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Carbon price plummets after fast-track backload proposal dropped

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Carbon prices plummeted on Monday after a European Parliament committee vote that would have fast-tracked proposals to backload sales of emissions allowances was dropped.

The postponement followed Germany’s second cancellation days earlier of a European Union Emissions Trading System (EU ETS) permit auction. Bids failed to reach the reserve price, which also caused prices to plummet to far below €5/tonne of CO2 for the first time.

The European Parliament’s environment committee (Envi) voted last week in favour of withholding 900 million carbon allowances until 2020 to give the carbon price a boost, but the chairman Matthias Groote reportedly failed to get support for a vote to push the matter to negotiations.

Deutsche Bank said that if the member states fail to agree on the proposal the vote could be pushed as late as June.

The European Parliament’s Industry, Research and Energy voted against the proposal in January, and the European Alliance of Energy-Intensive Industries criticised the proposal.

Others see it as a temporary measure that won’t go far enough. “The market is massively over-supplied. Backloading will still leave 900 million permits in the market,” according to Inenco analyst Joe Conlan.

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