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EU embarks on tough carbon cuts | |
(about 1 hour later) | |
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. |
'Level playing field' | |
"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 hand | Helping hand |
Critics argue that, even with the new lower limits, 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. |
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 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. | |
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. |
Member states who want to challenge Wednesday's new limits have two months to do so in a European court. |