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EU outlines new carbon permits EU embarks on tough carbon cuts
(about 1 hour later)
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 has set tough carbon limits under the European Trading Scheme's second phase, to the consternation of some of the 10 states involved.
To make the scheme effective in tackling climate change, the EU has cut member states' carbon permits by 7% on average from 2008-2012.
Germany, a major polluter, said the stricter limits were unacceptable and would push electricity prices up.
Critics have accused nations of making carbon allowance levels too high.
The European Trading Scheme (ETS) aims to cut emissions by 8% of 1990 levels.The European Trading Scheme (ETS) aims to cut 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. 'Level playing field'
The EU set allowances for the 2008-2012 period to an average of 7% below the levels proposed by member states.
"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."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.
This view was echoed by Michael Grubb, head economist of the UK's Carbon Trust: "They have done a lot to create a level playing field."
Britain was the only nation to see its planned carbon limit accepted by the EU.
Meanwhile reactions from member states, whose proposed limits were rejected was less positive.
Lithuania, which has been told to reduce its emissions by half, was "very upset" by the limits while Slovakia thought its new cap was too low.
Price rise?
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. Trading carbon is meant to enable firms to cut emissions at the lowest price.Depending on their needs, they can buy or sell permits. Trading carbon is meant to enable firms to cut emissions at the lowest price.
If limits are tightened, then carbon credits, which can be bought or sold, will gain in value.
But if it is more expensive for firms - for example pollution intensive power companies - to buy credits, there is a worry they might pass on this cost to the end consumer.
German industry group VDEW said the stricter targets could hamper new power generation projects.
Helping handHelping hand
Even so, there are concerns that the plan will do little to ease problems. Critics argue that, even with the new lower limits, the plans are unlikely to help improve pollution and the emission of greenhouse gases.
Critics argue that the plans are unlikely to help improve pollution and the emission of greenhouse gases.
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.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.
"The move is small and is unlikely to encourage the necessary substantive behavioural change," he said."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. Guenter 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. The latest emissions plans concern 10 member states: 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.
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?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 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.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.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. Member states who want to challenge Wednesday's new limits have two months to do so in a European court.