European Union Parliament Rejects Cap-And-Trade Program Fix

On Tuesday, April 16, the European Union Parliament rejected an emergency fix to its cap-and-trade program that would temporarily remove some of the oversupply of carbon permits.  Immediately following the vote, carbon prices dropped steeply, nearly 40%, hitting a record low of 2.63 euros/metric ton.  The Commission's proposal, known as "backloading", is meant to bolster the world's largest carbon market by delaying the introduction of some carbon permits over the next three years and instead "backloading" them to the market in 2019 and 2020.  The plan is a response to the recession which cut demand for the carbon allowances and caused prices to drop from an all-time high of 31 euros/metric ton in April 2006.  The proposal has been the subject of intense lobbying efforts facing off coal producers against less polluting sources, including natural gas.