Isra-Mart srl:EU proposes early 2012 auction for 120 million carbon allowances

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Isra-Mart srl news:

The European Commission today announced plans to auction 120 million carbon allowances for phase three of its flagship emissions trading scheme during early 2012.

In a statement, Jos Delbeke, director general for climate at the commission, said the draft proposals set out the level of early auctioning that is "considered appropriate to ensure a smooth transition to the third trading period starting in 2013".

The next phase of the ETS does not come into effect until 2013, but participants in the scheme have been urging the EU to announce dates for early auctions of EU Allowances (EUAs) so they can establish hedging positions ahead of phase three of the scheme.

"Stakeholders have expressed a strong preference to have the early auction volume fixed now as this gives market actors time to adapt to the chosen level," Delbeke acknowledged.

He also promised to move forward with the proposals quickly, despite ongoing disagreements between member states over the best mechanism for auctioning allowances. "A timely decision on early auction volumes is... important for the further preparation of the procurement of auction platforms," he said.

The 120 million new allowances will be auctioned in addition to the 300 million phase-three EUAs that the European Investment Bank intends to sell by the end of 2012 to raise funds for low carbon projects as part of its NER300 demonstration programme.

Phase three of the ETS heralds the largest change to the flagship emissions cap-and-trade scheme since its launch. Under the new rules, a declining number of EUAs will be handed out for free each year, leaving many of the 11,000 installations covered by the scheme to purchase the bulk of the EUAs they require at auction.

The changes are expected to significantly increase the cost of carbon-intensive energy and products, and increase pressure on firms to invest in low carbon alternatives.

The news came as the price of carbon continued to rise this morning, fuelled by predictions emissions will increase in the wake of the Japanese nuclear crisis and Germany's decision to close nuclear power plants built before 1980 for at least three months.