EU carbon-tax plan just a 'patch': French economist

(PARIS) - The collapse of Europe's controversial market for carbon emissions rights is "an extremely serious" matter and an EU Comission proposal to freeze a related auction for 2013-2015 is simply a "patch" for the problem, a French economist warned lawmakers on Wednesday.

"We are in an extremely serious situation regarding the development of the European quotas market," Christian de Pertuis told the French Senate's finance commission in a hearing.

On Monday, the price of a tonne of C02 traded on Europe's landmark carbon trading market plunged for the first time below five euros ($6.67), a level which discourages investment in renewable energy sources.

The European Commission has asked European Union members to take a position on its proposition to suspend an auction of carbon emissions rights covering the three-year period to underpin prices.

"That would be just patching up the problem, it would resolve nothing," said de Pertuis, who heads a committee that studies issues of ecology and tax policy.

"If you withdraw quotas and them put them back on the market in 2017 or 2018 you will change nothing regarding the balance on the European quotas markets," the economist added.

He emphasised that there was no public authority capable of managing the auctions, and deplored a lack of public will to make the system work.

EU members issue up to two billion tonnes' worth of carbon emissions permits, about half the annual amount produced by EU companies in the steel, chemical and energy sectors.

About 11,000 companies can buy such "pollution rights" if they need to, or sell those obtained for free from their respective governments if they emit less CO2 than anticipated.

On Tuesday, environmentalists charged that airlines made up to half a billion euros in windfall profits last year by passing on a carbon surcharge to travellers despite the EU move to freeze its controversial tax.