London, 15 December 2011:

Some of Europe’s biggest companies on Thursday called on European Commission President Jose Manuel Barroso to support intervention in the EU’s carbon market, where prices have crashed to record lows. Some of Europe’s biggest companies on Thursday called upon European Commission President Jose Manuel Barroso to support intervention in the EU’s carbon market, where prices have crashed to record lows.

The letter, which was sent by the EU Corporate Leaders Group on Climate Change, said policymakers at EU level should withhold the sale of allowances in the third phase of the scheme, which runs 2013-2020.

The group, which includes energy companies, manufacturers and retailers, said the economic crisis meant that carbon prices are now too low to meet their key objectives such as reducing the carbon footprint of power generation and manufacturing.

“Since the EU ETS is a leading symbol of the effort to tackle global climate change and reach Europe’s commitments, it is critical that the European Institutions take decisive action now,” the group said in its letter.

The call by business leaders to support prices in the EU Emissions Trading Scheme (ETS) comes ahead of two decisions next week by European organisations that could have a big impact on carbon prices, which on Wednesday fell to their lowest level ever at 6.30 euros for the benchmark contract.

On Dec. 20, a committee of 64 MEPs will vote on an energy efficiency directive that could include a measure to withdraw up to 1.4 billion EU Allowances from supply in the third phase of the bloc’s carbon market, starting 2013.

And just a day later, the European Court of Justice is to give its final ruling on whether the European Commission was within its powers to include non-European airlines in the ETS.

In Thursday’s letter, the group of companies said the EU needed to “recalibrate” the ETS not only by withholding allowances from third phase auctions but also through consideration of an “auction reserve price,” after 2020.

Such a move would effectively set a minimum price for a large share of permits sold off to power generators and heavy industry.

Corporate leaders also called for the EU to co-ordinate its policies so the ETS would be “re-affirmed as the flagship” of the bloc’s climate policy and reinforce the international credibility of the scheme.

Business leaders also want laws such the EC’s energy efficiency directive to align with EU ETS, amid fears that cutting the bloc’s energy use will mean lower carbon prices unless regulators intervene in the market.

Quoting the EC’s own studies, the corporate leaders said the energy efficiency law, which mandates a series of standards to reduce the use of energy in household appliances, buildings, and manufacturing, could mean a further reduction of carbon prices by 14 percent by 2020.

Ends --

By John McGarrity - Thomson Reuters Point Carbon, with permission.