* 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 the
European Parliament in Strasbourg rejected by 19 votes a
Commission proposal to remove temporarily some of the oversupply
that has overwhelmed the market for permits to emit carbon
Ireland, holder of the rotating EU presidency, said support
for the carbon market was still a priority and it would seek
agreement from member states, debating in parallel with the
parliamentary process, as a matter of urgency.
The Commission, the EU executive, and many in the power
sector are keen for a higher carbon price to drive investment in
lower carbon energy.
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 3.14 euros,
down 34 percent, by 1541 GMT.
"The carbon market is now in a coma, until a clear
intervention takes place," an emissions trader said.
Climate Commissioner Connie Hedegaard said the Commission
still believed its proposal, known as backloading, could restore
confidence in the Emissions Trading Scheme (ETS) pending deeper
"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."
But she said forging agreement on climate policy had become
a lot harder following economic crisis.
"The vote shows it has become more difficult than it was
three years ago, five years ago. Still I hope that in Europe, we
would not have become so poor that we think it should cost
nothing to pollute," she told Reuters.
A majority of member states is said to support the
Commission proposal. National representatives are expected to
debate what to do next this week.
NOT SO QUICK
The Commission's backloading plan was meant to be a quick
fix that could be agreed by the end of last year.
But it exposed deep divisions, with interest groups
intensively lobbying members of the European Parliament.
Hedegaard and many analysts have said failure to agree on EU
steps would fragment environmental policy as EU member states
tried to safeguard their own green targets.
Britain, for instance, already has a carbon price floor.
Analysts say a price of around 50 euros is needed to
encourage a switch away from coal to generation from less
The power sector and other energy companies, such as Royal
Dutch Shell, keen to promote natural gas, have strongly
supported the Commission plan.
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.
Opposition has been led by energy intensive industries.
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.
Debate on deeper, structural reforms, such as the permanent
withdrawal of allowances, is under way, but is expected to take
a long time via tangled EU process.
The Commission has also kicked off discussion on 2030 energy
and environment policy to succeed 2020 goals.
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
"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.
German Environment Minister Peter Altmaier had a very
different view, saying it was "not a good day for Germany".
"My concern is that critics of backloading haven't thought
about the fact that calls for regulatory intervention by the
state will grow louder now, so I hope we will manage to push it
through in a second attempt in the European Parliament," he told
German television channel ARD.
Environmental campaign groups voiced dismay at Tuesday's
vote, which Greenpeace called "a historic failure".
"In its present form, the carbon market will not stop a
single coal plant from being built," Greenpeace EU climate
policy director Joris den Blanken said.