|February 17, 2012|
EU edges towards carbon price support measures
|EU politicians have reportedly agreed a compromise text that could see the bloc withhold carbon permits from auction in order to boost low prices.|
The text, which will be put forward for a vote later this month, does not specify how many permits will be held back from the next phase of the emissions trading scheme (ETS).
But it does raise the prospect of the EU intervening in the market in order to tackle the mounting surplus, which many traders and businesses blame for prices dropping to record levels.
An earlier proposal suggested 1.4 million EU Allowances (EUAs) would be withdrawn in Phase III, which runs from 2013 to 2020.
However, the new draft text calls on the European Commission to amend regulations on auctioning carbon permits and to bring in measures that could include "withholding the necessary amount of allowances", according to news agency Reuters.
"The good thing is it is giving the Commission a mandate to act before the third phase [of the carbon market from 2013]," Dutch Green MEP Bas Eickhout told the news agency. "However, we lost the numbers. It was just not possible to get broad support."
Eickhout added that the proposal had widespread support and was likely to be voted through on 28 February, as part of a wider debate on a new energy-efficiency directive.
The text would not compel the EU to act, but would add to pressure from businesses and environmentalists who warn the falling prices are undermining the case for low carbon investment.
The amendment was welcomed in a joint statement by the German Emissions Trading Association (BVEK) and the Climate Markets and Investment Association (CMIA), which said the surplus "endanger[s] the climate protection goals of the European Union".
"In the event of the EU failing to take action, in Germany alone more than half of the investment needed to maintain a low carbon pathway will no longer be economical," the groups said. "CMIA [and] BVEK want decisive action from the EU parliament to take the surplus EUAs out of the EU ETS... and prevent an additional surplus of EUAs being created by the Energy Efficiency Directive."
This morning EUAs were trading at €9.12, up 1.33 per cent.
However, some carbon-intensive businesses remain opposed to any move to hold back allowances, arguing that changing the rules of the scheme will create investor uncertainty.
Any move to bolster the price of carbon allowances will have a knock-on impact on the wider green economy, as higher carbon prices are likely to feed through into higher energy and material prices. Such a move would provide firms with a greater incentive to invest in energy and resource efficiency measures, and switch to cleaner forms of energy.