November 20, 2013 / 12:15 PM / in 4 years

UPDATE 1-EU law to remove carbon permits nears completion

* Plan to be finally signed off next month

* Deal on permit removal paves way for bigger measures (Adds German MEP’s comments, background paragraphs 9-11)

BRUSSELS, Nov 20 (Reuters) - EU diplomats on Wednesday approved the European Union’s plan to remove some of its massive surplus of carbon emission permits from the market, reinforcing expectations that final approval of the measure is at last on track.

The intervention will remove a maximum of 900 million allowances from the EU Emissions Trading Scheme (ETS).

The pressure of oversupply of the permits has kept prices idling idled below 5 euros per tonne, nowhere near high enough to encourage low-carbon energy.

Utilities have been complaining that gas-fired power plants, which are relatively low in emissions, cannot compete with highly polluting coal.

Lithuania, holder of the EU presidency, said a committee of diplomats had agreed on a deal, which is expected to be signed off by member states and by the bloc’s parliament once and for all next month, along with a separate process to determine when allowances can be withdrawn.

Lithuanian Environment Minister Valentinas Mazuronis said the agreement would ensure the “good functioning” of the ETS.

“The properly functioning EU ETS will promote reduction of greenhouse gas emissions in a cost-effective and economically efficient manner,” Mazuronis said in a statement.

“It will also drive the transformation towards the low-carbon economy and investments within the European Union.”

Earlier this week, Eija-Riitta Korhola, a Finnish MEP and noted opponent of the measure, said the plan could still be defeated in a final parliamentary vote.

But on Wednesday, Matthias Groote, the German MEP leading on the issue for parliament, said he expected its final endorsement to run smoothly in December.

“We’ve had long discussions in parliament ... and everybody had the chance to table amendments and we voted on them (in July),” he said on the sidelines of the U.N. climate negotiations in Warsaw.

Agreement on backloading has taken so long that its impact has been diluted.

It may pave the way, however, for a structural reform that is likely to have more impact.

The Commission, the EU executive, is expected to lay out plans in January for a supply-adjustment mechanism that would automatically remove permits in the event of a saturated market.

Reporting by Barbara Lewis, with additional reporting by Susanna Twidale in Warsaw; editing by Jane Baird

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