Ambassadors from all 28 EU member states approved the MSR text without changes on Wednesday, a spokesman for Latvia said, clearing one of the last hurdles that could have seen the bill derailed.
Poland, Hungary, Romania, Bulgaria, Croatia and Cyprus kept their line of objecting to the bill, according to France’s ambassador Alexis Duterte on Twitter, but this was not enough to block the qualified majority in favour.
Last week, envoys from the three EU institutions clinched a trilogue deal on the MSR text to start in 2019 and to be filled with backloaded and unallocated allowances. Today’s approval means the bill now passes to the Parliament for formal approval votes.
The bill requires a simple majority in a vote first by the Parliament’s environment committee, due May 26, and then the whole assembly, scheduled for July 6.
It then goes for final approval at any formal Council meeting of national ministers, before being made law by appearing in the Official Journal of the EU, possibly by mid-July.
Analysts viewed today’s meeting as the main potential sticking point having cleared the most testing stages once the trilogue deal was struck earlier this month and because all major political groupings in the Parliament have signalled support.
Benchmark Dec-15 EUAs rose around 10 cents following the news and by 1035 GMT were up 1 cent on the day at €7.64 on ICE.
POTENTIAL WEAKENING
The MSR deal called on the European Commission to consider in an upcoming proposal due in July whether up to 50 million of the unallocated EUAs could be sold to fund industry innovations by 2021, and potentially more for carbon leakage, leaving open the possibility that some allowances could return to the market.
That proposal will need to be agreed by the Council and Parliament under the most common EU lawmaking co-decision procedure that can take at least two years to become law.
“So long as there is uncertainty on the ultimate fate of the unallocated allowances we think EUA prices will struggle to go much higher,” said Mark Lewis, an analyst at Kepler Cheuvreux in a note.
“If the Commission recommends that only a limited number of the unallocated allowances be auctioned back from the beginning of Phase 4 (2021) this would in our view be a bullish signal and would enable EUA prices to rally on a sustained basis over the second half of this year. On the other hand, if the Commission recommends that a significant portion of the unallocated allowances ultimately be auctioned back to the market, this would in our view limit further EUA price gains over the second half of 2015,” he added.
By Ben Garside – ben@carbon-pulse.com
