October 6, 2008 / 2:52 PM / 9 years ago

PREVIEW-EU vote weighs carbon trading riches

LONDON/BRUSSELS - European Union lawmakers are likely on Tuesday to support sweeping cuts in carbon emissions from coal plants, and tweak EU climate change proposals to ease costs for industries staring at recession.

The vote on “Super Tuesday” will set the EU Parliament position on how to spend 30 billion euros ($40.77 billion) or more that EU member states will earn annually from selling carbon emissions permits from 2013.

Until now, utilities have received most permits free, landing them billions of euros in windfall profits. From 2013, they will have to buy them in state-run auctions which will divert the money to member state coffers.

Tuesday’s vote will set the tone for negotiations with EU leaders ahead of a final agreement which France, holders of the EU Presidency, wants to wrap up this year.

“It’s as important as any vote in the European Parliament for many years,” said John Ashton, climate change representative at Britain’s foreign ministry, referring to the prospect for massive financial commitment to fighting global warming.

The vote could back 10 billion euros aid for an untested technology called carbon capture and storage (CCS), which many scientists and economists consider the closest thing to a silver bullet to fight climate change.

That would be by far the world’s biggest endorsement of CCS, and pour subsidies into companies which aim to trap the greenhouse gas carbon dioxide from coal plant smokes stacks and then pipe them underground -- including engineering and oil and gas companies as well as utilities.

Lawmakers will also vote on tougher regulations which, if agreed, would set such tough limits on power plant emissions that they would effectively prevent any new-build coal plants without CCS -- either from 2012 or 2015.

“The technology can have a greater impact on reducing carbon emissions in the next 30 to 40 years than any other,” said Chris Davies, the MEP (member of the European Parliament) responsible for CCS negotiation in the European Parliament.

BILLION

Lawmakers might back a modest increase in carbon offsetting limits for EU industry -- allowing companies to meet their EU caps on carbon emissions more cheaply by paying for emissions cuts in developing countries.

A proposed increase of carbon offsetting by 300 million tonnes to 1.7 billion tonnes from 2008-2020, compared to proposals by the EU executive Commission in January, will trim carbon costs while several EU countries face recession.

The environment committee of MEPs will likely back full auctioning of emissions permits from 2013, in a move which will cut coal plant profits -- and is opposed by heavily coal-dependent, east European economies such as Poland.

Poland said on Monday it was assembling a minority of member states sufficient to block full auctioning, in a move which could delay the whole energy and climate package.

Some of the auction revenues should be used to improve household and industry energy efficiency, at a time of soaring fuel bills, said Karsten Neuhoff, co-author of a report published for the Climate Strategies research group on Monday.

Collectively, European utilities are making windfall profits of about 20 billion euros annually at present from the EU emissions trading scheme, he added. Those windfall profits were explained by industry and government as a transition payment until 2012, to prepare industry for rising carbon costs.

Editing by Christopher Johnson

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