The European Commission has backed down on plans to establish a centralised platform for auctioning CO2 emission allowances from 2013, allowing Germany, the UK and other large emitters to organise auctions at national level, according to a draft proposal seen by EurActiv.
A draft regulation was presented to EU member states this week (6 April) that would see a joint platform for auctioning carbon permits established during the third phase of the EU's emission trading scheme (EU ETS), which starts in 2013.
As well as creating a single auctioning platform from 2013, the regulation provides for short-term auctioning of carbon futures.
However, the proposal gives EU member states the chance to opt out from the European scheme during the first five years andallows them to auction their share of emission allowances until 2016 at national level.
"No more than two auction platforms" will be established before 2013 in order to allow power companies to hedge their forward electricity sales contracts, according to the draft .
Pressure from Germany, UK
The option to initially opt out of the common platform represents a reversal of the Commission's previous position.
The impact assessment accompanying the draft regulation found that a centralised approach is "the most appropriate model" for auctioning EU allowances (EUAs), in that it minimises costs to both public authorities and bidders and provides simplicity.
Moreover, the absence of a centralised auctioning system could complicate any future negotiations on linking the EU ETS to other cap-and-trade systems as envisaged by the bloc, it added.
However, the Commission caved in to pressure from the EU's largest emitters - the UK, Germany, Poland and Spain - which formed a blocking minority. The group, led by the UK and Germany, are insisting on controlling their own auctions and prefer a system of linked national platforms.
By contrast, the other 23 EU members overwhelmingly favour a single process for auctioning, citing greater efficiency and equal access to all parties.
Experts said the initial opt-out is not significant as it still leads to a common platform.
"This regulation is going in the right direction," said Sanjeev Kumar of E3G, an environment think-tank, arguing that the time derogation is a minor compromise. It simply provides certainty for the UK and Germany, who will be able to continue with their platforms for a few years longer, he added.
"It's not cost-effective for Spain and Poland to create new trading platforms for two or three years," Kumar said, suggesting that both would probably opt for the central platform after all.