UPDATE 2-EU vote on plan to withhold carbon permits delayed

Thu Nov 29, 2012 2:41pm EST

Related Topics

* Commission had called for agreement before year-end

* Carbon market has fallen as expectation of fast deal fades

* Recession has led to glut of carbon permits (Adds context)

By Barbara Lewis

BRUSSELS, Nov 29 (Reuters) - EU member states will not vote until next year on a plan to boost the European Union's Emissions Trading Scheme (ETS) by holding back some of a huge surplus of allowances.

The scheme is meant to be the cornerstone of the European Union's policies on tackling climate change, but a collapse in the price of ETS carbon allowances means it is no longer serving to spur greener energy.

EU member states had been expected to vote on a proposal from the Commission, the EU executive, on Dec. 13.

But a statement issued after the carbon market close on Thursday said that meeting would only ask for the opinions of member states and would not hold a ballot.

"The agenda for the December committee meeting does not ... invite them to adopt a formal opinion (vote) at the meeting," the statement said.

Thursday's Commission statement said the member states would be asked to vote after agreement on a legislative amendment to reinforce the legality of the Commission's plan, which is not expected before February next year.

As soon as that vote had taken place, members of the European Parliament and member states would be asked to "complete their scrutiny as soon as possible thereafter" prior to formal adoption of the law.

The Commission published its proposal earlier this month to temporarily remove 900 million allowances from the next phase of the ETS, which begins next year, and had said it wanted a decision by the end of 2012.

Poland, which is heavily dependent on carbon-intensive coal, has led opposition to the plan, referred to as backloading because the withdrawn permits would be made available at the end of the next phase of the ETS, which runs from 2013-2020.

However, a bigger obstacle is dominant EU power Germany, which has so far failed to come up with a position as its environment ministry supports the proposal, while its economy ministry does not.

Germany's indecision has meant the carbon market had already begun to assume a delay and the market closed down nearly 4 percent at 6.56 euros a tonne on Thursday, compared with a record low of 5.99 euros a tonne hit in April.

The weakness of the market is linked to economic slowdown, which has led to the glut of carbon allowances as demand for them has plunged.

It was dealt another blow by the proposal of the European Commission earlier this month to freeze for a year its requirement all aviation using EU airports would have to offset their emissions with EU ETS allowances.

The requirement had triggered international outcry and threats of a trade war. (Additional reporting by Nina Chestney in London; Editing by Anthony Barker and Marguerita Choy)

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