EU Carbon Pares Gains After Parliament Sets Carbon Vote
European Union carbon permits pared gains after the bloc’s parliament scheduled its first vote on a legal change that would enable the bloc to curb a glut of emission allowances later than regulators had planned.
The European Parliament’s environment committee will vote on the measure on Feb. 19 under the “fastest possible timetable,” Matthias Groote, the chairman of the environment committee, said today in a telephone interview. The plenary vote that needs to follow will take place “as soon as possible” after national governments agree on their position, he said.
EU carbon allowances for December fell to as low as 7.55 euros a metric ton today, a 5.7 percent decline from 8.01 euros just before the announcement.
The European Commission, the 27-nation bloc’s regulatory arm, said in July it expected a decision this year on a draft strategy to curtail a glut of permits that was at the end of 2011 equal to almost half of the average annual pollution limit in the world’s biggest cap-and-trade program.
“This calendar is clearly not as optimistic as could have been expected,” Isabelle Curien, a Deutsche Bank analyst in Paris, said by e-mail. “For now, timing on further steps is very uncertain.”
The commission proposal seeks to help prices in the carbon market recover after they sank to a record earlier this year. The plan, which consists of a proposed 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. The legal amendment also needs approval by the parliament.
The environment committee is next scheduled to meet at an extraordinary gathering on Nov. 12 and will consider a draft report on the proposed amendment on Dec. 17, two days before a deadline to suggest changes. The exchange of views is due to take place on Jan. 23 to Jan. 24.
“We hope that the parliament will look at this as a matter of urgency so that they can speed up their work,” Isaac Valero- Ladron, climate spokesman for the commission, said by e-mail. “The commission will also present options for long-term structural measures before year-end.”
The carbon-permit surplus, which according to the commission reached 950 million tons of carbon-dioxide equivalent last year and could double by the end of this year, may be carried over to the next phase of the EU emissions trading system from 2013 to 2020, also known as Phase 3.
EU permits ended the session at 7.64 euros, 4.6 percent down from the level before the announcement on the parliamentary calendar, and up 0.7 percent from yesterday’s close. The contract lost 28 percent in the past year, also weakened by sales of allowances for Phase 3 from this month.
“Phase 3 auctions are likely to have a much more bearish impact now,” said Konrad Hanschmidt, an analyst at Bloomberg New Energy Finance in London. “The market will need to start absorbing full auction volumes without even a first official signal about the viability of backloading.”
Most European governments haven’t decided yet whether to back the commission proposal, according to the bloc’s presidency. Spain is examining the plan amid concern that it may undermine the predictability of the EU carbon trading rules, Federico Ramos de Armas, the nation’s state secretary for environment, said in Warsaw today.
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