EU Confirms Rules Give It Time to Sell Carbon-Reserve Permits

The European Union’s regulatory arm reiterated it doesn’t have to start selling 100 million carbon permits from a special reserve soon, as proceeds from the sales need to be awarded to clean-energy projects only by mid-2014.

The Luxembourg-based European Investment Bank, mandated by the EU to sell 300 million permits from a set-aside for new entrants to the bloc’s emissions trading system, is considering the timing of the second tranche of the so-called NER300 reserve, according to Jos Delbeke, director general for climate at the European Commission. The EIB sold the first 200 million allowances between December 2011 and September last year.

“The timeline of implementing the second call of the NER300 does not require the EIB to initiate the sales in the near future,” Delbeke said by e-mail. “The EIB will announce all relevant details with an appropriate lead-time ahead of the start of the sales.”

The EU decided in 2008 to use proceeds from the sales to encourage renewable-energy and carbon-capture projects. The commission granted 1.2 billion euros ($1.6 billion) from the sale of the first tranche of NER300 to 23 renewable-energy projects in December last year. It wants to award aid under the second round of the contest by the middle of next year, it said on March 4.

The sale of 100 million allowances under the second tranche will use experience gained from the sale of the first 200 million, Richard Willis, an EIB spokesman, said today by e-mail. He confirmed no date has yet been decided for sales of the second tranche.

Cooperation Agreement

Under a cooperation agreement with the commission on NER300 sales, the EIB may sell allowances with settlement in December 2013 at the earliest. That enables extending the sales into 2014.

The value of the reserve shrank as carbon prices slumped almost 90 percent in the past five years amid oversupply exacerbated by an economic crisis. To help the market rebound the commission proposed delaying auctions of allowances in a strategy known as backloading, which is currently being considered by governments and the region’s Parliament.

The EU may opt to wait until lawmakers decide whether to support the backloading proposal before it starts sales of the second tranche of NER300 allowances, Trevor Sikorski, an analyst at Energy Aspects Ltd. in London, said today in an interview in Barcelona.

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