May 15, 2006

EU 2005 CO2 emissions 44 mln tonnes below quota

By Gerard Wynn

BRUSSELS (Reuters) - EU emissions of heat-trapping carbon dioxide in 2005 were 44 million tonnes below a quota of 1.829 billion tonnes under the European Union's carbon trading scheme, the European Commission said on Monday.

The figures confirmed a Reuters report on Friday that most EU members undershot their limits for greenhouse gas emissions, suggesting the bloc had been far too generous in handing out permits to pollute.

Top polluter Germany moved swiftly to say it would make retroactive cuts to its 2005 allocation of allowances to emit carbon dioxide after European Union figures showed a 21 million tonne -- or four percent -- German undershoot.

Prices for European carbon dioxide emissions permits surged 50 percent to 14.00 euros a tonne on Europe's new market for trading carbon dioxide (CO2) emissions.

The rally reversed steep losses on Friday after the Reuters report. Analysts said the data confirmed that some EU governments, mindful of the potential impact on industries' costs and competitiveness, had set polluting firms lax emissions ceilings for phase one of the trading scheme (2005-2007).

Individual countries reported ranging performances -- German emissions were well below quota, while Britain overshot its quota by 33 million tonnes.

The EU calculated the total 2005 quota on the basis of countries' average annual emissions between 2005 and 2007, but because some states emit slightly different amounts from year to year, the true 2005 allocation picture would be slightly different.

The data will pile pressure on the European Commission, the EU executive, to take a tougher line when approving limits for phase two of the scheme, which runs from 2008-2012 and coincides with the period during which governments must meet greenhouse gas cuts pledged under the Kyoto Protocol.

The emissions trading scheme is the centerpiece of Europe's effort to meet its Kyoto commitment.