Plans to temporarily remove permits to pollute under the Emissions Trading System (ETS) have been passed by the European Parliament at a plenary vote in Strasbourg.

The vote (by 344 to 311) in favour of ‘backloading’ is being seen as a signal of support in EU climate policy and paves the way for a renewed drive in green investment.

European Parliament

It means temporarily withholding auction of 900 million CO2 allowances which had sunk the price of carbon to record lows this year.

Marcus Ferdinand, Senior Analyst at Thomson Reuters Point Carbon told Power Engineering International, “The outcome of today’s vote in Parliament came as a bullish surprise to the market, which didn’t expect the proposal to clear the Plenary by rejecting all attempts to water it down.

Today’s vote keeps the possibility of a permanent cancellation within phase 3 alive, and a lot of attention is now shifting towards member states like Germany which remain undecided.”

600 million withheld allowances will now be designated to help energy intensive industries invest in energy saving or social measures with support from the EU’s NER 300 scheme – a multi-million Euro fund designed to support renewable energy and efficiency projects.

The proposals were agreed as a compromise by the EU’s three largest parties, after the initial, more stringent plans were defeated in April.

Concerns remain that the agreed compromises have watered down the original plans to the point where they could prove ineffective at driving up the carbon price, with Climate Action Europe (CAN Europe) arguing that the number of allowances to be held back should have been much higher.

They now contend that backloading must be immediately followed by more long-lasting ETS structural reform, starting with cancellation of back-loaded allowances.

Julia Michalak of CAN Europe said, “By approving back-loading and rejecting several dangerous loopholes that had been proposed as part of a compromise, they’ve paved the way for the necessary deep reform of the EU ETS.”

The Commission is due to present formal proposals this Autumn outlining how it plans to deliver a longer term fix to the market while the vote on backloading must now also be approved by the European Council for the measures to pass.

The news has been positively received by renewable energy interests, with Rémi Gruet, the European Wind Energy Association’s (EWEA) Senior Regulatory Affairs Advisor saying, “Today’s vote will give a small boost to the carbon price but most importantly it will build confidence in the ETS,” said “It is crucial that the EU Member States now agree backloading as soon as possible. Then the European Commission should propose a 2030 Climate and Energy Package, with headline renewable and GHG reduction targets, without delay.”

Also commenting on the vote, EURELECTRIC Secretary General Hans ten Berge said, “We urge the Commission to continue down this path of strengthening the ETS in the long run by proposing more significant structural reforms. Such reforms should include revising the ETS annual linear reduction factor in the range of 2.3% and extending the scope of the ETS to other sectors of the economy.”

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