Bloomberg News

Hungary to Decide on EU Carbon-Glut Fix Feb. 20, Official Says

February 13, 2013

Hungary plans to decide next week whether to back the European Union proposal to curb oversupply of carbon permits and help prices in the world’s biggest emissions market rebound, a government official said.

The Hungarian government is going to adopt a position at a regular meeting on Feb. 20 on the European Commission’s plan to delay auctions of some carbon permits, according to the official, who asked not to be identified, citing policy. The central European country is now considering the advantages and drawbacks of the draft EU measure, the official said.

Hungary is among seven countries that hold the key to the fate of the rescue plan for the European emissions trading system, or the ETS, three EU officials with knowledge of the matter said last month. At stake is the fate of the 54 billion- euro ($72.8 billion) program after an excess of allowances caused by an economic crisis drove prices down as much as 91 percent from a record in April 2006.

EU permits for delivery in December pared earlier gains and were 0.7 percent up at 4.61 euros a metric ton on the ICE Futures Europe Exchange as of 9:05 a.m. in London. The contract gained 10 percent in the past five days after an EU lawmaker said the glut fix plan was increasingly likely to win majority support from the European Parliament’s environment committee.

The commission’s strategy to tackle the oversupply is to delay 900 million permits from 2013-2015 and return them to the market in 2019-2020. The proposal has divided governments, industry organizations and members of the Parliament.

Second Step

The EU assembly’s environment panel is due to vote on Feb. 19 on the first element of the commission’s proposal: a change to the emissions law to enable postponing auctions of some permits. The amendment will also need approval from the whole Parliament and national governments in the next stages of the legislative process.

In the second step, should the law change get the green light from the Parliament in the plenary vote tentatively scheduled for April, member states would vote on a separate regulation to set out the details of auction delays.

To be enacted, the commission’s so-called backloading proposal needs a qualified majority of 255 out of 345 votes from governments in a system with votes weighted by each country’s size. A blocking minority requires 91 votes. Hungary has 12 votes.

While the backloading proposal has more prospective supporters than opponents among the EU’s 27 governments, it still needs support from at least some of the seven undecided nations to be approved, the EU officials said. The nations also include Germany, Portugal, Malta, Greece, Cyprus and the Czech Republic, according to the officials. Poland has already declared it will oppose the EU plan.

The commission, the EU’s regulatory arm, warned member states last month that carbon prices are likely to decline further without action to curb oversupply, according to an EU document obtained by Bloomberg News.

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


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