February 22, 2006

EU executive rejects latest UK emissions plan

BRUSSELS (Reuters) - The European Commission on Wednesday
rejected plans by Britain to increase the level of pollution
heavy industry can pump out under a European Union trading

The Commission said it rejected the revised plan on
procedural grounds.

"The European Commission today took the decision to reject
the UK request for additional CO2 emission allowances to UK
companies for the 2005-07 trading period," it said.

The rejection was widely expected, since the Commission had
already complained that Britain had submitted its proposed
revisions after a required deadline.

The setback for the UK comes as British government
departments squabble over the level of CO2 limits it will
impose on industry during phase two of the trading scheme

EU governments must submit their emissions plans for the
second trading period by June 30.

Britain's amended plan outlined a rise in the number of CO2
emission allowances by about 20 million tonnes compared with
its original allocation plan, the Commission said in a

The government was not immediately available for comment on
Wednesday's ruling by the Commission.

Britain's power industry, which faces the toughest CO2
limits under the EU's trading scheme, said it was disappointed
with the commission's decision and would look for ways to fight

"We are extremely disappointed, we will be considering what
steps we might now take," said David Porter, chief executive of
the London-based Association of Electricity Producers.

He said the decision could cost the power industry 350
million pounds ($609.8 million) a year as companies have to buy
extra CO2 allowances.

Traders said the Commission's decision was bullish for the
price of CO2 allowances as it meant the market would not
receive an extra 20 million tonnes.

"The market firmed up last night and this morning ahead of
the decision, but it was widely expected, it has been largely
factored into prices already," said a London-based trader.

(additional reporting Stuart Penson in London)