Spain to Decide on Fix for EU Carbon Market in Two Weeks

Spain’s government is discussing whether to back a draft emergency measure to strengthen Europe’s carbon market and will decide about its position in two weeks, State Secretary for Environment Federico Ramos said.

The European Union’s 27 nations and the region’s parliament are considering a proposal to temporarily curb a surplus of emission permits in the world’s biggest cap-and-trade program and to help boost prices from record lows. The measure, known as backloading because it would delay sales of some allowances, has divided governments and industry.

“My minister and I will do our best to find a positive position on backloading or any other measures that help to maintain the EU emissions trading system,” Ramos said in an interview during the Carbon Expo conference in Barcelona today. “The industry department has some doubts and we have to solve them in the next two weeks.”

Spain is one of the key countries in the debate about the carbon fix because of its relative size. To be enacted, the rescue plan requires a qualified majority support from EU member states in a weighted-vote system that favors larger nations. The draft measure would also need approval from the European Parliament, which will hold a second vote on it in July after an initial rejection in April.

“Official support for backloading from Madrid could tip the balance in the upcoming parliament plenary vote if Spanish members were to follow their own government,” Itamar Orlandi, an analyst in London at Bloomberg New Energy Finance, said by email. “A public Spanish commitment to the backloading plan before July 2 could therefore trigger an increased volume of speculative bets ahead of the vote.”

Carbon Gains

Carbon for delivery in December extended gains to as much as 5.2 percent, reaching a three-week high of 3.84 euros a metric ton. They were trading 3.8 percent higher at 3.79 euros on the ICE Futures Europe exchange at 2:02 p.m. in London. The contracts fell to a record 2.46 euros last month.

Following July’s vote by the Parliament, EU governments will need to announce their decision on the European Commission’s carbon market proposal. To be approved by member states, the measure needs 255 out of 345 country votes. Spain has 27, just two less than the bloc’s biggest nation Germany.

Environment and energy ministers from nine countries, including Germany, France and the U.K., called on the EU Parliament earlier this month to support backloading and urged the commission to present legislation on a deeper overhaul of the ETS by the end of 2013.

Corporate Support

The Prince of Wales’s Corporate Leaders Group on Climate Change, which brings together companies including Alstom SA, Royal Dutch Shell Plc, Coca Cola Enterprises Inc. and Unilever NV, backed the ministers’ call.

While the carbon fix has more supporters than opponents among EU nations, its advocates are currently short of a qualified majority as several countries including Germany and the Czech Republic haven’t adopted official positions yet. Poland, Cyprus and Greece, which have a total of 43 votes, have said they won’t back the measure. To stop it, they would have to form a blocking minority of 91 votes.

Germany will decide how to vote after elections in September. Should the country abstain, its 29 votes will effectively count as being against the carbon fix.

It’s important to send a positive message about the EU emissions trading system, Ramos said.

“This is a very useful tool and we should be able to guarantee the future of this tool,” he said. “We are facing an economic crisis, but for us in the environment department it’s not an obstacle to continue the ETS and support backloading.”

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