OREANDA-NEWS. France has altered its price corridor proposal for the EU emissions trading scheme (ETS) to try and gain more traction in the Council of EU member states.

France failed to gain explicit support for its initial proposal from eastern European countries and from usual allies such as Germany, which has indicated its preference for "volume-based" market interventions.

A background note prepared by the Dutch EU presidency at the beginning of this month indicated that not one other country in the council supported the measure, and "suggests exploring options consistent with and complementary to" the market stability reserve (MSR).

This is what [yesterday's report] (https://direct.argusmedia.com/newsandanalysis/article/1273248) by the French carbon pricing task force did. The original French proposal submitted to the council suggested putting allowances into, and releasing them from, the MSR, while the most recent report recognises that re-opening the MSR legislation is "difficult to envisage".

Instead it proposes two other solutions. The triggers would work in the same way under both options — allowances would be held back if an auction reserve price is not met, and released if an upper price trigger is met. But rather than being held back and released from the MSR, this would either happen from the EU's registry, or from a "central bank" for the EU ETS that could buy and release allowances to regulate supply just as such banks do with government bonds to regulate currency supply.

Any such central bank would have to be well funded, given that it would likely have to purchase over 1bn allowances initially to absorb the current surplus in the scheme. The preferred option is one based around the registry, broadly modelled on the method used by the California ETS, the report said.

"In terms of implementation, an amendment to the EU ETS directive would be required to set price levels, but should be complemented by a review of the auction regulations that clarify the technical details," the report, which also proposes the specific wording of the amendment, said. This would enable a soft price collar to be introduced without adjusting the MSR legislation.