Corrected: Back-loaded carbon permits could avoid quick return

30 May 2014 11:41 Source:ICIS

Correction: The original version of this story stated that back-loaded EUAs are due to be entered back into the market in 2017. The article was corrected to state that back-loaded EUAs are not due back until 2019-2020.

An earlier start to a long-term EU emissions trading system (ETS) carbon market fix could involve preventing temporarily delayed auction carbon permits from coming immediately back onto the market, a senior EU official said.

The European Commission has proposed a 2021 start date for a market stability reserve to address oversupply in its carbon market. The mechanism would work by withholding EU allowances (EUAs) during periods of oversupply and releasing them during undersupply.

The reserve is a more permanent carbon market fix to back-loading, the temporary delay in the supply of 900m EUAs, which began in March.

In the event that the EU decides on an earlier start to the market stability reserve, the back-loaded volume – which is due back in 2019-2020 – would need to be considered.

“We would have to invent a mechanism to translate the back-loaded amount into the reserve,” Jos Delbeke, director at the commission’s climate unit said on the sidelines of a carbon conference in Cologne, Germany on Wednesday.

Delbeke would not comment on the details of how such a mechanism might work.

“We hope that one or the other member states will bring it to the table,” Delbeke said.

It is possible that the European Parliament could decide on whether to implement a market stability by the first half of 2015, Delbeke added, caveating that it is however in the hands of the parliament to determine the pace.

The parliament is reshuffling following elections over 22-25 May.

“We would not stand in the way if the co-legislators [parliament] say we should start earlier,” Delbeke said of the market stability reserve.

The original rapporteur for the reserve, Sophie Auconie, has not been re-elected so a new rapporteur will need to be chosen.

Some nations such as Germany and the UK have called for long-term structural reform of the EU ETS to begin in its third phase.

The commission did not propose the reserve with an earlier start date to avoid destabilising the market, Delbeke said. Ben Lee

By Ben Lee