Diplomats claim that EU countries support changes in the carbon market to reduce price spikes.
According to EU diplomats and a document seen by, the European Union agreed to keep more spare CO2 permits within the emissions trading system of the bloc to 'try to avoid spikes in prices for carbon.
The EU plan was first proposed in April by 'the European Commission' in response to the surge in fuel costs caused by the conflict in Iran, which left governments scrambling to find ways to reduce energy bills.
The ETS is Europe's primary climate policy and not the main cause of rising electricity prices in Europe. However, the changes agreed Wednesday are a response to requests made by governments such as?Poland or Italy to reduce the ETS contribution to electricity costs.
Two EU diplomats said that the ambassadors of EU countries agreed to stop the removal of excess CO2 permits currently on the market.
Instead, spare CO2 permits will be held in a "market stability reserve", which can then be released to the ETS market as a buffer supply.
The ETS requires big polluters in Europe, such as power plants and factories, to purchase permits to cover CO2 emissions. It also trades carbon permits on a daily-fluctuating market.
The excess CO2 permits are deleted if the reserve for market stability (MSR) is over 400 million. MSR will release 75,000,000 extra permits to the ETS if the EU carbon price doubles.
According to a draft agreement, the countries agreed that they would not revoke any spare CO2 permits until 2030.
If there are 800 million or more permits in the MSR by 2031, the excess will not be charged. The?threshold is then reduced each year.
The EU will now negotiate with the European parliament the final rules before they take effect.
In average, ETS accounts for?11% of the electricity bills in EU industries, although this figure is higher in countries like Poland, which rely heavily on fossil fuels. In countries like Sweden, where there is a large amount of nuclear and renewable energy as well as low-carbon power sources, the ETS contributes less to electricity bills.
(source: Reuters)
