EU lawmakers postpone vote on carbon market reform until Dec. 15

BRUSSELS (Reuters) - A vote by European lawmakers on an overhaul of the EU’s Emissions Trading System (ETS) will be postponed until Dec. 15 because major parties remain divided over how far the reforms should go, EU sources said on Monday.

The European Parliament’s environment committee, which had been due to vote on Thursday, has the lead on reviewing the European Commission’s proposal to reform the ETS.

The cap-and-trade system is designed to make big polluters, such as power companies and industrial firms, pay for their emissions by buying carbon permits. But since the global financial crisis, a surplus of carbon credits has weakened their price.

Scottish Conservative Ian Duncan, who is shepherding the reform through the European Parliament, is keen for a compromise among all political parties in order to secure a strong mandate in the house’s plenary vote before lawmakers enter three-way talks with EU member governments and the Commission on finalizing legislation.

Duncan tweeted on Monday that he felt “the ground shifting” toward a compromise in talks and so had asked for the vote to be postponed by a week.

“We are moving forward,” he said, but other key lawmakers said the sides remained divided on a number of key issues.

If the committee fails to reach a compromise this month, new discussions would be pushed back until February - delaying a plenary vote and final parliamentary position until at least April.

EU lawmakers want the proposal tightened to take into account the goals of the Paris climate accord and to do more to minimize the risk of energy-intensive industries moving abroad to avoid environment regulation.

Two sources said the Socialists and Democrats party was blocking talks as they want a higher annual rate of 2.4 percent for which carbon permits would be removed from the market from 2020-2030. The Commission’s proposal sets 2.2 percent as the rate for what is known as the linear reduction factor.

Duncan has proposed doubling the rate at which the EU’s carbon market stability reserve (MSR) soaks up excess allowances to 24 percent for the first three years after it enters into force.

He also seeks to cancel 750 million carbon allowances from the MSR to protect sectors, which some countries fear will be driven abroad in what is known as carbon leakage.

Along with these issues, sources close to the talks said European politicians are still stuck on which energy-intensive industries deserve to benefit from additional protection.

After news of the delay to long-awaited reforms, carbon prices fell 5.8 percent to 4.05 euros a ton as of 1231 GMT (7:30 EST).

Those in favor of deep reforms say a strong carbon market and higher permit prices are needed to spur investment in low-carbon technology and to help the bloc meet its emission reduction targets.

Reporting by Alissa de Carbonnel; Additional reporting by Nina Chestney in London; Editing by Louise Heavens and Susan Fenton