Hedegaard: Carbon plan needs German backing


A European Commission plan to reduce a glut of carbon emissions allowances, which are trading close to record lows, can pass provided it gets German support, EU Climate Commissioner Connie Hedegaard said.

The European Commission proposal, known as backloading, would remove permits from the first three years of the new phase of the carbon market (2013-2015) and put them back on the market at the end of it (2019-2020).

Coal-dependent Poland strongly opposes price-raising moves on the EU's Emissions Trading Scheme (ETS), where a surplus generated mostly by recession has plunged the price to less than €6 per tonne, compared with around €30 in 2008.

But the backloading plan, which many say is urgently needed to restore faith in the ETS, can still pass, Hedegaard said.

"Yes, if the Germans back it. And then I hope the UK would also come out in favour of that because obviously they have said they want to be even more ambitious, but in politics sometimes you have to take what you can get when you can get it," Hedegaard said in an interview with Reuters.

"If that changes after the elections in Germany, yes then I think we will get them," she said at the World Future Energy Summit in Abu Dhabi.

Germany, the EU's most influential member, has yet to take a stance.

The environment minister has spoken in favour of the plan, while the economy minister, reflecting the powerful heavy industry lobby opposed to any increase in energy costs, has so far opposed it.

German elections in Lower Saxony on Sunday could lead to a change of economy minister and unlock the indecision.

Elections can halt process

Some observers, however, have speculated Germany will slide into an abstention as it focuses on federal elections later in the year, at which Chancellor Angela Merkel will seek another term of office.

Hedegaard called for early decisions.

"I think it is urgent and I think that those member states that haven't internally made up their mind yet must realise that industry and investors need to know what they can count on," she said.

She declined to speculate on the fate of the backloading proposal should Germany refuse to back it.

Ireland, as current holder of the rotating EU presidency, has said it will try to broker a deal before the end of its six months at the helm of EU debate.

A presidency source on Wednesday (16 January) summed up the mood of member states so far as "undecided, with a few exceptions".

The presidency and the Commission meanwhile are working with other trading schemes to develop links, notably with Australia, with which plans for a tie-up were announced last year.

"During the Irish presidency, we will be seeking a mandate that we can start the very formal negotiations," Hedegaard said of the talks with Australia.

"It is just one part of the bigger vision that in the end – not tomorrow, not next year, not in the very foreseeable future – but in the end, the aim should be to have a global price on carbon."

The value of the world’s carbon market fell by 36% last year, according to Bloomberg New Energy Finance, the first annual contraction to hit the CO2 reduction mechanism since 2008.

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.

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