MEPs reject plans to cut ETS surplus

17th April 2013

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The price of carbon under the EU emissions trading scheme (ETS) is likely to remain at just €3 a tonne for the foreseeable future say experts, after the European parliament refused to back plans to delay the sale of allowances

In a shock vote, MEPs have rejected the European Commission’s proposals to tackle the huge surplus of ETS credits currently depressing the price of carbon and undermining the scheme.

Under the commission’s plans, 900 million allowances due to be auctioned during 2013–2015 would be held back until 2018–2020. “Backloading” the sale of credits in this way would, according to the commission, have counteracted the impact of the excess credits and increased the price of carbon to around €12 a tonne.

Despite support from member states including the UK, Germany and France, MEPs voted against the measure by a margin of 334 to 315.

The refusal to support backloading leaves the ETS in chaos and will result in continued rock-bottom prices for carbon, according to market analysts Point Carbon.

“Backloading is now politically dead and it is very unlikely that any political intervention in the scheme will be agreed during phase III [2013-2020],” said Stig Schjølset, head of EU carbon analysis at Point Carbon.

“We don’t envisage prices rising much above the current €3 mark and they may well drop lower.”

Chris Davies, Liberal Democrat MEP and regular columnist for the environmentalist, claimed that short-term financial concerns had overridden countries’ desire to support low-carbon technologies.

“MEPs have turned their back on the future,” he said. “By refusing to endorse the commission's proposals I fear that MEPs have betrayed Europe's long-term economic interests.”

Party politics also played a role, according to Davies, with UK Conservative MEPs rejecting the Liberal Democrat energy secretary’s calls to support the proposal.

Fiona Hall MEP, leader of the Lib Dem delegation in the European parliament, commented: “British Tory MEPs’ votes to reject the commission’s proposals have pulled the rug from underneath new green technology and undermined efforts to get a global climate change agreement.

"At the point where countries around the globe are introducing their own emission reduction schemes it goes completely against common sense for the EU to effectively abandon its own initiative instead of working to improve it.”

A spokesperson for Decc said that the EU parliament’s decision was disappointing, but that it remained optimistic that changes would be forthcoming to secure the ETS’ long-term future.

“The UK understands that the ENVI Committee [EU environment committee] will now discuss the proposals once more, and hopes that a positive outcome can still be achieved,” said Decc’s spokesperson. “We should now focus on the real issue – the urgent need for structural reform.

“The commission must now bring forward concrete legislative proposals for reform of the EU ETS later this year, following current consultations on its carbon market report.”

According to Decc the UK government supports the cancellation of a significant number of allowances to stabilise the scheme.

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