EU Set to Vote Next Week to Raise €20 Billion from Carbon Market

European Parliament is set to vote next week on plans to auction carbon permits early to raise €20 billion from the EU carbon market for countries to quit Russian gas, soothing concerns of a postponed vote that could have caused a spike in carbon prices. The vote, which aims to raise cash partly by holding carbon permit sales earlier than planned, is scheduled for Tuesday. The EU targets to raise extra funding for countries to spend on renewable energy and energy saving renovations to help replace Russian gas, and projects to help decarbonize heavy industries.

The rules had already been agreed last year by negotiators from member countries and lawmakers, and Tuesday’s vote is expected to be a formality that will pass the deal with no changes. The bloc’s ministers are also expected to approve the deal this month.

The early CO2 auctions cannot begin until the rules are formally approved.

Carbon prices shot up to near record highs above €97 per ton last week, an incident that was partly attributed to concerns among market participants that the vote would be delayed to April.

That could have pushed back the first auctions to July, and seen only 40 million to 45 million extra CO2 permits made available to the market this year instead of the 65 million expected if auctions launch earlier.

Benchmark EU carbon permits were trading around €92.20 per tonne on Monday, down 1% from Friday.

The EU carbon market forces power plants and factories to buy CO2 permits when they pollute, and is the bloc’s core policy for cutting carbon emissions.

The EU also agreed a major carbon market reform last year, which is expected to increase CO2 prices this decade to incentivize faster emissions cuts. EU lawmakers are expected to pass those reforms in April.

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