In Europe, discussions continue in relation to structural reform
of the European Union Emissions Trading System (EU ETS). The EU ETS
has a growing surplus of carbon credits, estimated at over 2
billion allowances. This has led to a collapse in carbon prices,
and reduced incentive on participants to reduce emissions. The
European Commission has proposed two measures to address this:
Backloading
As a short-term measure, the Commission is postponing the
auctioning of 900 million allowances until 2019-2020 to allow
demand to pick up. This "backloading" of auctions is
being implemented through an amendment to the EU ETS Auctioning
Regulation. Back-loading does not reduce the overall number of
allowances to be auctioned during phase 3, only the distribution of
auctions over the period. In 2014 the auction volume will be
reduced by 400 million allowances, in 2015 by 300 million and in
2016 by 200 million.
