Germany backs plan to shore up carbon price in EU emissions push

BRUSSELS, Feb 28 (Reuters) - Germany will back a plan to strengthen carbon prices, a senior official said on Tuesday, ahead of a meeting of European Union environment ministers on balancing the needs of industry with cutting emissions in reforming the carbon market.

EU member states such as Germany, Italy, Austria and Greece are prioritising measures to ensure that regulation does not drive big industry abroad, while poorer, coal-reliant nations in Central and Eastern Europe are keen to get the most generous provisions possible to help modernise their economies.

Last week the European Parliament adopted a draft reform of the EU’s emissions trading system (ETS) and environment ministers meeting in Brussels are keen for swift adoption of what will be its first big piece of climate legislation since the EU ratified the Paris accord on global warming.

The cap-and-trade permit system is the EU’s flagship policy for meeting its climate goals by regulating emissions at 11,000 industrial and power installations. It has suffered from excess supply since the financial crisis, which depressed prices.

But EU nations are divided over the level of ambition in measures to strengthen prices, how much protection industry needs to remain competitive and how best to manage funds to help laggards modernise their economies.

Sweden and France are leading a push to shore up carbon prices by doubling the rate at which the scheme’s Market Stability Reserve soaks up excess allowances and a mechanism for cancelling surplus permits after five years.

Although ten nations back this plan, EU diplomats had feared it will not carry enough weight without Germany’s backing. A minimum of 16 member states is required to back the compromise deal, representing at least 65 percent of the total EU population.

“The MSR has to be strengthened, we support that,” Jochen Flasbarth German state secretary for the environment told journalists ahead of Tuesday’s meeting. But big differences remain on other aspects of the reforms: “We have a lot to discuss ... with a bit of flexibility we can get there.”

The ETS is the EU’s main tool to achieve its goal of a 43 percent cut in greenhouse gases from industry and power plants compared with 2005. If ministers fail to find common ground, they will next take up the issue in June, delaying reforms.

“Europe has to keep its leadership in the climate arena,” French Environment Minister Segolene Royal told reporters. “We have to protect our industries but only up until a certain point, without it leading to a fall in the carbon price.” (Writing by Alissa de Carbonnel; Editing by Alexander Smith)