EU Carbon Fix in Energy Report Survives Rejection Attempt

The European Parliament upheld by a margin of three votes a non-binding recommendation for regulators to tackle oversupply of carbon permits in the world’s biggest market.

Carbon prices surged as much as 20 percent after members of the Parliament voted 292 to 289 with 32 abstentions today to keep a reference to a carbon-market intervention in the assembly’s report on the European Union’s energy policy through 2050. The decision came before the 754-seat assembly’s vote scheduled for April 16 on a separate measure drafted by the European Commission that would enable delaying auctions of some carbon allowances to reduce a record glut in the market that pushed prices to all-time lows.

The European People’s Party, the biggest political group in the Parliament, was seeking to remove from the report a call on the commission to amend “if appropriate” the carbon-permit auctioning regulation “in order to implement appropriate measures which may include withholding the necessary amount of allowances.” The party is split on the commission’s legal proposal to alter the auctioning timeline in the 54 billion euro ($70 billion) market, highlighting the controversy over the plan known as backloading, which has also divided governments and industry.

April Vote

“Today’s ballot confirms just how tight the April vote is likely to be,” said Itamar Orlandi, an analyst at Bloomberg New Energy Finance in London. “The margin of only three votes can easily be tipped given 173 members have not expressed their opinion because of abstentions or absence. That is far too narrow for backloading proponents to be comfortable.”

Social Democrats in the Parliament cast 146 votes to keep the reference to a carbon fix in report today, most among political groups in the assembly. Greens and Liberals cast 53 votes each to uphold the supply-curbs call on EU regulators.

EU carbon permits for delivery in December rose to as high as 4.23 euros and were up 7.7 percent at 3.79 euros on the ICE Futures Europe exchange as of 4:39 p.m. in London.

A plenary debate on the first element of the backloading strategy, or a draft amendment to the EU emissions trading law to enable carbon-permit supply curbs, is scheduled for April 15 and a vote will take place the following day, according to the Parliament’s legal database. Should the Parliament issue a positive opinion about the proposal, representatives of the assembly and national governments will start negotiations about the legal change that eventually needs their approval in further votes to be held in the coming months.

Second Element

After a potential deal on the legal amendment has been reached, representatives of member states will get the green light to vote on the second element of backloading, or a measure to delay 900 million of carbon allowances from 2013-2015 to 2019-2020. To be implemented, the plan needs a qualified majority from member states in an EU weighted-ballot system that favors larger nations.

While there are more supporters than opponents of backloading among member, the backing is short of 255 out of 345 votes needed for the measure to pass as several nations, including Germany, remain undecided.

The following is a breakdown of votes on point 91 of the Energy
Roadmap 2050 report, which includes reference to carbon market

GROUP                                        IN FAVOR  AGAINST
European People’s Party                       12       191
Alliance of Socialists and Democrats         146         4
Alliance of Liberals and Democrats            53        13
Greens/European Free Alliance                 53         0
European Conservatives and Reformists          1        38
European United Left-Nordic Green Left        20         5
Europe of Freedom and Democracy                1        26
Independent members                            6        12
TOTAL:                                       292       289
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