MEPs' move to fix EU carbon market praised

image captionGermany's Jaenschwalde power station is among Europe's biggest CO2 emitters

The UK government and green groups have welcomed a European Parliament move to rescue the EU's carbon trading scheme, but say deeper reforms are needed.

MEPs backed a European Commission plan to freeze the auctioning of some carbon dioxide (CO2) emission allowances.

The idea is to reduce the current oversupply of allowances, thereby pushing up the carbon price.

Carbon trading gives heavy industry an incentive to cut CO2 emissions, which have been linked to global warming.

The parliament voted on Wednesday to let the Commission delay the auctioning of up to 900 million CO2 allowances.

The plan still has to be agreed with EU governments to take effect, and Poland - heavily dependent on carbon-rich coal - is among several countries that oppose it.

Depressed market

The EU is now in phase three of the Emissions Trading System (ETS), a scheme launched in 2005 in a drive to tackle climate change.

By reducing the number of permits traded, the Commission hopes to correct the oversupply which has pushed the carbon price below four euros (£3.5; $5.2) per tonne - far short of the original target of more than 20 euros.

The UK Secretary of State for Energy and Climate Change, Ed Davey, said: "This is a good decision by the European Parliament and is an important step forward for climate change policy".

But he also spoke of "an urgent need for structural reform" of the ETS, "in order to promote growth in low-carbon industry in the longer term". He said the UK and 11 other member states were calling on the Commission to propose legislation by the end of this year to reinvigorate the carbon market.

The Commission says the carbon market now has a surplus of nearly two billion CO2 allowances. Each allowance corresponds to one tonne of CO2 emissions. Enterprises that adopt low-carbon technology and emit less CO2 can sell their unused allowances.

The Greens/European Free Alliance group in the parliament welcomed the vote to delay, or "backload", the auctioning of CO2 allowances. But Greens MEP Bas Eickhout said it was "only a stop-gap measure to buy more time for much-needed structural ETS reform".

The Greens want the Commission to permanently withdraw at least 1.4 billion allowances this year.

The environmental campaign group Greenpeace said the current plan "will not restore the credibility of the carbon market, because as soon as the suspended allowances are allowed to re-enter the system, the carbon market will be back to square one". Greenpeace called for the Commission to remove 2.2 billion allowances before 2020.

Enterprises fuelled by coal generally need to buy more allowances than those using gas, because their CO2 emissions are higher.

The ETS covers more than 12,000 power plants and manufacturing installations in the EU, as well as airlines that use European airports.

The EU wants China and the US - the world's biggest CO2 polluters - to agree on more ambitious targets to limit climate change.

On current trends the world will miss the target of keeping the rise in temperatures below 2C, which experts say increases the risk of drought and rising sea levels.

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