Cyprus to open further talks on CO2 set-aside: official

Point Carbon - article online
27 Mar 2012 11:39

Cyprus will consult stakeholders on how best to cut supply of EU carbon permits should member states fail to agree to support CO2 prices that are trading near record lows, a senior official with the Cypriot government said Monday.

“We (Cyprus) agree about the set-aside but we have to discuss it at all levels and ask the major stakeholders to open a dialogue on how to do it in a fair way,” said Theodoulos Mesimeris of Cyprus’ environment ministry at an industry event in Brussels.

On July 1, Cyprus will succeed Denmark as the presidency of the EU and will have an influential role in all EU policy.

The statement is the first sign that the island state will continue the debate over whether to intervene in the flagging carbon market should member states fail to find a solution before the end of June.

MEPs and ministers are at odds over whether to ask the EU Commission to withdraw up to 1.4 billion carbon permits from the 2013-2020 trading phase to underpin carbon prices and incentivise companies to invest in clean energy.

While the EU Parliament supports the measure, some national governments are concerned that intervention would lead to a rise in electricity prices at a time that companies and households are struggling.

Without a clear signal from member states, the Commission has been reluctant to propose a so-called set-aside, but the Parliament will try to force the measure on to the statute books by June as part of an energy efficiency bill.

The Parliament wants the Commission to work out when and how many allowances could be withdrawn from the 2013-2020 phase of the bloc’s carbon market by the end of this year.

Analysts polled last month said carbon prices could almost treble from current levels to 17 euros by the end of 2013 if 1.4 billion permits were withdrawn, but some suggest the impact could be much more limited if permits are taken out too gradually.

Cyprus’ Mesimeris said further study of the effects of withdrawing permits could help convince more member states to adopt a set-aside.

“We have to see the set-aside as an option, but we must assess the impacts for potential problems such as carbon leakage,” he told the event organised by think-tank Climate Strategies, referring to the risk that higher CO2 prices could drive companies abroad.

The prospect of member states quickly agreeing to cut supply of carbon permits was left in limbo earlier this month after environment ministers failed to reach a united front on a longer term emission strategy.

Mesimeris said the Cypriot presidency would try to hasten an agreement on the 2050 low carbon roadmap by tying talks on the issue to discussions over the next EU budget.

“We have to try to link the multilateral financial framework with the roadmap,” he said, referring to the EU’s proposed budget of 1.025 trillion euros over 2014-2020.

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

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