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UPDATE 3-Carbon Wins Lifeline After Tight EU Parliament Vote
Wed Jul 3, 2013 * Carbon price jumps as much as 13 percent * Close 344-311 vote follows months of wrangling * Will need member state backing to become law * German economy ministry says still against the plan (Adds comment, updates prices) By Michael Szabo, Nina Chestney and Andrew Allan STRASBOURG/LONDON, July 3 (Reuters) – The European Parliament after months of bitter debate backed a plan on Wednesday to boost carbon prices, throwing a lifeline to the EU Emissions Trading System (ETS) and the bloc’s push for greener energy. EU politicians in Strasbourg voted 344-311 in favour of temporarily removing up to 900 million permits from trade , tackling oversupply that has sent carbon prices to record lows. The plan will now require backing from a majority of EU countries to become law. “A lot of member states are coming out in favour …We need to see what the formal vote is. Realistically, it will not be until after the German elections (in September),” EU climate chief Connie Hedegaard told Reuters. The ETS is a cornerstone of European Union climate policy, but a much higher carbon price is needed to achieve its goal of spurring industry to invest in low-carbon energy. EU politicians voted against a plan put forward last month but agreed to allow a one-off intervention in the market to temporarily withdraw up to 900 million permits. Companies and utilities buy these to cover their excessive carbon emissions output. “The ‘yes’ vote should provide a short-term boost to carbon prices and confirms the EU’s commitment to the success of the ETS and to implementing the long-term improvements that are still needed,” said Thomas Rassmuson, founding partner at CF Partners, an investment firm specialising in renewable energy. TEMPORARY BOOST? EU carbon prices were down ahead of the vote but traders took the outcome as a signal to buy, with prices jumping as much as 13 percent to 4.86 euros a tonne in afternoon trade. Shares in Germany utility E.ON briefly turned positive after the vote before falling back on a lower benchmark DAX index. RWE shares were down 0.9 percent. Analysts have estimated that EU carbon prices could average 8 to 9 euros over the next eight years, almost double current levels, if the plan to temporarily remove permits is implemented. Ultimately, they say carbon prices must reach levels of 40 to 50 euros to drive investment in lower carbon energy, something governments are keen to see happen to help them reach environmental targets. Poland opposes efforts to bolster carbon prices, however, as its economy still relies heavily on carbon-intensive coal . Germany has failed to take a formal position as the economy ministry opposes it on concerns it will hurt competitiveness, while the environment ministry supports the plan. “Today’s decision is regrettable. The economy ministry’s criticism remains unchanged,” a ministry spokesman said. Other opponents include energy-intensive industries loath to pay higher energy costs, free trade advocates against intervening in markets, and some who argue temporary removal of permits will not raise carbon prices to meaningful levels. Some energy companies have strongly supported the permit removal plan. Finnish utility Fortum said it marked a step toward needed, deeper reform. “A more profound renovation of emissions trading is necessary,” Fortum Chief Financial Officer Markus Rauramo said, noting the market would benefit from the setting of 2030 EU emissions reduction targets. (Additional reporting by Christoph Steitz, Barbara Lewis, Nerijus Adomaitis, Michel Rose, and Sarah Marsh; editing by Jason Neely) Continue reading
After Failed Attempt in April, Europe Approves Emissions Trading System
Ina Fassbender/Reuters Wind turbines and a coal power plant in Germany. Europe approved a measure aimed at raising carbon permit prices. By STANLEY REED Published: July 3, 2013 LONDON — The European Parliament approved on Wednesday a measure intended to revive sagging prices and confidence in the European Union’s emissions trading system, the centerpiece of Europe’s effort to cut greenhouse gases and a model for similar systems around the world. The vote had taken on symbolic importance because Parliament had rejected a similar proposal in April. That vote threatened the carbon trading system, which has been emulated globally as a way of using markets to curb greenhouse gases. The measure passed on Wednesday in Strasbourg, France, by a vote of 344 to 311 after intense lobbying by the European Commission and some national governments, including those of France, Denmark and Finland. It also gained stronger backing from liberal and socialist groups. Among those opposed were the governments of Poland and the Czech Republic, which were wary of the plan’s impact on their energy-intensive industries. A large moderate group, the European People’s Party , was divided, leading many of its members to abstain. “This was to some extent a symbolic vote indicating support more broadly for Europe’s carbon policies,” said Stig Schjolset, an analyst at Reuters Point Carbon, a market research firm based in Oslo. A negative vote would have meant “that European policy makers did not want to fix the carbon market and use it as a key tool to combat climate change,” he said. Richard Seeber, an Austrian and spokesman on the environment for the European People’s Party, voted in favor of Wednesday’s legislation after voting ‘no’ in April. He said he was persuaded by an amendment ensuring that the intervention in the market was “a one-off” and by a requirement that an assessment be made about “carbon leakage,” the extent to which businesses would leave the European Union to avoid the higher permit price. “It is essential to keep the E.T.S. as the main market-based instrument to fight against climate change,” said Mr. Seeber, referring to the emissions trading system. The market for carbon credits reacted positively, rising to about 4.70 euros, or $6.13, per ton, a 9 percent increase for the day, on heavy volume. The approved proposal will try to shore up prices for permits to emit greenhouse gases by delaying the auctioning of some of these allowances in the coming years through what is called backloading. Carbon permits are licenses for companies to release greenhouse gases. The idea behind the European cap-and-trade system is to tighten the amount of permits available each year so as to make polluting more costly, forcing companies to switch to greener technologies. But Europe’s prolonged economic downturn and generous allocations of allowances have created a glut of permits that cut the price to as low as about 2.75 euros a ton after the negative April vote. In a sense, the system is working by providing relief at a time of economic stress. But analysts say that a price of 30 euros a ton or higher is needed to persuade companies to switch to cleaner fuels like natural gas, the main alternative to coal for generating electric power. Coal use in Europe boomed last year. Analysts caution that the number of allowances that will be held off the market, about 900 million, is estimated to be only about half of the surplus of permits that would otherwise have built up by 2020, so it will not by itself shift the carbon market from bear to bull mode. “I think the backloading itself will have limited impact on prices because the market remains significantly oversupplied,” said Roland Vetter, head of research at CF Partners, a carbon trading firm based in London. In addition, there are still negotiations with Europe’s national governments and other hurdles to clear before the changes are put into effect, perhaps in the early part of next year. “This is a marathon, not a sprint, so today is not the end of the story,” said Miles Austin, the executive director of the Climate Markets and Investment Association, an industry group based in London. Business groups, some of which had lobbied against the measure, were critical of what they described as interference in a market system. “Even a one-off intervention undermines the principles of the emissions trading system and will make it more difficult for businesses to produce cost-effectively in the E.U.,” Arnaldo Abruzzini, secretary general of Eurochambres, which represents European chambers of commerce, said in a statement. But the world’s pioneering carbon market has a pulse again. Among supporters of carbon trading there is now hope that Europe will in a couple of years adopt structural changes that would lead to permanently higher prices. Connie Hedegaard, the European Union’s commissioner for climate action, said the purpose of the backloading measure was to “stop the bleeding with the drop in the carbon price while we were discussing more challenging issues.” The simplest overall change that would raise the price would be to “reduce the cap,” or permanently reduce the number of allowances available, said Robert N. Stavins, director of the Harvard Environmental Economics Program. But such a move “is very difficult to do at a time like this,” he said. With Europe mired in recession, politicians do not want to saddle Europe-based companies with even higher costs, especially considering that their American competitors are benefiting from lower energy prices thanks to the discoveries of shale gas. Also, the United States seems to have more or less permanently rejected a cap-and-trade system after the House of Representatives passed one in 2009 that later failed in the Senate. For some businesses, that left the European system looking like yet another burdensome and costly regulatory initiative. “Europe thought it would take the lead and the U.S. would follow,” Mr. Stavins said. Instead, the United States rejected cap and trade and that is affecting the cost of carbon-intensive services in Europe, he said. Mr. Stavins said that countries like Australia, Japan and China were all experimenting to various degrees with systems like the one Europe adopted. A version of this article appeared in print on July 4, 2013, on page B3 of the New York edition with the headline: After Failed Attempt in April, Europe Approves Emissions Trading System. Continue reading
Carbon Voting Gets Dirty
4:38 am Jul 3, 2013 Carbon Voting Gets Dirty These signs were hanging from parliament members’ door handles in Strasbourg. They were put there by the International Paper Co., which said it agreed with the climate-change fighting scheme, but not the proposed fix intended to raise carbon emission prices. Courtesy of International Paper Co. European Parliament was gearing up to vote Wednesday on whether to rejuvenate, or let lie fallow, its flagship climate-change fighting policy, the Emissions Trading System. Shortly beforehand, the outcome remained too close to call with any definitive certainty. Again. The legislation is a compromise on what parliament very narrowly shot down in April. For those members of parliament having difficulties making the decision this time around, there was no shortage of opinions being pushed. MEPs, by all accounts all 766 of them, showed up to the office Monday with a hotel-style sign hanging from their office door handles by International Paper Co. IP -0.16% “Do as you are told!” said the tear-drop sign featuring a full mug shot of Connie Hedegaard, European commissioner for climate action. “The Climate Action Commissioner refused to accept your democratic decision and is now telling you to compromise your principles,” it said. “The choice is clear. Vote NO again to preserve your political credibility.” The effort was condemned by Matthias Groote, MEP in the Social Democratic party who heads the parliament’s environment committee. “I’m okay with lobbying,” Mr. Groote said. “Everybody has a right to share their opinions. It’s part of the democratic process.” “But this is not fair. We work very hard. To simplify it like this is a lie,” Mr. Groote said. An International Paper spokesman said the company supports the ETS scheme, just not the proposed fix. The proposal, known as backloading, is intended to lift the cost of emitting carbon-dioxide, which collapsed alongside the drop in demand for electricity during the economic downturn. The lack of industrial activity resulted in too many carbon permits in the market. The new rules would temporarily reduce this oversupply. The higher prices anticipated from this could help reintroduce incentives for cutting the use of fossil fuels and developing renewable technologies. But the fix is technical and not easy to understand. Analysts have said it probably won’t raise carbon prices enough to have an impact. Yet without this attempt at reform, the EU’s carbon market will almost certainly fall into obscurity, while California, Australia, and even China race ahead with their own carbon markets. So just how close will this vote be? About as close as the last one. In April parliament voted 334 to 315, with 63 abstentions. This was so close for a parliamentary vote that the a whole host of variables could have shifted it, including nothing to due with climate or industry at all, said Jerzy Buzek, EPP member and former prime minister of Poland, who is against backloading. The vote in April “was just one day before the funeral of Margaret Thatcher,” Mr. Buzek said, adding that if it had been “on the day of the funeral, backloading would have been approved. All the conservatives would have gone to London, and the result would have been quite opposite.” With no major state funerals scheduled for Wednesday, expect this to go to the wire. Continue reading
