* Withdrawal of 900 mln permits should limit volatility
* Commission outlines six plans for deeper reform
* Long-term fix could take years, backloading can be quick
BRUSSELS, Nov 14 The EU carbon market must have
clarity before the year-end on a short-term plan to revive a
scheme that has lost its power to drive greener energy, the
European Union's climate boss said on Wednesday, as she outlined
plans for much deeper reform.
The Commission proposed on Monday to defer the auction of
900 million allowances that would have been sold between 2013
and 2015, the first three years of the next phase of the EU
Emissions Trading Scheme (ETS).
In a process known as backloading, they would instead be
auctioned at the end of the phase, in 2019-2020, to tackle a
glut of allowances caused by the economic slowdown in Europe.
"Market operators must have clarity before year-end on
this," European Climate Commissioner Connie Hedegaard said in a
"At the same time, the Commission presents options for
possible structural measures that can provide a sustainable
solution to the surplus in the longer term."
The temporary solution in theory is relatively quick and
easy, in line with what the Commission sees as an urgent need to
reform the market.
"Our carbon market is delivering emissions reductions. But
because of the oversupply in the market, the ETS is not driving
energy efficiency and green technologies strongly enough,"
Hedegaard said. "This is bad for Europe's innovation and
The Commission decided on holding back 900 million
allowances, even though some market participants had called for
deeper cuts to address the surplus.
"Backloading 900 million allowances is expected to have a
more proportional impact, temporarily leading to a better
balance between supply and demand and resulting in a more
gradual build-up of the structural surplus, thereby reducing the
risk of market price volatility in the transition to phase 3,"
Phase 3 covers the period 2013-2020 for the ETS.
Deeper structural reform is considered by many to be
necessary but could take years, making it unlikely to be
achieved before the current European commissioners end their
term in 2014.
The Commission's views on long-term change for the scheme
emerged last month in a draft seen by Reuters.