“Backloading” proposals to address oversupply in the market by delaying the sale of 900 million emissions allowances were voted through by 344 MEPs to 311. EU emissions allowances for delivery in December finished the day up 9.39 per cent to €4.69/tonne.
Matthias Groote, the German MEP steering the legislation through Parliament, will now start negotiations with national governments to get the measure through.
He said: “Across all continents, Europe’s experience of a market-based system for reducing CO2 emissions is being considered, and seen as a credible option, as most recently in China. We shall not let the ETS be the victim of short-term concerns. Structural reform of our Emissions Trading System will follow to ensure it remains the cornerstone of EU’s climate policy.”
UK energy secretary Ed Davey, who has been actively lobbying for ETS reform, said the vote was “an important step forward” but “there is still much work ahead”. He added: “We need a stable carbon market so we get a more certainty for investors so emissions reductions can be achieved at the lowest cost possible.”
Analysts said the backloading vote was unlikely to have a long lasting impact on the carbon price but showed political will to reform the ETS.
Roland Vetter, head of research at CF Partners, said: “While the impact on the carbon price is likely to be limited, the vote should send a strong political signal that the ETS is not dead and some long-term structural fixes are likely to follow.”
The European Parliament rejected a compromise amendment that sought to return the delayed permits to the market sooner. However, it agreed the intervention should be a one-off.
MEPs also accepted a 900 million cap on the volume of permits to be delayed and a condition that there must be “no significant impact” on industries that might relocate to regions with less stringent carbon pricing. BNEF carbon analyst Konrad Hanschmidt said: “This is more bullish than the market had anticipated.”
The move was welcomed by the renewables lobby, environmental groups and charities.
Lies Craeynest, Oxfam’s EU climate change expert, said: “Today’s vote keeps the EU Emissions Trading Scheme afloat for now but the rescue plan will need to be further strengthened if Europe’s flagship climate policy tool is to be fit for purpose. A clear signal was given to EU governments and the European Commission that the time is ripe for deeper reforms. With climate change already undermining food security across the globe we simply cannot afford for the scheme to fail.”
Not everyone was happy. Opponents of the decision said it would push up energy costs.
UK Steel director Ian Rodgers said the backloading plan was a “sticking plaster” and “will be counter-productive because interfering with the market sends the wrong signals”.