EU lawmakers to vote next week on early CO2 market auctions

European Union flags flutter outside the EU Commission headquarters in Brussels
European Union flags flutter outside the EU Commission headquarters, in Brussels, Belgium, February 1, 2023 REUTERS/Yves Herman/File Photo

BRUSSELS, Feb 6 (Reuters) - European Union lawmakers will vote next week on plans to auction carbon permits early to raise cash for countries to quit Russian gas, soothing concerns of a postponed vote that some analysts said helped to drive up carbon prices last week.

An EU official told Reuters the European Parliament vote is scheduled for Tuesday on the legislation to raise 20 billion euros ($21.5 billion) from the EU carbon market, partly by holding carbon permit sales earlier than planned.

The plan aims to raise extra funding for countries to spend on expanding renewable energy and energy-saving renovations to help replace Russian gas, and projects to help heavy industry decarbonise.

The rules were agreed last year by negotiators from EU countries and lawmakers, so Tuesday's vote is a formality, expected to greenlight the deal with no changes. EU country ministers are also expected to okay the deal this month.

The early CO2 auctions cannot began until the rules are formally approved.

Carbon prices shot up to near record highs above 97 euros per tonne last week - a move some analysts attributed partly to concerns among market participants that the vote would be delayed to April.

That could have pushed back the first auctions to July, and seen only 40 million to 45 million extra CO2 permits made available to the market this year instead of the 65 million expected if auctions launch earlier, analysts at Energy Aspects said.

Bidding by speculators also helped drive prices higher last week, Energy Aspects said.

Benchmark EU carbon permits were trading around 92.20 euros per tonne of CO2 on Monday, down 1% from Friday.

The EU carbon market forces power plants and factories to buy CO2 permits when they pollute, and is the bloc's core policy for cutting carbon emissions.

The EU also agreed a major carbon market reform last year, which is expected to increase CO2 prices this decade to incentivise faster emissions cuts. EU lawmakers are expected to greenlight those reforms in April.

($1 = 0.9297 euros)

Reporting by Kate Abnett; Additional reporting by Susanna Twidale; Editing by Jan Harvey

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