EU Parliament to stimulate increase in EU ETS carbon price

Posted on 4 Jul 2013 by Tim Brown

The European Parliament has approved measures to temporarily withhold the auction of 900 million CO2 allowances in an effort to drive up the price of carbon.

A glut of allowances have sunk the price of CO2 to record lows this year. The carbon price peaked at nearly Eu30 per tonne in June 2008 but has since fallen to less than Eu5 since the beginning of 2013.

MEPs yesterday voted in favour of “backloading” proposals at a plenary vote in Strasbourg, approving plans for the European Commission to temporarily postpone the auction of 900 million allowances as a part of the Emissions Trading System (ETS).

The backloading proposal was rejected in April but the new proposal passed with a vote of 344 votes to 311. According to Bloomberg, the decision had an immediate effect on the carbon price with allowances for delivery in December gaining 7.2% to reach Eu4.60 per tonne on the ICE Futures Europe exchange.

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As a part of the deal, there cannot be a repeated backloading of carbon allowances or a cancellation of the auction. In addition, the parliament also agreed to review the risk of ‘carbon leakage’, whereby energy intensive firms relocate outside of the EU to avoid carbon cutting taxes.

Disappointingly for manufacturers, separate changes to the agreement to provide funding to help energy intensive industries invest in efficiency measures were rejected.