Two major environmental groups have called for problems in the EU’s emissions trading scheme (ETS) to be “robustly tackled” in order to avert further deterioration in the region’s carbon market.

WWF and Greenpeace say that unless EU environment ministers intervene to fix the ETS, the scheme will continue to suffer from an excess of carbon allowances – the permits that allow industries to emit greenhouse gases.

An excess of carbon allowances in the market depresses the price of carbon, making it cheaper for companies to emit carbon than to invest in low-carbon technologies.

The allowance excess could last until 2024, say WWF and Greenpeace, and has been caused largely by the economic downturn. The European Commission has proposed removing some allowances from the market, a process called set-aside, but this alone will not be enough to solve the problems, according to Jason Anderson, Head of European Climate and Energy Policy at WWF’s European Policy Office.

“The EU ETS is in urgent need of reparation. Options to intervene should present a long lasting signal to the market and a short term set-aside with a mere reintroduction of the allowances in this trading phase will not do the trick alone,” said Anderson. “The EU Commission’s upcoming proposal to backload or set-aside emission allowances must be accompanied with ideas to effectively cancel these allowances as soon as possible.

“Member states must raise the overall adequacy of EU climate policies and adopt a higher target.”

The excess of carbon allowances in the ETS has caused the price of carbon to fall from around €16/tonne in April 2011 to €6.1/tonne in April 2012.

In addition to set-aside, WWF and Greenpeace want EU governments to reduce the annual ‘cap’ on emissions that the ETS scheme enforces. They have released a report on the ETS and the EU’s climate ambitions to coincide with a June meeting of EU environment ministers.

Earlier in June the European Commission said that the 27-nation bloc should agree green targets for 2030 in order to boost investment in low-carbon technologies.

It fears that the low carbon price and the lack of a framework for renewable energy and carbon emissions post-2020 will result in a slump in investment.