Environment Commissioner Stavros Dimas said the 17 plans received by the Commission so far allowed for a cap on emissions that was 15 percent higher than actual 2005 emissions levels.

"If member states put more allowances into the market than are needed to cover real emissions, the scheme would become pointless," Dimas told a news conference after a meeting of EU environment ministers. "I cannot let that happen."

The Commission, which can approve or reject the plans, is under pressure from environmentalists to insist on strict cuts after 2005 data showed that most companies had more credits than they needed, leading to a carbon price crash.

Dimas said several of the plans would be sent back to national capitals for amendment and correction.

"Many of these national allocation plans have to be completed and they will be sent back," he said.

Asked if that meant he would demand reductions, the commissioner said: "Yes."
CREATING SCARCITY

The plans form the basis of the EU's emissions trading system by setting limits on the amount of carbon dioxide (CO2) big factories can release, forcing companies to buy emissions permits if they exceed their cap.

The EU's scheme is its key instrument to fight climate change and meet commitments under the Kyoto Protocol.

Dimas' comments are the latest sign that the Commission is gearing up for a battle with EU member states over the plans.

The Commission has repeatedly admonished governments to take the 2005 data into account when forming their plans, but the 15 percent rise he cited showed those warnings had not been heeded.

"About the 15 percent, you have to reduce this," he told reporters, adding that the whole purpose of the scheme was "creating scarcity in the market."

All 25 plans were due at the end of June, but most were late. The first decisions from the Commission are expected next month. Dimas said he hoped to have all of the plans submitted before the end of the year.

The Commission started legal action this month against the eight states that have not yet turned in their plans.

On Monday benchmark carbon prices from phase 1 for December 2006 delivery were down 30 cents at 12.55 euros, while benchmark phase 2 prices for December 2008 delivery were up 20 cents at 16.20 euros on the European Climate Exchange.

"Dimas can say one thing, but cracking down on the emissions plans is another," said Gerhard Mulder of ABN AMRO. "Scarcity must apply to all plans."