The
European Commission is considering auctioning emissions permits from 2011 over
centralised platforms and might cancel auctions if carbon prices are
"abnormally low," according to two leaked documents.
Officials in the EU's executive,
pressured by industry calling for longer-term visibility on carbon permit
prices, are deciding how to arrange auctions ahead of the third phase of bloc's
Emissions Trading Scheme (EU ETS), which starts in 2013.
The scheme is the EU's main tool
for reining in carbon dioxide emissions, blamed for warming the planet. Companies
above their emissions cap must buy carbon permits from firms that have a
surplus.
The scheme's first two phases have
been dogged by teething troubles that included low prices, stemming from an
overall permit surplus and the economic slowdown, as well as windfall profits
for industry as a result of receiving free permits.
As a result, from 2013 the EU will
force utilities to buy at auction most of their permits under a steadily
tightening emissions cap.
"Two central auctioning
platforms are to be developed and established ... a provisional central
platform, the purpose of which would be to auction in 2011 and 2012 allowances
required for 2013," read a letter seen by Reuters. "The other
platform will be the definitive central platform," it added.
A centralised platform, either a
regulated market or a multilateral trading facility, would be a setback for
Britain
and
Germany
,
which had pushed for linked national platforms, and had successfully lobbied
Spain
and
Poland
to support them.
At present, trading is mainly done
over regulated, private exchanges like
London
's European Climate Exchange.
There will be no active price
management but if prices are too low, auctions might be cancelled, both
documents show.
"In case the auction clearing
price is abnormally low, the auction shall be cancelled forthwith and the
auctioned volume shall be distributed evenly over the next four scheduled
auctions," the leaked draft regulation said.
It said the Commission will
determine what amounts to an abnormally low price using a confidential
methodology that can be modified.
"If something goes wrong in
an auction for whatever reason and the price goes below the secondary market
price the auction would be cancelled," Yvon Slingenberg of the EU's
Climate Action division said on the sidelines of a conference in
Amsterdam
.
Auctions will occur at least
weekly using a "uniform, single round, sealed bid," and will be
mainly limited to ETS participants and regulated financial institutions, the
draft said.
To prevent market manipulation, a
maximum bid of 25 percent of allowances could be implemented, and to ensure the
auctions are protected against fraud or abuse, a monitor will be appointed to
supervise.
Getting it right
A spokeswoman said the Commission
was finalising its proposal before seeking the approval of the EU's 27
countries, and it regretted the details had been leaked.
Emissions traders and market
observers praised the plan.
"Getting this right is
absolutely vital for the integrity of the EU's climate policy," said
Sanjeev Kumar of environment think-tank E3G. "The Commission's position is
quite solid. There should be one central platform and no more loopholes."
Seb Walhain, head of environmental
markets at Fortis Netherlands, said: "A centralised platform is good for
the market as it is more transparent and guarantees the proper distribution of
revenues."
By starting auctions from 2011,
the Commission will keep industry happy, particularly utilities which, instead
of receiving them for free, must pay for their permits from 2013.
Auctioning permits from 2011 will
allow utilities to hedge their forward power sales.
(from
EurActiv)