* Carbon price jumps as much as 13 percent
* Close 344-311 vote follows months of wrangling
* Will need member state backing to become law
* German economy ministry says still against the plan
(Adds comment, updates prices)
By Michael Szabo, Nina Chestney and Andrew Allan
STRASBOURG/LONDON, July 3 The European
Parliament after months of bitter debate backed a plan on
Wednesday to boost carbon prices, throwing a lifeline to the EU
Emissions Trading System (ETS) and the bloc's push for greener
EU politicians in Strasbourg voted 344-311 in favour of
temporarily removing up to 900 million permits from trade,
tackling oversupply that has sent carbon prices to record lows.
The plan will now require backing from a majority of EU
countries to become law.
"A lot of member states are coming out in favour ...We need
to see what the formal vote is. Realistically, it will not be
until after the German elections (in September)," EU climate
chief Connie Hedegaard told Reuters.
The ETS is a cornerstone of European Union climate policy,
but a much higher carbon price is needed to achieve its goal of
spurring industry to invest in low-carbon energy.
EU politicians voted against a plan put forward last month
but agreed to allow a one-off intervention in the market to
temporarily withdraw up to 900 million permits.
Companies and utilities buy these to cover their excessive
carbon emissions output.
"The 'yes' vote should provide a short-term boost to carbon
prices and confirms the EU's commitment to the success of the
ETS and to implementing the long-term improvements that are
still needed," said Thomas Rassmuson, founding partner at CF
Partners, an investment firm specialising in renewable energy.
EU carbon prices were down ahead of the vote but
traders took the outcome as a signal to buy, with prices jumping
as much as 13 percent to 4.86 euros a tonne in afternoon trade.
Shares in Germany utility E.ON briefly turned
positive after the vote before falling back on a lower benchmark
DAX index. RWE shares were down 0.9 percent.
Analysts have estimated that EU carbon prices could average
8 to 9 euros over the next eight years, almost double current
levels, if the plan to temporarily remove permits is
Ultimately, they say carbon prices must reach levels of 40
to 50 euros to drive investment in lower carbon energy,
something governments are keen to see happen to help them reach
Poland opposes efforts to bolster carbon prices, however, as
its economy still relies heavily on carbon-intensive coal.
Germany has failed to take a formal position as the economy
ministry opposes it on concerns it will hurt competitiveness,
while the environment ministry supports the plan.
"Today's decision is regrettable. The economy ministry's
criticism remains unchanged," a ministry spokesman said.
Other opponents include energy-intensive industries loath to
pay higher energy costs, free trade advocates against
intervening in markets, and some who argue temporary removal of
permits will not raise carbon prices to meaningful levels.
Some energy companies have strongly supported the permit
removal plan. Finnish utility Fortum said it marked a
step toward needed, deeper reform.
"A more profound renovation of emissions trading is
necessary," Fortum Chief Financial Officer Markus Rauramo said,
noting the market would benefit from the setting of 2030 EU
emissions reduction targets.
(Additional reporting by Christoph Steitz, Barbara Lewis,
Nerijus Adomaitis, Michel Rose, and Sarah Marsh; editing by