Looking to the future of its Emissions Trading Scheme (ETS), which will be revised for 2013, the commission has floated the idea of introducing a range of other gases into the cap and trade system, including nitrous oxide and methane.

This, it says, will increase the positive environmental impact of the scheme and further its global application as ‘a tool kit to combat climate change’.

As more countries and states consider adopting their own climate trading agreements, such a shift would also help Europe maintain its self-appointed leadership role in this field.

The current scheme allocates carbon credits to energy producers and energy intensive industries. Under the new proposals, ammonia producers could have their emissions of nitrous oxide capped while coal mines will also have limits put on the methane they can produce before incurring financial penalties.

The review will also look at how the scheme can ensure that small installations contribute to efforts to climate change while reducing their costs.

Since different member states have interpreted the rules of the fledgling ETS system differently, the revised version will also clarify which types of combustion installations will be covered.

Away from the technical detail, there will also be an effort to make the system more business friendly by looking at ways to give investors a better idea of what lies ahead.

The current system makes medium to long term predictions of how the market will perform difficult, as caps are set for five year periods with no indication of what will come beyond that.

How countries outside the EU could become involved with the ETS will also be considered in the review, which is expected to begin late next year to give time for its decisions to be implemented by 2013.

This is are area of growing importance as the alliance of north eastern US states and California, along with some Australian states, implement their own cap and trade plans and begin to look at the potential of linking these systems.

“Climate change is the gravest challenge facing mankind and emissions trading is the most effective policy instruments for tackling it,” said Stavros Dimas, the EC’s Environment Commissioner.

“The EU Emissions Trading Scheme is a clear proof of the EU’s commitment to take resolute action against climate change and reach the EU’s Kyoto targets. We now need to see how we can further improve the scheme. The better its design, the easier it will be for other countries to adopt similar policies.”

Sam Bond

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