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Spain Says EU Needs Clear Carbon Rules, Examines Backloading

European Union’s draft plan to curb a glut of carbon permits may endanger the predictability of the bloc’s trading rules and Spain hasn’t decided whether to back the proposal, Environment Minister Federico Ramos de Armas said.

“What we’re asking for are clear rules for our companies that are not changing in an unexpected way,” he told reporters in Warsaw. “We’re studying the proposal, we don’t know the exact terms yet and we don’t know what our decision will be.”

The European Commission, the 27-nation bloc’s regulatory arm, proposed in July a plan to curtail an excess of permits in the world’s biggest carbon market to help prices recover from a record low. The strategy, which consists of a draft change to the EU emissions trading law and a separate measure to delay sales of some allowances as of 2013, known as backloading, needs qualified-majority backing from member states to be implemented.

At stake is the cost of pollution for European companies that have enjoyed record-low prices for the permits they are forced to buy in the EU carbon market to offset their emissions. The economic crisis has hurt industrial output, boosting the surplus of credits to almost half of the average annual pollution limit in the so-called cap-and-trade program, and pushing December carbon to an all-time low of 5.99 euros a ton on April 4.

EU permits for delivery in December rose 4.5 percent to 7.88 euros a metric ton on the ICE Futures Europe exchange as of 14:10 p.m. in London, its biggest daily gain since Aug. 31. The contract has slid 25 percent in the past year.

No Number

The EU hasn’t yet proposed a specific number of permits to be postponed and plans to do so after finishing work on an impact assessment, which will be ready “in the coming weeks,” Jos Delbeke, director general for climate action at the commission, said on Sept. 26. The permits would be returned to the market at a later date in the next trading period, which runs from 2013 to 2020, the commission has said.

To enter into force, the backloading measure would need 255 out of 345 votes in the EU’s weighted ballot system that favors larger member states. A blocking minority requires 91 votes. Spain has 27 votes.

Most member states are still scrutinizing the commission’s proposal after they voiced reservations about the draft change to the law at two meetings last month, an EU presidency official said on Sept. 24.

Poland, which relies on coal for more than 90 percent of its electricity needs, has objected to the carbon-permit supply curbs and Environment Minister Marcin Korolec said in July there’s no need to “manipulate” the market.

Slovakia, Netherlands

Slovakia also opposed the measure, two EU diplomats with knowledge of the talks said last month. The Czech Republic’s Prime Minister Peter Necas said on Sept. 12 his government will probably not support the commission’s plan.

The Netherlands has also signaled it’s unlikely to back the backloading strategy, though some politicians including Bas Eickhout, a Dutch member of the Green group in the European Parliament, has said the country may change its position after a new government is formed following Sept. 12 elections.

France and Belgium both expressed support for the backloading plan last month, said the diplomats, who declined to be identified because the talks were private.

To contact the reporter on this story: Marek Strzelecki in Warsaw at mstrzelecki1@bloomberg.net; Ewa Krukowska in Brussels at ekrukowska@bloomberg.net

To contact the editor responsible for this story: Lars Paulsson at lpaulsson@bloomberg.net

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