Commission unveils plan to address ETS allowance surplus

As expected the European Commission today outlined its plan to bolster the carbon price in the European Union’s (EU) Emissions Trading Scheme (ETS) by tackling the surplus of allowances, reports Reuters.

The Commission, the EU's executive body confirmed it was proposing to alter the auction timetable to delay the release of new allowances.

It is also seeking clarification of an article governing the timetabling of auctions within the ETS law.

No firm numbers were given in the draft proposal, but according to Reuters, a Commission analysis has assessed the possibility of withdrawing 400m, 900m or 1.2bn allowances. Environmental groups have made the case for removing 2bn allowances or greater.

"The EU ETS has a growing surplus of allowances built up over the last few years," Connie Hedegaard, the climate commissioner, said. "It is not wise to deliberately continue to flood a market that is already oversupplied."

The EC is expected to present a report later this year on the ETS to kick-off the debate on what deeper structural reforms will be required following this short-term fix.

The Commission will need to seek EU Member States’ approval for its ETS proposals before they can take effect.

However, this may prove particularly challenging with countries such as Poland and the Czech Republic, which remain heavily dependent on coal for their electricity supply.

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