LONDON - The European Union's key scheme to fight climate change is heading for impasse as member states this week submitted pollution targets that are much softer than the European Commission's guidelines require.
All EU states must present by Friday permit quotas for the second round of the market from 2008-12, but the European Commission can reject these if it considers them too lax.
Politicians, analysts and green groups agree that the most cost-effective way to cut greenhouse gas emissions is by allowing industry to trade rights to pollute.
But carbon markets only work if there is a shortage of permits, and around half the countries that have declared their plans so far propose increases on the quotas applied in 2005-07 -- suggesting the political support some have voiced for the scheme was largely rhetoric.
"This is a shining example of the need for political leadership," said Keith Allott, UK Head of Climate Change at green group WWF. "There's a race to the bottom here."
Cuts in quotas are vital given that 17 out of 21 EU states gave their industry too many permits in 2005, the first year of the first phase of the scheme, triggering a crash in carbon prices last month.
"Everyone's got to play ball," British Environment Secretary David Miliband told reporters on Thursday, as he announced Britain's carbon plan, which proposed a 2.9 percent cut in quota.
Only Britain, Austria, Ireland and Spain reported shortages of permits last year.
"I've discussed (with EU environment ministers) the importance for every EU country to contribute to scarcity (of permits)," said Miliband.
"The EC (European Commission) is making clear that the starting point is 2005 emissions."
The European Commission expects final agreements on the pollution plans by December and it looks as if negotiations will last until then.
The Commission has various weapons to support its case including the argument that over-generous quotas to industry constitute illegal state aid.
HOT AIR
Estonia proposed on Thursday to increase its quota by some 30 percent. Poland, Sweden and Slovakia have also so far tabled big increases -- of 17 percent, 9 percent and 13 percent respectively.
The only countries to propose big quota cuts, exceeding 10 percent, are Finland and Portugal. But both are well behind on their separate, legally-binding greenhouse gas emissions targets under the Kyoto Protocol, increasing pressure on them to take action under the EU market.
New EU-wide greenhouse gas emissions data shows these rose in 16 out of 25 states in the bloc in 2004 compared to 2003, adding force for the European Commission to show a strong hand when it reviews the new pollution targets.
The Commission will put together a discussion paper over the next 9 months regarding the long-term future of the EU trading scheme, including involving new sectors such as transport and new greenhouse gases such as methane.
Story by Gerard Wynn
REUTERS NEWS SERVICE
