EU States Seen Agreeing on Carbon-Fix Stance by ‘Early Fall’

By Ewa Krukowska – Jun 4, 2013 European Union nations may reach a negotiating position on a draft fix for the EU carbon market by “early fall” should the bloc’s Parliament approve the stopgap plan next month, according to Lithuania . “If there’s a mandate from the plenary in July” at the Parliament, “then we’ll work to reach a qualified majority position on backloading pretty soon, by early fall,” said Arunas Vinciunas, Lithuania’s Deputy Permanent Representative to the EU. His country takes over the EU’s rotating presidency next month. EU governments and the Parliament are considering a change to the region’s emissions-trading law to enable temporary curbs on the supply of carbon permits. The amendment is the first element of the carbon-market rescue plan, known as backloading, which would help prices rebound from record lows. EU carbon allowances for delivery in December rose as much as 4.9 percent to a seven-week high of 4.11 euros a metric ton on London ’s ICE Futures Europe exchange today. The contract slumped to an all-time low of 2.46 euros in April on concerns policymakers may fail to tackle a record glut of permits aggravated by an economic crisis. The EU carbon program imposes pollution limits on about 12,000 manufacturing companies and utilities in the region, including Germany ’s largest utility EON SE and steelmaker ArcelorMittal. The system, in which caps were set before the economic crisis, doesn’t allow any price floors or ceilings. After the slowdown reduced industrial production and cut into demand for pollution rights, the surplus of permits rose to around 2 billion metric tons last year, a level almost matching the annual supply, according to EU estimates. Delayed Auctions The backloading plan, which would delay auctions of some carbon permits, has divided governments, members of Parliament and industry. It was proposed last year by the European Commission, the EU’s regulatory arm, and needs approval by governments and the Parliament to be enacted. The Parliament’s environment committee is scheduled to recommend next steps on the draft measure on June 19 before the whole assembly holds a second vote on it on July 2. In the first ballot on April 16, lawmakers declined to support backloading and sent it to the environment panel for further talks. Should the assembly endorse the market fix next month, EU governments will need to adopt a position on the draft measure for talks with representatives of the Parliament on the final wording of the proposal. A potential deal in such negotiations, which are also known as trilogue because they also involve the commission, must be formally approved by the ministers and the assembly before it becomes a law. Merkel Call “Optimistically, we could start the trilogue in October,” Vinciunas said. While most member states favor backloading, they are short of the 255 votes needed in the EU weighted-ballot system to approve the proposal because several nations, including Germany, remain undecided. Chancellor Angela Merkel said last month she hoped Germany would be able to tackle the plan soon after elections on Sept. 22. Spain , which doesn’t have an official position on backloading yet, aims to decide on whether to back the plan in two weeks, its state secretary for environment Federico Ramos said on May 29. Poland, Cyprus and Greece , which have a total of 43 votes, have said they won’t back the measure. To stop it, they would have to form a blocking minority of 91 votes. Lithuania’s “optimism” is a good sign, because it indicates that, in its role as the EU presidency, the country is willing to put pressure on member states to take official positions on backloading even before German elections, said Konrad Hanschmidt, an analyst at Bloomberg New Energy Finance in London. Lithuania will chair meetings of climate officials from national governments and gatherings of the EU Council of Ministers in the second half of next year. “Nonetheless, it will be a difficult task to establish an official Council position before a new German cabinet has been elected,” Hanschmidt said. “That in turn would delay a potential trilogue.” To contact the reporter on this story: Ewa Krukowska in Brussels at ekrukowska@bloomberg.net To contact the editor responsible for this story: Lars Paulsson at lpaulsson@bloomberg.net Taylor Scott International