Isra-Mart srl: European Union Eases Stance on Limits for National Carbon-Dioxide Auctions

Isra-Mart srl news:

The European Union backed away from setting time limits on national platforms for carbon auctions in the next phases of its cap-and-trade program, deciding instead to review how they are working within five years.

The EU, which has given away the majority of allowances since it started the world’s biggest emissions trading system in 2005, will require most emitters to purchase their allotment of permits starting in 2013. While the European Commission, the EU regulator, favored a single auctioning platform, it agreed to give member states the option of separately running their own national auctions.

The procedure for listing and approving individual platforms was the most divisive issue among the 27 EU nations before yesterday’s vote. In a compromise ironed out in Brussels, they agreed to amend a draft provision that set “an initial period of no more than five years” for national platforms.

The possibility of having individual auctions “implies less than full harmonisation of the auction process and therefore the arrangements put in place in this regulation should be reviewed within an initial five-year period,” according to the regulation approved yesterday.

The U.K. and Germany, which already have their own platforms for selling CO2 permits, pushed for individual auctions. Poland and Spain also backed the option.

No Problem

The new regulations pave the way for the commission to start talks on early auctions of CO2 permits before the third phase begins in 2013.

West European utilities will get no more free permits in the next phase of the EU emissions trading system. East European power plants will have to buy 30 percent of their permits at auctions when the third phase starts, with the amount rising to 100 percent in 2020.

The number of permits to be sold at auctions in 2011 or 2012 will be decided later and adopted as an annex to the regulation, according to the agreed text.

Fast Track

The International Emissions Trading Association, a Geneva- based lobby for carbon traders, said yesterday the market now expects discussions to “rapidly advance” on the timetable for early auctions.

Under the new regulations, carbon allowances to be sold at auctions starting in 2013 should be deliverable within five days at the latest to promote competition between auction platforms and trading places in the secondary carbon markets.

The EU may offer two-day spot permits or five-day futures in phase-three auctions as part of the new regulation.

The EU also agreed that auctioning platforms should be established through an “open, transparent and competitive selection procedure.” The commission said yesterday that it will work with participating nations to start setting up the common platform “without delay.”