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Europe and Japan are already running very carbon efficient economies.
CARBON CRASH: VOTE LEAVES EU EMISSIONS TRADING IN TATTERS
Date: 17/04/13The Wall Street Journal
The European Union’s flagship program to fight global warming suffered a major blow Tuesday when lawmakers rejected a proposal aimed at shoring up the region’s carbon-emissions trading system, putting its survival in doubt. Germany’s Minister of Economic and Technology Philipp Rösler welcomed the rejection of the backloading plans as an “excellent signal” for an continuing economic recovery.
After the European Parliament’s surprise afternoon vote, spooked investors drove the price of emissions permits down by nearly half. Benchmark electricity prices also fell.
The legislature derailed—at least temporarily—a plan to push up permit prices by postponing issuance of new permits for between five and seven years. Electricity generators and others must buy the permits in order to emit carbon dioxide.
Europe’s so-called Emissions Trading System, first launched in 2008, was designed to raise the cost of polluting and discourage the production of greenhouse gases to protect the environment.
But lately, politicians’ focus on generating jobs and sparking growth in a region struggling to recover from recession is relegating green concerns to second place behind economics.
“It was a vote of reason,” said Poland’s environment minister, Marcin Korolec. Poland, one of the EU’s less-affluent members, has been outspoken in its opposition to the measure, which it said could hamper development.
The parliament’s Environment Committee after the vote said that some lawmakers felt that “a rise in the carbon price would erode the competitiveness of European industry and be passed on in household energy bills.”
Germany’s Minister of Economic and Technology Philipp Rösler welcomed the rejection of the backloading plans as an “excellent signal” for an continuing economic recovery. “Reducing supply CO2 allowances would equate to an intervention into a functioning market system,” and further burden industry, he said.
The EU’s executive arm, the European Commission, which devised the so-called backloading plan, said it regretted parliament’s move. And the EU’s Council of Environment Ministers said it would try to draw up an alternate plan.
“Today’s vote is a historic failure,” said Joris den Blanken, EU climate policy director at environmental advocacy group Greenpeace. Without action to deal with an oversupply of permits, the trading system won’t “dissuade polluters and promote investments in cleaner production.”
Slack demand for electricity and an abundance of permits in the market helped push the price of emitting a ton of carbon below 5 euros earlier this year, down from nearly €30 in 2008. After the vote, the price dropped to €2.55 before recovering partially to €3.2.
Without the backloading plan to increase scarcity on the emissions permit market, “the ETS will almost certainly collapse,” said Kash Burchett, a London-based analyst at consulting company IHS Energy.
“Prices will likely sink below €1 per ton as participants recognize that there is no political will at present to restore the market mechanism to functioning order,” he said.