April 16, 2013 / 11:20 AM / 7 years ago

UPDATE 1-EU carbon hits new record low after backloading vote

* EU Parliament rejects carbon backloading draft law

* Hits new record low of 2.63 eur/t (Adds detail, comment, price)

STRASBOURG/LONDON, April 16 (Reuters) - The European Parliament rejected an emergency fix to support the EU carbon market in a make-or-break vote on Tuesday, sending carbon prices plunging and German power prices to eight-year lows.

Lawmakers voted 334-315 to drop a measure known as backloading, with over 60 abstentions.

The proposal will now go back to parliament committee for further debate.

Reacting to the news, EU carbon permits fell 43 percent to 2.63 euros a tonne, a new record low, before recovering slightly to 2.93 euros by 1049 GMT.

The German power price fell 3 percent to 39.60 euros per megawatt hour.

“Even though the Commission will reflect on what to do we think there’s no possibility of passing it. A second reading needs absolute majority,” said Marcus Ferdinand, an Oslo-based analyst with Thomson Reuters Point Carbon.

The EU’s Irish Presidency said member states would keep working on a deal to support the carbon market.

The Commission last year proposed temporarily withdrawing some of a huge surplus of carbon allowances from the EU Emissions Trading Scheme (ETS) to prop up prices, which have collapsed to a series of record lows.

Carbon hit peaks around 30 euros in 2008.

Temporarily withdrawing, or backloading, permits was meant to be a quick fix and a means of paving the way for longer-term market reform.

Backloading involves temporarily withholding of carbon permits due to come to market between 2013-2015 and reinserting them later.

Analysts say the market is oversupplied with around 1.7 billion carbon permits.

The ETS caps the emissions of some 12,000 power plants and factories. Lower industrial production due to the economic downturn reduced demand for permits, which exacerbated the glut.

Opinion has been deeply divided on backloading. Within the European Parliament, the single biggest political group, the European People’s Party, has mostly opposed the intervention.

In contrast, more than half of the EU member states has backed it, while a few, including coal-reliant Poland, have not.

Germany, facing an election year, has refused to take a position as industry complains a higher ETS would raise energy costs, reducing competitiveness.

Polish Environment Minister Marcin Korolec tweeted that the outcome was a “strong voice of common sense”. ($1 = 0.7643 euros) (Reporting by Ben Garside, Andrew Allan, Nina Chestney; editing by Jason Neely)

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