EU Carbon Market Reforms Likely by July

Member state disagreements over start can be overcome.

Reforms aimed at raising prices on Europe's carbon market are likely to be agreed by the end of June at the latest, a senior official at the European Commission said on Wednesday.

Peter Zapfel, head of unit implementation of the ETS (Emissions Trading System) at the European Commission, said he had every confidence that the Latvian presidency of the EU would be able to broker an agreement before its rotating EU presidency finishes on June 30.

"I am confident we will see an end to this legislative procedure by the end of the Latvian presidency at the latest," he said at an industry event in Amsterdam.

A committee of the European Parliament voted last month to launch a Market Stability Reserve (MSR) to temporarily withdraw some carbon allowances in 2018, addressing oversupply that has suppressed prices. The permits would be reintroduced to the market if demand improves.

However, member states have not yet agreed on the start date. Britain and Germany are pushing for a 2017 start while coal-reliant Poland is calling for a 2021 start.

Zapfel said that while there is disagreement over the start date there is consensus among member states that the reforms are needed and that and agreement will be found to allow the MSR to become law.

He said plans to launch an innovation fund to help industry adapt to low carbon technologies, and funded by the proceeds of the sale of hundreds of millions of permits, could help to unlock the negotiating process.

Sarah De Block, EU Policy director at industry group the International Emissions Trading Association said progress on a new text is expected soon.

"The council does not yet have a position, there is not a qualified majority for a particular position but that is expected to change by the end of the month," she said at the event.

The EU ETS is central to policy aimed at cutting greenhouse gas emissions by charging for the right to emit carbon dioxide.

An oversupply of permits, exacerbated by weak economic growth across Europe, has hampered efforts to raise carbon prices and thereby spur industries to switch to green energy.

Prices for EU allowances (EUAs) have fallen to less than 7 euros ($9) a tonne from 30 euros six years ago. (Reporting by Susanna Twidale