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EU to set phase two carbon limits EU outlines new carbon permits
(about 23 hours later)
The European Union is to establish carbon limits for the second phase of the carbon trading scheme, a key way to cut greenhouse gas emissions. The European Union has established carbon limits for the second phase of the carbon trading scheme, a key step in cutting greenhouse gas emissions.
The EU is tipped on Wednesday to say some European countries have handed out too many carbon permits between 2008 and 2012, and to urge further cuts. The European Trading Scheme (ETS) aims to cut emissions by 8% of 1990 levels.
The European Trading Scheme (ETS) is part of the EU's aim to cut greenhouse gas emissions by 8% of 1990 levels. Critics say that nations involved in the scheme had set their carbon allowance levels too high, and have not been aggressive enough in cuts.
Trading carbon is meant to enable firms to cut emissions at the lowest price. The EU set allowances for the 2008-2012 period to an average of 7% below the levels proposed by member states.
The scheme is the largest scheme of its kind and was developed by the EU as a way to meet its targets under the Kyoto protocol. "Today's decisions send a strong signal that Europe is fully committed to achieving the Kyoto target and making the ETS a success," said EU Environment Commissioner Stavros Dimas.
The protocol was aimed at tackling global warming by setting limits on greenhouse emissions - but was never ratified by two major players, the US and Australia.
International market
By creating a market for carbon, firms are meant to have a financial motive to cut emissions.By creating a market for carbon, firms are meant to have a financial motive to cut emissions.
Heavy polluters, notably power firms, are obliged to own the right for each metric ton of carbon dioxide they produce.Heavy polluters, notably power firms, are obliged to own the right for each metric ton of carbon dioxide they produce.
Depending on their needs, they can buy or sell permits. Depending on their needs, they can buy or sell permits. Trading carbon is meant to enable firms to cut emissions at the lowest price.
But critics have argued that the limits have been set too high, thereby failing to encourage firms to make the necessary cuts. Helping hand
In their defence, proponents have said the scheme - which only started last year - is in its infancy and needs time to adapt. Even so, there are concerns that the plan will do little to ease problems.
Carbon prices plummeted in May after it was revealed that governments had doled out too many permits, creating a surplus. Critics argue that the plans are unlikely to help improve pollution and the emission of greenhouse gases.
Other trading schemes have looked to Europe's carbon trading scheme, which is worth some 7.2bn euros ($9.4; £4.8bn), as a template. According to Tony Ward, Energy Director at Ernst & Young, the cuts imposed by the EU "will make little material difference to the reduction of Europe's carbon emissions against a backdrop of accelerating global emissions.
"It has to be and will be the nucleus of an international carbon market," said Peter Zapfel, the EU coordinator of the scheme. "The move is small and is unlikely to encourage the necessary substantive behavioural change," he said.
Günter Verheugen, the EU's Industry Commissioner, has warned that Europe's competitiveness could be affected if the targets are too strict.
The latest emissions plans concern the UK, Ireland, Germany, Greece, Latvia, Lithuania, Luxembourg, Malta, Slovakia and Sweden.
France has withdrawn its plan for carbon allowances and will submit a tougher outline in a number of weeks, a French environment ministry spokeswoman said.
Blueprint?
The ETS scheme is the largest of its kind and was developed by the EU as a way to meet targets under the Kyoto protocol.
The protocol was aimed at tackling global warming by setting limits on greenhouse emissions - but was never ratified by two major players, the US and Australia.
Other trading schemes have looked to Europe's carbon system, which is worth some 7.2bn euros ($9.4; £4.8bn), as a template.
Even though the US and Australia failed to ratify Kyoto, they have both developed voluntary trading initiatives.Even though the US and Australia failed to ratify Kyoto, they have both developed voluntary trading initiatives.
While the ETS currently covers large polluters - such as power firms and oil refineries - in time it is set to include emissions from planes among others.While the ETS currently covers large polluters - such as power firms and oil refineries - in time it is set to include emissions from planes among others.
Allocations will be set on Wednesday and they cannot be changed.Allocations will be set on Wednesday and they cannot be changed.
"Governments cannot go back and say we want to give more or fewer allowances," said Mr Zapfel.
The EU will assess allocations for 11 member states on Wednesday, including Britain, France, Germany, Latvia and Ireland.