Merkel’s Party Opposes EU Proposal for Carbon-Permit Supply Curb

A European Union proposal to postpone the sale of some emissions permits to prop up prices in the carbon market is flawed, said Joachim Pfeiffer, the economic policy spokesman for Chancellor Angela Merkel’s party.

The EU proposal would push up energy and production costs, hurting German industry even as it’s being asked to shoulder a bigger burden in the euro crisis, and “must be prevented,” Pfeiffer said in an e-mailed statement today. “Europe shouldn’t lop off the branch it’s sitting on.”

EU carbon prices have fallen 47 percent in the past twelve months to 7.20 euros ($8.67) a metric ton as the recession has cut demand for permits from factories and power stations. The bloc has a surplus of about 1.4 billion permits by the end of the current 2008-2012 trading period, according to Bloomberg New Energy Finance.

The European Commission wants to temporarily delay the sale of some number of permits to prop up prices, a process known as backloading. The commission said on July 20 it would propose a procedure to allow it to postpone auctions of allowances.

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