The EU carbon market today suffered a potentially
catastrophic blow, as the European Parliament rejected a plan to
temporarily breathe new life into the flagging scheme. The news
sent the carbon price
tumbling to around €3 per
Despite some hope that the vote could focus EU
efforts to reform its carbon policies, most commentators fear it
will prove a major setback for market-based emissions
MEPs today voted by a narrow majority to reject a
proposal that would withhold 900 million permits from the EU
emissions trading scheme (ETS) - known as backloading. The
emissions trading scheme has been in decline for months, with the
carbon price hitting
record lowsearlier this year.
Companies buy and sell permits to emit carbon dioxide
in the ETS. If they emit less than their permits allow, they can
sell the excess for a profit. The scheme is meant to reward those
that cut their emissions, and it relies on a shortage of permits.
economic slowdown meant the
market became over-supplied, sending the carbon price sliding to
record lows, removing the
incentive for polluters to cut their emissions.
Backloading would have reduced the number of permits
on the market, which policymakers hoped would boost the carbon
price. That plan is now "politically dead", according Marcus
Ferdinand from market analysts Reuters Point Carbon.
Today's vote was
expected to be close - and
so it proved. 315 MEPs voted for the backloading plan, but 334 MEPs
That the vote was decided on just 19 votes shows
there are "two equally strong groups of MEPs on either side of the
debate", according to Ferdinand.