EU prepares to be top player in emissions trade

Date: 08/01/1998

By Simon Coss

HAVING savagely criticised the practice of 'emissions trading' prior to last month's international climate change conference in Kyoto, the European Union now appears to be preparing to become one of the world's largest pollution brokers.

The deal which was finally struck in Japan allowed for countries to meet a set of targets for reducing their emissions of greenhouse gases - notably carbon dioxide (CO2) - by using the controversial emissions trading system.

Essentially, this means that countries close to or above their own emissions ceilings will be able to buy the right to pollute from those with 'excess capacity'.

The idea was put forward by the US and was fiercely criticised by Environment Commissioner Ritt Bjerregaard in the run-up to Kyoto. Bjerregaard said the US was simply using the plan as a means for Washington to avoid making any real cuts in its own emissions.

But now that the trading principle has been agreed, the Union appears to be intent on making sure it will be at the cutting edge when a new international market-place opens up.

The Commission's Directorate-General for the environment (DGXI) has already appointed an emissions trading expert to look into how any new system would work.

The EU has pledged to reduce its emissions of six greenhouse gases to 8% below 1990 levels by 2012 at the latest. The Commission has been tasked with presenting the Union's environment ministers with a detailed analysis of what this will mean for the EU ahead of their next formal meeting in March. A month after that, Bjerregaard will be expected to come forward with legislative proposals outlining how the Union expects to meet its Kyoto cuts.

These plans are likely to include suggestions on how emissions trading - at present a purely theoretical concept - would work in practice.

Meanwhile, the City of London has already launched a bid to ensure that the emissions trading market is firmly based in the Union.

Later this month, the London-based International Petroleum Exchange (IPE) - Europe's leading energy futures and options exchange - will put forward a plan to the UK government outlining how it believes an international trade in emissions permits would work.

"We feel that the IPE is the ideal home for such a market and we are determined to lead the way in developing and promoting the appropriate trading instruments," said IPE chief executive Lynton Jones.

This theme was taken up by the UK's Deputy Prime Minister John Prescott yesterday (7 January) when he outlined his government's environmental priorities for London's stint at the helm of the EU.

"Once the rules on trading emissions have been worked out, for example, the City will have a fresh opportunity to trade in these new international commodities," he said.

"What was started in Kyoto has to be seen through: it falls to us to lead the EU in implementing the outcomes of the summit."