Bloomberg News

EU Will Propose Nov. 14 Volume of Carbon to Delay From Sales

October 16, 2012

The European Union’s regulatory arm will propose a detailed plan next month for curbing oversupply in its carbon market, including the specific number of permits it recommends selling in auctions at a later date.

“The European Commission will present the tailor-made and proportionate impact assessment, as well as the necessary details of the proposal on Nov. 14 so that member states can take a decision before year-end,” Isaac Valero-Ladron, the climate spokesman for the commission, said by e-mail yesterday.

The EU, which runs the world’s biggest cap-and-trade market, is set to auction permits for the third phase of the program beginning next year. The commission’s comment came after Bloomberg New Energy Finance forecast that the bloc may delay until early 2013 the details of its strategy to postpone auctions of some permits to help carbon prices recover.

The commission’s proposal to trim sales planned for the next three years will probably be intertwined with its assessment for more permanent rule changes to prevent future oversupply, said Matthew Gray, an analyst and trader at Jefferies Group Inc. in London. The blending of short-term and long-term policy consideration will probably make the bloc’s carbon price subject to political influence through 2020, he said today in an e-mailed research note.

“This is almost perfectly analogous with recent developments in the euro,” Gray said. “Just like the European Central Bank has threatened intervention and mentioned the futility of shorting the euro, the commission could similarly hold the carbon market to ransom.”

Premium Widens

EU emission permits for 2012 fell to a record low in April after the financial crisis hurt industrial production and cut demand from industry for pollution rights. That boosted a glut of allowances to almost half of the average annual pollution limit in the system. Allowances rose as much as 2.5 percent to 7.88 euros ($10.25) a ton in trading today on the ICE Futures exchange in London and were at 7.80 euros at 9:41 a.m.

The premium for December EU carbon over United Nations Certified Emission Reduction credits advanced as much as 2.6 percent to a record 6.39 euros.

EU Climate Commissioner Connie Hedegaard presented an outline in July of a measure to postpone some auctions, a practice known as backloading, and a draft amendment to the bloc’s emissions-trading law to reassert the commission’s right to decide the timing of carbon-permit sales.

Official Proposal

The number of permits to be delayed, which wasn’t specified in the draft measure, will now be included in the official proposal to be submitted to national governments on Nov. 14, Valero-Ladron said yesterday. The package to be presented will also include an impact assessment of auction delays and a report on long-term potential options to improve the EU carbon market, he said.

EU member states, whose support is needed for the commission plan to take effect, are waiting for the assessment and the report before taking positions on the backloading option, according to the minutes from their Sept. 19 meeting published in an EU database earlier this month.

To contact the reporter on this story: Ewa Krukowska in Brussels at ekrukowska@bloomberg.net Mathew Carr in London at m.carr@bloomberg.net

To contact the editor responsible for this story: Lars Paulsson at lpaulsson@bloomberg.net


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