Industry and other stakeholders have welcomed proposals for some phase III EU emissions trading scheme allowances (EUAs) to be auctioned next year, before the start of the third phase . The European Commission argues that early auctioning will help ensure a smooth transition from phase II, ending in 2012. It should particularly help power producers to hedge against future price spikes.
The commission has proposed that 100 million to 300 million phase III EUAs should be auctioned in 2012. A consultation that ended last week showed general support for the plan. But it also revealed concern over whether new platforms will be in place in time. And with recession having cut demand not all agree early auctioning is necessary.
Once phase III starts in 2013 power firms will have to buy all allowances at auction. Most industrial participants will have to buy 20%, rising to 70% in 2020.
Power sector association Eurelectric supported early auctioning of close to 300 million allowances. It rejected concerns that the auctions could flood the market, saying the volumes would not be additional.
Eurelectric also raised concerns that the new auctioning platforms and registry infrastructure may not be ready in time. The trade body and international emissions trading association IETA also called for early auctions to test the new systems.
France favoured early auctions subject to clarity on deadlines. But the UK and Germany were worried about extra costs if temporary auctioning platforms need to be created, while Belgium and the Netherlands believed early auctions were not needed.
NGO Climate Action Network warned that early auctions would mean lower revenues from the so-called NER300 allowances for carbon capture and renewable energy projects. The allowances will come from the ETS's new entrants reserve.
The commission's climate action department will now submit a draft amendment to the auctioning regulation that will be scrutinised by a committee of member states. Most stakeholders agree that adoption needs to occur in the first half of 2011.