Tory MEPs planning to defy David Cameron on key emissions trading vote

This article is more than 6 years old
Many Conservative MEPs are expected to vote against 'backloading' despite the prime minister favouring reform
ArcelorMittal steelworks, Aceralia, northern Spain
Two men at work inside an ArcelorMittal steelworks. Under the ETS, polluters like utilities and steel companies are allocated carbon allowances. Photograph: Eloy Alonso/Reuters

Tory MEPs are planning to defy David Cameron in a tense vote at noon on one of Europe's flagship climate policies, the emissions trading scheme (ETS).

Many of the group of more than 20 MEPs in the European parliament are understood to be planning to vote against a reform of the ETS.

The reform - known as "backloading" - is aimed at shoring up the price of carbon, which has plummeted owing to an excess of carbon permits in the ETS market. If successful, the reform would result in the postponement of a series of auctions of carbon permits.

But the Conservative MEPs, who have a history of voting against environmental measures, are against the reform even though Cameron is in favour. Some business groups have been lobbying fiercely against the reform, though others support it.

Former Tory environment ministers Tim Yeo and John Gummer intervened on Tuesday, calling for the MEPs to vote in favour of the reforms. Yeo told Guardian partner EurActiv that Margaret Thatcher, who died last week, would have been in favour of the reform because she "favoured market mechanisms" as a way of addressing environmental problems.

The vote is likely to be tight. Green campaigners said the Tory MEPs were in danger of putting British business at a disadvantage. That is because the Tory-led coalition has pledged to put a minimum price on carbon, so that if the EU price falls further, UK companies will still pay more. If backloading is not approved, this "floor price" could mean that UK businesses pay more for their emissions than continental European competitors.

"Today's vote is 'make or break time' for the EU ETS," said Hæge Fjellheim, senior analyst, Thomson Reuters Point Carbon. "A negative outcome would probably be the end of the backloading proposal, causing a depressed market for several years, sending the price of carbon downwards and leaving the scheme in disarray, while support from parliament substantially increases the chances of backloading being implemented."

A spokesman for Conservative MEPs said: "The EU ETS was established as a market-based mechanism and must continue to operate according to market principles. We are therefore concerned about the impact of commission intervention to adapt the auction timetable in order to manipulate the carbon price. We fear it will only serve to discourage green investments, affect transparency, encourage further carbon leakage, and undermine much-needed market predictability as the EU economy strives to find a way out of the economic crisis.

"Nevertheless, we acknowledge that the EU ETS requires significant reform and we will play a constructive role in developing a long-term structural solution that will make the ETS a relevant policy tool for reducing emissions in a cost-effective and proportionate manner."

But the Liberal Democrats and Labour said the vote was essential to ensure the smooth working of the ETS.

Bryony Worthington, the Labour peer and director of emissions trading organisation, said: "If we do not introduce a quick fix now, the chances of getting more effective longer-term solutions will become more remote, not more likely. Only if the backloading vote is won will the commission have the mandate to take the necessary next steps to begin proper reform of the policy. A vote against backloading will in effect be interpreted as a vote in favour of delay and inaction and be leapt on as supporting evidence by the climate sceptics who oppose any action on climate change on ideological grounds."

Carbon prices have fallen so low that they now give almost no incentive to companies to cut their emissions. This is owing to an overallocation of permits, coupled with the effects of the recession.