Poland Proposes EU Carbon Price Cap And Floor
Date: 05-Nov-08
Country: BELGIUM
Author: Huw Jones and Pete Harrison
The proposal will not lead to any swift changes, as the scheme is the remit of environment ministers. But finance ministers agreed that a committee of national treasury officials would discuss the request and report back with a plan in December.
EU Economic and Monetary Affairs Commissioner, Joaquin Almunia, said the European Commission was against the proposal as a floor could make the system more expensive, a diplomat said.
But Polish Finance Minister Jacek Rostowski told reporters the proposal had been welcomed by other eastern European nations as well as four western countries including Italy and Belgium.
The ETS accounts for more than 40 percent of total EU emissions, and imposes on industry a fixed carbon quota which it reduces over time as a way to combat climate change.
The scheme allocates emissions permits which companies can buy or sell according to how clean and efficient they are.
The EU is currently reviewing the design of the ETS from 2013, and Poland fears plans to make power generators pay for every tonne of carbon dioxide (CO2) emissions will create heavy costs for its highly polluting coal-fired power plants.
"Given the high probability of significant CO2 price volatility post-2013, there is a need to introduce some kind of safety mechanism," said a Polish document circulated to finance ministers.
"Such a safety mechanism, if well designed, will enable European companies to plan long-term CO2 abating investments and will alleviate the burden imposed on European economies."
A price floor would give certainty to renewable energy companies, allowing them to invest in the knowledge carbon prices will not collapse and they will retain some competitive advantage over fossil fuels, the Polish submission said.
Meanwhile a price cap could reassure energy intensive heavy industries that the cost of carbon would never rise so high as to make them uncompetitive versus rivals in less regulated states, which might force them to relocate abroad.
The Polish text had been prepared for a meeting of finance ministers on Oct. 7, but was never discussed then due to the urgency of dealing with the financial crisis.
Polish government adviser Krzysztof Zmijewski told Reuters the ETS needed floors to prevent the collapse of carbon prices threatening investement in green energy schemes like new technologies to trap and bury CO2.
He also called for mechanisms to prevent speculators such as sovereign wealth funds forcing up carbon prices to make a profit.
-- Additional reporting by Gabriela Baczynska in Warsaw and Marcin Grajewski in Brussels
(Reporting by Huw Jones, writing by Pete Harrison; Editing by Gerard Wynn)