EU Considers Ending Automatic Cancellation of Excess Carbon Permits

The European Union is contemplating a revision to its emissions trading system to prevent price volatility by avoiding the automatic cancellation of excess carbon permits. This is amid soaring energy prices due to the Iran war. The plan includes keeping spare permits in a reserve to stabilize the market.

The European Union is proposing a change to its emissions trading system in a bid to address price volatility, according to EU officials. This move comes as part of the response to the recent surge in energy prices, exacerbated by the ongoing conflict in Iran.

The draft plan suggests ending the automatic cancellation of excess carbon permits, instead placing more spare permits in a market stability reserve. These permits would serve as a buffer and could be released if carbon prices spike, without imposing a cap on the prices themselves.

This proposal is still under negotiation within the European Commission and is set for publication next week. The current system, contributing 11% of industrial electricity bills across the EU, has become a point of contention amid soaring energy costs. Permit prices have declined in anticipation of EU intervention and the economic strain caused by the Iran war.