Bloomberg News

EU Parliament May Avoid More Delays on Carbon, Lawmaker Says

March 01, 2013

The European Parliament may avoid further delays on a carbon-permit glut fix and reach a first- reading agreement on the plan should its supporters muster a majority in April, according to a member of the assembly.

The 754-seat Parliament may opt to authorize talks on the proposal with European Union member states before it formally adopts a position on the measure, saving time on legislative procedures, Jo Leinen, a German member of the EU Parliament, said today by telephone.

“We want a first reading, otherwise if we go for a second reading it will postpone things by many months,” said Leinen, a member of the Group of the Progressive Alliance of Socialists and Democrats in the EU Parliament.

EU carbon allowances slumped more than 90 percent in the past seven years to an all-time low of 2.81 euros a metric ton last month as the economic crisis curbed demand for pollution rights, leading to a record oversupply in the world’s biggest cap-and-trade market. The EU proposal to temporarily reduce the glut by delaying auctions of some permits, known as backloading, has divided lawmakers and industry.

A first-reading process allows a faster EU agreement on draft legislation by giving the full Parliament one vote on a negotiated deal. A second reading takes place when a formal Parliament position is adopted in a first vote that serves as a basis for negotiating over differences with national governments before a second vote. This takes more time and requires a bigger majority for the final decision by the full assembly.

Commission Proposal

EU permits for delivery in December fell 2 percent to 4.80 euros a metric ton on the ICE Futures Europe exchange as of 2:33 p.m. in London.

It is “essential” that discussions about the proposal drafted by the European Commission, the EU’s regulatory arm, are not delayed further, according to the International Emissions Trading Association. Should members of the plenary support the draft change to the EU emissions law that would enable backloading, talks with governments can start “shortly” and an agreement may be reached “rapidly,” said Sarah Deblock, EU policy director at IETA in Brussels.

“It is both unlikely and unhelpful to assume that a second-reading agreement will be reached rather than a first- reading agreement,” she said.

Carbon-Fix Plan

The Parliament’s environment committee earlier this week supported a compromise version of the carbon-fix plan while scrapping a separate vote on the mandate for its chairman, Matthias Groote, to start talks with EU member states. Such negotiations with the EU’s Council of Ministers are needed to reconcile the final wording of the proposal, which requires support from both the Parliament and governments to be enacted.

The transfer of the draft change to the EU law from the committee to the plenary session in April triggered speculation that a first-reading deal, which requires only one parliamentary vote on the assembly’s final position, was ruled out.

“What we will do in the plenary is we will vote on our environment committee amendments and postpone the final vote, as we do sometimes, and we’ll go for negotiations with the Council,” Leinen said. “It means postponing by two months but it doesn’t exclude the possibility of first-reading agreement.”

Energy Prices

The Parliament is split on the need to intervene in the carbon market. A majority of members of the European People’s Party oppose backloading because it undermines predictability for investors and leads to higher energy prices, threatening the competitiveness of European business, Eija-Riitta Korhola, the group’s lead lawmaker on the measure, said this week. EPP is the biggest group in the EU assembly.

The commission’s rescue plan for the carbon market has also caused a rift among EU governments, whose qualified-majority support is needed for backloading to be enacted.

“If the plenary rejects the commission’s proposal, then negotiations with Council are unlikely, and future reform of the EU emissions trading system is put into question,” IETA’s Deblock said.

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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