Campaigners promise to step up calls for wider reforms as European Council provides final rubberstamp for Emissions Trading Scheme (ETS) fix.
The price of carbon in the European Union ETS is set to rise next year, after final approval was granted to plans to delay the auctioning of 900 million carbon allowances in an attempt to tackle chronic oversupply in the market.
The council of member states approved the so-called “back-loading” plan, after the European Parliament last week voted through the new strategy.
The move paved the way for auctions of new EU allowances (EUAs) to be delayed from next year.
Final details on the new timetable for auctions were expected to be finalised early next year.
Analyst firm Thomson Reuters Point Carbon predicted that the changes would push the average price of carbon in the ETS up by around 35 per cent next year to €6 a tonne.
The increase in the carbon price should lead to a modest increases in energy prices across the bloc and make low carbon investments more attractive relative to high carbon investments.
However, analysts have repeatedly warned that the carbon price will need to be significantly higher if it is mobilise large-scale clean energy investments.
Responding to the final approval for the back-loading plan, Britain’s Energy and Climate Change Secretary Ed Davey stressed that further reforms were urgently needed to improve the carbon market.
“The decision by the Council to support back-loading is welcome and I am pleased that both they and the European Parliament have given final approval of this temporary measure,” he said in a statement.
“I look forward to its swift implementation as soon as possible.
“However, we need urgent structural reform to strengthen the EU ETS, and deal with the glut of allowances that is reducing the price of carbon so that it can provide a strong, long-term signal to stimulate low-carbon investment.”
The European Commission is currently looking at a number of proposals designed to provide a permanent fix for the oversupply of allowances in the market.
These could include increasing the EU’s emissions targets to help drive more demand or permanently retiring some allowances to help curb supply.
However, any attempts to more fundamentally reform the market are likely to face stiff opposition from industrial groups who fear they will push up energy costs, while analysts are sceptical changes can be finalised ahead of next year’s European elections meaning a final decision on reforms could be delayed until 2015 or even later.
