By Barbara Lewis and Susanna Twidale
BRUSSELS/LONDON (Reuters) - Prospects for early reforms to prop up the EU's Emissions Trading System (ETS), the world's biggest carbon market, hang in the balance ahead of a vote on Tuesday with members of the European Parliament divided over how soon to act.
Parliamentary sources said negotiations between rival political groups could continue up to the vote at around 1400 GMT, which still needs to be followed by a plenary vote and to get the backing of member states.
But they said a compromise proposal from the main centre-right grouping to begin reform by Dec. 31, 2018, could be enough of a shift from a previous proposal, which set the start date specifically as Dec. 31, 2018, to get a deal.
Any time in 2018 is earlier than the executive European Commission's 2021 proposal, which coal-producing Poland and energy-intensive industry say is soon enough.
It is later, however, than the 2017 start sought by some member states, utilities and environmental campaigners.
"No one (in the market) expects it to be the original 2021 date any more but anything later than 2018 would be bearish," one carbon trader, speaking on condition of anonymity, said.
Having fallen from all-time highs above 30 euros a tonne reached in 2006, ETS allowances traded around 7.60 euros on Monday, up around 3 percent since the previous close in anticipation of Tuesday's vote.
Still too cheap to stimulate investment in low-carbon energy, the current price of allowances makes it more economic to burn heavily polluting coal than gas.
Volumes of trade have also contracted, falling around 13 percent last year, according to data from Thomson Reuters Point Carbon, although the analysts expect the market to grow by roughly 8 percent this year.
Those keenest to accelerate reform include Britain, Germany and big utilities, such as E.ON, which seek to support investment in zero-emissions energy. They have been pushing for a 2017 start.
In a sign of the divisions at member state, industry and political level, the parliament's industry and energy committee last month failed to decide when to start putting hundreds of millions of surplus carbon allowances into a repository named the Market Stability Reserve.
After weeks of behind-the-scenes haggling, some parliamentary sources say settling for a 2018 date is the best strategy to get unity.
There is scope for extra compromises when negotiations on the final legal text begin, either after a plenary vote in parliament in April or earlier if parliament can agree.
The Commission avoids specifying target price levels, but in a draft of its energy union strategy to be published on Wednesday, it says the ETS must put "a meaningful price on carbon emissions" to stimulate cost-efficient emission cuts.
(Editing by Dale Hudson)
