London, 3 July (Argus) — The European Parliament's vote in favour of a European Commission proposal to withhold some EU emissions trading scheme (ETS) allowances from the early years of phase 3 (2013-20) paves the way for a temporary curb of the scheme's huge oversupply.
Today's vote marks a turnaround from parliament's narrow rejection of the proposal during a first vote on 16 April.
In a plenary session in Strasbourg, MEPs approved amendments tabled by parliament's environment committee whereby the commission "may, in exceptional circumstances" adapt the timing of auctions, provided an impact assessment shows the sectors concerned will not face "significant risk" of companies relocating outside the EU. "The commission shall make no more than one such adaptation for a maximum number of 900mn allowances," the amended proposal says.
Rapporteur Matthias Groote, who is steering the legislation through parliament, said having been given a mandate by parliament he would start negotiations with EU ministers as soon as possible and “seek a common solution that will allow the ETS to fulfil its purpose."
But the EU council too has to give its go-ahead for these negotiations before discussions between parliament and EU member states can begin. In addition, the council may not decide a final position until after Germany takes a stand, which will only happen after the country's federal elections in September. Germany's position is seen as pivotal because it holds 29 votes and is one of only seven states with 81 votes not yet to have declared a final position.
Hence the back-loading proposal is likely to only be implemented in 2014, assuming it overcomes all the legislative hurdles it still faces.
EU climate action commissioner Connie Hedegaard welcomed the vote as a “clear message” from parliament that Europe needs an effective, well-functioning ETS. “The next step is now for the council to take a decision. The sooner, the better, so that we can move on to the structural reform of the ETS as soon as possible,” she said.
The International Emissions Trading Association (Iata) described the outcome as “a constructive shift compared to the recent political stalemate” and a “critical first step” towards further ETS reforms. “It is now important for the negotiations between the co-legislators to move forward rapidly, to avoid further delays and uncertainty for market operators”, Ieta president and chief executive Dirk Forrister said.
The Climate Markets and Investment Association (CMIA) also welcomed the outcome, but warned the “tortuous EU legislative process still has a few more hurdles,” adding that it anticipates that these steps will be equally hard fought.
“This positive vote now gives the EU ETS breathing space for more profound supply side reforms to be enacted that will prevent the need for another back-loading debate in the future," the CMIA's executive director, Miles Austin, said.
But the proposal still has to pass through the trilogue procedure, a joint council and plenary vote, the climate change committee and then finally a three- month period of scrutiny, the CMIA said.
Surprisingly, nearly all of the compromise amendments tabled by the main political parties — which were at least partly aimed at softening back-loading's potential negative economic impact should the proposal be adopted — were rejected. Insofar as these amendments would have substantially weakened the measure and complicated further negotiations with the council, the outcome of today's vote was more positive for the ETS than expected.
Last month, the European People's Party (EPP), Progressive Alliance of Socialists and Democrats (S&D) and Alliance of Liberals and Democrats for Europe (ALDE) agreed a set of compromise amendments to help usher the proposal through parliament.
But ultimately, MEPs voted against an amendment whereby withheld allowances would have been reintroduced to the market in “a predictable and linear manner” from the moment of their last withdrawal. They also rejected a proposal whereby revenue from the eventual sales of 600mn withheld allowances would be used to finance low-carbon innovation.
Send comments to feedback@argusmedia.com
em/jc 3.1
If you would like to review other ArgusMedia.com content options, request more information about Argus' energy news, data and analysis services.
Copyright © 2013 Argus Media Ltd - www.ArgusMedia.com - All rights reserved.
