Feb. 22 (Bloomberg) -- European Union carbon-dioxide permits pared a decline as Denmark said it will support the bloc’s proposal to curb a surplus of allowances in the world’s biggest cap-and-trade market.
EU emissions permits for December closed 2.1 percent lower at 5.19 euros ($6.8) a metric ton on the ICE Futures Europe exchange in London. The contracts earlier slumped as much as 9.4 percent to 4.80 euros after an auction of permits by Germany failed for the second time this year because bids didn’t meet the unspecified reference price.
The price of carbon has fallen 22 percent this year as EU governments and the bloc’s Parliament wrangle over a law change that would enable delaying the sale of 900 million tons of allowances as a way to support prices. The European Commission, the architect of the measure, has said the cost of carbon has fallen too low to encourage trade in the permits.
“We have chosen to support the commission’s proposal in order to save the carbon market as it struggles with very low prices,” Denmark’s Climate Minister Martin Lidegaard said in a statement published on the ministry’s website today. “We still demand, however, that the commission set out a plan for making structural changes to the market.”
The proposed change to the emissions-trading law makes explicit the commission’s legal right to alter the schedule of carbon auctions. This would allow the regulator to withhold the sale of some permits over the next three years, and then return them to the market in 2019 and 2020 in a strategy called backloading.
The plan has more prospective supporters than opponents among the EU’s 27 governments, though it still needs the backing from some undecided nations to win the qualified majority, three EU officials familiar with the matter said last month. The uncommitted countries include Germany, Hungary, Malta, Portugal, Greece and the Czech Republic.
Backloading also requires the support of the European Parliament where the biggest political group, the European People’s Party, has said most of its members oppose market intervention.
The Parliament’s Environment Committee approved a compromise version of a draft law change in a non-binding decision this week. The committee’s chairman Matthias Groote is yet to decide whether to call a vote next week on pursuing fast-track talks with member states before a plenary discussion.
The EU’s emissions trading system, the world’s biggest greenhouse-gas program by traded volume, may be oversupplied by 1.5 billion tons by the end of this year without action to curb the glut, Jos Delbeke, the European Commission’s director general for climate, said Feb. 6.
The EU introduced its emissions trading system in 2005 to help meet greenhouse-gas reduction targets under the 1997 Kyoto Protocol. The program auctions or allocates for free allowances to factories and utilities, which must surrender enough permits to cover their discharges of carbon dioxide or face fines.
To contact the reporters on this story: Ewa Krukowska in Brussels at email@example.com
To contact the editor responsible for this story: Lars Paulsson at firstname.lastname@example.org