May 12, 2006

EU undershoots emissions cap

By Gerard Wynn

COLOGNE, Germany (Reuters) - Most EU members undershot
their limits for greenhouse gas emissions last year,
accidentally leaked data showed on Friday, suggesting the bloc
had been far too generous in handing out permits to pollute.

The numbers, inadvertently placed on an EU Web site before
their scheduled release on Monday, sent the price of credits
sliding to their lowest levels for a year on Europe's new
market for trading carbon dioxide (CO2) emissions.

Prices have slumped 70 percent since mid-April.

Analysts said Friday's 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

"There's no question that some first phase allocations have
been self-serving," said Abyd Karmali, managing director,
Europe, of ICF International. "Some countries have been
complicit in setting lax allocations."

Friday's 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.

"You can be absolutely sure that the Commission will have
to look much more closely at second phase (credit) allocation
plans as they roll in," Karmali said.

Governments have until the end of next month to hand in
draft plans for phase two.

The EU's scheme sets a cap on total emissions by industries
of global warming gas CO2. Caps are set initially by allocating

Companies that have allowances to spare can sell them on
the market, while those that have more emissions than they have
allowances must buy credits or face a fine.

Total CO2 emissions for 20 countries were about 60 million
tonnes below the scheme's ceiling for 2005, Friday's data
showed. Top polluter Germany came in 25.5 million tonnes below
its quota, a wider than expected margin.

France, the Czech Republic, Denmark, Portugal, Belgium and
Hungary were among the countries below quota.

Britain's emissions came in above its allocation. Spain and
Italy were the only two other countries above target.

Figures were not available for five of the EU's members
including Poland, a country which analysts expect will
significantly undershoot its limit.

Successive revelations in recent weeks that countries were
coming in below their 2005 limits had already toppled carbon
credits prices from record highs hit last month and the EU had
asked remaining member states to hold off publication until May

After a Reuters reporter found the data via the Web site, the Commission said
it had been published accidentally and was authentic.

"We are talking about an IT (information technology) error.
It was not intentional at all," a Commission environment
spokeswoman said, adding that full aggregated data could be
released only on Monday.