* 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 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
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
Commission officials have admitted time is running out for
agreement on them before the current team of commissioners steps
down next year.