EU plan to cut supply of carbon permits passes into law

Date: 27-Feb-14
Country: UK
Author: Ben Garside

A plan to prop up EU carbon prices was published in the official journal of the European Union on Wednesday, enacting into law the so-called backloading measure that keeps on track the European Commission's aim to allow the withdrawal of a maximum 400 million permits this year.

The plan involves cutting the supply of permits to be sold under the EU Emissions Trading Scheme (ETS) in an effort to incentivize more investment in low carbon technologies.

Carbon traders are keenly watching the progress of the implementation of backloading, as its rules mean that a March start would allow this year's total permit withdrawal to be 400 million, whereas an April start would allow only 300 million units to be withdrawn.

Benchmark carbon prices soared 62 percent in the six weeks leading up to the measure being finally approved by lawmakers on Monday, though prices slipped 11 percent to 6.31 euros on Tuesday as traders sold to lock-in profits made in anticipation of the rise.

On Monday, the European Commission said that once backloading was made law it would make an announcement in the following days which auction dates would be the first ones to be affected.

Exchanges must give at least two weeks notice of any change to their auction calendar.

(Reporting by Ben Garside; Editing by Mark Potter) nL6N0LV0LG