LONDON — The European Parliament approved on Wednesday a measure designed to revive sagging prices and confidence in the European Union’s emissions trading system, the centerpiece of Europe’s effort to cut greenhouse gases and a model for similar systems around the world.
The vote had taken on symbolic importance because the Parliament had shot down a similar proposal in April. That earlier vote meant the carbon trading system, which has been emulated globally as a way of using markets to curb greenhouse gases, was on life support.
The measure passed on Wednesday in Strasbourg by a vote of 344 to 311 after intense lobbying by the European Commission and some national governments, including those of France, Denmark and Finland. It also gained stronger backing from liberal and socialist groups. Among those opposed were the governments of Poland and the Czech Republic, which were wary of the plan’s impact on their energy-intensive industries. A large, moderate group, the European People’s Party, was divided, leading many of its members to abstain.
“This was to some extent a symbolic vote indicating support more broadly for Europe’s carbon policies,” said Stig Schjolset, an analyst at Reuters Point Carbon, a market research firm based in Oslo. A negative vote would have meant “that European policy makers did not want to fix the carbon market and use it as a key tool to combat climate change,” he said.
Richard Seeber, an Austrian with the European People’s Party, voted in favor of Wednesday’s legislation after voting no on the legislation in April. He said he was persuaded by an amendment ensuring that the intervention in the market was “a one-off” and by a requirement that an assessment be made about “carbon leakage,”the extent to which businesses would leave the European Union to avoid the higher permit price.
“It is essential to keep the E.T.S. as the main market-based instrument to fight against climate change,” said Mr. Seeber about the emissions trading system. Mr. Seeber is his party’s spokesman on the environment.
The market for carbon credits reacted positively, surging to about 4.70 euros per ton, or $6.11 per ton, a 9 percent jump for the day, on heavy volume.
The proposal approved Wednesday will attempt to shore up prices for permits to emit greenhouse gases by delaying the auctioning of some of these allowances in the coming years through what is called backloading.
Carbon permits are licenses for companies to release greenhouse gases. The idea behind the European cap-and-trade system is to tighten the amount of permits available each year so as to make polluting more costly, forcing companies to switch to greener technologies.
But Europe’s prolonged economic downturn and generous allocations of allowances have created a glut of permits that cut the price to as low as about 2.75 euros per ton after the negative April vote.
In a sense, the system is working by providing relief at a time of economic stress. But analysts say that a price of 30 euros per ton or higher is needed to persuade companies to switch to cleaner fuels like natural gas, the main alternative to coal for generating electric power. Coal use in Europe boomed last year.
Analysts caution that the number of allowances that will be held off the market, about 900 million, is estimated to be only about half of the surplus of permits that would otherwise have built up by 2020, so it will not by itself shift the carbon market from bear to bull mode.
“I think the backloading itself will have limited impact on prices because the market remains significantly oversupplied,” said Roland Vetter, head of research at CF Partners, a carbon trading firm based in London.
In addition, there are still negotiations with Europe’s national governments and other hurdles to clear before the changes are implemented, perhaps in the early part of next year. “This is a marathon, not a sprint, so today is not the end of the story,” said Miles Austin, the executive director of the Climate Markets Investment Association, an industry group based in London.
Business groups, some of which had lobbied against the measure, were critical of what they described as European Union interference in a market system.
Article source: http://www.nytimes.com/2013/07/04/business/global/european-parliament-acts-to-support-emissions-trading-system.html?partner=rss&emc=rss
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