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EU Plan to Delay Carbon Sales to Cut State Revenue, Poland Says

Poland will raise the issue of the impact on state revenue of a proposed delay in auctions of European Union carbon permits at a meeting of European Union environment ministers Dec. 17.

The country is concerned that the proposal by the European Commission aimed at delaying sales of 900 million allowances to alleviate the glut of permits and help prices will dent its budget receipts, Environment Minister Marcin Korolec said.

“It’s the end of the year and the national budgets are closed, so the question is how the proposal will impact the revenue, and here our estimates differ from those of the commission,” Korolec told a news briefing today in Warsaw.

The 27-nation EU is moving to a wider sale of permits, now largely granted for free, to meet its climate-protection goals. Selling the allowances will add to operating costs for power generators and may encourage emissions reductions that can be achieved for less than the cost of the permits. Funds from the sales may be invested in climate-related projects.

The minister declined to give estimates of the potential cut in the 2.85 billion zloty ($910 million) that Poland plans to raise from selling carbon-dioxide permits next year, according to a July draft law prepared by the ministry.

“We don’t know when, how often and to what extent the commission plans to intervene on the market, so assessing the impact is difficult,” he said.

The July draft envisaged that funds for the Polish government from carbon sales will increase to 3.1 billion zloty in 2014, 3.41 billion zloty in 2015 and 4.01 billion zloty in 2016 as more permits will be sold to factories in the cap-and-trade program.

Next Phase

“The main difference in estimates stems from the fact that we’re analyzing the whole next phase of the EU ETS system, while the commission takes into account only the next few years,” Korolec said. The third phase of the bloc’s carbon market runs from 2013 through 2020.

According to Korolec, it is unclear how the proposal to delay carbon sales would affect the possibility of east and central European countries using an exemption from EU requirement that power plants purchase all allowances from 2013.

“The political discussion on the proposal is beginning and there’s a large number of countries that haven’t decided on their position, including skeptical ones like Poland,” he said.

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