The Heat Is Online

EU Sets Emissions Trading System for 2005

Europe Adopts Climate Emissions Trading Law

ENS, July 23, 2003

BRUSSELS, Belgium, July 22, 2003 (ENS) - European Environment Commissioner Margot Wallstrom today welcomed the final adoption by the European Council of Ministers of an emissions trading law for the European Union. The new legislation will give carbon dioxide a market value across the European Community from January 2005. Next May 10 new countries will join the 15 current EU member states, and the bloc will extend from Poland in the east to the United Kingdom in the west.

Calling European Union "world leaders in applying emissions trading," Wallstrom said the new law has enabled the bloc to act swiftly to meet its emissions limits under the Kyoto Protocol.

"I expect that tomorrow the Commission will propose to open the new market to emission credits gained by companies internationally under Joint Implementation and the Clean Development Mechanism," said Wallstrom, referring to two of the three flexible mechanisms provided for under the protocol. The two mechanisms permit industrialized countries to earn credit for reducing greenhouse gas emissons in developing countries.

"This will mean that other countries, for example Russia, will benefit from our EU emissions trading market," Wallstrom said.

The environment and energy ministers of the 25 current and future EU member states put more pressure on Russia to ratify the Kyoto Protocol during their three day informal council meeting in Montecatini, Italy over the weekend.

Since the United States has declined to ratify the international treaty governing the emission of six greenhouse gases, the ratification of Russia, which accounts for 17 percent of emissions, is needed to bring the protocol into force.

The rules for entry into force of the Kyoto Protocol require 55 countries that signed the agreement to ratify it, including industrialized countries accounting for 55 percent of that groups carbon dioxide emissions in 1990.

Russia promised in September 2002 to ratify the protocol, but has been stalling ever since, possibly in hopes of prying more financial advantages from the European Union.

The European ministers for energy and environment met at Montecatini to state that the integration between energy and environment can be a source of opportunity and development.

The emissions trading law is expected to promote innovation, which brings new opportunities to companies within the European Union.

The new law will, for the first time, set limits on the emissions of carbon dioxide from energy sectors of the European economy. Companies reducing emissions to a level below their limit can sell this over-achievement to other companies that are above their emissions limit, or save the credits for future use.

A company's strategy will depend on the price at which emission reductions are traded.

In this way, Wallstrom said, the EU emissions trading scheme will allow emission reductions to take place at minimum cost to the economy, and will also bring climate change into the boardroom through giving carbon reductions a value.

The Commission will assess the coverage of the new law in 2004 and 2006 with a view to the possible inclusion of other sectors such as the chemical, aluminium and transport sectors.

The initial focus of the new law is on carbon dioxide. However, from 2008, member states may extend the coverage of the trading scheme to emissions of other greenhouse gases - methane, nitrous oxide, hydrofluorocarbons, perfluorocarbons and sulphur hexafluoride - from aluminium and chemicals production.

"When the European Union signed up to the Kyoto Protocol," Wallstrom said, "we knew that this commitment would require solid action to follow. The EU emissions trading scheme demonstrates the Community's willingness to take such action which is not only ambitious in its scope but swiftly decided upon. I hope that other countries become inspired by our progress, in order that global action is taken to protect current and future generations from climate change."

EU member states are expected to implement the provisions necessary to comply with the new emissions trading law by December 31, at the latest.

Copyright Environment News Service (ENS) 2003. All Rights Reserved.

EU Reaches Climate Emissions Trading Breakthrough

Environmental News Service, June 26, 2003

STRASBOURG, France, June 25, 2003 (ENS) - Governments and Members of the European Parliament have clinched a deal to create a climate emissions trading system for the European Union. The agreement removes any doubt that the scheme to trade emissions allowances will become a reality from 2005.

The law setting up the system is now set to enter force at the end of this year. First national emission allowance allocation plans will be due from EU member states the following March.

The deal is based on compromise proposals, tabled on Monday by EU member state diplomats, following voting in the European Parliament's Environment Committee earlier this month.

The parliament should now approve the text at its second reading during a plenary session in Strasbourg next week. The European Council of Ministers will then formally accept the amendments.

Reaction has been swift. Chris Davies of the Liberals said the early deal was a "vital step" in maintaining the EU's credibility on climate issues.

Green Alexander de Roo said the move would now "put pressure on the Russian Duma" to ratify the Kyoto Protocol which would bring the treaty into force. There had been fears that failure to compromise with the council before the summer would jeopardize the protocol's start date.

The Kyoto Protocol is an international treaty under the UN Framework Convention on Climate Change (UNFCCC). It requires 37 industrialized countries to reduce their emission of six greenhouse gases an average of 5.2 percent of 1990 emissions during the five year period 2008-2012.

The rules for entry into force of the Kyoto Protocol require 55 countries that are Parties to the UNFCCC to ratify the protocol, including enough of the 37 industrialized countries to account for 55 percent of that groups carbon dioxide emissions in 1990.

Countries accounting for 43.9 percent of the 1990 emissions have now ratified the protocol. A Russian ratification would push the emissions percentage above the required 55 percent.

Under the terms of the climate emissions trading accord agreed today, EU member states will not be subject to a quantitative cap on the amount of allowances they can distribute, contrary to the European Parliament's original demands.

Instead the member states will have to hand out "no more than is likely to be needed" for the "strict application" of the national emissions allocation plans.

For the initial 2005-2008 trial period, this must be "consistent with a path towards achieving or over achieving" Kyoto Protocol targets.

Auctioning of emissions allowances remains voluntary, against parliament's earlier insistence on the guaranteed sale of at least a small portion. During the initial period, up to five percent may be auctioned, with 10 percent from 2008. There is a promise of harmonized EU auctioning of allowances "after 2012."

Concessions won by the parliament include limitation of an opt out clause during the initial phase to individual installations rather than whole industry sectors.

Inclusion of other sectors and other greenhouse gases beyond carbon dioxide remains optional, though there is a stronger commitment for the addition of the chemicals, aluminum and transport sectors when the European Commission reviews the law at the end of next year.

The prospect of linking the Kyoto Protocol's flexible mechanism credits to the trading scheme remains, though softened with language insisting this should be "supplemental" to domestic actions taken within the industrialized countries governed by the protocol.