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EU carbon market plunge 'a wake-up call'

Jan 24 2013 18:35 Reuters

Flags of the EU member states fly outside the European Parliament in Brussels. (AFP, File)

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Brussels - A carbon market price fall to less than €3 on Thursday must serve as a wake-up call to EU member states to back a Commission plan to prop up the European Union's Emissions Trading Scheme (ETS), the EU climate commissioner said.

The cost of carbon allowances on the ETS hit a low of €2.81 a tonne on Thursday after a European Parliament committee in a preliminary, non-binding vote, rejected proposals for market reform.

The price later climbed back above €4.

"It must be clear to all that when the Commission warned that the ETS price could drop dramatically it was not a false warning but a real possibility," Climate Commissioner Connie Hedegaard said in a statement.

"This should be the final wake-up call both to governments and to the European Parliament."

Thursday's vote was only an advisory step in the tortuous EU process of trying to agree a plan to remove temporarily some of the surplus allowances that have depressed the market.

A more decisive vote in the European Parliament's environment committee is expected next month, to be followed by a vote of member states.

Hedegaard said there was widespread agreement an ETS was "the most cost-efficient tool in EU climate politics" and world-wide the idea was catching on.

The European Union is working on linking up with other schemes in Switzerland and Australia, for instance.

As the rest of the world moves towards coherent carbon pricing, which many in business say they need to plan investment, Hedegaard said the EU was in danger of a messy patchwork of policies, different for each of the 27 member states.

"The alternative to a well-functioning carbon market is hardly that the EU member states will make it cost nothing to pollute," she said.

"The alternative is a re-nationalisation of climate tools, meaning a future patchwork of up to 27 different systems and taxes, instead of one market creating a level playing field internally in Europe."

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