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EU Talks Said to Bring No Breakthrough on CO2 Supply Fix

European Union talks on a carbon market fix failed to bring clarity on whether governments will back a proposal by the bloc’s regulator to curb a glut of emission permits, two EU officials said.

Representatives of EU nations in the Climate Change Committee reached no breakthrough at a meeting yesterday on a draft measure to delay auctions of 900 million carbon permits starting in 2013, according to the officials, who declined to be identified citing policy. The gathering in Brussels was the first after the European Commission on Nov. 12 proposed a specific number of allowances to be delayed under the draft measure outlined earlier this year and two days later set out long-term options to improve the market, as requested by governments.

While there was no sign of a blocking minority emerging at the meeting, many member states, including Germany, stopped short of revealing their position on the strategy to delay auctions of carbon permits, known as backloading, according to the officials.

At stake is the price of emission permits in the world’s biggest cap-and-trade system after they plunged to a record low of 5.99 euros in April as the economic crisis hurt industrial output, boosting the surplus of allowances to almost half of the average annual pollution limit in the 27-nation EU.

EU allowances for delivery next month fell 1.8 percent to 7 euros a metric ton on the ICE Futures Europe exchange as of 11:19 a.m. in London. The contract has lost about a third of its value in the past year.

Further Questions

France and Belgium confirmed their support for the measure at the meeting yesterday and Poland reiterated its objections to the plan, according to the officials. A number of countries had further questions about the commission’s proposal, they said.

The proposal to auction fewer permits at the beginning of the next trading period in the EU emissions trading system is considered in the so-called comitology procedure. Under that process, a draft measure needs qualified-majority support from representatives of member states to pass and then becomes subject to a three-month scrutiny period by national governments and the European Parliament before being officially adopted.

In a parallel but separate process, member states and the European Parliament are considering an amendment to the EU emissions trading law to reassert the commission’s power to decide about the timing of auctions, a provision that would remove any legal uncertainty about the backloading measure.

Next Meeting

EU Climate Commissioner Connie Hedegaard has said she aims for a decision on the backloading measure before the end of this year. The next meeting of the Climate Change Committee is scheduled for Dec. 13.

The European Parliament is scheduled to decide about the amendment to the ETS emissions law on April 15, two months after a vote in the assembly’s environment committee. The commission will adopt the backloading measure only after lawmakers’ verdict on the change to the EU carbon-trading legislation, Hedegaard said on Nov. 12.

The EU carbon-permit auction calendar for next year, which may be published by early December, won’t initially take into account the amount of permits to be delayed, according to the commission. The ICE Futures Europe exchange and the European Energy Exchange AG, which host carbon auctions for EU governments, will update their schedules to take account of backloading after the commission adopts the supply fix, reducing the volume for the remainder of the year.

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