UK Energy Minister Sees Rapid Reform of EU Carbon Market

Plans to accelerate reform of Europe's carbon market could be finalised as soon as April, building on the momentum from last week's EU deal on green energy policy, Britain's energy and climate minister said on Tuesday.

The EU has been debating proposals to strengthen its Emissions Trading Scheme (ETS), meant to be the bloc's sharpest tool in shifting to a low carbon economy but blunted by a surplus of spare pollution permits.

The plan is to set up a mechanism known as the Market Stability Reserve (MSR) to absorb some of the excess and drive up the price of allowances to increase the cost of burning higher carbon fuels relative to cleaner energy.

"I want to see 2030 legislation in place by spring and I don't see any reason for delay, and if you were to see ambitious reform with the Market Stability Reserve (MSR) by April, what a strong signal that would send to the world," Britain's Energy and Climate Minister Ed Davey told Reuters by telephone.

"We just have, as the EU, to use this historical deal."

Davey was speaking on the sidelines of EU environment ministers' talks in Luxembourg on Tuesday to debate the EU's next steps in achieving a global pact to tackle climate change.

The talks come ahead of a U.N. climate conference in Paris in 2015 and interim U.N. talks in Lima at the end of this year.

Last week European Union leaders struck a deal on a new target to cut carbon emissions but the bloc still has to enshrine its 2030 deal into law. The new European Commission, which takes office on Nov. 1, is expected to put forward formal legislative proposals early next year.

Germany and Britain have said they want the MSR reserve to be in place by 2017, earlier than the 2021 start date put forward by the European Commission, the EU executive.

Davey said he might have previously said it would take 18 months to get all the EU players on side, but after the impetus of last week, he thought the process could be much quicker.

"The timetable is potentially by April next year," he said. "Germany and Britain have very similar positions, that it (the MSR) should be brought on line in 2017. France is very close to that. Minister after minister from across the EU is talking about the need to bring in the MSR early."

Poland, however, whose economy relies on coal, is likely to object even though it was offered incentives such as free ETS allowances to sign up to last week's 2030 deal aiming for a cut of at least 40 percent in emissions, compared with an existing 2020 goal for a 20 percent cut versus 1990.

The bloc has already met that target.

Davey reiterated reassurances from other EU leaders that the wording to cut 2030 emissions by 40 percent at least meant there was no way to lower the EU goal. "It was a great deal," he said. "We got the highest common denominator, not the lowest common denominator."

(By Barbara Lewis; Editing by David Holmes)