Dimas tells industry he will tighten CO2 emission caps

EU industries will have to reduce carbon dioxide (CO2) emissions by millions of tonnes after 2007, following a European Commission announcement on 29 November.

Delivering its verdict on ten national allocation plans (NAPs) for CO2 emission trading this week, the Commission ordered nine countries to reduce annual emission allowances for the trading period 2008-12. The decision means that there will be 46.86 million tonnes of CO2 less allowed on the market than the nine governments had proposed.

NAPs are the building blocks of the EU emission trading scheme, which sees large industries buying and selling permits to emit CO2.

"It is the Commission’s task to be the guardian of the emissions trading scheme’s integrity," said Environment Commissioner Stavros Dimas. "We have to ensure that member states do not allocate more allowances than their industries really need, otherwise there would be no scarcity and therefore no market."

France withdrew its plan at the last moment and has promised to submit an "improved" version within two weeks, said Dimas. A UK proposal to allocate 246.2 million tonnes of allowances won Commission approval.

Decisions on all other plans are due before the end of the year. Denmark is the only country not to have submitted a draft plan.

A statement from market analysts Point Carbon predicted that "the Commission’s decisions should ensure that the EU will indeed meet its Kyoto Protocol target to reduce greenhouse gas emissions by 8% of its 1990 levels by 2012".

Carbon prices for second round trading remained relatively steady after the NAPs announcement, staying below €20 after a closing price of €17.85 on Tuesday. "The market reaction depends on how today’s news corresponds to expectations," said Andreas Arvanitakis, a carbon analyst with Senior Point. "The Commission had made enough noises to suggest it would be quite tough."

But Arvanitakis warned that "it would be unwise to take hasty decisions at this stage…The market is still trying to interpret a lot of information".

He predicted that the Commission would be equally tough when the remaining NAPs come up for assessment, perhaps encouraging member states to propose lower allocations before a Commission decision.

Conservation groups complained that Dimas had not gone far enough. "The decision announced by the Commission today is still not strict enough on member states that seek to shelter their polluting industries from tough emission standards," said Mahi Sideridou from Greenpeace.

EU industries will have to reduce carbon dioxide (CO2) emissions by millions of tonnes after 2007, following a European Commission announcement on 29 November.