Brussels, 25/07/2012 (Agence Europe) - The European Commission is proposing a change to the timetable for the auctioning of emissions quotas for the third period (2013-2020) of the emissions trading scheme (ETS) in order temporarily to reduce the quantity of allowances on the carbon market. It is proposing to hold back the auctioning of a significant quantity of surplus allowances so as not to aggravate the situation in the first few years of Phase III. This is the short-term solution it advocates to deal with the failings in the system which have led to the price of a tonne of carbon tumbling to much too low a level (less than €7 currently compared with €15 in 2011, far below the €30 expected by lawmakers when the ETS directive was revised) to provide any sort of incentive for investment in low-carbon technologies.
The package adopted by the college of commissioners contains a proposal to amend the ETS directive (2003/87/EC) in order to clarify the provision relating to the timing of the auctions of emissions allowances, a draft future revision of the regulation on auctioning emissions allowances (Regulation no. 1031/2010) and an analytical working document by the Commission containing all the calculations that gave rise to the various figures in three possible options for review of the regulation. Auctioned volumes would be reduced in the first three years of Phase III and brought back later. The examined options reduce the volume of auctioning in the first three years of Phase III by 400, 900 or 1200 million allowances. It will be for the Council and European Parliament to decide which option is best suited.
The draft for future amendment of Regulation 1031/2010 was sent on Wednesday through the ad hoc climate change committee to member states for consultation. The text is available to the public on the European Commission website for consultation until the start of October. After the summer break, the Commission will finalise the report on the functioning of the carbon market to define the long-term structural options it will propose to provide more long-lasting correction of ETS failings.
“The EU ETS has a growing surplus of allowances built up over the last few years. It is not wise to deliberately continue to flood a market that is already oversupplied. If the political will is there, all the necessary decisions can be taken before the next auctioning phase starts at the beginning of 2013. Now it is up to the European Parliament and member states to deliver”, said Climate Action Commissioner Connie Hedegaard in press release and via Twitter.
To those who question whether this is the right time to bring forward this proposal, the commissioner's spokesperson Isaac Valero-Ladron said: “The Commission has decided to act quickly. The Parliament and Council are aware that time is money. It's up to them to say which option they prefer and to act quickly, before the end of the year.”
An important first step. MEP Peter Liese (EPP, Germany and Parliament rapporteur) said that this Commission proposal was “an important first step, but more need to follow soon” so that the serious problems faced by member states that base their investment strategies on revenue from the ETS can be fixed, not by national measures, but at European level.
Environmentalist NGOs Greenpeace and WWF gave a cautious welcome to the Commission plan. They are pleased that the Commission has acknowledged that the ETS has suffered from a surplus of allowances which have driven down the price of carbon and reduced the scheme's ability to encourage polluting companies to cut greenhouse gases. They expressed disappointment, however, that the Commission has not yet suggested structural measures to reform the carbon market, such as permanently removing allowances or increasing the EU's emission reduction target.
“The euro crisis is showing Europe the cost of doing too little too late. The EU should not repeat the same mistakes with the carbon market. We need swift and decisive action or the scheme will deteriorate fast and will not deliver any real reduction in carbon emissions for at least a decade. The number of allowances needs to come right down or companies might as well be trading Monopoly money”, said Greenpeace EU climate policy director Joris den Blanken. WWF EU climate policy officer Sam Van den plas said: “We all know that the EU Emission Trading Scheme is in a state of crisis and only structural measures can save it from collapse.”
Responses to the proposal on future amendment of Regulation 1031/2010 can be sent to the Commission at: CLIMA-auction-backloading@ec.europa.eu (AN/transl.rt)