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EU at impasse before final push to clinch carbon market reform

Reuters Staff

08 Nov 2017

(Reuters) – EU negotiators are split over the uses of a new clean technology fund ahead of talks on carbon market reforms on Wednesday, with the bloc keen for a deal this week to show leadership at U.N. climate talks in Bonn.

The last round of talks between EU nations, the European Parliament and the EU executive to finalize reforms to the EU Emissions Trading System (ETS) post-2020 broke down over the issue in October, and the negotiators remain divided.

The cap-and-trade system is the EU’s flagship tool for reducing greenhouse gases and meeting its climate goals by regulating emissions at some 12,000 industrial and power installations.

But it has suffered from a glut of permits, giving added political urgency to the push for reform.

The 28-nation bloc hopes to show climate leadership during the U.N. talks this month aimed at finding ways to implement the 2015 Paris accord it helped broker on shifting the world economy away from fossil fuels this century.

“It would be a pity if the EU couldn’t go to Bonn with this trophy onboard,” said Ivo Belet, a deputy from the center-right European People’s Party who is part of talks.

The talks have hit what one senior negotiators called an “intractable impasse” over a new modernization fund.

Some lawmakers and member states want installations with emissions of over 450 grams of carbon dioxide per kilowatt hour to be banned from receiving funds. That rules out coal-fired power plants.

But coal-dependent Poland and other central and eastern European states say they cannot match the bloc’s ambition without funds to help them modernize their industry.

“This is still a hot potato,” Belet said.

Seven nations – Denmark, France, Germany, Luxembourg, Netherlands, Sweden and Britain – together called for none of the fund’s money to be used to support “any solid fossil fuels-based energy generation,” according to an informal EU document seen by Reuters.

The Estonian presidency of the EU is upbeat, but it has a tricky balancing act to set out climate ambitions while offering protection for energy-intensive industries if it is to satisfy most member states by the end of the year.

 “We believe that an agreement … is possible this Wednesday and we are working to achieve this,” a spokeswoman for the presidency said.

Negotiators have already reached provisional agreement on a number of areas including measures to shore up prices and extra protection for sectors from a cap on the overall number of free permits.

A deal on Wednesday should support carbon prices, but a delay would have a negative short-term impact, Thomson Reuters senior carbon analyst Ingvild Sorhus said.

Reporting by Alissa de Carbonnel in Brussels and Susanna Twidale in London; Editing by Hugh Lawson

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