President Barack Obama’s call for Congress to act on climate change may embolden European Union policy makers to fix the bloc’s ailing carbon market, said the president of the International Emissions Trading Association.
A proposal for stricter emissions rules in northeast America may also provide the impetus for EU nations to tackle the oversupply of carbon allowances in the world’s biggest cap-and-trade market, Dirk Forrister, president of the Geneva-based lobby group, said yesterday.
EU carbon permits surged 15 percent in the past two days as the bloc’s policy makers prepare to vote next week on a plan to fix a glut of the allowances that pushed prices to record lows. In the U.S., the Regional Greenhouse Gas Initiative covering northeast states including New York last week proposed a 45 percent cut in its available permits to mend the surplus there.
Obama’s State of the Union address on Feb. 12 referred to a climate-protection law previously sponsored by Republican Senator John McCain, a signal the president is attempting to draw that party into supporting new policy, said Forrister, who was a climate adviser to former president Bill Clinton.
“We still think there is more support for a market-based measure than any other solution,” Forrister said. “What’s missing here is a senior statesman from the Republican side who’s willing to step in and show some leadership.”
Congress should pursue a “bipartisan, market-based solution to climate change,” Obama said in his address. “If Congress won’t act soon to protect future generations, I will.”
The European Parliament environment committee votes Feb. 19 on a proposal that involves postponing the sale of 900 million tons of allowances until the end of the decade. The entire parliament votes later this year on the measure, which must also clear the Climate Change Committee of national governments.
At stake is the reputation of carbon markets as a climate-protection tool, which the EU will struggle to sell in the latest round of global climate negotiations if prices fall to 1 euro a metric ton, said Andrei Marcu, a Brussels-based adviser at the Centre for European Policy Studies.
“Those that sell the emissions trading market short should think twice,” said Andrei Marcu, a Brussels-based adviser at CEPS, said Feb. 13. “The cavalry may be on its way.”
EU carbon permits for December declined 1 percent to 5.20 euros ($6.95) a metric ton today on the ICE Futures Europe exchange in London at 4:30 p.m. They dropped to a record 2.81 euros last month.
Obama said he will order his cabinet to identify new executive actions to combat climate change, including reducing emissions, helping the nation prepare for the worsening effects of global warming and speeding the transition to lower-polluting energy sources.
The U.S. will probably first tackle emissions from coal and natural-gas burning power stations by using its Environment Protection Agency to set new rules, said Nick Robins, head of HSBC Holdings Plc’s Climate Change Centre in London. Lawmakers are already debating a potential carbon tax, he said yesterday in an interview.
“It could go back to cap and trade,” he said.
The EPA may set a total reduction target for fossil-fuel power plants and allow states to decide how to meet those limits, IETA’s Forrister said.
There was a “glimmer of hope” that U.S. coal-fired power stations may in future years be able to buy international emission credits to offset some of their carbon dioxide output, he said, citing rules of California’s carbon market.