EU to have first international marketplace for trade in emissions

Oct 09, 2001 02:00 AM

The European Union would have the first international marketplace for trade in the gases responsible for global warming under proposals to be unveiled by the European Commission later this month. The emissions trading plans would impose quotas on the amount of carbon dioxide that could be pumped out by power stations, oil refineries and iron and steel works, as well as the cement, glass, ceramics and pulp and paper industries.
Those industries would be forced to buy additional permits to pollute if they exceeded their allowances. Emissions trading is seen as a crucial element in helping European companies reduce the costs of meeting the EU's ambitious target of cutting greenhouse gas emissions by 8 % from 1990 levels by 2012, as set out in the Kyoto climate change protocol. The Commission calculates that participating sectors could cut their compliance costs by as much as a third.
"The flexibility offered by Community-wide emissions trading would enable costs of emissions reductions to be reduced substantially, as these will take place wherever in the Community it is cheapest to make them," the paper says. However, following intensive lobbying from industry, the Commission has made a number of changes to an earlier draft of the plan.

European businesses are worried that the EU's determination to press ahead with Kyoto will put them at a disadvantage compared with US companies after President George W. Bush withdrew from the protocol in March. The plan would set up an EU-wide emissions trading system from 2005, limiting the amount of carbon dioxide companies could release into the environment. If they exceeded these quotas, they would be forced to buy permits from other companies or face fines.
Until 2008, countries would have the option of exempting particular plants from the scheme as long as they were making equivalent efforts to cut emissions. Governments could also award companies extra permits to pollute if "market conditions" justified this, subject to Commission approval. The Commission has cut its proposed fines to an initial level of euro 50 ($ 46) per ton of carbon dioxide, rising to euro 100.

And in the initial three-year pilot phase, governments may not charge for issuing emission permits. Europia, the European oil industry association, said emissions trading could be a useful tool, but only if you accepted that there had to be constraints on carbon output. "We're also concerned about the level of flexibility in the draft. It'll inevitably be applied inconsistently."
The World Wide Fund for Nature, the conservation group, attacked the lack of firm targets in the proposals, but said they could form the basis of an effective future system. Signatories to the Kyoto Protocol will meet in the Moroccan city of Marrakech, where one of the issues up for debate will be the creation of a global emissions trading system.

Source: The Financial Times
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