EU carbon market review to extend free permits in exchange for local investments, document shows

By Kate Abnett

BRUSSELS, June 10 (Reuters) - The European Union's review of its emissions trading system will extend industries' free emissions allowances, in exchange for them investing in the bloc, according to an internal European Commission document seen by Reuters on Wednesday.

• The EU's ​emissions trading system is the bloc's main tool for ​reducing CO2 emissions, which it does by forcing ⁠industries, power plants, ships and aircraft to buy CO2 permits when they pollute.

• Heavy industries are currently given some ETS allowances for free, to help them compete with foreign companies that do not pay carbon costs.

• The EU had planned to gradually reduce these free CO2 permits, to ensure emissions decrease, but has faced calls from some companies and governments to maintain them to help European firms stay competitive.

• The Commission is due to propose a revision of the ETS on July 15.

• The document said the review would also require national governments to spend more of the revenues they collect from the ETS on decarbonising industries covered by the scheme.

• It will also expand the ETS to cover the EU's "fair share" of emissions from international flights, without specifying further.

• And it will "more comprehensively" redesign a special reserve which regulates the supply of allowances in the ETS, to avoid volatile prices, after the Commission proposed small tweaks in March.

• The review will simplify ETS rules for ship operators and airlines, the document said.

• Other parts of the ETS will be maintained, including a fund that invests in innovative low-carbon technologies, and a system where 10% of the revenues from ETS allowance sales are given to poorer EU countries.

• The Commission will also "consider" gradually adding waste incinerators to the ETS, the document said.

• A Commission spokesperson declined to comment on the document, which was being discussed in a meeting between Commission President Ursula von der Leyen and her EU commissioners on Wednesday.

(Reporting by Kate Abnett and Inti Landauro; Editing by Alison Williams)