European Commission Presents Options on EUETS Reform

14 November 2012: The European Commission has presented options for reforming the EU Emissions Trading System (EUETS) to resolve the problem of supply-demand imbalances of emission allowances. The proposal calls for back-loading auction volumes in 2013 to reduce the allowance surpluses that have accrued during the economic crisis, and launching a debate on structural reform measures.

The options are presented in a report titled "The State of the European Carbon Market in 2012," which includes a draft amendment to the EU ETS Auctioning Regulation that would shift auctioning of 900 million emission allowances from the period 2013-2015 to 2019-2020. The report also identifies six options for structural change to the EU ETS, including: reducing the overall EU ETS cap by 1.4 billion allowances between 2013-2014 to bring ambition in line with a 30% reduction in greenhouse gas (GHG) emissions by 2020; retiring some phase 3 allowances permanently; changing the linear factor of 1.74% by which the emission cap under the ETS decreases, resulting in increased ambition over time; expanding to other sectors; reducing access to international credits after 2020; and creating discretionary price mechanisms to provide price support. [EU Press Release] [EU Question and Answer] [European Commission DG-Climate Press Release] [Publication: The State of the European Carbon Market in 2012]