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MEP's objection could delay emissions back-loading start

20 Jan 2014 18:45:47 | edcm

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An objection against the back-loading of auction supply in the EU emissions trading system (ETS) will be voted on Thursday in a European Parliament committee, a source close to the matter told ICIS on Monday. The move could prevent the measure being fast-tracked and therefore result in a lower reduction of the 2014 auction volume.

Under the profile chosen by EU countries in the Climate change Committee (CCC) earlier this month ( see EDCM 8 January 2014 ), if back-loading starts before the end of Q1, then the 943m to be auctioned in 2014 would be reduced by 42%, or 400m.

Should back-loading start in Q2 instead, the auction volume for the year will be reduced by 300m EUAs, or 32%.

The decision would normally be subject to a three-month scrutiny period during which it is possible for the European Parliament and the Council to file objections, but climate action commissioner Connie Hedegaard asked the two bodies to shorten it to allow the measure to start before the end of March.

However, MEP Paul Ruebig’s objection to the change to the auction calendar to the Industry, Research and Energy (ITRE) committee of the European Parliament and six other lawmakers including Eija-Riitta Korhola, now risks delaying the process.

“This does not necessarily mean that the shortening of the scrutiny period is off the table – but becomes less likely,” said Philipp Ruf, senior analyst EU carbon market at ICIS’ analytics firm Tschach Solutions. “If everything works out smoothly, the scrutiny period could still be terminated end of February and back-loading could start within Q1. But a start within Q2 becomes more likely as some MEPs seem eager to delay the final implementation,” said Ruf.

The objection will be voted by MEPs in the ITRE committee on Thursday morning, and it will be forwarded to the Environment committee if passed, the source said.

The reasons for the objections “are still being drafted”, the source said, so it remains unclear which of the three possible reasons has been invoked. These include the objection that the Commission has exceeded its powers; the new legislation is not compatible with the basic act; or the principles of subsidiarity or proportionality were not respected.

Under the back-loading profile passed by the CCC, if the 2014 auction volume is reduced by 400m, 300m EUAs will be taken out of 2015 auctions, and 200m out of 2016 auctions. If 2014 auction supply is cut by 300m, 350m will be cut in 2015 and 250m in 2016. The entire volume will be then reintroduced in 2019-2020 on top of scheduled annual supply, unless a more gradual re-loading is introduced ( see EDCM 17 January 2014 ). Silvia Molteni

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