Skip to main content

European Commission Consults on Structural Options to Strengthen the EU ETS (until 28 February 2013)

With record low prices for CO2 emission allowances and difficult discussions at the European Parliament on the issue of backloading, it is more than crucial that external signals are sent.

The European Commission holds a public consultation until 28 February 2013 which has for purpose to gather comments on the report "The state of the European carbon market in 2012" (COM (2012) 652 final of 14.11.2012), and inputs as to the structural changes required for the survival of the market (following the options defined in the report). The report serves itself as consultation document.

The 2012 report was a mandatory task for the purpose of evaluating the functioning of the EU ETS and the need for regulatory action (see Article 29 of Directive 2003/87/EC) as phase 3 starts in 2013. The market has experienced a surplus due to increasing supply of allowances and international credits (surplus of 955 million allowances in early 2012). The economic recession and budgetary crisis has contributed to putting demand and prices down. The trend should continue, with three regulatory sources of surplus: NER 300 reserves for carbon capture and storage and innovative technologies, the auctionning to meet power sector hedging demand (carbon leakage) and the selling of phase 2 new entrants reserves. The report predicts that, since "emissions in 2012 and 2013 are not expected to change significantly, ... the surplus at the start of phase 3 could be well over 1.5 billion allowances, and even as large as 2 billion allowances." Therefore, the EU ETS is facing a growing structural supply-demand imbalance which requires rapid action.

The report defines 6 non-exhaustive options for structural changes:

1. increasing the EU reduction target to 30% in 2020
2. retiring a number of allowances in phase 3
3. early revision of the annual linear reduction factor
4. extension of the scope of the EU ETS to other sectors
5. limit access to international credits
6. discretionnary price management mechanisms

The different options show that the disease is well advanced, and it is urgent to fix the market through regulatory intervention. The suitability of an international carbon market is also questioned. Finally, the place of the EU ETS as main climate tool should be re-evaluate, as the efforts to finance low carbon technologies and in the same time protect sectors exposed to carbon leakage have weakened the robustness of the regulatory framework of the EU ETS as well as its financial survival.

The text of the consultation mentions that stakeholders meeting may be held in 2013 in order to enable discussions on the structural options to be proposed.


Libellés :

Comments

Post a Comment