symbolic importance

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.

Article source: http://www.nytimes.com/2013/07/04/business/global/european-parliament-acts-to-support-emissions-trading-system.html?partner=rss&emc=rss

OPEC Keeps Lid on Oil Production Targets

The lack of even modest action was a setback for Saudi Arabia, which had argued for a change in production quotas that had been set nearly three years ago. But it is likely to have little more than symbolic importance since the organization is now pumping about 1.5 million barrels above the quota levels anyway and Saudi Arabia has been increasing output the last several weeks by an estimated 200,000 barrels a day.

Iran led the bloc of countries that opposed changing the quotas, even though it has been exceeding its own allotment by about 50,000 barrels a day for more than a year to raise funds to counter economic sanctions. Some oil experts said that Iran, which holds the presidency of the Organization of Petroleum Exporting Countries this year, was merely maneuvering to undercut Saudi Arabia, its traditional adversary.

Oil benchmark prices rose in response to the surprise outcome, but only modestly, by a bit more than a dollar a barrel.

“Everybody in OPEC is cheating and everyone knows that,” said Fadel Gheit, an Oppenheimer oil analyst and managing director. “Don’t listen to what they say, but watch what they do.”

The decision comes at a time when international oil markets are tightening, with stockpiles declining in much of the world. The United States Energy Department estimated this week that world oil consumption will grow by 1.7 million barrels a day, mostly due to increasing use of oil for electricity generation in China, Japan and the Middle East.

In the meantime, the turmoil in Libya has taken over 1.3 million barrels a day off of the world market, and unrest in Yemen and Syria have subtracted as much as 300,000 barrels a day.

The International Energy Agency, the Paris-based organization that represents industrial countries, reacted to the OPEC inaction with concern. “We have noted with disappointment that OPEC members today were unable to agree on the need to make more oil available to the market,” the IEA said in a statement. “A further tightening in the market and potential increases in prices risk undermining economic recovery.”

But the organization also noted that “what really matters is actual supply.”

Ever since Libyan exports slowed around March, Saudi Arabia has assured importing countries that it would bolster production. As the only OPEC member with considerable spare capacity, estimated at 2.5 million to 3 million barrels a day, Saudi Arabia is the only OPEC member that has the ability to bolster supplies and curb price increases.

“In the end, it’s all about how much extra oil Saudi Arabia can or is willing to put on the market,” said Amy Myers Jaffe, a Rice University energy analyst. “Who cares what Iran says? It doesn’t matter. The countries produce whatever they think is best for their individual financial needs and long-term strategy.”

Iran was able to block Saudi Arabia in large part because it holds the presidency. The organization is likely to meet again within three months in Iran to reconsider its decision.

Relations between Iran and Saudi Arabia, never particularly warm, are tense these days over the sectarian turmoil in Bahrain. Saudi Arabia sent more than 1,000 troops into Bahrain in March to help put down predominately Shiite protests against the Sunni monarchy. Saudi Arabia blames Iran for inciting the protests, and Iran has harshly criticized Saudi Arabia and Bahrain for repressive policies.

The current OPEC quotas were set by the 12-nation organization in December 2008, when oil prices were plummeting at the outset of a global recession. The quotas put a floor on slumping prices and maintained moderate and stable prices for more than a year. But as prices began to rise, many OPEC members began to cheat, making the current quotas little more than a shadow benchmark.

With oil prices rising by more than 35 percent in the past year, a debate has emerged inside OPEC about what to do about them. Saudi Arabia has led members that want to help save the economic recovery with moderate prices, while Iran and Venezuela have resisted. Most OPEC countries, including Saudi Arabia, say speculators rather than tight supplies are the cause of the rising prices.

“No formal decision was reached on a production agreement,” OPEC said in a short statement after the closed-door meeting. “However, the organization abides by its long-standing commitment to order and stability in the international oil market.”

Article source: http://feeds.nytimes.com/click.phdo?i=37d7a082311fc58067ecbca5da9e48c0

Europe Acts to Support Emissions Trading System

OPEC Keeps Lid on Oil Production Targets

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