Are MEPs Ready To Deliver Carbon Backloading Compromise?

Eight MEPs from ALDE group in European Parliament also call for urgent structural reform to the Emissions Trading System By Jessica Shankleman 17 Jun 2013 MEPs in the European Parliament will this week decide whether to water down the plan to delay the auctioning of 900 million carbon allowances, in pursuit of a compromise that could green light the controversial attempt to force up the price of carbon. Hopes are mounting that a new package of rules governing how the backloading programme is enacted could help secure sufficient support in the European Parliament for a vote on the plan to pass at the second time of asking. However, a group of liberal MEPs have warned the Commission that time is running out to find a permanent fix for the the bloc’s faltering emissions trading scheme (ETS), which has seen prices crash to an all time low because of a huge surplus of carbon allowances. Nearly 70 MEPs in the Parliament’s Environment Committee will on Wednesday  vote to decide exactly what backloading proposals should be put to the plenary next month. The largest parties, the European People’s Party (EPP), Socialists and Democrats and the Alliance of Liberals and Democrats (ALDE) have reportedly already agreed a compromise proposal that would include assurances that the witholding of allowances would not be repeated, and that backloading would not lead to the permanent withdrawal of delayed carbon allowances. They will also vote on whether to propose a fund that would take money made from the auctioning of allowances to help energy intensive sectors invest in low carbon technology. The compromises are designed to secure fresh support for the backloading proposals, after a previous bid to push through the plan in April narrowly failed when it was defeated in by 334-315 votes, forcing the plan to return to the committee stage. Chris Davies, British Liberal Democrat MEP and ALDE leader in the Environment Committee, said he was optimistic the backloading would be approved at the second time of asking. “People were very fearful last time round that there would be a huge increase in the carbon price,” he told BusinessGreen . “Even BusinessEurope which opposed backloading last time accept now that any price increase will be unlikely to make a huge difference to competiveness of European industry.” He said the proposed fund for energy intensive industries could be established before 2020 to ensure that low carbon investments can be made swiftly, despite the risk that spending the money before the end of the 2013-2020 Phase III of the ETS could undermine the short-term purpose of backloading by further reducing demand for carbon allowances. But Davies acknowleged that a successful vote this time around could also depend on the Green Party agreeing to the compromises. The Greens have said they could vote against the new proposals, on the grounds that the concessions would stop backloading pushing up the carbon price in any meaningful way. Green MEP Bas Eikhout said the group was unlikely to back the compromise at the preliminary vote by the Environment Committee. “I thought fixing ets was the goal. Now it seems fixing backloading is getting the goal. Less ambition by the day,” he wrote on Twitter last week. But beyond the quick fix that backloading may or may not provide to the carbon price, ALDE MEPs are becoming increasingly concerned that time is running out to deliver more meaningful reforms to the ETS. ALDE MEPs from a range of committees last week wrote to Climate Commissioner Connie Hedegaard, warning that a failure to reform the EU ETS with both long and short term measures would push up the price of tackling climate change for member states. The letter, seen by BusinessGreen , and signed by eight MEPs, including Davies and  Fiona Hall, warned that EU’s carbon market cannot be allowed to fail at a time when other countries and regions are looking to set up their own carbon trading schemes. “If the ETS were allowed to fail, EU Member States would still have to deliver on their climate change commitments and would thus be forced to put new mechanisms in place,” adds the letter, which is also signed by Denmark’s Jens Rohde, Germany’s Jurgen Creutzmann, Sweden’s Kent Johansson , France’s Corinne Lepage, Bulgaria’s Vladko Todorov Panayotov, and Romania’s Adina Ioana Valean. “That is why, in parallel with the rapid resolution of the backloading proposal, it is essential to move forward now with structural reform of the ETS and to restore the system’s credibility.” The Commission is due to present structural reform proposals for the ETS this Autumn, which centre on permanently retiring two billion carbon allowances or lowering the emissions cap for companies covered by the ETS in order to increase demand in the market. But the MEPs are concerned that a changeover in the Commission in 2014 will delay progress on the new structural reforms being decided on and implemented until 2015. Davies told BusinessGreen that the letter was designed to push the Commission to start debating long term reforms, despite the run up to next year’s European elections. “In the parliament there seems to be general support for the idea of structural reforms,” he said. But my concern is that when the proposals are put forward, people will find lots of opportunities to disagree with them. We could end up being in the position of a new commission coming in October next year, and it could be 2015 before anything is brought forward and we think that delay [to the wider structural reforms] would be inappropriate.” But alongside these fears, the letter to Hedegaard also suggests that the ALDE group may be closer to building a consensus on the backloading proposals. Panayotov, Valean and Creutzmann all voted against backloading in April, but their signatures on the letter suggest they may now be prepared to support a compromise agreement. Davies, who supported the first backloading vote, said he hoped there would be greater support from ALDE this time round, even though there would still be a split. “It’s not the Environment Committee members we need to win over, it’s the rest of the parliament that voted against backloading last time,” he added. Environment Commitee MEPs will also this week vote on proposals to tighten the EU’s regulation on flourinated gases such as those used in fridges, which have a powerful greenhouse gas effect, and plans to boost the economy through green sustainable industries and ecodesign requirements for water heaters and hot water storage tanks. But despite all these votes all eyes will be on the latest twist in the long-running backloading saga, as both opponents and supporters of the plan wait to see if MEPs can revive the carbon market after all. Taylor Scott International