(Adds confirmation of EU Council agenda in paragraph 3)
By Ben Garside
STRASBOURG, France Dec 10 The European
Parliament voted on Tuesday to remove surplus permits from the
carbon market from next year to prop up allowance prices on the
EU Emissions Trading Scheme (ETS), ending months of argument
over the plan.
The full assembly voted in Strasbourg, France, to approve
without further changes a step known as backloading, which will
allow regulators to make a one-off delay to scheduled sales of
900 million carbon permits.
The bill is set to be formally signed off by the European
Council of member states at a meeting on Dec. 16 and will
require no further discussion by ministers following an informal
agreement last month, an EU diplomat close to the process said
The benchmark December 2013 EU Allowance futures
fell to an intraday low of 4.73 euros following Tuesday's
ballot, before climbing back to Monday's settlement level of
Analysts had expected a dip following the ballot as prices
had risen in the past week in anticipation the plan would be
The European Commission wants to intervene in the market to
lift carbon prices to a level that prompts companies to cut
their greenhouse gas emissions, for example by investing in
energy efficiency or switching to renewable energy sources.
The EU recession has cut the bloc's emissions, resulting in
a massive oversupply of permits in the ETS that caused carbon
prices to tumble below 5 euros from more than 30 euros in 2008.
Analysts predict prices could at least double due to
backloading, but expect it will be years before they rise above
the 20-euro level needed to prompt industry and utilities to
invest in greener energy.
Some lawmakers believe the bloc's carbon market will be
irrelevant without further reform.
"It's clear that backloading is not enough. The market is
still oversupplied by 2 billion permits, but this buys us time
to have a discussion on how to reform it," said Matthias Groote,
the German Socialist lawmaker who steered the legislation
Still, the proposal caused fierce divisions within member
states, national governments and the European Parliament over
fears it will push up energy prices and dent economic growth.
Following approval of the plan by EU ministers next week,
member state officials will still need to agree exactly how and
when the permits can be withdrawn from scheduled sales.
Officials are due to discuss options on Wednesday, but are
not likely to vote on them until January or February.
"We expect some upside to EU Allowance prices in the coming
months as the implementation of the measure becomes more
concrete," said Marcus Ferdinand, an analyst at Thomson Reuters
"Assuming the first allowances will be withheld from the
market in the second half of 2014, we forecast the Dec-14 carbon
price will increase by 35 percent compared to this years' (mean)
price, to an average of 6 euros," he said in an emailed
statement following the vote.
The European Commission proposed backloading as a limited
first step to rescue the ETS, its flagship tool to curb
emissions of heat-trapping gases blamed for climate change.
In January, the Commission will publish a legislative
proposal on deeper ETS reforms, a well-placed EU source told
Reuters last month.
(Additional reporting by Michael Szabo; Editing by Dale Hudson
and Jason Neely)