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Flexible supply tool ‘may be EU ETS reform option’

6 Mar 2013, 3.46 pm GMT

Flexible supply tool 'may be EU ETS reform option'

Amsterdam, 6 March (Argus) — The European Commission could consider a flexible supply mechanism as one way to reform the EU emissions trading scheme (ETS), a senior commission official said today.

Other than the six structural measures proposed in its The State of the European Carbon Market in 2012, published in November, the commission would be willing to consider other options, including a flexible supply device focused on managing volume rather than achieving a particular price.

“The commission wouldn't ever close its eyes to an option,” said the climate action department's head of policy co-ordination, Peter Zapfel, at the Argus Emissions Conference in Amsterdam.

Such a supply management system is “not completely outside the remit of current discussions,” given that reference was made to “some kind of reserve mechanism” at a stakeholder workshop in Brussels on 1 March, Zapfel said.

To sustainably tackle the market imbalance more than back-loading is needed — a debate about structural measures is necessary, he said. Many stakeholders seem to think that such a supply management mechanism could offer a possible solution, Zapfel added.

The commission held the first of two consultation meetings on its EU ETS reform proposals on 1 March. The first meeting considered three options — retiring a number of allowances in phase 3 (2013-20), a discretionary price management mechanism, and raising the EU's 2020 reduction target to 30pc from 1990 levels, from 20pc. At the second meeting, scheduled for 19 April, an early revision of the linear reduction factor, extending the scope of the EU ETS to other sectors, and restricting the use of international credits, will be discussed.

But although “it is probably quite easy to agree the general principles of such a mechanism, it is more difficult to implement at an operational level,” Zapfel cautioned.

But the commission official dismissed the possibility of an independent carbon bank and said the idea “doesn't have much of a future in the EU.”

“If such a carbon bank was to be independent of the 27 EU member states, it will require a change of treaty. I don't see that as likely,” he said.

Whether structural ETS measures can be agreed before a 2030 reduction target is decided partly depends on next year's elections, when a new European Parliament and a new commission will be chosen, Zapfel said.

“Among some member states, there is a clear willingness for us to advance the debate, while others are more reluctant,” he added.

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