EU Politicians Back Carbon Market 2019 Reform Start

The European Parliament on Wednesday approved a proposal to begin reform of the world's biggest carbon market in 2019, clearing the last major hurdle before the plan can become law.

The aim is make the EU Emissions Trading System (ETS) strong enough to spur investment in lower-carbon energy and precedes U.N. talks in Paris at the end of the year to seek a deal to curb global warming.

EU carbon allowances at around 7.50 euros per tonne were little changed after Wednesday's vote, which had been expected.

Ivo Belet, from the centre-right European People's Party, who led the debate in parliament, said the reform strengthened the credibility of the European Union ahead of the Paris climate summit.

"The Greek crisis is so urgent that it puts everything else aside, but climate is something that cannot wait," Belet said in a debate this week.

Following the plenary vote at the European Parliament in Strasbourg, with 495 in favour, 158 against and 49 abstentions, the reform only requires a sign-off from member states to become law.

It will set up from 2019 a Market Stability Reserve (MSR) to remove some of the surplus of carbon allowances generated by recession that has depressed the ETS.

Jos Delbeke, director general of the European Commission's climate action department, said as many as 1.6 billion allowances could be removed from the market.

Analysts say carbon prices could now reach at least 20 euros per tonne by 2020, especially with the help of deeper structural changes the European Commission plans to propose next week.

Emil Dimantchev, analyst at Thomson Reuters Point Carbon, said the subdued market reaction on Wednesday followed speculation of a positive vote.

"It will take longer for the carbon price to fully reflect the long-term implications MSR agreement," he said, adding the financial sector had to regain confidence in the market.

Debate was held up over previous months by opposition led by Poland, whose economy depends on coal, the most carbon intensive of the fossil fuels.

Jadwiga Wisniewska, a Polish member of the European Conservatives and Reformists Group, opposed the measure, saying it was "completely unacceptable". "It is something that is built on a legal base that is quite simply wrong," she said.

But there was broad welcome from other political groups.

"Today's vote truly strengthens the carbon market and will gradually put an end to the surpluses that have paralysed the carbon market," Gerben-Jan Gerbrandy, a Dutch member of the  Alliance of Liberals and Democrats for Europe.
 

(By Susanna Twidale and Barbara Lewis)