EU to set phase two carbon limits
November 29, 2006
The European Union is to establish carbon limits for the second phase of the carbon trading scheme, a key way to cut greenhouse gas emissions.
The EU is tipped on Wednesday to say some European countries have handed out too many carbon permits between 2008 and 2012, and to urge further cuts.
The European Trading Scheme (ETS) is part of the EU's aim to cut greenhouse gas emissions by 8% of 1990 levels.
Trading carbon is meant to enable firms to cut emissions at the lowest price.
The scheme is the largest scheme of its kind and was developed by the EU as a way to meet its targets under the Kyoto protocol.
The protocol was aimed at tackling global warming by setting limits on greenhouse emissions - but was never ratified by two major players, the US and Australia.
International market
By creating a market for carbon, firms are meant to have a financial motive to cut emissions.
Heavy polluters, notably power firms, are obliged to own the right for each metric ton of carbon dioxide they produce.
Depending on their needs, they can buy or sell permits.
But critics have argued that the limits have been set too high, thereby failing to encourage firms to make the necessary cuts.
In their defence, proponents have said the scheme - which only started last year - is in its infancy and needs time to adapt.
Carbon prices plummeted in May after it was revealed that governments had doled out too many permits, creating a surplus.
Other trading schemes have looked to Europe's carbon trading scheme, which is worth some 7.2bn euros ($9.4; £4.8bn), as a template.
"It has to be and will be the nucleus of an international carbon market," said Peter Zapfel, the EU coordinator of the scheme.
Even though the US and Australia failed to ratify Kyoto, they have both developed voluntary trading initiatives.
While the ETS currently covers large polluters - such as power firms and oil refineries - in time it is set to include emissions from planes among others.
Allocations will be set on Wednesday and they cannot be changed.
"Governments cannot go back and say we want to give more or fewer allowances," said Mr Zapfel.
The EU will assess allocations for 11 member states on Wednesday, including Britain, France, Germany, Latvia and Ireland.
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