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Europe will narrowly agree to backloading

Oslo, 18 February 2013

The crucial debate on the backloading of carbon allowances will turn tomorrow’s vote in the European Parliament’s Environment Committee into a proxy vote on whether the EU Emissions Trading Scheme (ETS) can survive as an effective climate policy measure, according to Thomson Reuters Point Carbon, the leading provider of market intelligence, news, analysis, forecasting and advisory services for the energy and environmental markets. Analysts from Thomson Reuters Point Carbon will be available for interview or comment before and after tomorrow’s vote.

Whilst Thomson Reuters Point Carbon predicts the vote will pass, signs are the number of votes in favour will be narrow, underlining prevailing uncertainties in the political process going forward and weakening the resulting upward impact on carbon prices. “The expected narrow majority is likely to lead to a short-lived price increase in the range of €1/t to €2/t in the direct aftermath of the ballot, but this bullish sentiment will be significantly diminished in the event of a close vote”, said Marcus Ferdinand, senior market analyst at Thomson Reuters Point Carbon.

Ferdinand warned “if the Environment Committee votes down the Commission proposal tomorrow, backloading will be politically dead. This would cause current historically-low carbon prices to drop by a further €2/t to €3/t and remain at rock bottom for several years to come and would make the EU ETS irrelevant as a climate policy measure at least until 2020”, he said.

If the vote passes then the backloading proposal is likely to get a first reading vote in the Parliament’s plenary session on 15 April and the backloading of 900m allowances could be implemented by autumn this year. “However, the process could be much lengthier”, warns Hæge Fjellheim, Senior Analyst, Thomson Reuters Point Carbon, “as there are many hurdles that will need jumping on the way, requiring a strong political will among member states to tackle the problem of Europe’s carbon surplus of some 2bn allowances”.

The vote will take place between 9:00 and 12:30 CET on Tuesday, 19th February, 2013.

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