European Union diplomats have approved the EU’s plan to remove some of its massive surplus of carbon emission permits from the market, moving a step closer to completion of a long legal process.
The intervention will remove a maximum of 900 million allowances from the EU Emissions Trading Scheme (ETS).
Under Australia’s carbon price laws, currently being repealed by the conservative Liberal-National government, the fixed carbon price reverts to a market based ETS in 2015 and will be linked to the EU market.
Reuters Newsagency reports the pressure of oversupply of the permits has kept prices sitting below €5 a tonne, nowhere near high enough to effect the aim of encourage low-carbon energy.
Utilities have been complaining that gas-fired power plants, which are relatively low in emissions, cannot compete with highly polluting coal.
Lithuania, holder of the EU presidency, said a committee of diplomats had agreed on the deal.
That plan is expected to be signed off once and for all next month, along with a separate process to determine when allowances can be withdrawn.
Lithuanian Environment Minister Valentinas Mazuronis said the agreement would ensure the “good functioning” of the ETS.
“The properly functioning EU ETS will promote reduction of greenhouse gas emissions in a cost-effective and economically efficient manner,” Mr Mazuronis said in a statement.
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It will also drive the transformation towards the low-carbon economy and investments within the EU.”
Agreement on the removal of some of the permit oversupply has taken so long that its impact has been diluted.
It may pave the way, however, for a structural reform that is likely to have more impact.
The European Commission, the EU executive, is expected to lay out plans in January for a supply-adjustment mechanism that would automatically remove permits in the event of a saturated market.
