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EU carbon market in 'freefall' after backloading vote

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Monday, 28 January 2013

EU carbon market in 'freefall' after backloading vote

EU carbon prices briefly slid 40% to a record low (€2.81 a metric tone) on Thursday (24 January)  after a vote in the European Parliament's energy and industry committee opposing a scheme known as "backloading" - or supporting prices by extracting allowances from the market and reinjecting them later. This raises concerns that prices could hit zero.
"This should be the final wake-up call both to governments and the European Parliament," EU Climate Commissioner Connie Hedegaard said.
The €110-billion scheme is core to Europe's efforts to prompt utilities and industry to go green but carbon prices are far too low to provide that incentive. Analysts say carbon prices need to be at least €20 to make utilities switch to lower carbon energy generation. Launched in 2005, the scheme is now in its third trading phase and is legislated to run until at least 2020, which means it cannot be dismantled even if prices crash to zero.
Thursday's vote is part of a long EU process. Although not binding, it is the latest sign of the difficulty the EU is having in reaching agreement on how to intervene in the carbon market.A vote in the environment committee, expected next month, as well as another in a committee of representatives of member states, are far more decisive.
Many doubt the Commission's proposal will be passed, meaning more ambitious reform plans might not happen for years, leaving the market limping along and Europe's ambitions to lead the world fight against rising carbon emissions severely dented.
So far, coal-intensive Poland is opposed, Britain wants a more ambitious plan and Germany, the EU's most influential member, is undecided.

Source: Euractiv