* Vote expected around 1000 GMT
* Longer-term structural reform debate also under way
* Majority of member states supports Commission plan
By Barbara Lewis and Nina Chestney
BRUSSELS/LONDON, April 16 (Reuters) - EU politicians onTuesday hold a decisive vote on a plan to reduce a glut ofallowances that has devastated the EU Emissions Trading Scheme(ETS), the world's biggest carbon market.
Following months of bitter debate, the vote in a plenarysession of the European Parliament at around midday (1000 GMT)is expected to be extremely close.
Uncertainty over whether the plan can succeed drove thecarbon market to a record low of less than 3 euros ($3.93) atonne in January compared with peaks around 30 euros in 2008.
Anticipation of a positive vote pushed allowances 2.31percent higher to 4.87 a tonne by 0640 GMT on Tuesday.
A Commission proposal, named backloading, was meant to be aquick fix that could be agreed by the end of last year. But ithas exposed deep divisions, with various interest groupsintensively lobbying members of the European Parliament.
The power sector and other energy companies, such as RoyalDutch Shell, keen to promote natural gas rather thanmore carbon-intensive coal, have been strong supporters.
On Monday, 42 firms, representing more than 875 billioneuros ($1.15 trillion) in turnover - ranging from E.ON, to multinational consumer goods company Unilever - placed a full-page advertisement in the FinancialTimes, calling on the European Parliament to vote "yes".
"Without agreement on the backloading proposal the pricewill fall further threatening the long-term survival of the EUETS and lead to fragmentation of the single energy marketthrough a patchwork of national regulations," it said.
Opponents of the Commission plan, have been led by energyintensive industries, such as the chemical sector.
It has argued intervention in the ETS will push up energycosts when Europe is already suffering a competitivedisadvantage compared with the United States, which hasbenefited from abundant supplies of shale gas.
TECHNICAL BUT SIGNIFICANT
In theory, Tuesday's vote is on a technical amendment tounderpin the legality of removing permits, but a "no" vote wouldindicate a lack of political will to go ahead with reform.
While the power sector, already worried about how to ensureinvestment, is concerned EU policy will fragment as memberstates devise national solutions, carbon analysts warn thattraders will abandon the ETS.
"If the vote fails, then the market is essentially finisheduntil further notice," Matthew Gray, analyst at Jefferies Bache,said in a note.
"Some volatility may occur," he said. "But this will surelydissipate as utilities, speculators and industrials go theirseparate ways."
At member state level, EU sources say a majority supportsbackloading even though Poland, heavily reliant oncarbon-intensive coal, is resolutely opposed to it and Germanyhas failed to take a formal position because of divisions withinits government on the issue.
Theoretically, member states can continue debatingregardless of what happens on Tuesday and a second cycle ofparliamentary discussion and voting could take place.
In reality, the focus is likely to switch to deeper reforms,such as the permanent removal of allowances and tougher limitson how much carbon emitters can produce.
The problem is how long it will take to reach thesestructural changes.
Commission officials have admitted time is running out foragreement on them before the current team of commissioners stepsdown next year.
Unilever (ULVR)
