Isra-Mart srl: European Commission solves stand-off over CO2 market

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The European Union's executive has ended an internal dispute over new energy regulations that had threatened to undermine the EU carbon market, an EU source said on Monday.

Analysis by the European Commission's energy department showed the energy efficiency directive, to be launched on Wednesday, might impact on the EU's Emissions Trading Scheme, its main tool to curb emissions.

The energy efficiency regulation was expected to be so effective in cutting carbon emissions that it would reduce demand for emissions permits, leaving them swilling around in the ETS and depressing prices.

The analysis showed the carbon price falling to between zero and 14 euros a tonne in 2020, from a business-as-usual price of 25. That sparked an internal feud between the Commission's energy department and the climate department, which oversees the ETS.

An EU source said the Commission had solved that dispute on Monday, by agreeing to monitor the impact on the ETS and to ensure it continues to reward low carbon investments.

The latest draft of the energy efficiency rules highlights the need for measures to "recalibrate" the ETS if prices fall too low, the source added, speaking on condition of anonymity.