Europe’s Carbon Market Fix Set for July Second-Chance Vote
The European Parliament will hold a second plenary vote in early July on a stopgap plan to bolster prices in the world’s biggest carbon market after it rejected the draft measure last month.
Representatives of political groups in the Parliament’s environment committee agreed today that the panel will give its verdict on the proposal on June 19, before a vote by the full assembly during the July 1-4 session, lawmaker Matthias Groote said. The plan to curb the oversupply of carbon permits, meant to prevent further price drops before a deeper overhaul of the cap-and-trade system, must be approved by the Parliament and national governments.
“I’ll work very closely with coordinators from political groups to bring it to success,” Groote, who heads the environment committee and oversees the carbon proposal in the Parliament, said in an interview in Brussels.
The emergency carbon market fix designed by the European Commission, the 27-nation bloc’s regulatory arm, has divided member states, industry and the Parliament. The assembly on April 16 sent it back to the environment committee for further debate, reflecting concerns that higher energy prices would deepen the euro-area recession and that intervention would be against the market nature of the program.
EU carbon permits for delivery in December slumped a record 44.8 percent following the vote and extended losses the next day, falling to an all-time low of 2.46 euros a metric ton. The contract lost 6.4 percent to 3.66 euros on the ICE Futures Europe exchange as of 2:49 p.m. in London today. That compares with 25-30 euros expected by European lawmakers when they were setting up the bloc’s emissions trading system, or EU ETS, which started in 2005.
Low carbon-permit prices reduce the incentive for polluters to invest in cleaner technologies needed to meet the EU’s long-term climate ambitions, according to the commission. The ETS ensures a 21 percent reduction of emissions in 2020 by imposing a cap on discharges by about 12,000 factories and power plants. EU leaders have declared the bloc should aim to cut greenhouse gases by at least 80 percent by 2050.
The stopgap plan would help prices rebound by delaying auctions of some permits from 2013-2015 to 2019-2020 after an economic crisis caused a record glut of permits. It includes a change to the EU emissions trading law to confirm the commission’s right to postpone the sale of allowances, which the Parliament is currently considering, and a separate measure to set out the details of delaying, or backloading, the auctions.
Environment and energy ministers from nine countries, including Germany, France and the U.K., called on the Parliament to support backloading by July at the latest and urged the commission to present legislation on a deeper overhaul of the ETS by the end of 2013.
“Although we are clear that market interference should be kept to a minimum, a one-off and targeted intervention now would minimize market uncertainty and distortions, and also promote investment in low carbon technologies,” they said in a joint statement. “A delay could lead to greater costs in the long term to meet EU 2050 objectives.”
The Prince of Wales’s Corporate Leaders Group on Climate Change, which brings together companies including Alstom SA (ALO), Royal Dutch Shell Plc (RDSA), Coca Cola Enterprises Inc. and Unilever NV (UNA), backed the ministers’ call.
“Our investments and business plans for Europe have all been made on the basis that there would be a credible CO2 price,” the companies said in an e-mailed statement. “The fact there isn’t undermines current investments as well as the huge volume of future investments Europe needs to make to ensure its energy security and efficiency, modernize its infrastructure and boost its competitiveness.”
The voting schedule agreed by parliamentarians today allows the assembly and member states to work along a similar timeline to make progress on the measure, said Bas Eickhout, a Dutch member of the Greens group in the Parliament. Representatives of national governments are due to meet in Brussels on May 27 for the next round of talks about backloading.
“We have a chance of getting a good majority in both institutions in favor of the proposal,” Eickhout said in an interview.
Negotiations with member states on the final wording of the proposal in the process known as trilogue would start after the plenary vote, Groote said. Environment Minister Phil Hogan of Ireland, which holds the EU’s rotating presidency, said last month that Groote could urge some changes to the carbon-fix plan to help salvage it.
Parliamentarians agreed today to set May 27 as the deadline for proposing amendments to the draft measure.
Potential options to allay the concerns of those who opposed it in the first vote could include some restrictions on the frequency of intervention in the carbon market, volumes of permits to be delayed or circumstances under which sales could be postponed, an EU official said on April 30.
While most member states favor backloading, they are short of the 255 votes needed in the EU weighted-ballot system to approve the proposal because several nations, including Germany, remain undecided. Chancellor Angela Merkel said yesterday she hoped Germany would be able to tackle the plan no later than the autumn. Poland, Greece and Cyprus are opposed to the proposal.
The spat over backloading heralds a wider struggle to set new climate protection and renewable energy policies after 2020 and threaten to keep emission prices near historic lows. The commission intends this year to propose a new set of goals to reduce greenhouse gases and boost the share of clean technologies in its energy consumption by 2030.
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