EU tweaks carbon market to attempt to smooth prices

BRUSSELS, April 1 (Reuters) - The European Commission proposed tweaks to the EU's emissions trading system on Wednesday to try to avoid volatile carbon prices, after pressure from governments including Italy to amend the system to curb soaring energy prices triggered by the Iran war.

The EU proposal would end the automatic cancellation of excess carbon permits in the ETS, so that spare permits are kept in reserve as a supply buffer, which could be released in future if carbon prices spike. At present, if there are more than 400 million permits in the MSR, the excess is invalidated.

The proposal must be negotiated by the European Parliament and EU countries before it passes into law.