Bloomberg News

EU Parliament Calls for Emissions-Permit Set-Aside Option

March 15, 2012

The European Parliament threw its weight behind the option of temporarily setting aside some emission permits for energy and manufacturing companies to bolster prices while stopping short of urging a tighter cap.

In a non-binding resolution, the European Union assembly said EU regulators should put forward, “if appropriate,” measures that “may include withholding the necessary amount of allowances” in the world’s biggest emissions-trading system. The carbon-dioxide permits, whose prices have slumped, would be withheld from auctions as early as next year.

The language in the resolution mirrors a provision that the assembly’s industry committee inserted last month into draft EU energy legislation. As a result, today’s vote in Strasbourg, France strengthens the hand of Parliament negotiators seeking to win fast-track backing from EU national governments for the set- aside provision in that planned law, which relates to energy efficiency.

At the same time, the 754-seat assembly rejected a version of the resolution that went further by asking the European Commission, the EU’s regulatory arm, to propose legislation that would eliminate a share of Europe’s emission permits. The Parliament’s environment committee had recommended calling for that more ambitious step, which would result in a tightening of the CO2 cap on European power plants and factories.

Political Debate

The political debate in Europe over the possibility of curbing the supply of EU-CO2 permits has intensified in recent months as their cost has fallen. The euro-area economy is projected by the EU to contract this year for the first time since 2009. Allowance prices dropped to a four-year low in January because of oversupply.

At stake is the credibility of the EU emissions-trading market, which imposes CO2 quotas on more than 11,000 facilities including plants owned by Electricite de France SA, Europe’s biggest power generator, and Royal Dutch Shell Plc (RDSA), the region’s largest oil company. The system, the 27-nation EU’s leading tool to fight climate change, requires businesses that exceed their limits to buy permits from companies that discharge less.

The Parliament resolution approved today is on Europe’s climate goals in general. It endorses a path recommended by the commission for the EU to cut greenhouse gases including CO2 by 80 percent in 2050 compared with 1990 levels.

Best Scenario

The commission said in a strategy paper last year that the best scenario for Europe would be to reduce emissions by 40 percent in 2030 and 60 percent in 2040. The EU is already on track to meets it goal of reducing greenhouse gases by 20 percent in 2020.

The Parliament’s support for the paper is a boost for the commission after it suffered a setback six days ago when the Polish government blocked a similar declaration on climate policy at a meeting of EU environment ministers. Such national vetoes can make it harder for the commission to put forward measures to crack down further on emissions.

“We should not allow that the most reluctant among us dictates the pace,” European Climate Commissioner Connie Hedegaard told the Parliament today.

To contact the reporter on this story: Jonathan Stearns in Strasbourg, France at jstearns2@bloomberg.net

To contact the editors responsible for this story: James Hertling at jhertling@bloomberg.net


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