The EU Emissions Trading Scheme faces a tough vote today over efforts to bolster the bloc's ailing carbon market.
* A 'no' vote would scupper plans for deeper reform
* Vote expected to be tight
* Carbon price too low to drive low-carbon investment
By Michael Szabo
STRASBOURG, July 3 (Reuters) - The European Parliament resumes efforts to bolster the bloc's ailing carbon market on Wednesday with a vote on a revised plan that has sharply divided the chamber's more than 700 members.
The market, called the EU Emissions Trading Scheme (ETS), has priced in a 'yes' vote that would signal confidence in the future of the scheme, but politicians said it was too close to call.
The vote is scheduled for just before noon Central European Time (1000 GMT).
An earlier version of the plan was narrowly defeated 334-315 by the Parliament in April, triggering a fall of more than 40 percent in the already battered price of carbon.
A defeat on Wednesday would almost certainly send carbon prices plunging towards zero and leave them in limbo for the rest of the decade.
The plan calls for the temporary removal of some of the traded carbon permits in order to bolster prices for them.
The market is meant to spur industry and the energy sector to shift to low carbon energy sources but current carbon prices of about 4 euros per tonne are nowhere near high enough to prompt industry to invest in a switch to greener energy.
Analysts say the price would have to be 40-50 euros to trigger such a shift.
A vote in favour of the proposal would likely have little immediate price impact but supporters say it could pave the path toward further steps to bolster prices.
In the Parliament's main centre-right grouping, which defeated the plan in April, opposition remains strong despite the latest plan being watered down.
German centre-right politician Peter Liese said many of his party remain opposed, although he still thought it might pass.
Another member of his grouping, speaking on condition of anonymity, said a straw poll on Tuesday night showed just as much opposition as in April.
COMPROMISE
Under Wednesday's compromise proposal, the carbon permits would be returned to the market almost as soon as they are taken away, and a fund has been proposed to help energy-intensive industry cut emissions.
Yet weakening the plan has also upset its supporters.
Dutch Green Member of the European Parliament Bas Eickhout said the Greens were very unhappy, but saw it as "imperative to get this bill to the next level".
"In the end, I think (it) will carry," he said.
Supporters say a yes vote would be a political signal and a step towards structural reform of the market.
Utilities support the plan and say the ETS is needed to drive investment in the sector, while heavy industry is opposed to any move that would raise energy costs, especially at a time when U.S. rivals are benefiting from inexpensive shale gas.
Politically, a deal has been blocked primarily by Poland, which relies heavily on carbon-intensive coal, and by Germany, which has put off policy issues ahead of elections in September.
Each of the 28 EU member states would have to individually weigh the plan if approved by Parliament on Wednesday, a step unlikely in Germany until after the elections. A majority would need to back it for removal of the permits to take place, likely in 2014. (Writing by Barbara Lewis; editing by Jason Neely)
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