EU parliament sticks to slow carbon reform timetable

Reuters News
Posted: Oct 16, 2012 1:25 PM

By Barbara Lewis

BRUSSELS (Reuters) - EU politicians have ignored European Commission efforts to hasten plans to bolster the bloc's carbon trading scheme (ETS), in which prices have plunged under a burden of surplus allowances generated by recession, EU sources said on Tuesday.

That means one European Parliament vote, as part of the proposals to prop up the Emissions Trading Scheme (ETS), will not take place until February, after the start of the next phase of the market, which runs from 2013-2020.

Early this month, the Commission said it was in talks to try to accelerate progress.

"They have stayed firm," one source said on condition of anonymity, referring to the Environment Committee vote still scheduled for February 19 next year. Another also said he saw no prospect of a change.

The vote is on an amendment that will reinforce the legality of withholding allowances to deal with the surplus that has driven the ETS down to around 8 euros a tonne, less than half of the levels of about 17 euros in the first half of 2011 and two euros above a record low of 5.99 euros set in April.

While the Commission, the EU's executive, has sought a faster pace in parliament, it too has been accused of not moving quickly enough. Detail on its proposal to hold back temporarily -- or backload -- some permits is not expected before November.

But the Commission has kicked off a fast-track EU process with the aim of getting swift agreement on withholding allowances, and this will continue on Wednesday with another meeting of officials representing the 27 member states.

The vote on February is designed to provide a legal safety net and need not hold up progress in the main debate, officials and analysts said.

"In essence, the Climate Change Committee has the right to do what it's doing. I don't think it (the February vote) will impact the decision too much," Remi Gruet, a senior advisor at the European Wind Energy Association (EWEA), said.

The big decision for the committee is how many allowances to withhold.

A Commission analysis presented three options -- withholding 400 million, 900 million or 1.2 billion allowances over the first three years of the market's next phase.

EWEA sees the need to do more than that. "We're coming to the conclusion the surplus looks to be bigger than the Commission has modelled," Gruet said. "It's very clear for backloading, we need close to 2 billion."

The European Union also needs to deal with a surplus of U.N. allowances called Assigned Amount Units (AAUs).

Analysts say the surplus of AAUs could add very slightly to the weakness of the ETS, but the greater concern was that the bloc's struggles to find a solution would undermine its leadership in the fight against climate change.

Coal-dependent Poland, which has surplus AAUs, has repeatedly opposed anything to stop it keeping them when the first phase of the U.N. Kyoto targets ends at the end of 2012.

EU environment ministers are expected to tackle the issue once again when they meet in Luxembourg next week.

The Cyprus EU presidency said it was trying to broker a compromise, while draft council conclusions seen by Reuters said member states were divided.

Some delegations believe "very strict" rules should apply to any carry-over of AAUs, but "some other delegations are of the view that no limits should apply," the draft said.

(Editing by Anthony Barker)