Wallström under pressure to accept voluntary CO2 cuts

Date: 06/12/01

By Laurence Frost

THE carbon dioxide trading system proposed by the European Commission could disrupt efforts already under way to curb greenhouse emissions in member states, EU governments will warn next week.

Margot Wallström, the environment commissioner, will come under pressure to modify her plan when she presents it to environment ministers meeting on Wednesday (12 December).

The UK, Germany and Italy will argue for a voluntary scheme rather than the compulsory regime proposed by the EU executive as a key plank of its strategy for implementing the Kyoto Protocol on climate change.

Germany says it will make its share of CO2 cuts through non-binding agreements it has already negotiated with heavy industries. The UK has already signalled its opposition to a compulsory regime before 2007, when its own voluntary emissions trading programme ends.

The Emissions Trading Group (ETG), the UK industry panel that designed the country's trading system, is concerned that the incompatible EU plan is already making it more difficult to persuade firms to sign up for emissions trading.

"If the EU scheme is guaranteed to come in on January 1, 2005 in its current form then firms may have second thoughts," said Margaret Mogford, head of environment at BG Group, formerly British Gas. BG was still "seriously considering" participation from next year, said Mogford, who sits on the ETG.

Under the UK initiative, up to 80 companies are expected to bid to reduce their CO2 emissions and enter the trading scheme in return for government payments approved last week by the EU's state aid watchdog. Firms that achieve cuts beyond their targets will be able to raise further cash by selling the unused allowances.

"This does create some uncertainty," said ETG member Bill Kite, head of sustainable development at Powergen. "One of the

issues the Commission will have to consider is the compatibility between its system and existing systems."

But Wallström's spokeswoman Pia Ahrenkilde rejected calls for changes to the EU plan to accommodate voluntary schemes. "We doubt if we could have the critical mass needed to make the system work under a voluntary system," she said. "It makes sense to have a European level playing field and avoid any distortions of competition."

The EU executive is reluctant to water down its proposal, which it says will cover 46 of all carbon emissions across the EU. "The UK regime will cover only as many companies as want to volunteer," said one official. "Anything voluntary is going to be limited in terms of the emissions covered."

But with Germany and Italy seemingly opposed to compulsory trading on principle and other countries including France still undecided, Wallström may yet be forced to give way on dates to win crucial UK backing.

Power firms are calling for a three-year voluntary trial phase before the 2008 deadline for emissions cuts agreed under Kyoto to be implemented. "This would avoid a shock to the industry and allow differing systems to be taken into account," said a spokesman for industry body Eurelectric.

The carbon dioxide trading system proposed by the European Commission could disrupt efforts already under way to curb greenhouse emissions in Member States, EU governments will warn at an environment ministers meeting on 12 December 2001.