EU Parliament Panel Rejects Opinion to Improve CO2 Market

The European Parliament’s environment committee rejected a resolution to improve Europe’s carbon market and swiftly adopt a climate and energy policy package for 2030.

The panel, which leads parliamentary work on legislation linked to the European Union’s 53 billion-euro ($70.8 billion) emissions trading system, voted 32 to 27 against the non-binding opinion in Brussels today. EU emission permits for December pared gains after the rejection, dropping to 5.64 euros a metric ton from an intraday high of 5.92 euros.

“This is the most worrying result,” Sarah Deblock, EU policy director at the International Emissions Trading Association, said after the vote. “The market needs predictability and they failed to provide it.”

The committee’s verdict comes as the 28-nation EU considers options to improve the world’s biggest carbon market after prices dropped to a record low in April. The Parliament earlier this year backed a short-term rescue plan for the emissions program, known as backloading, overcoming opposition by energy-intensive companies and some member states including Poland.

“Despite previous progress on backloading, the inability of the committee to reach a consensus demonstrates that disagreement still exists between parties on the future of the ETS,” said James Cooper, an analyst at Bloomberg New Energy Finance in London. “Such issues could also slow and complicate any progress on structural measures and the 2030 climate and energy package in the coming years.”

Worst Scenario

The rejection of the resolution, which was meant to express the Parliament’s opinion on a carbon-market report by the European Commission last year, is the “worst-case” scenario, according to Matthias Groote, head of the environment panel. The committee failed to approve it after some members of the European People’s Party, the biggest political group in the Parliament, decided to oppose it, he said.

The EPP could not support the final version of the measure after the panel approved an amendment that called on the commission to propose increasing the EU emissions-reduction target to 25 percent in 2020 from the current 20 percent, according to Eija-Riitta Korhola, a Finnish member of the group.

In 118 amendments to the resolution, members of the committee also proposed steps including improving the EU ETS by setting up an independent authority to monitor the functioning of the market, increasing the pace of carbon reduction and permanent withdrawal of at least 1.4 billion allowances. None of those proposals was accepted.

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