European lawmakers narrowly rejected Tuesday controversial plans to make polluters pay more in a bid to further reduce greenhouse gas emissions, blamed for global warming.
The European Commission launched the plan last year, hoping that by reducing the number of pollution credits available under its Emissions Trading System (ETS), their price would rise.
If their price could be increased, then it would be financially more attractive for companies to invest in new clean technology rather than continue polluting.
The European Parliament voted 334 against the proposal, with 315 for and 63 abstentions on the proposal to freeze 900 million tonnes of carbon dioxide emission credits in 2013-15.
The ETS was set up with the aim of cutting greenhouse gas emissions by 21 percent between 2005 and 2020. But current prices of below five euros per tonne of CO2 mean companies have little incentive to change their ways and invest in cleaner equipment.
EU officials had said they expected a "very close" vote after the European People's Party, the largest group in the parliament, said it would oppose the move because it did not believe in such market intervention.
Last week, the environment ministers of Britain, Denmark, France, Germany, Italy and Sweden wrote in a letter to MEPs that "eight years of efforts" to control CO2 emissions would be put at risk if parliament voted 'No'.