EU Lawmaker Sees No Carbon Fix Compromise Before Vote

Political groups in the European Parliament will not propose a new compromise solution on a draft carbon market fix before the full assembly vote scheduled for next month, according to lawmaker Eija-Riitta Korhola.

Korhola, who leads the work on the measure in the European People’s Party, said representatives of political groups were unable to agree on potential changes to the legislative proposal yesterday during their last meeting before the April 16 vote. The Parliament and EU governments are considering a one-sentence amendment to the emissions law to allow curbing a record oversupply in the carbon market by delaying the sale of some permits. The draft plan has divided policy makers and industry.

“We couldn’t find a compromise,” Korhola, a Finnish member of the EPP, the biggest political group in the Parliament, told Bloomberg News in a telephone interview late yesterday. “It would be either a polite way to say no or a shy way of saying yes.”

Carbon prices in the EU cap-and-trade program, the world’s biggest, slumped to a record low of 2.81 euros a metric ton in January amid concerns that the rescue plan will fail. A lack of a deal among representatives of political groups before the plenary vote may mean that the position of parties next month will be similar to their voting pattern in February, when the Parliament’s environment committee discussed the measure.

Temporary Remedy

The committee in a non-binding opinion supported the carbon market rescue plan by 35 to 28, with two abstentions, while transferring the decision on the future steps on the proposal to the plenary. A majority of EPP members in the environment panel voted against the strategy to delay the sale of 900 million carbon permits designed by the European Commission.

The intervention proposed by the EU’s regulatory arm is a temporary remedy that won’t tackle the underlying cause of problems in the region’s emissions market, according to Korhola. The program has been harmed by the overlap of member states and EU policies on renewable energy and energy efficiency that undermine demand for pollution rights, she said.

“If we had signals that the commission wants to forbid renewable energy subsidies, that’d help the emissions system,” she said. “Renewable energy is on the tit. The EU will need to lower its renewable target sooner or later for this energy to be able to reach genuine profitability.”

Trilogue

Korhola’s negative view on the commission’s proposal, known as backloading, may not reflect the opinion of all members of the EPP, according to Jan Frommeyer, an analyst at Tschach Solutions GmbH, the Karlsruhe, Germany-based provider of carbon- market analysis. In the February vote, 7 EPP members voted in favor of the carbon market fix, 15 against and 2 abstained.

“I believe that the plenary will generally accept the environment committee’s report and its proposed amendments,” Frommeyer said by e-mail.

Should the Parliament support the change to the emissions trading law and authorize Matthias Groote, the lead lawmaker on the measure, to begin talks with member states, the two will need to agree on a final version of the proposal in a process known as trilogue. Following a potential deal in the trilogue, the measure will need formal approval by the plenary and by EU ministers in further votes to take place in the coming months.

Adoption of the emissions law change would pave the way for member states to vote on a separate measure to set the details of the carbon market rescue plan. It assumes delaying 900 million allowances at auctions in 2013-2015 and returning them to the market in 2019-2020.

The backloading proposal may fail in the Parliament as members of the assembly remain split and Germany, Europe’s biggest economy, is undecided whether to back the measure, according to Jens Teresniak, an energy economist at Stadtwerke Leipzig GmbH.

“I’m really not that optimistic regarding a majority for backloading in the April 16 vote,” he said in an e-mail today.

To contact the reporter on this story: 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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