Netherlands Unlikely to Back EU CO2-Permit Sales Delay Plan

The Netherlands, the euro area’s fifth-largest economy, is unlikely to support a proposal by the European Union to delay some auctions of carbon permits as of 2013, according to the Infrastructure and Environment Ministry.

“The proposal could lead to temporarily higher costs for companies in the Netherlands that compete internationally, which could indirectly bear a disadvantage on the Dutch economy,” Marie-Christine Reusken, a spokeswoman for the ministry, said by e-mail. “The proposal could also bring further uncertainty to the carbon market.”

The European Commission, the EU’s regulatory arm in Brussels, is seeking member states’ support for its plan to postpone some auctions of carbon allowances in the next stage of the bloc’s emissions market which starts in 2013 to curb oversupply in the market and help prices recover. EU carbon permits for delivery in December lost as much as 6.9 percent to 7.80 euros today following the Dutch comments.

“The Netherlands will probably not back it, although formally the Netherlands has not taken a final position,” Reusken said, adding that the decision will be preceded by a discussion in the parliament. “We will elaborate our position following further analysis of its impacts on the economy, and on the basis of the position of other member states.”

The proposal to delay some auctions of carbon permits in the EU emissions trading system, or the ETS, will be considered in the so-called comitology procedure, in which a measure put forward by the commission needs qualified-majority support from representatives of national governments to pass.

Weighted Ballot

The Netherlands has 13 out of 345 votes in the EU’s weighted ballot system that favors larger countries. Poland, which has repeatedly said it opposes any measure to “manipulate” the European emissions market, has 27 votes. A blocking minority requires 91 votes.

Poland’s Environment Minister Marcin Korolec said the commission’s backloading plan was “quite confusing” as the carbon market works, and offers liquidity and a price signal.

“ETS needs a structural reform towards 2030, not a patch,” he said by e-mail today. “I hope we will manage to put that message across in the council of ministers.”

The Netherlands’ position could shift after elections set for Sept. 12, according to some analysts including Jos Cozijnsen, a Dutch consulting attorney specialising in emissions trading. The lead of Prime Minister Mark Rutte’s pro-austerity Liberal Party narrowed in polling before the vote.

Election Result

“The election results may make the government move a bit closer to the commission on this issue as most political parties want a higher carbon price and want the Netherlands to be a leader in renewable energy and innovation,” Cozijnsen said.

The Labor Party, which advocates less austerity and more time for the country to meet its budget-deficit limit as a way to boost growth, cut the gap with the Liberal Party, according to a poll by Ipsos Synovate on Sept. 8. Labor stands at 35 seats, the same as the Liberal Party and 14 more than the Socialist Party, the poll showed.

The commission sent its draft proposal on CO2 auction delays, otherwise known as “backloading”, to member states in July and the first discussion by representatives of governments is scheduled for Sept. 19. The draft will be followed later this year by a formal proposal that will include the number of permits to be postponed at auctions.

Draft Amendment

Also in July the commission put forward a draft amendment to the EU carbon law to clarify its right to decide on the auctioning timetable. The legal change, considered in a separate legislative process and aimed at removing uncertainty about the commission’s powers, was first discussed by representatives of national governments at a meeting in Brussels on Sept. 7.

“We have some legal questions on the way this amendment is drafted,” Reusken said. “In 2011 the Netherlands voted in favor of adjusting the timetable to allow for early auctions as was advocated by power companies under the ETS.”

Before it's here, it's on the Bloomberg Terminal. LEARN MORE