Policy makers in the European Union came a step closer to agreeing on a plan to support the price of carbon when the European Parliament’s Environment Committee supported proposals for ‘backloading’ in the Emissions Trading Scheme (ETS).

The Environment Committee voted by 38-25 in favour of an amendment to ‘backload’, or temporarily withdraw, 900 million emission allowances from the ETS. It is hoped that the move will help to drive up the price of allowances in the market, which have fallen to below 5 Euros in the last few weeks.
The vote by tthe Environment Committee allows the proposal to enter the next phase of the political process – three way discussions among the Europen Commission, the European Parliament and the council. An overallocation of emissions allowances combined with a drop in energy demand caused by the economic recession is at the heart of the fall in carbon prices, which are meant to stimulate clean energy investment.

"Should the discussions eventually end in a compromise text we believe the probability that backloading will be implemented is high," said Hæge Fjellheim, Senior Analyst at Thompson Reuters Point Carbon, adding, however, that plenary support in Parliament is "far from being a done deal".

If the proposal clears all of the political hurdles needed for it to be passed, the first reduction in auction volumes is likely to be seen in early 2014, according to Thompson Reuters Point Carbon.