EU parliament set to call for carbon market intervention

Reuters News
Posted: Dec 19, 2011 4:19 AM
EU parliament set to call for carbon market intervention

By Barbara Lewis

BRUSSELS (Reuters) - European politicians are expected on Tuesday to vote through an amendment that could pave the way for the first direct intervention in the carbon market, which has sunk to record lows.

Businesses and environmentalists have heaped pressure on the European Commission to find a way of strengthening the EU Emissions Trading Scheme.

It should be the bloc's flagship tool for cutting carbon emissions, but it has collapsed under the burden of a sovereign debt crisis and oversupply, which the amendment would look to tackle by reducing availability of allowances.

With prices of less than 7 euros ($9) per tonne, it is far below the levels deemed necessary to encourage investment in green energy, estimated at anything from 20 to 50 euros.

"We have not voted yet, but I expect broad, cross-party support for the compromise amendment," Dutch Green MEP Bas Eickhout told Reuters.

"A broad majority in the parliament is really concerned about what's going on with the carbon price."

The vote is not yet binding. If passed it would require a further vote next year as well as debate by member state governments.

But it would "send a strong signal," Eickhout said, and could help to overcome deadlock within the Commission, which has stalled for months on the issue.

The Commission would comment "in due course," a spokesman said.

Opposition has come from heavy industry, which benefits from a low carbon price, while firms calling for action have included Royal Dutch Shell, which wants a price high enough to justify the use of technologies such as carbon capture and storage.

Green politicians and other sources have said the vote is more likely to be positive after an earlier amendment proposing the setting aside of 1.4 billion tonnes of carbon allowances was changed.

It now proposes withholding "a significant amount of allowances" before the start of the third phase of the EU carbon market, which begins in 2013.


The 1.4 billion figure dates back to a Commission document from May last year on how to increase the EU's ambition on cutting its carbon emissions.

"A tighter ETS cap would raise the level of environmental achievement and would have the effect of strengthening the incentive effect of the carbon market," the May 2010 text said.

"Reducing (carbon) auctioning rights by some 15 percent over the whole period 2013-2020, representing some 1.4 billion allowances, could be sufficient."

For some environmentalists, such as the wind lobby, raising the EU's green ambitions is the most obvious way to increase the carbon price.

They say the current targets of a 20 percent cut in emissions and a 20 percent increase in the share of renewables in the energy mix by 2020 are not ambitious enough.

The amendment is within the context of the proposed Energy Efficiency Directive, which deals with a third target of improving energy efficiency by 20 percent.

So far the EU is far from achieving that and ironically, progress on efficiency could punish the carbon price further, underlining the need for action to support it.

Denmark, which takes over the rotating EU presidency from the start of next year, has a strong domestic commitment to green energy and has also said the environment will be a priority for its presidency.

Environmentalists are looking to the presidency and the Climate Commissioner Connie Hedegaard, also a Dane, to follow through on the EU's achievement in Durban in bringing the Kyoto Protocol, the only global treaty on tackling climate change, back from the brink.

"In our view it puts a lot of pressure on Europe to act decisively where and when it can on climate and energy policy," Jason Anderson, head of European climate and energy policy at WWF, said of the outcome of the Durban talks.

"With the ETS in dire need of reform, the first opportunity is already upon us." ($1 = 0.7665 euros)

(Additional reporting by Jeff Coelho, Nina Chestney and Ben Garside in London; Editing by John Stonestreet)