EU bids to rescue carbon trading scheme

26 Jul 2012, 7:35 am   -   Source: AAP

Europe is moving to fix its emissions trading scheme, as certificates fail to find buyers amid the region's economic crisis.

The European Commission has moved to fix the EU's sickly carbon emissions trading scheme (ETS), as certificates fail to find buyers due to the recession.

"Is it wise to continue to flood an already oversupplied market? Clearly not," said Europe Union energy commissioner Connie Hedegaard on Twitter.

"That's why (we) propose to change the auction time profile."

Brussels proposes a delay or freeze in auctions of the certificates from 2013 to 2020 to prop up sagging prices.

The ETS scheme, a centre-piece of EU climate policy, was set up in 2003 to discourage polluters and simultaneously raise funds to invest in clean and low-carbon energy, with the certificates being held by industries which can trade them if unused.

But the system is in trouble due to an oversupply of carbon allowances to industries which have slowed down in recessionary times.

Prices on Wednesday were at seven euros ($A8.31) a tonne in comparison to the 24 to 30 euros needed to invest in renewables.

As the scheme widens and goes into its third trading period in 2013, some 8.5 billion tonnes of carbon allowances are to be put up for auction between then and 2020.

Hedegaard sees three options, from a small freeze of 400 million tonnes to a medium freeze of 900 million or a more significant intervention affecting 1.4 billion tonnes.

The European parliament, which is involved in the decision-making, favours the steepest option, which would bring the price up to 14 or 15 euros.

Hedegaard said the change in the timing for auctions was "a short-term measure" to improve the functioning of the market.

"If the political will is there, all the necessary decisions can be taken before the next auctioning phase starts at the beginning of 2013," she said.

But some industrial lobbies, backed by supporters inside the commission, are opposed to any move to prop up prices.

The proposals "are not a good solution", said Eurometaux, the European Association of Metals.

Under the ETS, member states each year allocate two billion tonnes of carbon emissions, or about half of the carbon dioxide emissions produced across the 27-nation bloc.

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