The EU's announcement that early auctions are not likely to
start in 2011 was "quite a surprise " and permits from the
reserve, known as NER300, may be the only phase-three allowances
brought to the market before 2013, said Trevor Sikorski, analyst
at Barclays Capital in London.
"There's a question whether there will be anything above
300 million tons in 2012," he said...
+------------------------------------------------------------------------------+
Early CO2 Auctions 'Hardly Feasible' in 2011, EU Says (Update2)
2010-11-12 15:00:49.256 GMT
(Updates with comments from Barclays in fourth paragraph.)
By Ewa Krukowska and Mathew Carr
Nov. 12 (Bloomberg) -- Early auctions of carbon allowances
for the post-2012 period of the European Union emissions program
are not likely to start in 2011 as further work is needed on
infrastructure for the sales, according to a senior EU official.
The 27-nation EU, which has given away the majority of
allowances since it started the world's largest cap-and-trade
program in 2005, will require most emitters to purchase their
allotment of permits in the third phase that starts in 2013 and
runs through 2020. European power producers, including Germany's
second-biggest utility, RWE AG, have said they need phase-three
permits immediately to hedge their future electricity sales.
"In view of the further work needed, a start of phase 3
auctions in 2011 is hardly feasible," Jos Delbeke, director
general at the European Commission's climate department, said in
a statement today. "The commission is fully committed to ensure
a smooth transition to large-scale auctions."
EU allowances for delivery in December jumped as much as
1.2 percent to 15.01 euros a metric ton and were at 14.95 euros
at 2:29 p.m. in London. Barclays Capital said the commission's
statement was "in the longer term bullish for prices" and
could prompt the bank to revise its forecast for EU permits.
The commission, the EU's regulatory arm, is planning a
meeting with experts and interested parties before the end of
this year to discuss the volume and timing for early auctions of
CO2 permits, Delbeke said. A decision on that will be included
as an annex to the auctioning regulation that member states
agreed on July 14 and the commission formally adopted today.
Emissions Program
The EU emissions program, designed to help fight climate
change, imposes CO2 quotas on around 12,000 power plants and
factories, requiring those producing more than their allowance
to buy more and letting those that emit less can sell their
surplus. The EU carbon market was valued at $118.5 billion last
year, according to the World Bank.
The bloc will auction around 60 percent of the total number
of permits in 2013, according to the commission estimates, and
the proportion will increase in coming years. The cap for CO2
discharges for that year has been set at 2.04 billion tons,
including aluminum and chemical makers that join the program in
the third phase. A further adjustment is planned for airlines
that will become part of the system from 2012.
"A successful phasing-in of phase 3 auctions requires
striking the right balance between speed and quality," Delbeke
said. "We have managed to get the balance right so far and are
eager to continue to do so in the further steps."
Larger Share
The EU last year agreed to give a larger share of free
permits to 164 manufacturing industries to prevent EU companies
from fleeing to less-regulated regions, a process known as
"carbon leakage." Manufacturers that aren't on the list will
receive 80 percent of benchmarked allowances for free in 2013
and face an annual decline in that share to 30 percent in 2020.
West European utilities will no longer get free permits in
the third phase, while east European power plants will have to
buy 30 percent of their permits at auctions, with the amount
rising to 100 percent by 2020.
European electricity industry association Eurelectric said
in April that the EU should auction as many as 500 million
phase-three permits, including allowances from a special reserve
for new companies entering the system after from 2013.
The commission said earlier this week that it will sell
over the next two years 300 million CO2 allowances from the
reserve to help finance projects for carbon capture and storage
and renewable energy. The sales, to be managed by the European
Investment Bank, may take place through auctions, on an exchange
or in over-the-counter transactions, the EU said.
Preparatory Work
The EU's announcement that early auctions are not likely to
start in 2011 was "quite a surprise" and permits from the
reserve, known as NER300, may be the only phase-three allowances
brought to the market before 2013, said Trevor Sikorski, analyst
at Barclays Capital in London.
"There's a question whether there will be anything above
300 million tons in 2012," he said. "I don't think it's the
start of a massive bull run. In the longer-term, it's bullish
for prices."
Delbeke said today the commission and member states have
already initiated preparatory work on procedures to buy a common
platform and a monitor for auctioning phase-three allowances.
In addition to the common platform for auctioning spot
permits, the EU may buy one or two joint platforms on a
provisional basis to auction forwards and futures, the
commission said in July. It's also possible that one platform
will auction more than one of these three products, it said.
Auction Platforms
"As part of this process, the commission and the member
states will also decide whether to procure one or two
transitional common auction platforms for the auctioning of
futures and forwards until the legal and technical means for
delivery of the allowances are in place," Delbeke said today.
"As a first step we aim to have the joint procurement framework
agreements in place in early 2011."
Under the auctioning regulation unanimously agreed in July,
EU countries will also be able to apply for permission to run
national auctions alongside the common platform. Germany,
Poland, Spain and the U.K. had asked for individual auctions.
For Related News and Information:
Emission market news NI ECREDITS <GO>
Today's top energy stories ETOP <GO>
European power-markets home page EPWR <GO>
Sustainability, environmental indexes SEI <GO>
--Editors: Jones Hayden, Peter Chapman
To contact the reporters on this story:
Ewa Krukowska in Brussels at +32-2-237-4331 or
ekrukowska@bloomberg.net;
Mathew Carr in London at +44-20-7073-3531 or
m.carr@bloomberg.net.
To contact the editor responsible for this story:
Stephen Voss at +44-20-7073-3520 or sev@bloomberg.net
