EU Eyes Billions of Euros From CO2 Market for Post-Brexit Budget

(Bloomberg) -- The European Union executive plans to sound out the bloc’s leaders on redirecting part of the revenue generated by auctions of carbon-dioxide permits from national coffers to the common post-Brexit budget.

The move would help plug the EU budget financing hole arising from the U.K.’s departure, by injecting an unspecified part of as much as 105 billion euros ($129 billion) that are projected to be generated by auctions over the seven years after 2021, according to a person familiar with the European Commission’s calculations. The final amount would depend on the exact share of revenues to be shifted to the EU budget and the price of emission permits, said the person, who spoke on the usual condition of anonymity.

The commission plans to outline the option for EU heads of government to debate at a summit on Feb. 23 in Brussels. The bloc faces a gap of about 10 billion euros a year as of 2021 as a result of Brexit. EU Budget Commissioner Guenther Oettinger says the hole should be filled “using 50 percent savings, 50 percent fresh money.”

The Emissions Trading System covers almost half the EU’s discharges of carbon dioxide and is the cornerstone of Europe’s drive to cut pollution blamed for global warming. The program imposes decreasing emission caps on around 12,000 facilities owned by manufacturers and utilities ranging from chemicals maker BASF SE and paper producer Stora Enso OYJ to power generator EON SE and electricity company PGE SA. For every metric ton of carbon dioxide they discharge, emitters have to submit one emission permit, bought at auctions or received for free.

In the 2021-2030 ETS trading period, 57 percent of allowances will be sold at government auctions and 43 percent will be given for free. 

Benchmark permits for delivery in December traded 0.7 percent higher at 9.29 euros a metric ton on the ICE Futures Europe exchange as of 10:39 a.m. in London. They have rebounded from an all-time low of 2.46 euros in 2013 and are forecast to rise further in the coming years as the pollution limits shrink and the EU implements reforms to curb a glut of allowances.

--With assistance from Jonathan Stearns

To contact the reporter on this story: Ewa Krukowska in Brussels at ekrukowska@bloomberg.net.

To contact the editors responsible for this story: Reed Landberg at landberg@bloomberg.net, Nikos Chrysoloras, Jones Hayden

©2018 Bloomberg L.P.