a record earlier this year.

“It’s not the politicians’ task to interfere with the system,” Roesler said.

The German government seeks to agree by the end of next month on a joint position in response to the commission proposal, Environment Minister Peter Altmaier said in a document released yesterday. Rebuilding the “stimulus function” of the EU carbon market is key to ensuring that the cap-and-trade system can continue to help cut pollution, he said last month.

Price Plunge

EU carbon prices have fallen 43 percent in the past 12 months as oversupply in the market has cut demand from factories and power stations. The bloc will be oversupplied with about 1.1 billion permits by the end of the current 2008-2012 trading period, according to Bloomberg New Energy Finance. The surplus can be carried over to the next phase starting in 2013.

EU Climate Commissioner Connie Hedegaard said last month she was “quite confident” that the bloc’s member states will approve changes to the supply of carbon permits, an idea known as backloading, before the end of this year.

The plan to curb oversupply of carbon allowances will be carried out in two steps. In the first, national governments and the European Parliament need to approve an amendment to the EU law reasserting the commission’s legal right to amend the auctioning schedule.

The second will involve a vote on a proposal to delay some auctions in the so-called comitology procedure, where a measure requires qualified majority support from representatives of national governments to pass and then becomes subject to a scrutiny by ministers and the European Parliament.

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