By John Parnell
The European Parliament has voted down plans to reform its struggling carbon market.
The proposal to hold back 900m carbon credits from the next allocation of emission allowances, a process known as backloading, was designed to boost demand, and raise the carbon price.
The cost of emitting a ton of carbon fell as the recession stunted economic output and the absence of reinforced greenhouse gas targets at the EU meant the cap on emissions was too high.
The plans will now return to the Environmental Committee for tinkering ahead of a possible new vote but the consensus appears that the next proposed changes will involve structural alterations.
News of the 334-315 vote halved the carbon price instantly.
The reaction has differed greatly from jubilant to mournful.
Connie Hedegaard, European Commissioner for Climate Action
”The Commission of course regrets that the European Parliament has not approved the back-loading proposal. However, it is worth noting than when it was suggested in the second vote that the Parliament finalised its rejection right away, this was not supported. The proposal will now go back to the Parliament’s Environment Committee for further consideration. Europe needs a robust carbon market to meet our climate targets and spur innovation. The Commission remains convinced that back-loading would help restore confidence in the EU ETS in the short term until we decide on more structural measures. We will now reflect on the next steps to ensure that Europe has strong EU ETS.”
Eija-Riitta Korhola, MEP, co-sponsor of the amendment that sunk the reforms
“I appreciate that the EPP [the European People’s Party, largest in the European Parliament] took a clear stance and decided to reject the Commission’s backloading proposal. On the eve of the upcoming elections our message to the citizens is that we want to create jobs for Europe, as well as a world that is, particularly in terms of environmental values, sustainable. We do not give our support to a climate policy that is made at the expense of clean European production and industries.”
Phil Hogan, Minister of Environment for Ireland, holder of the EU’s revolving presidency
“The immediate need to address the carbon price issue in the ETS remains a clear priority. While I can understand concerns around intervening in a market-based instrument, the reality is that the EU is faced with an exceptional policy situation which demands an exceptional policy response. The ETS clarification proposal is designed to underpin a focused, short-term intervention that will assist in restoring the ETS to a more effective level of operation while the structural reform measures necessary to strengthen the operation of the ETS in the longer term are being considered.”
UK Department of Energy and Climate Change
“The UK Government is disappointed at the Parliament’s vote but respects their view. The UK understands that the ENVI Committee will now discuss the proposals once more, and therefore hopes that a positive outcome can still be achieved. In parallel, the UK Government feels that we should now focus on the real issue – the urgent need for structural reform.
The Commission must now bring forward concrete legislative proposals for reform of the EU ETS later this year, following their current consultations on their Carbon Market Report.
Bas Eickhout, MEP
“An irresponsible and unholy alliance of MEPs have today voted to allow the rot in the EU’s emissions trading scheme to continue. The ‘backloading’ proposal was only stop-gap measure, which would have bought time to allow a more fundamental solution to the problems in the ETS to be adopted.”
Richard Gledhill, partner and Head of Climate Change, PricewaterhouseCoopers
“The vote against backloading is another body blow for carbon markets in Europe. Emission trading can be a very effective policy tool to drive down emissions, but only if it is backed by political commitment to action.
“This hardly chimes with all the talk of ‘increasing ambition’ in the UN climate negotiations. Urgent reform is now needed to restore confidence in the markets and in the political process, ahead of the 2015 target for a global deal on climate.
“Economic growth is still the predominant driver of emissions, so it is the economic downturn that has been the undoing of the EU Emissions Trading Scheme. The slow recovery in Europe isn’t enough to address the imbalance of supply and demand in the market.”
Sam Van den plas, climate policy officer, WWF-Brussels
“After broad agreement that backloading alone would not solve the fundamental problems faced by the ETS, EU lawmakers need to get rid of the surplus toxic tonnes hanging like a dark shadow over the carbon market. In addition, the EU should stop handing out free allowances to a large majority of EU manufacturing industries since current carbon prices do not justify such gifts.”
Baroness Worthington, founder of the Sandbag campaign group
“The carbon market in Europe has suffered a real blow today. It remains to be seen if the Commission can come forward with a more ambitious rescue plan that could be more successful in gathering the support of MEPs. Whatever happens it seems certain that in the short the EU will miss out on much needed investment in increased industrial efficiency and the low carbon economy at precisely the time when other countries such as China and the US are starting to catch up.”
Stephanie Pfiefer, executive director of the Institutional Investors Group on Climate Change
“We are disappointed that MEPs have voted against the backloading proposal. The ETS in its current guise may be flawed but an EU-wide emissions trading scheme is an important mechanism. Structured correctly such a mechanism can provide the long-term policy certainty necessary to drive low-carbon investment and reduce emissions. The energy challenges facing the EU are serious and the impacts of unchecked climate change are dangerous. As investors we will now look forward to discussing with EU policymakers how stable, supportive, long-term climate policies can best hasten the transition to a low-carbon economy.”
Miles Austin, executive director Climate Markets & Investment Association (CMIA)
“The consequences of MEPs voting against backloading will undoubtedly be rapidly reflected in the EUA price over the coming days, this solely lies at the feet of Parliament. Hopefully as a result they will finally demonstrate their ability to lead and accelerate the timetable for the now even more urgently needed structural reforms of the EUETS.”
Adrian Rimmer, CEO of The Gold Standard
“The no vote demonstrates the unwillingness of European governments to fix their flagship climate legislation. As a policy signal, without any indication of an alternate plan, it is very damaging. The vote makes the job of those, like The Gold Standard, which advocate the merits of a market-based approach, significantly harder, in sharp contrast to those private sector organisations that continue to invest in robust voluntary action.”
Rémi Gruet, senior climate advisor of the European Wind Energy Association (EWEA)
“The European Parliament today 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.”
Reaction on twitter:
ETS-vote was serious setback for Climate Protection. We will have to encourage a public debate on the bestway to reduce CO2 emissions
— Peter Altmaier (@peteraltmaier) April 16, 2013
Looks like the Euro Parliament has just killed the ETS – it is now a joke. Time for carbon tax? greenpeace.org.uk/newsdesk/energ…
— Mark Lynas (@mark_lynas) April 16, 2013
— Pascoe Sabido (@pascoesabido) April 16, 2013
EU parliament voted against reforming of ETS CO2 emissions trading system. Prices down 40%! Until further notice, market is as good as dead
— Hans van Cleef (@Cleef_Hans) April 16, 2013