Germany, 6 More EU Nations Said to Hold Key to Carbon FixEwa Krukowska
Germany and six other EU nations hold the key to the decision on a rescue plan for the world’s biggest carbon market after prices slumped due to record oversupply, three EU officials with knowledge of the matter said.
The EU proposal to help emission prices rebound from all-time lows has more prospective supporters than opponents among the EU’s 27 governments, according to the officials. It still needs support from at least some of the seven nations to win approval in a qualified-majority system with votes weighted by each country’s size, they said.
Among the seven countries, Germany, Portugal, Hungary and Malta are undecided, while Greece, Cyprus and the Czech Republic have voiced concerns about the draft measure, said the officials, who asked not to be named, citing policy.
At stake is the fate of the 54 billion-euro ($73 billion) EU emissions trading system after an excess of allowances caused by the economic crisis pushed prices to a record low of 2.81 euros last week, down as much as 91 percent from an all-time high in April 2006. The EU cap-and-trade program doesn’t allow price floors or ceilings.
EU permits for delivery in December dropped as much as 7.1 percent today to 3.53 euros a metric ton and were trading at 3.56 euros as of 11:45 a.m. on London’s ICE Futures Europe exchange.
The strategy to curb the record glut of permits also depends on the European Parliament, whose approval is needed for the first phase of the EU plan. In that stage, the assembly and EU member states are due to vote on a change to the bloc’s emissions trading law to enable postponing auctions of some carbon permits. In the second step, governments would consider a measure setting out the details of the delay, also known as backloading.
“I remain quite skeptical about backloading,” said Matteo Mazzoni, a NE Nomisma Energia Srl analyst in Bologna, Italy. “I won’t be surprised to see another decline in prices when traders’ and operators’ suspicions that the measure won’t get the green light become reality.”
Germany, Europe’s biggest economy, doesn’t have an official position whether to back the EU emergency plan, which pitted the country’s environment and economy ministers against each other. Portugal, Hungary and Malta also remain undecided whether to support the European Commission’s proposal to postpone sales of 900 million allowances from 2013-2015 to 2019-2020, the officials said.
Cyprus, the Czech Republic and Greece voiced concerns about the measure, according to the officials. Should they decide to vote against or abstain, they will join forces with Poland, which already declared it will object to the backloading. The measure amounts to market manipulation, Poland’s Environment Minister Marcin Korolec said last year.
To be enacted, the commission’s proposal needs a qualified majority of 255 out of 345 votes from governments. A blocking minority requires 91 votes.
Poland has 27 votes in the EU system, Cyprus four and the Czech Republic and Greece 12 apiece, giving those nations a total of 55. Germany has 29 votes and Malta three, while Portugal and Hungary each have 12.
A majority of EU nations, including the U.K. and Denmark, are more likely to eventually vote in favor of backloading, according to the officials. Some of those governments signaled conditional support or indicated they would prefer more ambitious measures to strengthen the market, the officials said.
Finland and Slovakia, with seven votes each, said this week that they will support the commission’s plan. Spain, Italy, France and Belgium, which signaled last year that they are in favor of backloading, have 97 votes together. The Netherlands, whose parliament called on the nation’s government to back the commission’s proposal, has 13 votes. Lithuania, which said last month that in principle it has nothing against the plan, has seven votes.