EU May Cancel Carbon Allowance Auctions if Price Falls Too Low

by | Mar 8, 2010

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emissions4As part of a plan to centralize carbon emissions allowances auctions, the European Union may suspend auctions if allowance prices fall “abnormally low,” according to the World Business Council for Sustainable Development.

The plan, which is to take effect in 2011, would set up no more than two auction platforms through 2013, at which point the EU would decide on a single auction platform.

The plan would also establish two-day spot or five-day futures securities in the auctions, reports Nasdaq.

In the short term, the EU is likely to require that emissions allowances be auctioned in blocks no smaller than 1,000 units.

After the single platform is decided upon, the EU may drop the minimum buy to 500 units.

The EU wants to set up a once-a-week auction, with at least a two-hour window for companies to place bids.

These changes would comprise the third-phase of the EU’s Emissions Trading Scheme (ETS).

The first two phases have seen low prices for allowances because of oversupply. The ETS also has been criticized for giving free allowances to major industrial polluters.

For instance, two groups recently put together a study that shows 10 organizations, primarily in the steel and cement industries, could share a surplus of $4.4 billion of pollution permits by 2012. That study was put together by Sandbag Climate Change and Carbon Market Data.

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