The European Commission sought Wednesday to force a reduction in the bloc's carbon emissions by delaying the next sale of emission allowances, thus driving up their price.
"We must not flood a market that is already oversupplied," said EU Commissioner for Climate Action Connie Hedegaard.
The economic crisis has hurt industry and reduced greenhouse gas emissions more than expected, leading to a surplus in allowances, the EU's executive said.
Companies in the EU must buy allowances for the right to pollute. There is a finite number of allowances, placing a cap on carbon emissions. But an oversupply of allowances is weakening the incentive for companies to cut emissions.
The proposals, if approved, will delay the auction of 900 million allowances initially planned for 2013-15, as well as offering six alternatives to reduce their long-term availability.
"Because of the oversupply in the market, the emissions trading system (ETS) is not driving energy efficiency and greenhouse technology strongly enough," Hedegaard said.
The six structural reforms proposed for the ETS include: setting more ambitious targets for the next eight years; withdrawing allowances already issued; broadening the ETS to other sectors; and influencing the minimal trading price.
But environmental groups said the proposals were insufficient.
Bas Eickhout of the Greens' alliance in the European Parliament called for "radical action" to "repair the misfiring emissions trading scheme."
"The oversupply of emissions allowances and resulting unrealistically low carbon price mean the emissions trading scheme is failing in its purpose," he said.
Delaying the auction of 900 million allowances was "far too conservative," he added, given that there was already a surplus of 1.5 billion allowances on the market.
Juliette de Grandpre of environmental organization WWF dismissed the proposal as "superficial cosmetics" and warned that the EU faced a "lost decade" in terms of reducing emissions.
The Greens and WWF both backed the long-term option of bringing the ETS in line with a targeted 30-per-cent greenhouse gas reduction by 2020, compared to 1990 levels - one of the six alternatives presented by the commission.
This option would require reducing the cap in allowances by 1.4 billion over the next eight years.
To take effect, the proposal needs to be approved by the European Parliament and member states.
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