| Sourced From |
Early auctions of carbon allowances for the post-2012 period of the European Union emissions program are not likely to start in 2011 as further work is needed on infrastructure for the sales, according to a senior EU official.
The 27-nation EU, which has given away the majority of allowances since it started the world’s largest cap-and-trade program in 2005, will require most emitters to purchase their allotment of permits in the third phase that starts in 2013 and runs through 2020. European power producers, including Germany’s second-biggest utility, RWE AG, have said they need phase-three permits immediately to hedge their future electricity sales.
“In view of the further work needed, a start of phase 3 auctions in 2011 is hardly feasible,” Jos Delbeke, director general at the European Commission’s climate department, said in a statement today. “The commission is fully committed to ensure a smooth transition to large-scale auctions.”
EU allowances for delivery in December jumped as much as 1.1 percent to 15 euros a metric ton and traded at 14.92 euros at 1:10 p.m. in London. They have gained almost 20 percent this year on signals the region’s economy is recovering from the recession.
Delbeke also said the commission, the EU’s regulatory arm, is planning a meeting with experts and interested parties before the end of this year to discuss the volume and timing for early auctions of carbon permits. A decision on that will be included as an annex to the auctioning regulation that member states agreed on July 14 and the commission formally adopted today.
Emissions Program
The EU emissions program, designed to help fight climate change, imposes CO2 quotas on around 12,000 power plants and factories, requiring those producing more than their allowance to buy more and letting those that emit less can sell their surplus. The EU carbon market was valued at $118.5 billion last year, according to the World Bank.
The bloc will auction around 60 percent of the total number of permits in 2013, according to the commission estimates, and the proportion will increase in coming years. The cap for CO2 discharges for that year has been set at 2.04 billion tons, including aluminum and chemical makers that join the program in the third phase. A further adjustment is planned for airlines that will become part of the system from 2012.
“A successful phasing-in of phase 3 auctions requires striking the right balance between speed and quality,” Delbeke said. “We have managed to get the balance right so far and are eager to continue to do so in the further steps.”
Larger Share
The EU last year agreed to give a larger share of free permits to 164 manufacturing industries to prevent EU companies from fleeing to less-regulated regions, a process known as “carbon leakage.” Manufacturers that aren’t on the list will receive 80 percent of benchmarked allowances for free in 2013 and face an annual decline in that share to 30 percent in 2020.
West European utilities will no longer get free permits in the third phase, while east European power plants will have to buy 30 percent of their permits at auctions, with the amount rising to 100 percent by 2020.
European electricity industry association Eurelectric said in April that the EU should auction as many as 500 million phase-three permits, including allowances from a special reserve for new companies entering the system after from 2013.
The commission said earlier this week that it will sell over the next two years 300 million CO2 allowances from the reserve to help finance projects for carbon capture and storage and renewable energy. The permits may be the first allowances for the next trading period brought to the market.
Preparatory Work
Delbeke said today the commission and member states have already initiated preparatory work on procedures to buy a common platform and a monitor for auctioning phase-three allowances.
In addition to the common platform for auctioning spot permits, the EU may buy one or two joint platforms on a provisional basis to auction forwards and futures, the commission said in July. It’s also possible that one platform will auction more than one of these three products, it said.
“As part of this process, the commission and the member states will also decide whether to procure one or two transitional common auction platforms for the auctioning of futures and forwards until the legal and technical means for delivery of the allowances are in place,” Delbeke said today. “As a first step we aim to have the joint procurement framework agreements in place in early 2011.”
Under the auctioning regulation unanimously agreed in July, EU countries will also be able to apply for permission to run national auctions alongside the common platform. Germany, Poland, Spain and the U.K. had asked for individual auctions.
To contact the reporters on this story: Ewa Krukowska in Brussels at [email protected]; Mathew Carr in London at [email protected].