EU carbon market fix to start in March

The European Commission will begin efforts to prop up carbon prices in the EU Emissions Trading System (ETS) in mid-March under its so-called back-loading plan.

The EC, the 28-nation European Union executive, said it has started preparatory work with member states and exchanges to reduce carbon permit sales by 400 million units this year.

“The auction platforms will publish the revised auction calendars in advance of the start of back-loading,” the EC said on its website, referring to London’s ICE Futures Europe and Germany’s EEX.

“At this stage of the preparations, we expect that back-loading will be implemented as of mid-March,” it added.

Reuters Newsagency reports the EU wants to delay the sale of 900 million permits in the EU carbon market between now and 2016 in a bid to lift carbon prices.

It believes this will incentivise business to curb their greenhouse gas emissions and rebuild confidence in the ETS, the bloc’s main weapon against climate change.

Reuters reports the back-loading plan was approved in January amid fierce opposition from coal-reliant Poland and after months of squabbling by lawmakers in the European Parliament.

Following the plan’s endorsement, the EC asked that the normal three-month scrutiny period required before the bill became law be cut to allow intervention to begin sooner.

That was approved by parliamentarians last week and is now scheduled to get a final nod from EU ministers on February 24.

Reuters reports shortening the scrutiny period paves the way for back-loading to begin next month, which, according to EU rules, will allow 400 million allowances to be withdrawn from government-run sales this year instead of 300 million.

Carbon prices have risen in anticipation of the plan’s approval, with the front-year futures hitting a 13-month high of €6.74 a tonne of carbon dioxide.

While still well below the €30 levels touched in 2008, prices are up by more than a third since December, making carbon one of the world’s top performing commodities so far this year.

The EC proposed back-loading after Europe’s economic slowdown left a massive oversupply of permits that caused carbon prices to crash to under €2.50 a tonne last year.