EU Politicians Seek to Revive Sluggish Carbon Market

European politicians are expected this week to back by a narrow majority early action to bolster prices on the EU carbon market and sharpen a weapon against climate change that recession has blunted.

Thursday's vote, one of several legislative stages, will be closely watched by traders.

The Emissions Trading System (ETS) is designed to make polluters pay for their emissions but a surplus of more than 2 billion carbon allowances generated by economic crisis has crushed the market.

That means industry can still burn highly polluting fuel, such as coal, at little cost as permits are worth only around 7 euros per tonne.

Before new rules can enter the statute books, Thursday's vote in the European Parliament's industry committee must be followed by another next month in the environment committee, then a plenary parliamentary vote and endorsement from the 28 EU states.

The European Commission, the EU executive, last year proposed putting hundreds of millions of ETS allowances in a Market Stability Reserve (MSR) starting from 2021.

Member states Germany and Britain, however, which want to boost zero carbon power generation, say 2021 is too late and have led the push to get the MSR in place for 2017. Big utilities including Germany's E.ON also support early action.

"All efforts must be made to have the proposed market stability reserve running already by 2017," a German government paper circulated by diplomats in Brussels says.

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