EU drafts plan to end excess carbon permit cancellation

The European Union is considering ending automatic cancellation of excess carbon permits in its emissions trading system, in an attempt to avoid future price volatility, EU officials told Reuters.



The draft plan is part of the EU response to a surge in energy prices triggered by the Iran war. Governments including Poland and Italy have asked Brussels to intervene to curb the contribution of the ETS to electricity bills.



A Commission spokesperson did not immediately respond to a request for comment on the proposed change to the ETS, which is the EU's main policy to reduce climate change. It requires power plants and industries to buy permits to cover their emissions, a cost which is then passed on to consumers.



The draft plan would not cap ETS prices. Rather, it would mean more spare permits are kept in a "market stability reserve" as a supply buffer which could be released if carbon prices spike.