LONDON — The European Parliament narrowly rejected an effort to raise companies’ costs of emitting greenhouse gases, a potential death blow to Europe’s world-leading effort to combat climate change.
The Emissions Trading System, or E.T.S., in the European Union has been losing credibility even as other countries like China and Australia consider adopting similar measures to help bring down greenhouse gas emissions, which scientists have linked to global warming.
But in the 334-to-315 vote, members of the European Parliament in Strasbourg seemed to focus less on the global implications than on not wanting to add to industry’s energy costs. Natural gas prices in Europe are roughly three times those in the United States, which is benefiting from the shale gas boom.
Advocates of systems like the E.T.S. as the most efficient means of bringing down greenhouse gases conceded that the vote was a severe blow to the European effort.
“This is a crisis in European leadership on the climate issue,” said Anthony Hobley, head of the climate change practice at Norton Rose, a law firm in London. “We have reached the stage where the E.U. E.T.S. has ceased to be an effective environmental tool.”
After the vote, the price of a carbon allowance, which allows a factory to emit one ton of carbon, fell sharply to just above 3 euros per ton from about 4.50 euros per ton an hour earlier.
At that price level, the system was failing in its intended purpose of encouraging companies to cut emissions and invest in clean energy technologies. Analysts say a price of 30 euros a ton or higher is needed to influence companies’ behavior.
Stig Schjolset, an analyst at Thomson Reuters Point Carbon, an Oslo-based research firm, said prices might remain in the current low range “for some time.” He said the current effort to fix the market by withdrawing allowances was “mostly dead.”
“Prices will sink very low – potentially below €1/ton — and liquidity will dry up,” wrote Kash Burchett, an analyst at market research firm I.H.S. in London, in a note. “Europe’s flagship climate change policy tool – will become irrelevant for the near term at least.”
The Parliament turned down a proposal from the European Commission, the executive arm of the European Union, to bolster the price of carbon allowances by withdrawing about a quarter of the allowances scheduled to be auctioned through 2015.
Some industry groups and conservative politicians applauded the defeat of the measure, which would probably have put upward pressure on electricity prices as well as adding to the costs of businesses and consumers.
“Arbitrary interventions in the carbon market would just make it more difficult for businesses to produce cost-effectively in the E.U.,” said Eurochambres, which represents millions of European businesses, in a statement after the vote.
Even before the vote, the price of allowances had plunged from 25 euros a ton in 2008, to 7 euros a year ago, to less than 3 euros earlier this year. The main reason for the collapse is the economic crisis in Europe, which has meant reduced industrial activity and a glut of allowances.
Laura Dzelzyte, a director at CF Partners, a carbon trading and investment firm in London, said those who opposed the measure were concerned about other things than just a technical fix. “It turned into a much larger debate on energy and where Europe stands in terms of its economy,” she said.
Connie Hedegaard, the European Union’s commissioner for climate action, expressed “regrets” for the vote and said it would be sent back to the Parliament’s environment committee for further consideration.
In a statement, the European Socialists and Democrats bloc in the Parliament said it had supported the measure and “expressed their deep concern that a conservative-led majority today failed to act responsibly, not only to make sure we have effective climate policies, but to secure the E.U.’s global leadership against climate change and create an efficient policy framework for those companies investing in energy efficiency.”
Article source: http://www.nytimes.com/2013/04/17/business/global/europe-rejects-carbon-plan.html?partner=rss&emc=rss
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