EU carbon prices surge on hopes of phase III allowance 'set-aside'

The European Commission will wait for final decisions from the European Parliament and Council, not just from the Parliament committees, before it brings forward a proposal to reduce the number of permits in the EU Emissions Trading Systems (ETS), a spokesman said on Friday.

Carbon prices have surged on reports that the European Parliament's industry, research and energy committee (ITRE) is likely to vote through a compromise motion calling on the Commission to reduce or 'set aside' the number of emissions allowances (EUAs) in the ETS phase III (2013-2020).

The positive sentiment created by renewed hopes of set-aside remained in the market on Friday, participants said, with EUAs for December 2012 deliveries up by €0.30 day-on-day to €9.25/tonne of CO2 equivalent, a 12-week high, according to ICIS Heren data.

The compromise amendment says that immediately after the EU's Energy Efficiency Directive comes into force, the Commission should make a report to the European Parliament and to the Council on climate issues, and if necessary, amend the provisions in the EU ETS directive.

"As soon as possible or at the latest before the start of the third phase, the Commission shall, if appropriate implement appropriate measures which may include to withhold the necessary amount of allowances," the compromise amendment states.

The Parliament's environment committee has already made a similar plea to the Commission to take action.

But a Commission spokesman said that while it is "closely following all debates", it will wait for "final decisions from the institutions, not only the committees".

The biggest group in the European Parliament, the EPP, will push for a plenary vote on set-aside before meetings with the Council begin, which means it will likely be April before these meetings start.

And there is a strong split within the Council of EU member states between those in favour of set-aside and those against it.

There are no plans at this stage to discuss set-aside at an Environment Council meeting on March 9, a spokesman for the Danish presidency said.

Instead, Denmark will push EU member states to agree to deeper emissions cut targets under the EU's low carbon 'Roadmap', published by the Commission last year.

Denmark believes the bloc's emissions targets should be agreed before any decision is made about removing allowances for EU ETS phase III, the spokesman said.