Last-minute wrangling over changes to ETS (19-7-2012) Divisions over plans to ‘back-load’ allowances.

European commissioners are scheduled to debate next week (25 July) changing the EU’s emissions trading scheme (ETS) to alter the distribution of allowances for the 2013-20 trading period. But disagreements about whether to hold back more of the emissions allowances until near the end of the trading period – known as ‘back-loading’ – may delay a legislative proposal until after the Commission’s summer break.
The justification for backloading would be to raise the price of carbon in the market, which has fallen to unsustainably low levels of around €7 per tonne because of an oversupply of allowances, partly explained by the economic slowdown.
A spokesperson for Connie Hedegaard, the European commissioner for climate action, said that the Commission still intends to present the proposal by the end of this month. The issue has been put on the commissioners’ agenda for their college meeting next week, but sources involved in the discussions said the discussion may be deferred, as a proposal to hold back a specific number of allowances and an accompanying analysis of possible longer-term changes are now more likely to come out in September.
Impact assessment The Commission’s industry directorate-general is resisting the adoption of a specific back-loading proposal next week, wanting an impact assessment on its possible effects before the change is proposed. The European association of employers’ organisations, BusinessEurope, has taken the same stance. Last month, BusinessEurope sent a letter to José Manuel Barroso, the president of the Commission, warning that changing the auctioning schedule “could have major repercussions for EU industry, which is already under strain from the economic crisis”.
In response, a group of 13 companies that support the change, including E.ON, Alstom and 3M, sent a letter to Barroso calling on the Commission to “bring forward an immediate proposal to back-load the timing of EU ETS auctions”.
MEPs have called for the EU to set aside permanently up to 1.4 billion carbon allowances. Such long-term changes would be subject to a lengthy process of approval by the European Parliament and member states. But a change in the auctioning timeline can be done by the Commission independently.
The Commission acknowledges that this ‘quick fix’ will not be enough to save the carbon price, but it is an immediate measure that can be taken while more long-term solutions are considered.
Climate campaign group CANEurope said it was important for the Commission to get the auctioning delay proposal right. “Waiting until the autumn will give the Commission time to come up with the right number of permits to withhold,” said Julia Michalak, a policy officer with the group. “As a first step, they should delay auctioning at least 1.4 billion emission allowances, which should later be permanently pulled from the market.” If the proposal does not come out before the summer break, only a few months will remain to approve the change before the next ETS phase begins on 1 January 2013. But sources said that a proposal in September could still be enacted in time.