No quick fix for setting minimum CO2 price: Commission

Point Carbon - article online
Tuesday 27 March 2012

The European Commission would not be able to deploy a minimum price for carbon allowances as part of fast-track changes to existing EU law, an official said Monday, dampening prospects for price intervention in the world’s biggest carbon market.

“(Creating) a fixed minimum price level would have to be done through co-decision,” said Yvon Slingenberg, a senior official in the Commission’s climate department, referring to a lengthy lawmaking procedure that often takes two-to-three years.

“If we proposed it as a comitology (implementing) measure, there would be a very easy legal challenge,” she said at an event in Brussels launching a report by think-tank Climate Strategies.

The Climate Strategies report called for a reserve auction price starting at 15 euros to be set alongside a temporary withdrawal of hundreds of millions of carbon allowances to give more certainty to investors and governments.

Slingenberg said EU law only allows for auctions to be postponed if bids are far below prices in the secondary market, a safeguard common in current sales processes.

URGENT MEASURES

EU carbon prices have more than halved in the past year to near-record lows of below 7 euros amid stuttering economic growth.

Weak prices have led to growing calls for a so-called permit set-aside as a fast-track means of boosting prices ahead of wider reform.

The EU Parliament has called on the Commission this year to propose withdrawing an “appropriate” amount of allowances, which could be implemented within four-to-five months if member state officials agree.

A temporary set-aside could be imposed under existing EU law, which allows the Commission limited leeway in determining when permits can be auctioned over the 2013-2020 trading period.

From 2013, member states will collectively sell about 1.1 billion allowances each year as the EU moves away from the current system of freely allocating most permits.

A reserve price should be proposed by the Commission as part of wider carbon market reform, even though this would require a longer period of legislative scrutiny, said Chris Davies, a member of the European Parliament.

“I hope the Commission will bring this forward very shortly,” he told the event.

The European Commission, which devises EU-wide policy, does not currently support any form of direct carbon price intervention, although earlier this month a senior Commission advisor spoke about the long-term appeal of setting a minimum level.

By Ben Garside – This e-mail address is being protected from spambots. You need JavaScript enabled to view it

Brussels