Wallström calls for restrictions on right to trade emissions

Date: 24/02/2000

By Renée Cordes

THE debate over whether companies should be allowed to buy and sell the right to pollute will be reignited next month when the European Commission outlines its plans for a pilot scheme on emissions trading.

The long-awaited Green Paper will set out how the Commission believes the right to trade 'credits' should be regulated as the EU strives to meet the commitment it made at the 1997 Kyoto climate change conference to cut emissions of greenhouse gases.

In the draft text due to be adopted by the full Commission on 8 March, environment supremo Margot Wallström says the institution remains commited to introducing a pilot scheme by 2005, despite reservations in some quarters over whether the practice should be allowed.

But she argues that the number of companies allowed to participate in the scheme should initially be severely restricted to make it easier for the Commission to monitor progress in meeting emission reduction targets.

Under the plan, firms in key industrial sectors would be given targets for reducing emissions, but those which achieved better-than-expected results would be allowed to sell their 'credits' to others struggling to stay within their quotas.

Wallström will propose limiting the scheme to firms in Europe's six most heavily-polluting sectors - thermal power stations and firms involved in iron and steel making, refining, inorganic chemicals, cement and paper pulping - which together account for nearly half the EU's carbon dioxide emissions.

She will argue this would make it easier for the Commission to judge the effectiveness of the system and give the EU more time to fine-tune its strategy before an international trading scheme is introduced, probably after 2008.

"Establishing emissions trading before 2008 would allow the Community and the member states to confine [its] initial scope to a limited number of gases or sectors where monitoring is less complicated and more accurate," argues the draft paper.

However, it leaves open the question of whether permits would be allocated to businesses based on their past emissions, or sold at auction to the highest bidder. The latter option would be consistent with the Commission's determination to ensure that polluters pay for the damage they cause, but Wallström argues that this should be a matter for member states to decide.

Stefan Singer, of the World Wide Fund for Nature, applauded Wallström's approach, arguing it put the right emphasis on curbing pollution from highly polluting industries.

But European employers' lobby group UNICE gave a more guarded response, cautioning that the periodic 'auctioning' of emissions credits, as suggested in the paper, could amount to an anti-energy business tax. "Any measure going in the direction of learning by doing must be welcomed," said an official, but he added that auctioning off credits would "amount to an obligation for companies to pay in order to develop their economic activities".

The debate over whether companies should be allowed to buy and sell the right to pollute will be reignited in March when the European Commission outlines its plans for a pilot scheme on emissions trading. The long-awaited Green Paper will set out how the Commission believes the right to trade 'credits' should be regulated as the EU strives to meet the commitment it made at the 1997 Kyoto climate change conference to cut emissions of greenhouse gases.