Don’t count your chickens . . .

Many member states have been planning to use revenue from the planned auction of allowances under the EU Emissions Trading System (ETS).  The UK journal, Energy in Buildings and Industry, reports that introducing a floor price for the scheme risks being seen as a carbon tax.  This was the view of the Director General of DG Climate Action, Jos Delbeke.  The UK was going to unilaterally set a floor price option next year, but this could be deemed a “direct price intervention.”  A new tax requires the endorsement of all 27 member states and the Commission wants to avoid that. Instead, Delbeke favours setting a long term emissions reduction target (say for 2030) which will give more certainty to the market.

Possible changes to the trading system include delaying the auctioning of some allowances for energy intensive industry from 2013 until later in the decade.  This would not require Council approval.

The dilemma for member states is that they were counting on the revenue from auctioning allowances to fund other sustainable energy initiatives.  In the UK alone, policy-makers were expecting to receive £4 billion annually from the auctioning.  That will have a serious effect, to say the least, on financing options, in the UK and probably in other member states too.

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