EU: December 10, 2002
BRUSSELS - European Union environment ministers agreed yesterday to create the world's first international greenhouse gas emissions trading system, a key part of efforts to fight global warming.
Subject to final approval by the European Parliament, the scheme will from 2005 cap the amount of carbon dioxide (CO2) that big factories and power plants can emit and allow them to trade emissions rights with other firms in the 15-nation bloc. "The quota system (on emissions trading) will allow enterprises in Europe to reduce emissions in the most cost effective manner," Danish Environment Minister Hans Christian Schmidt, whose country holds the rotating EU presidency, said after the ministers backed the scheme.
"It is good for the environment, it is good for enterprises and it is good for the economy...The EU can really begin work on reducing emissions of greenhouse gases" he told reporters.
Large plants in key sectors will have CO2 caps: power generation, oil refineries, coke ovens, ore smelters, steel works and cement, glass, ceramics, pulp and paper factories.
Member states can apply for sector-wide opt-outs until 2008 when the scheme becomes compulsory. They can also apply for additional sectors and other greenhouses gases to be included in the scheme after 2008.
The opt-out was a key demand for Britain which already has a voluntary emissions trading scheme up and running at national level - the first of its kind - and did not want clashes.
KYOTO TUSSLE
Emissions trading is key to the EU's drive to cut greenhouse gases to eight percent below 1990 levels by 2012, required under the United Nations' Kyoto Protocol on global warming.
The EU projected itself as the saviour of Kyoto after the United States pulled out of the pact in 2001, but the European Environment Agency predicted last week that the bloc will miss its target without new policies like emissions trading.
Scientists say the world needs to slash CO2 and other gases which trap heat in the atmosphere if it is to avoid disastrous floods, droughts and a rise in sea levels in coming decades.
The EU scheme could be the precursor of a global emissions trading market between all countries involved in Kyoto.
The European Commission, the EU's executive arm, will set out how the EU scheme can link to a future Kyoto trading system after 2005 in a paper to be published in the next six months.
Traders are already brokering speculative deals between companies around the world where CO2 credits are changing hands for up to five euros a tonne.
Ironically, most of those traders are located in the United States, where emissions trading was first established to deal with pollutants like sulphur dioxide which causes acid rain.
The United States may not be allowed to take part in a global emissions trading scheme as it has rejected Kyoto.
AMENDMENTS
Industry, especially in Germany, has been sceptical of a policy it fears could just be an energy tax by a differenct name. CO2 is an inevitable by-product of fossil fuel use.
To ease the burden on industry, ministers agreed a number of concessions, notably a reduced level of fines for firms that fail to reach their targets. In the first period, from 2005 to 2007, factories will be fined 40 euros per tonne of excess CO2. This will rise to 100 euros from 2008.
Industry sectors will be able to buy and sell emission credits as a bloc, rather than having to trade individually, a concession sought by German industry, which has negotiated sector-wide emissions targets with the government.
Firms will not have to pay for emissions allowances, at least to begin with. National governments will distribute them to factories every year for free until 2007.
From 2008 governments can choose to auction up to 10 percent of the emissions credits if they want, ministers agreed.
WWF, formerly the World Wildlife Fund, hailed the result.
"WWF is quite pleased that half of the cap and trade directives is behind us. The other half is for the cap (on firms' emissions) to be set at the national level," said WWF climate campaigner Stephan Singer.
He said WWF would push governments to require industry to cut emissions by more than the eight percent required by Kyoto.
Story by Robin Pomeroy
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