Brussels (Platts)--25Jan2013/630 am EST/1130 GMT

The EU Emissions Trading System "is not going to go away" and the European Commission will include it in the upcoming debate on the EU's 2030 energy policy framework, a senior EC official said late Thursday.

"We have to think before we let the ETS go down," the EC's director-general for climate action, Jos Delbeke, told an industry event in Brussels.

"There is no end date for it in the legislation," he said. "The question is, does it stay on with low prices?"

EU carbon prices dropped below Eur3/mt earlier Thursday after the European Parliament's energy committee rejected the EC's right to change when ETS allowances are auctioned in an advisory vote.

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Carbon prices have been low since the recession reduced output from the industries covered by the ETS and thus demand for allowances. Some observers have claimed the ETS is now on the verge of collapse, but Delbeke disagrees.

"The ETS works as it was intended to work, in reducing emissions at low prices and meeting the emissions cap," Delbeke said.

But "it clears today at too low a price, and we are unhappy about that," he said.

The low prices mean the ETS is failing to stimulate long-term investment in low carbon technologies and innovation, he said.

"We are losing out on a harmonized EU instrument" to support the EU's planned transition to a low carbon economy, Delbeke said.

Instead national governments are finding national solutions, such as the UK's planned carbon floor price, or the energy and carbon taxes "popping up" across the EU, Delbeke said.

EU 2030 ENERGY POLICY BY END-YEAR

The EC has proposed a short-term fix to bolster the carbon price -- holding back ETS allowances from auctions planned in 2013 to 2015 and selling them in 2018 to 2020.

But it is also working on the longer term, with plans to produce a policy paper by the end of the year on what the EU's 2030 energy framework should be, Delbeke said.

"There will be a consultation in the coming months," he said. This will ask which targets -- e.g. renewables, emissions, efficiency -- the EU should have, and which instruments to achieve them.

The consultation will also cover how to strengthen the ETS, he said.

The EU has binding 2020 targets to cut emissions and increase renewable energy use, plus a non-binding 2020 target to improve energy efficiency.

It has a non-binding target to cut EU emissions by 80-95% by 2050, but no targets yet for between 2020 and 2050.

--Siobhan Hall, siobhan_hall@platts.com
--Edited by Jonathan Fox, jonathan_fox@platts.com

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