Carbon windfall to go to clean energy: official

MILAN (Reuters) - The European Commission wants to back alternative energy like wind and solar with the money it raises from sales of carbon emissions permits, which could reach billions of euros, a senior EC official said on Wednesday.

Brussels is preparing changes to its carbon trading scheme, its flagship climate change policy, in time for a third trading cycle which starts in 2013.

The scheme has been criticized for allowing power generators to make windfall profits, by passing on to electricity consumers the cost of emissions permits which they got for free.

The European Commission will stamp out that practice from 2013, by auctioning permits rather than handing them out free, potentially raising tens of billions of euros in revenues.

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Brussels plans to spend the money on renewable energy, said Fabrizio Barbaso, deputy director general for energy at the European Commission's energy and transport directorate.

"(We want) to use revenues to promote new technologies for the renewable energy sector," he told Reuters on the sidelines of an energy conference in Milan.

Barbaso said that the EC was still fine-tuning details of the proposed changes, to be announced on December 5, but said that he personally preferred not to give any free permits to electricity producers.

"In my view the best solution will be full (auctioning). I'd prefer to go for a radical change," he told Reuters. "It's still subject to discussion with member states and experts."

Electricty producers have been criticized not only for earning windfall profits but for not investing those in clean alternatives to fossil fuels, and thereby cutting emissions of plant-warming greenhouse gases as the scheme had intended.

Auctioning permits and spending these revenues on renewable energy like wind and solar would help remedy that problem.