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No restart for carbon back-loading talks before German elections

29 Aug 2013 17:50:00 | edcm

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Talks between the European Parliament, EU countries and the European Commission regarding the back-loading proposal will start after the German federal elections, which will be held on 22 September, said EU Commissioner for Climate Action Connie Hedegaard.

"The reality is that [the talks] will start just after the German elections Rather soon after that, [the vote]. I hope that we can also have a go from the Council, from the European governments on this and thereafter trialogue will start," she said in a broadcast interview with Bloomberg TV.

The position of Germany - currently governed by a CDU-Liberals coalition led by Angela Merkel - is seen as crucial, since the country controls the most votes in the Council. The current government could not agree on a common stance on the measure, which is meant to support carbon prices in the short-term, because of a disagreement between the environment and the economy ministers.

"If Germany supports the measure, it will most likely reach the qualified majority in the Council, as more member states will likely support the back-loading. If not, the future of back-loading is unclear," said German analytic firm Tschach Solutions - now part of ICIS - in a note earlier this month.

Position might take long

However, the German position might take a while after the elections to be finalised.

According to Oliver Geden, senior associate at the German Institute for International and Security Affairs SWP, it is not necessarily true that Germany will change its position right after the polls. "If there will be a change in government, a new government might not be in charge before mid-November," he told ICIS.

The less favourable scenario for the back-loading support is that Merkel - whose party is currently ahead in the polls - re-forms a coalition with the Liberals. But "we do not expect a strong Liberal party in the coalition negotiations... If the Conservatives support back-loading the position of the new government will most probably be accordingly," Tschach said. "However, the coalition negotiations could be lengthy and therefore we do not see any chance for a Council vote on 14 October."

In case the CDU enters into a coalition with the Social Democrats, a supportive position on back-loading is even more likely, as it would be in case the Social Democrats and the Greens - both pro-back-loading - secure enough seats to form the government, the firm added.

Structural measures

But Hedegaard also reiterated that back-loading alone will not be able to support prices enough to give a "strong signal".

"[Back-loading] was intended only to stabilise the situation while we were discussing the most far-reaching structural options, that would also have to come into the picture, but first... agreement between Parliament, the government and the Commission on the back-loading, then we will come to the next," she said.

The Commission proposed six options to structurally reform the carbon market. A so-called seventh option - linking the cap to economic performance - was added unofficially after a public consultation and got support fro, the Commission (see EDCM 4 June 2013), utilities, manufacturers and traders (see EDCM 8 March 2013), despite some analysts raising questions about its application. Silvia Molteni

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