EU Lawmaker Groote Seeks Carbon Rescue Compromise, Lobby Says

Matthias Groote, the lawmaker in charge of a carbon market rescue plan in the European Parliament, is seeking to restrict the proposal to win support in the assembly, according to the Friends of ETS lobby group.

Groote is proposing to keep intervention in the carbon market to a one-time move, according to his draft amendments published by the lobby group, which advocates strengthening the European Union emissions trading system. The emergency measure would postpone the sale of some allowances to reduce a surplus and help emission prices recover from all-time lows.

The amendments also include capping the number of allowances to be delayed to 900 million, as well as a provision that it won’t be implemented if higher carbon costs force companies to move production outside the EU, according to the draft. Representatives of political groups in the Parliament’s environment committee are discussing the plan tomorrow before a June 19 vote in the panel.

“The amendments could tip the balance in favor of the proposal, even though they are unlikely to find formal cross-party support,” Itamar Orlandi, an analyst at Bloomberg New Energy Finance in London, said by e-mail today.

Groote said on his Twitter Inc. account today that he’s building a broad compromise on backloading. The whole assembly is to vote on the carbon fix on July 2 in Strasbourg, France.

Rescue Plan

The carbon rescue plan, known as backloading, has divided EU governments, industry and members of the Parliament. The assembly declined to support the European Commission proposal in April, sending the measure back to the environment committee for further talks.

The European People’s Party, the biggest group in the assembly, said last month it will seek a rejection of the measure again, or to restrict it if attempts to block the plan fail. The EPP needs modifications to the proposal to ensure any short-term action to cut oversupply in the market will be followed by a deeper overhaul of the trading system, Richard Seeber, an Austrian member of the group, said on April 24.

The emissions program should be adaptable to changing economic conditions, and national revenues from permit sales need to be channeled to clean technologies, Seeber said. Groote’s draft proposal also includes a call on the EU to use proceeds from the auction of some delayed allowances for a fund to develop low-carbon technologies.

EU carbon permits for delivery in December dropped as much as 3.5 percent today to 3.90 euros a metric ton on the ICE Futures Europe exchange in London. The contract slumped to a record low of 2.46 euros on April 16. It traded as high as 36.4 euros in July 2008.

The European cap-and-trade program imposes pollution limits on about 12,000 manufacturing companies and utilities in the region, including German utility EON SE and steelmaker ArcelorMittal. Europe’s economic slowdown reduced industrial production and cut demand for pollution rights, boosting the surplus of permits to about 2 billion tons last year, a level almost matching annual supply, according to the EU.