EU parliament poised for crunch carbon market vote
* Vote expected around 1000 GMT
* Longer-term structural reform debate also under way
* Majority of member states supports Commission plan
By Barbara Lewis and Nina Chestney
BRUSSELS/LONDON, April 16 (Reuters) - EU politicians on Tuesday hold a decisive vote on a plan to reduce a glut of allowances that has devastated the EU Emissions Trading Scheme (ETS), the world's biggest carbon market.
Following months of bitter debate, the vote in a plenary session of the European Parliament at around midday (1000 GMT) is expected to be extremely close.
Uncertainty over whether the plan can succeed drove the carbon market to a record low of less than 3 euros ($3.93) a tonne in January compared with peaks around 30 euros in 2008.
Anticipation of a positive vote pushed allowances 2.31 percent higher to 4.87 a tonne by 0640 GMT on Tuesday.
A Commission proposal, named backloading, was meant to be a quick fix that could be agreed by the end of last year. But it has exposed deep divisions, with various interest groups intensively lobbying members of the European Parliament.
The power sector and other energy companies, such as Royal Dutch Shell, keen to promote natural gas rather than more carbon-intensive coal, have been strong supporters.
On Monday, 42 firms, representing more than 875 billion euros ($1.15 trillion) in turnover - ranging from E.ON , to multinational consumer goods company Unilever - placed a full-page advertisement in the Financial Times, calling on the European Parliament to vote "yes".
"Without agreement on the backloading proposal the price will fall further threatening the long-term survival of the EU ETS and lead to fragmentation of the single energy market through a patchwork of national regulations," it said.
Opponents of the Commission plan, have been led by energy intensive industries, such as the chemical sector.
It has argued intervention in the ETS will push up energy costs when Europe is already suffering a competitive disadvantage compared with the United States, which has benefited from abundant supplies of shale gas.
TECHNICAL BUT SIGNIFICANT
In theory, Tuesday's vote is on a technical amendment to underpin the legality of removing permits, but a "no" vote would indicate a lack of political will to go ahead with reform.
While the power sector, already worried about how to ensure investment, is concerned EU policy will fragment as member states devise national solutions, carbon analysts warn that traders will abandon the ETS.
"If the vote fails, then the market is essentially finished until further notice," Matthew Gray, analyst at Jefferies Bache, said in a note.
"Some volatility may occur," he said. "But this will surely dissipate as utilities, speculators and industrials go their separate ways."
At member state level, EU sources say a majority supports backloading even though Poland, heavily reliant on carbon-intensive coal, is resolutely opposed to it and Germany has failed to take a formal position because of divisions within its government on the issue.
Theoretically, member states can continue debating regardless of what happens on Tuesday and a second cycle of parliamentary discussion and voting could take place.
In reality, the focus is likely to switch to deeper reforms, such as the permanent removal of allowances and tougher limits on how much carbon emitters can produce.
The problem is how long it will take to reach these structural changes.
Commission officials have admitted time is running out for agreement on them before the current team of commissioners steps down next year.
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