Stop press: Critics slam EU failure to "fix" carbon market

The European Parliament has voted against propping up the EU’s emissions trading scheme in a move that sent prices plunging to new lows in the world’s biggest carbon market.

Members of parliament voted 334-315 so called “backloading”, which would have temporarily removed some 900m allowances from the over-supplied emissions trading system.

The news has been greeted with dismay by many in the clean energy industry, and some reports have even suggested that 10 years of investment could be brought to a halt. Rémi Gruet, Senior Climate Advisor of the European Wind Energy Association (EWEA) said that MEPs had effetively voted against the polluter pays principle and putting a market-oriented price on carbon emissions:

"This makes the ETS irrelevant in Europe's bid to reduce the use of fossil fuels. The carbon price will continue having no impact on investment decisions in the power sector" he said.

EWEA and others in the industry backed the plan to delay auctions for additional emissions allowances ("backloading"), because over allocation of allowances, and the economic crisis, led to a significant surplus of free allowances to heavy industry. Combined with a large influx of credits from international projects, the price crashed.

Politicians and businesses had been lobbying hard to try and sway MEPs to back the measures. The Climate and Environment Ministers of Germany, France, Italy, the UK, Sweden and Denmark released a joint letter last week urging MEPs to back the proposals and warning that "without sustainably strengthening the ETS, eight years of climate action will be lost, creating a serious threat for the existence of our most cost efficient climate policy instrument".

Analysts said progress on other packages of reforms is unlikely to materialise, and warned that the market is now unlikely to see any fundamental changes until 2015 at the earliest.

But EU Climate Commissioner Connie Hedegaard insisted the vote had left the door open for earlier action to support the carbon market. "The commission of course regrets that the European Parliament has not approved the backloading proposal," she said in a statement. "However, it is worth noting that when it was suggested in the second vote that the parliament finalised its rejection right away, this was not supported.

"The proposal will now go back to the parliament's Environment Committee for further consideration. Europe needs a robust carbon market to meet our climate targets and spur innovation. The commission remains convinced that backloading would help restore confidence in the EU ETS in the short term until we decide on more structural measures."

Greenpeace UK political director Joss Garman said:

“The central plank of Europe’s strategy for cutting carbon emissions is now rendered impotent as it won’t stop a single dirty coal plant from being built.”

More to follow... 

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