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06/12/2016

Backloading amendment to return for ‘second round’

Climate & Environment

Backloading amendment to return for ‘second round’

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EXCLUSIVE / An EU plan to “backload” or withhold 900 million carbon allowances to see-saw their falling price, rejected by the European Parliament in a plenary session last week, could return for a ‘second-round’ vote in June.

EU environment and energy ministers are scheduled today (April 23) to discuss strategies to return a variant of the European Commission proposal to a restive Parliament.

One Commission source told EurActiv that he foresaw the issue “coming back to a vote in plenary in two months time."

German MEP Matthias Groote, chairman of the Parliament's environment committee, "will look at the text and probably work with what he has in terms of changing it, perhaps introducing the ‘fallback amendment’,” the source said.

The European Parliament vote on 16 April sent the Commission's proposed one-line legal amendment back to the environment committee, from whence it had come. Because the line is too short to be easily redrafted, some MEPs concluded that it would effectively die there.

But the fallback amendment is a separate text worked out by Groote. It stresses that backloading is a one-off measure, involving no more than 900 million allowances.

Before this fallback amendment can be triggered, EU countries sitting in the Council of Ministers must send a steer back to the parliament, by agreeing support for such a position. A successful vote in the environment committee would then return the legislation back to plenary.

“I don’t want to paint a picture of an easy win in the second round,” the source added. “It is not at all evident it will go through.”

EurActiv understands that the Commission has been talking to EU ministers about their positioning and the necessity of backloading.

“We are looking to the Parliament and legislature to do something with this proposal,” a Commission source said. “The Council needs to find out where they stand and Parliament has to find out how they want to come back on this.”

No blocking minority exists on the Council to prevent the passage of guidance on the backloading proposal but with Germany still sat on the fence, there is not yet a positive majority either.

Even so, the expectation in Brussels is that the Council will send a steer to the European Parliament rather than see the EU’s Emissions Trading System (ETS) languish. This could emerge from a June summit of EU environment ministers.

An 'interesting Spanish dynamic'

Fallout from last week’s surprise rejection of backloading is continuing to ruffle feathers among MEPs.

One EU source noted an “interesting dynamic” that had been playing out among Socialist and Democrat (S&D) MEPs from Spain, who abstained in the vote on backloading, as did their political opponents in the European People's Party (EPP).

On 18 April, Reuters Thomson Point Carbon reported that parliamentary voting records showed that several Spanish S&D MEPs had requested that their abstentions in the vote be changed,  because they had intended to support the amendment.

This position was given short shrift by supporters of the backloading proposal, who were present at the Strasbourg vote. One said that the real problem had been a split among the ALDE liberal group of MEPs and, crucially, a lack of S&D solidarity with Groote, the rapporteur tasked with navigating the legislation’s passage. 

“Many of them didn’t support their own man’s report,” he said. “It doesn’t normally happen that you stab your man in the back like that.”

“You could see from Matthias Groote’s body language on the Tuesday that he was clearly shaken and jaded by the hostility from within the group,” he added.

An early S&D press release blaming the EPP group was aimed at “hiding the fact that they were the ones who fractured,” he said.

Beneath the politicking lies a troubled central driver of Europe’s climate policy, whose demise could have serious repercussions for global talks on a replacement to the Kyoto Protocol. 

What is the ETS?

The EU’s ETS obliges most of the bloc’s industries to buy enough carbon allowances to cover their CO2 emissions, once they rise above an agreed baseline. Companies can also sell their allowances if they emit less than their quota.

However, because of falling production levels in the long recession since 2009, and a glut of over-allocations to big emitters, the price of carbon has sunk to a price that provides no incentive for carbon reductions – €2.77 per tonne of carbon, yesterday (22 April).

Green MEPs have called for the Commission to use the backloading vote to bring forward structural measures to shore up carbon values – such as steepening an annual decline in allowance numbers, or increasing the 2020 emissions reduction target to 30%.

Commission sources insist that although structural measures are important, it would be premature to propose them now.

“Structural measures would require full-fledged impact assessments,” one said. “It would not be credible for us to introduce measures outside the context of the 2020 climate policy discussion [at this point].”

Background

With a turnover that reached around €90 billion in 2010, the EU's Emissions Trading System is the world's largest carbon market. Around 80% of it is traded in futures markets and 20% in spot markets.

The ETS aims to encourage companies to invest in low-polluting technologies by allocating or selling them allowances to cover their annual emissions. The most efficient companies can then sell unused allowances or bank them.

The scheme has proved influential. Australia’s is due to begin carbon trading in 2015,  Thailand and Vietnam have both unveiled plans to launch ETS’s, China is due to launch pilot schemes across several provinces this year, and India will ring the bell for trading on an energy efficiency market in 2014. Mexico and Taiwan are also planning to introduce carbon markets.

Timeline

  • June 2013: Council of EU Environment Ministers
  • 2014: India due to begin energy efficiency trading
  • October 2014: Thailand due to launch a voluntary emissions market
  • 2015: South Korea due to begin emissions trading
  • 2018: EU and Australia due to link emissions trading schemes

Further Reading

European Commission

Market analysis

  • Bloomberg New Energy Finance: BNEF
  • Thomson Reuters: Point Carbon
  • International Emissions Trading Association: IETA