EU Cuts Industrial Carbon Emissions Quota 10 Pct
Date: 29-Oct-07
Country: BELGIUM
Author: Jeremy Smith
Industry got too many emissions permits in the first trading period of Europe's carbon trading scheme from 2005-07, harming the credibility of Europe's flagship weapon against climate change and heaping pressure on the EC.
Many EU states are well behind their binding, 2012 greenhouse gas emissions targets under the Kyoto Protocol on global warming, notably Spain, Portugal and Italy.
The Commission only accepted proposed emissions quotas for the next phase of the scheme, from 2008-12, for Britain, France, Slovenia and Denmark, in an approval process which started last year and ended on Friday with the last two decisions, to cut emissions for Bulgaria and Romania.
"We have assured a robust market with real emission reductions which will constitute an important contribution to meeting our Kyoto target," EU Environment Commissioner Stavros Dimas said in a statement.
National governments had tabled requests for 2.3 billion tonnes, 12 percent more than the final quota of 2.1 billion.
The EU scheme is meant to give industry a shortage of permits to emit the planet-warming gas carbon dioxide (CO2), and is being closely watched in the United States where senators have tabled proposals to introduce a carbon market.
This time the EC has got it about right, analysts say, estimating a shortage of permits equivalent to about 250 million tonnes of CO2 emissions per year from 2008-12.
Companies have to buy extra emissions permits if they bust their quota, and power companies pass this cost on to consumers. In that way the scheme has raised power prices for everyone in Europe, from industry to individuals.
BATTLE
But the troubles for Europe's trading scheme are not over. At least seven member states have said they will appeal against the Commission: Lithuania, Slovakia, Poland, Estonia, Hungary, the Czech Republic and Latvia.
Bulgaria said on Friday it could join that list, after a 37 percent cut in its quota, while Romania wouldn't rule that out.
"It's premature to say whether we will challenge the Commission's decision in court," Romania's Environment Minister Attila Korodi told Reuters by telephone.
"This is a major reduction in our emission plans," he said, referring to a 21-percent cut.
In other problems, Europe's power companies have passed on to electricity consumers the cost of emissions permits they get for free, and will earn 20 billion euros (US$28.74 billion) in windfall profits annually as a result, analysts say, a practice attracting mounting criticism.
Businesses can make up the expected shortfall in EU permits either by buying carbon offsets from developing countries, under a Kyoto Protocol trading scheme, or cutting their own emissions.
Uncertainty about these costs has left analysts unsure about the future price of EU permits, also called EU allowances (EUAs), with price forecasts ranging from 20 to 40 euros.
EUAs for 2008 delivery were trading at 22.9 euros in early afternoon trading on the European Climate Exchange on Friday, up 7 cents on Thursday's close.
The EC on Friday also confirmed it would link its trading scheme with similar systems in three non-EU countries, Norway, Iceland and Liechtenstein, but did not specify when.
(Additional reporting by Michael Szabo in London, Tsvetelia Ilieva in Sofia and Radu-Sorin Marinas in Bucharest.)
