EU carbon market easy on emitters during 2006

BRUSSELS/LONDON (Reuters) – European industries’ emissions of the greenhouse gas carbon dioxide in 2006 once again undercut their quota of free emissions permits, as in 2005, preliminary data showed this week. The figures further undermined the 27-nation bloc’s flagship weapon against climate change, although Brussels was quick to state that the European Union was still on track to meet its emissions targets under the Kyoto Protocol on global warming. Europe’s carbon market is supposed to curb emissions of CO2 by handing heavy industry like steel mills and power plants too few emissions permits, forcing them either to clean up or buy extra allowances. Instead, last year as in 2005, the first year of the scheme, companies got a surplus – all but consigning the market’s first trading period from 2005-07 to the status of experiment. «I think the first phase shows you have to have the politics and the market right,» said Nick Mabey, the chief executive of E3G, an environmental group focused on sustainable development. «Markets aren’t magic, they only work if the politics creates scarcity.» To salvage the market’s credibility Brussels has taken a tough line with member states for the scheme’s second phase from 2008-12, demanding further cuts to 14 out of the 17 proposed quotas it has ruled on so far. «The problem that we had during the first… trading period was an overallocation of emissions (permits),» said Environment Commissioner Stavros Dimas before release of the 2006 data. «During the second trading period we hope that we shall maintain the necessary scarcity.» Only Denmark, Ireland, Italy, Spain and Britain gave their businesses too few permits in 2006, as countries were meant to do, the data suggested. The EU figures were preliminary, accounting for some 93 percent of all data. Roughly 9,000 of 10,000 installations had submitted data and the Commission said it will update its website with further submissions daily. Industry’s quota of free permits exceeded by some 30 million tons reported emissions of 1.84 billion tons of CO2 – around a third of the surplus reported in 2005, down because of small increase in emissions last year. The 15 countries that joined the European Union before 2004 were still on course to meet their Kyoto Protocol target to reduce their collective greenhouse gas emissions by 8 percent compared to 1990 levels, Dimas said on Monday. EU-15 greenhouse gas emissions fell 1.6 percent in 2005 versus 2004, Brussels said. However, the bloc’s two biggest emitters, Germany and Britain, have both said in recent days that their carbon emissions were up again in 2006. Also damaging to the credibility of the EU carbon market, Europe’s biggest emitters have made huge windfall profits from the scheme by passing on to electricity consumers the cost of emissions permits they got for free.

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