November 29, 2021

Europe Acts to Support Emissions Trading System

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.

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British Group Criticizes European Transaction Tax Plan

LONDON — A European tax on financial transactions would fall disproportionately on London firms, a business lobbying group said Thursday, highlighting growing tensions between Britain and its continental allies over banking regulation.

The British government started legal action last month to try to block the European Union’s so-called Robin Hood tax on the grounds that it could ensnare banks from countries that do not adopt the law, including Britain and even the United States. At issue is a clause in the proposal under which the tax would be applied to trades by banks from European countries that sign on to the law, like Germany or France, regardless of where the transaction actually takes place.

The British Treasury says that, for example, were an American bank to trade a British government bond with the London branch of a German bank, then both the U.S. and German banks could be liable for the tax.

A report published Thursday by the London Chamber of Commerce and Industry identified the tax as a problem area of European Union policy, along with employment regulation.

In a survey of 130 London businesses of different sizes and from various sectors, 52 percent said they believed that it was not desirable for Britain to remain in the union under the current terms. But 60 percent favored staying if powers could be transferred from Brussels back to national governments. That is broadly the policy preferred by Prime Minister David Cameron, who has promised to hold a referendum on European Union membership.

The report Thursday said the union’s drive to strengthen the regulation of financial services after the crash had produced “legislative proposals that are particularly damaging for London’s financial services industry.”

The proposed transaction tax “would affect London disproportionally as it is a major hub for euro trading,” it added.

The tax has joined a growing list of financial issues dividing the Continent and the British government. Britain says the country needs a looser relationship with the bloc if it is to stay a member.

Under the proposal, a tax would be imposed of at least one-tenth of 1 percent of the value of all transactions between financial institutions. Derivatives contracts would be taxed at the rate of one-hundredth of 1 percent. The European Commission has estimated the tax could raise 30 billion euros to 35 billion euros, or $39 billion to $46 billion, a year.

Britain refused to sign on to the proposal. But 11 other European Union nations agreed to go ahead: France, Germany, Belgium, Austria, Slovenia, Portugal, Greece, Slovakia, Italy, Spain and Estonia. Transactions would be taxed if there were “an established economic link” between a financial institution and the group of 11 nations — the so-called Financial Transaction Tax-zone, or F.T.T. That would include branches of banks operating outside the zone.

Last month, the British government decided to challenge the tax in Europe’s highest court, the European Court of Justice, even though no detailed agreement was in place among those countries that wanted to implement it.

Emer Traynor, spokeswoman for the European commissioner for taxation, Algirdas Semeta, said she was “fully confident that the F.T.T. as proposed is legally robust. It is fully in line with international tax laws and broad principles already widely used.”

The tax is just one of several disputes between Britain and the European Union about financial services. Earlier this year Britain found itself isolated over moves to cap bankers’ bonuses. Britain has a separate legal challenge against the European Central Bank over its plans to prevent some euro-denominated securities from being cleared outside the 17 European Union countries that share the euro — in that way excluding Britain, which has kept its own currency.

The British government is also resisting new rules to rehabilitate troubled banks, which would mean creating national funds to pay for bank resolution costs. And a long-standing plan to harmonize the base on which corporate tax is levied in Europe is also a point of contention between Britain and Brussels.

Tension with Brussels has grown during an economic crisis seen by many continental Europeans as the product of freewheeling financial services. The result was pressure for tougher regulation and, in the case of the Robin Hood tax, measures to recoup cash from the industry. The euro zone’s debt crisis is also forcing the 17 European Union countries that use the currency to integrate more closely in areas like banking, raising issues for member states outside the monetary union.

“On the one hand it shows the dangers of disengaging from the E.U.,” said Philip Whyte, senior research fellow at the Center for European Reform, a research institute in London, who argues that Britain feels increasingly beleaguered on issues related to financial services.

“At the same time, it gives a lot of ammunition to those saying that the E.U. is a hostile force to Britain. ‘Let’s get out and develop closer links with faster-developing parts of the world economy.’ ”

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European Union Seeks to Remove Market Obstacles

BRUSSELS — Seeking to spur growth in the single market introduced nearly two decades ago, the European Commission on Wednesday proposed a dozen measures to dismantle barriers still obstructing the free flow of people, goods and services in the European Union.

In announcing the proposals, all of which need approval from national governments, José Manuel Barroso, the commission president, called on countries to reject the lure of economic nationalism and help open up their markets.

“The single market is not just another policy area,” Mr. Barroso said. “It is what makes Europe real for citizens and businesses.”

The proposals include plans to allow professional qualifications in one country to be recognized in another, as well as efforts to encourage consumers to shop online from Web sites in other European countries.

The list of proposed measures was a vivid reminder of the problems of doing business across borders in the 27-nation European Union, which has almost 500 million consumers.

Mr. Barroso acknowledged that several of the ideas proposed had been “around for quite some time,” but had yet to be acted upon.

That underlines the likely political difficulties in winning agreement from national governments on the proposals, which also include coordinating corporate tax rules, standardizing public procurement procedures and establishing a unitary patent across the European Union.

Mr. Barroso acknowledged that “times of economic crisis provide sometimes a strong temptation to roll back the single market. And we have seen that coming from some member states recently.”

“In these times, many like to question competition rules, exploit the missing links and seek refuge in economic nationalism,” Mr. Barroso said. “That is exactly the wrong approach.”

Europe’s single market was put in place on Jan. 1, 1993. The proposals announced Wednesday would require new legislation or revision of old laws, and the goal is to complete them by Jan. 1, 2013.

“We don’t want the anniversary to be a moment of nostalgia,” said Michel Barnier, the European commissioner for the internal market. “We want to be dynamic and proactive.”

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