Panel backs carbon allowance 'set-asides'

BRUSSELS, March 2 (UPI) -- A key European Parliament committee this week approved a measure allowing the EU to withhold carbon emission permits to prop up their market prices.

The EP's Industry, Research and Energy Committee Tuesday approved a draft EU directive that authorizes the European Commission to intervene in the open market for carbon allowances sold under the EU's emissions trading scheme, beginning with its 2013-20 phase.


The changes to the EU's Energy Efficiency Directive call for a "necessary amount of allowances" to be removed from the market to strengthen their languishing open-market price.

Backers hail it as a way to cope with a saturated market for the credits brought on by the economic slowdown and other factors, resulting in an oversupply estimated at between 500 million and 1.4 billion. Prices for the allowances have dropped from a peak of $40 per ton of carbon equivalent in 2008 to $9 per ton.


The idea behind the EU allowances is to encourage European industry to use energy more efficiently and save money through the installation of new technology to cut carbon emissions. But the price is too low to act as a motivator to spur costly long-term investments in green energy technologies, analysts say.

Industries that have purchased and stockpiled the EUAs, however, vehemently oppose intervening in the market, saying it amounts to "moving the goalposts" after they've already made investments under the trading scheme.

Poland also opposed any form of EUA set-aside because strengthening carbon prices could hurt its coal-dependent economy.

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The EP committee, however, turned aside those concerns, passing the set-asides as part of a larger package of changes that authorize the European Commission to seek binding national energy efficiency targets and save energy by specific means such as renovating public buildings.

That way, the demand for the EUAs will rise, asserted Claude Turmes, a Greens/EFA member of Parliament from Luxembourg.

"This vote is a major sign that Parliament, with a majority including most political parties, takes rising energy costs and energy poverty seriously," he said. "Energy efficiency offers possibilities for job creation -- notably in the building sector.

"Now governments have a choice: protect citizens against energy poverty and create many job opportunities or allow big energy companies to make ever-increasing profits."


For the set-aside plan to become law, the commission must make a formal proposal to withhold the permits and persuade a majority of the EU council of 27 environment ministers to go along with it, followed by a vote of the full European Parliament.

Denmark, which holds the council's rotating presidency, has vowed to support the energy efficiency measures before its term runs out in July. But whether the EUA set-asides will be included in its agenda unclear, The Guardian reported.

In addition to the Poland-led opposition in the Council of Europe, the commission itself is divided on the issue, the newspaper said, with Climate Commissioner Connie Hedegaard in favor but Industry Commissioner Antonio Tajani opposed.

"The pricing of allowances should be left to the market," Tajani said Tuesday. "Prices would recover by themselves as soon as the economy were to pick up."

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