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EU Talks on Carbon-Fix Mandate Postponed as Nations Stay Divided

Sept. 11 (Bloomberg) -- Representatives of European Union member states failed to agree on a mandate to start talks with the European Parliament about a draft measure to help boost carbon prices, according to two people familiar with the matter.

Countries including Poland and Cyprus were against the proposal, while nations such as Germany and Spain remained undecided during a meeting today in Brussels of ambassadors to the EU, according to the people, who declined to be identified, citing policy. The Parliament approved an amended version of the measure, known as backloading, in July after carbon prices slumped to a record low in April.

The emergency fix, which would temporarily alleviate oversupply in the European emissions-trading system by delaying auctions of some permits, needs both approval by the Parliament and qualified-majority support from EU governments to be enacted. Lithuania, which holds the EU rotating presidency in the second half of this year, suggested countries accept the Parliament’s amendment with no other changes, according to a statement.

Today’s talks showed nations need “more time to finalize” a position on the measure, according to the statement. “At the request of the member states, the presidency has decided to postpone the discussion on the issue.”

Backloading

EU carbon permits for December erased earlier gains on the delay, dropping from a high of 5.25 euros per metric ton to 5.15 euros as of 3:37 p.m. in London on the ICE Futures Europe exchange. The contract has lost more than 80 percent in the past five years as an economic recession and debt crisis hurt industrial output, cutting into demand for pollution rights and helping inflate the glut of permits to a record 2 billion tons last year.

The cost of pollution is too low to encourage the investment in clean technologies that Europe needs to shift to a low-carbon economy, according to the European Commission.

To temporarily boost prices, the commission, the EU regulatory arm, proposed last year to postpone auctions of 900 million allowances from 2013-2015 to 2019-2020. The proposal has divided member states and industry, with Poland, Greece and Cyprus objecting to the planned market intervention.

In Germany, Economy Minister Philipp Roesler opposes backloading, while Environment Minister Peter Altmaier advocates a move to help prices rebound. Chancellor Angela Merkel said in May she hoped that Europe’s biggest economy would be able to tackle the plan soon after elections on Sept. 22. Other undecided countries include Spain and the Czech Republic.

“The failure to get a mandate is not a surprise, as it was always going to require the backing of countries which are still officially undecided, notably Germany,” said Konrad Hanschmidt, an analyst at Bloomberg New Energy Finance in London.

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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