EU's carbon market suffers after parliamentary vote

Reuters News
Posted: Jan 24, 2013 5:49 AM

BRUSSELS (Reuters) - Carbon prices on the European Union's Emissions Trading Scheme (ETS) sank to another record low on Thursday after European politicians opposed plans to prop up the market.

The price of permits to produce carbon - known as allowances - fell to 2.81 euros a metric ton (1.1023 tons) after a vote in the European Parliament's energy and industry committee.

The vote is not binding, but is the latest sign of the difficulty the European Union is having in reaching agreement on how to intervene in the carbon market.

To try to rescue the ETS, which is meant to be central to the EU's climate change policy, the European Commission has proposed a temporary withdrawal of some of the glut of permits that has undercut the price of allowances.

But some countries and members of the European Parliament oppose withholding permits, a process known as backloading.

While important, Thursday's vote is not decisive.

There will be more important votes on the issue next month in the parliament's environment committee and a committee of representatives of member states.

Member states and parliament will consider the overall proposal, as well as the amendment to the carbon auctioning directive, which is designed to reinforce the legality of the Commission's backloading proposal.

Whether the Commission plan can pass depends on leading member states such as Britain and Germany.

Britain has said the backloading plan is not ambitious enough and wants deep, structural reform. Germany has yet to take a stance as its economy and environment ministries disagree.

Analysts say the Emissions Trading Scheme will limp along, even if it looks to be on its last legs, as it would be as complicated to dismantle it as it is to reform it.

The Commission is working on links with other carbon schemes across the world, including in China and Australia.

On Thursday the Commission submitted a recommendation on beginning formal talks to link up with Australia's system.

(Reporting by Barbara Lewis; editing by Luke Baker)