The European Union is likely to start work on overhauling the world's biggest carbon market in the second half of 2013 once it has reached agreement on a short-term fix to prop up prices, Climate Commissioner Connie Hedegaard said.
Prices of carbon emission allowances, central to EU climate policy, plunged this year as economic recession and slowing industrial production led to a surplus of allowances. Prices have been too low to drive investments in clean energy to help cut greenhouse gas emissions.
Many EU nations "want us to move forward very quickly on the structural options" for a long-term reform of the market, Hedegaard said in an interview on Thursday.
Long-term reform "should be something on the plate for the second half of this year," she said on the sidelines of a conference on climate change in Oslo. She predicted an end to a deadlock over the emergency fix in coming months.
Carbon prices, which fell to a record below 3 euros ($3.90) a tonne, were at 4.3 euros a tonne on Thursday.
MORE SUPPORT
The Commission proposes to bolster the European Trading System (ETS) in the short term by withdrawing allowances from the market temporarily, a move known as backloading.
"More and more member states are announcing that 'yes, we will be supportive'," Hedegaard said. "Somehow it will get solved."
She said, "As soon backloading is adopted, then the next discussion with member states will be on structural options."
The Commission has so far tended to be overly optimistic in its predictions that a solution to the carbon market would be reached.
Last month a committee of EU lawmakers backed the backloading plan but put off drafting the needed laws.
The plan faces opposition from Poland, which relies on carbon-intensive coal for most of its energy. Germany, the dominant EU economy, has yet to take a formal stance.
In Berlin on Thursday, German Chancellor Angela Merkel said the European Union must consider the long-term structure of the market and if necessary take action, hinting that she might be open to holding back permits.
Hedegaard noted that the Commission hosted a meeting last week at which some of the options for long-term overhaul of the carbon market were discussed with industry and environmentalists.
The meeting showed little support for toughening the European Union's goal of cutting greenhouse gas emissions to 30 percent below 1990 levels by 2020 from an existing target of 20 percent.
Less radical solutions for reforms won more support, such as permanently withdrawing surplus emissions or bringing forward a review of a cap on how much big emitters can pollute.
Hedegaard and Norwegian Environment Minister Baard Vegar Solhjell said they would host a meeting in Brussels on July 3-4 with nations interested in aiding U.N. negotiations on a deal to fight climate change, meant to be agreed in 2015.
They said the world was headed toward failure in meeting a goal set by almost 200 nations to limit a rise in temperatures to below 2 degrees Celsius (3.6F) above pre-industrial times, adding that a failure could result in more floods and droughts and rising sea levels.
Hedegaard urged both China and the United States, the top two emitters of greenhouse gases, to do more. The appointment of John Kerry as U.S. Secretary of State could help, since he has a strong record of supporting tougher U.S. action, she said.
