* EU carbon price touches new record low
* Longer-term structural reform debate also under way
* Majority of member states supports Commission plan
By Ben Garside and Barbara Lewis
STRASBOURG/BRUSSELS, April 16 European Union
politicians rejected a plan to prop up the world's biggest
carbon market on Tuesday, sending it plunging to a new record
low and raising questions about its survival.
After months of bitter debate, a plenary session of European
Parliament in Strasbourg rejected by 19 votes a Commission
proposal to temporarily remove some of the oversupply that has
overwhelmed the market for permits to emit carbon dioxide.
Ireland, holder of the rotating EU presidency, said support
for the carbon market was still a clear priority and it would
seek agreement from member states as a matter of urgency.
Traders took the lack of political support as a signal to
sell, driving the market down to its lowest yet. Immediately
after the vote, carbon prices dropped by around 40 percent to
2.63 euros a tonne.
They were trading at 3.15 euros, down 33.82 percent, by 1205
"The carbon market is now in a coma, until a clear
intervention takes place," an emissions trader said.
Climate Commissioner Connie Hedegaard said in a statement
the Commission was still convinced its proposal, known as
backloading, could restore confidence in the Emissions Trading
Scheme (ETS) pending deeper reforms.
"We will now reflect on the next steps to ensure that Europe
has a strong EU ETS," Hedegaard said. "The market, the investors
and our international partners are all waiting."
A majority of member states, which have been debating the
plan in parallel with the parliamentary process, is said to
support the Commission proposal. National representatives are
expected to debate what to do next this week.
NOT SO QUICK
The 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 interest groups
intensively lobbying members of the European Parliament.
Some analysts have also warned that failure to agree on EU
steps could spur fragmentation in environmental policy as member
nations move to safeguard their own green targets.
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.
Analysts say a carbon price of around 50 euros is needed to
encourage a switch away from coal to generation from less
Together with more than 40 firms, representing more than 875
billion euros ($1.15 trillion) in turnover, Shell placed a
full-page advertisement in the Financial Times newspaper on
Monday, saying backloading was needed as a stop-gap measure.
"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
They have 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.
EU business lobby BUSINESSEUROPE welcomed Tuesday's vote and
said the focus should be on long-term reform.
"We want an ETS, but without political interference," Adrian
van den Hoven, the body's deputy director-general, told Reuters.
Debate on deeper structural reforms is already under way,
but is expected to take a long time via tangled EU process.
Apart from seeking lasting solutions, such as the permanent
withdrawal of allowances, the Commission has also kicked off
debate on 2030 energy and environment policy to succeed a set of
At member state level, EU sources say a majority supports
backloading even though Poland, heavily reliant on
carbon-intensive coal, is opposed to it and Germany has failed
to take a formal position because of divisions within its
government on the issue.
"Reducing the number of emissions certificates would be an
intervention in a functioning market system. It would place an
additional burden on our industry and harm the competitiveness
of Germany and the whole EU," German Economy Minister Philipp
Roesler said in a statement.