Thirteen of Europe’s biggest companies, including General Electric, Royal Dutch Shell and Statoil, sent a letter urging the European Union to pull 1.4 billion CO2 permits to prop up the carbon market and encourage investment in green technologies.
The letter comes ahead of the European Commission’s review of carbon-permit auctioning rules, an effort to help prices recover from record lows caused by an oversupplied market and the recession, which has reduced industrial activity.
The commission, the EU’s regulatory arm, is considering proposals that would postpone some sales of allowances in the early phase of the next emissions trading period, which runs from 2013 to 2020, Bloomberg reported. The commission has drafted proposals that would delay the sale of up to 1.2 billion carbon allowances, EU sources told Reuters earlier this month.
A fully functioning EU ETS is the main policy tool to achieve the EU’s long-term goal of cutting greenhouse gas emissions by 80 to 95 percent by the middle of the century compared with 1990 levels, the companies wrote in the letter, according to Reuters.
The 13 companies and associations also argued that auction revenues from the ETS need to play a role in funding low-carbon innovation and the transition to a green economy.
Analysts have said carbon allowances must be priced at €20 ($24.94) to encourage low-carbon investment. That’s far off from the record low of €5.99 that carbon prices hit in April. On Thursday, permits traded at around €8, Reuters reported.
Meanwhile, employers’ federation BusinessEurope sent a letter urging the EU to avoid short-term action, such as postponing sales of carbon allowances. Instead, the group said the EU should start a discussion about 2030 carbon-reduction targets.
The EU’s cap-and-trade program has been embroiled in other controversies as well, notably a stand off with the Chinese government over its policy on airline emissions. Earlier this month, China said it would take counter-measures that could include impounding European aircraft if Chinese airlines are penalized for not complying with the EU’s cap-and-trade scheme.