Dismay at 'no' vote to ETS fix

The European Parliament has rejected a proposed change to the EU’s ailing emissions trading scheme (ETS), sending prices plunging to new record lows on the world’s biggest carbon market.

Members voted 334-315 against the so-called "backloading” proposal.  This would have temporarily removed some 900 million allowances from the over-supplied scheme.

The EU carbon price fell by more than 40% to a new record low of €2.63/tonne on the ICE Futures Europe Exchange in London following news of the vote.

In an effort to push up the carbon price and make low-carbon investments more attractive, the European Commission had proposed withholding the 900 million allowances over the next two years.

The hope was that the resulting scarcity would drive up the price.

The move was backed by a number of European energy companies, which had urged a "yes” vote.

But industries that use a large amount of energy argued that the low price of carbon accurately reflected the economic reality of a Europe struggling with a slump for the past four years.

Hans ten Berge, secretary general of industry body Eurelectric, said it regrets the "no" vote. “This vote is a dangerous setback for the internal energy market and for the EU carbon goals.

“Immediate carbon market reactions to the vote show how low the credibility of the ETS has fallen.  Only urgent action by the Commission to put forward structural proposals on the ETS can now stop member states from each legislating their own alternative policies.

“We remain convinced of the need to firmly establish the ETS as the main policy instrument for driving investment choice in carbon dioxide reduction,” he says.

Remi Gruet, senior climate advisor for the European Wind Energy Association (EWEA) said the parliament had voted against repairing the collapsing carbon market.

“MEPs have voted against the 'polluter pays' principle, and putting a market-oriented price on carbon emissions. This makes the ETS irrelevant in Europe’s bid to reduce the use of fossil fuels. The carbon price will continue having no impact on investment decisions in the power sector,” he added.

Ahead of the vote, the International Energy Agency (IEA) warned failure to approve the backloading proposals for one of Europe’s flagship environmental policies would have serious consequences around the world.