Bloomberg News

German, U.K. Ministers Urge Support For Carbon Fix

April 11, 2013

Six environment and climate chiefs, including German Environment Minister Peter Altmaier and U.K. Energy and Climate Secretary Ed Davey, pressed European Union lawmakers to back a rescue plan for the world’s biggest carbon market, as divisions persist before a key vote.

The European Parliament is to decide April 16 on the future of a measure to enable delaying the sale of some permits in the EU’s 54 billion-euro ($70.8 billion) emissions trading system. The plan, designed to bolster prices in the cap-and-trade program by temporarily alleviating oversupply, has divided Parliament, governments and industry.

“We’re struggling to explain to honorable members of the European Parliament how important it is to provide a signal we so badly need in order to make ETS more effective and to increase its attractiveness worldwide,” Altmaier told a conference in Berlin today.

Prices in the EU carbon market, the primary tool of the 27- nation bloc’s climate policy, sank to a record low in January amid a record glut of permits caused by an economic slowdown and concern that the European Commission’s emergency fix may be rejected. In a letter to EU lawmakers today, Altmaier, Davey and ministers from France, Italy, Denmark and Sweden called on Parliament to clear the way for the rescue plan for the Emissions Trading System, or ETS.

ETS Role

“ If the ETS lost its central role in Europe, member states would possibly introduce more unilateral measures for climate protection in order to incentivize sustainable investments in their industries and to enforce their national climate targets,” they said. “This would lead to new competitive distortions in Europe.”

The plan consists of a change to the EU emissions trading law, which Parliament is to vote on next week, and a separate measure to postpone the sale of 900 million allowances from 2013-2015 to 2019-2020 in a process known as backloading.

“My message to the MEPs who are thinking how to vote next week is if you want to vote for green growth, if you want to vote for a future strong European economy, you vote for the backloading proposal,” Davey told the conference. “Not to vote is actually a real backward step for the European economy.”

Clean Technologies

At stake is the price of emissions in the ETS, which according to the commission and analysts including Mark Lewis at Deutsche Bank AG fails to encourage investment in clean technologies after slumping 77 percent in the past three years. The cost of pollution will decline further should the Parliament reject the market rescue plan, UBS AG has said.

To be implemented, the backloading strategy needs support from the EU assembly and a qualified-majority backing from national governments in a weighted-ballot system that favors larger nations. Germany, which as Europe’s biggest economy has 29 out of 345 votes in the EU, is split over whether to support the market fix, which pits Altmaier against Economy Minister Philipp Roesler.

Countries including the Netherlands, Spain and Belgium have voiced support for the commission’s plan, aimed to be a short- term measure to curb oversupply before the EU agrees on a deeper overhaul. The program imposes pollution caps on about 12,000 installations owned by power companies and manufacturers from steel producers to refineries.

‘Getting There’

To win support from member states the backloading proposal needs 255 votes and governments are “getting there,” Climate Commissioner Connie Hedegaard said in an interview in Brussels last month. Opponents of the proposed market fix, led by Poland with 27 votes, need 91 ballots to form a blocking minority. Abstentions in EU decisions effectively count as votes against.

Germany has no formal deadline for deciding about its position on backloading. Should the rescue plan pass in the European Parliament, representatives of the assembly and national governments will start talks about the final wording of the emissions trading law amendment. The German government should make a decision on the measure in “near future” so that it has an official stance in negotiations after the Parliament vote, according to Urban Rid, director general at the Environment Ministry.

Germany may abstain in any vote on the issue in Europe if Altmaier and Roesler fail to reach an agreement, the Economy Ministry has said.

“The ETS is a free market system that works and shouldn’t be interfered with,” Roesler, who leads Chancellor Angela Merkel’s Free Democratic Party junior coalition partner, said in a statement in Ankara. “Any interference would be a burden to the industry.”

Permits for Delivery

EU permits for delivery in December closed 1.2 percent up at 4.35 euros a metric ton on the ICE Futures Exchange in London. They fell to as low as 2.81 euros in January, when the Parliament’s industry committee issued a non-binding opinion on backloading. In the run-up to the plenary decision on the commission’s proposal, a majority of Christian Democrats in the assembly are against the rescue plan, while most Social Democrats have signaled they will vote in favor.

“We need to do our homework and we need to strengthen emissions trading in Europe,” said Altmaier, a Christian Democrat like Merkel. “Backloading can’t solve all the existing problems. But it has become an issue of highly symbolic importance. It has become an issue of our willingness, of our commitment, of our dedication.”

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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