EC vies to change auction timings of emission allowances in Europe’s carbon market

25 Jul 2012

European Commission's climate action commissioner Connie Hedegaard

Climate action commissioner Connie Hedegaard has today revealed details of the European Commission’s steps to address what it terms the “surplus” of emission allowances in Europe’s carbon market. The commission has proposed a decision to clarify the provisions of the directive governing the EU Emissions Trading System (ETS) on the timing of auctions of emission allowances.

Back in April, the European Commission initiated a review of the auction time profile of the ETS, itself a key element of the EU’s policy to tackle climate change.

In phase three of the EU ETS, which will run from 2013 to 2020, a large amount of allowances will be auctioned, with the revenues going to member states, according to the Commission.

Hedegaard spoke today in Brussels about how the emissions trading scheme has built up a growing surplus of allowances over the past few years. She said it was not wise to “deliberately continue to flood” an already oversupplied market.

“This is why the commission today has paved the way for changing the timing of when allowances are auctioned.”

Hedegaard declared that this short-term measure will improve the functioning of the market.

“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. After the summer recess, the commission will also finalise the options for long-term structural measures,” she said.

So what exactly is the commission proposing? It is advocating a specific technical amendment to the ETS Directive. Apparently the aim is to clarify that the timing of auctions within a trading period may be changed, in exceptional circumstances, by the commission. It said this would be through amending the regulation on auctioning in order to “ensure the orderly functioning of the carbon market”.

The commission is today also transmitting a draft for a future amendment to the Auctioning Regulation to the EU Climate Change Committee. It said this would be to gather early views from member states, including on the amount of auctioned allowances that should be back-loaded.

The ETS apparently covers about 11,000 industrial installations and 45pc of the EU’s emissions. From this year, aviation is also included in the scheme.

In the third phase of the ETS, emissions from industrial installations also have to be brought down to 21pc below 2005 levels.

Carmel Doyle was a long-time reporter with Silicon Republic