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Following talks in Brussels on Tuesday, the next negotiating session on EU carbon market reforms is likely to take place on or close to July 10, a well-placed EU source said late Tuesday.

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The tentative date for the next session follows three-way talks between the EU Parliament, Council and Commission on Tuesday as the EU's decision-making bodies work to overhaul the 31-nation EU Emissions Trading System for the period after 2020.

Efforts to shore up the market follow years of low prices as Europe's regulated CO2 emissions fell more quickly than first envisaged, weighing on demand for carbon allowances and dragging the euro-priced permits down into single digits since 2012.

Tuesday's meeting was one of a series of trialogues -- three-way talks between the EU parliament and Council, facilitated by the European Commission -- which are not public.



"The trialogue today could be considered the first trialogue because the rapporteur wanted to make a start on the file, having replaced Ian Duncan [MEP] and having just taken up the file," the source said in an interview, in reference to the EU Parliament's new lead negotiator for carbon market reforms, UK conservative Julie Girling MEP.

"It's clearly the first meaningful trialogue we've had so far," the source said, following a preliminary meeting on April 4 which came ahead of the start of negotiations on Tuesday.

Representatives from the parliament and council discussed three core issues on Tuesday as well as points that emerged from interim technical meetings, the source said.

The so-called "triangle" of issues are: strengthening the EU ETS; implementing new sources of funding for energy market innovation and modernization; and avoiding the need for unpredictable future cutbacks to free allocation of carbon allowances for Europe's trade-exposed industries.

"What the trialogue didn't attempt to do was reach agreement today. It was to set out the views [of the parliament and council] and try to move on to the next points," the source said, adding: "They tried to keep the momentum going and focus on the key issues."

The negotiations are focused on agreeing the rules for the EU ETS after 2020, and in particular on how to deal with a long-running surplus of CO2 allowances that has kept prices depressed.

"The next trialogue will be around July 10, but it's not yet decided. The date is not confirmed, but it seems to be around July 10," the source said. "We will see if they can align the different approaches of the parliament and council."

The talks are set to extend beyond Malta's six-month rotating EU Presidency, which is set to end Friday before handing over to Estonia.

After the next trialogue in July, further technical meetings will be needed, and these break-out sessions will have to report back into the main negotiations, the source said.

That means at least another trialogue session would be needed after July to draw together the progress made on technical work under the negotiations, and this is likely to happen after the EU summer recess in August, making September a likely candidate for the final talks, at the earliest.

"So the question is whether that further trialogue will be enough to reach agreement, and it's too early to tell for that, at this stage," the source said.

The Parliament and Council must agree on a common text before the reforms can pass into law. Agreement on a common position was expected later in the year and could take place as soon as September.

There is no limit on the number of trialogues, and the negotiations will continue until agreement is reached.

However, political pressure is building to get the reforms across the finish line before the COP23 United Nations climate talks hosted by Fiji, and taking place in Bonn, Germany, running November 6 to 17.

"It would be good for the European Union to have agreement on this before COP23," the source said.

"The EU ETS is a very complicated file and nothing gets agreed on its own. So nothing is agreed until everything is agreed," the source said.

EU Climate Action and Energy Commissioner Miguel Arias Canete said progress had been made Tuesday towards a final deal to effectively reform the EU ETS.

But "more political will [is] needed," Canete said in comments posted on Twitter.

--Frank Watson, frank.watson@spglobal.com
--Edited by James Leech, james.leech@spglobal.com