EU sets date for Kyoto ratification and unveils plans for emissions trading

Less than one week before international talks begin in Morocco aimed at producing the legal text for a workable Kyoto Protocol, the Commission announced its intention to bring the Protocol into force before the World Summit on Sustainable Development, known as Rio+10, takes place in September 2002. The proposal, which has been sent to the European Council for adoption, will see the EU having to reduce its greenhouse gas emissions by 8% of 1990 levels by 2008-2012, with some member states allowed to increase their emissions while others reduce them, so that the EU jointly achieves its target.

By presenting its proposal for an early ratification of the Protocol, the Commission hopes to convince other parties to follow suit rapidly, especially Russia and Japan whose ratification is now essential for the Kyoto Protocol to enter into force. In the meantime, the EU has reduced its greenhouse gas emissions by 4% between 1990 and 1999 and is thereby on track, it says, to meet its commitment to stabilise its emissions at 1990 levels. In order to meet the 8% target, the Commission has announced a series of 10 actions to further reduce greenhouse gas emissions.

These actions have been identified as particularly cost-effective and feasible in the short term under the European Climate Change Programme (ECCP) (see related story), whose 40 possible measures are estimated to have a combined emission reduction potential of roughly double of what is likely to be needed for the EU to reach its Kyoto target. Some of the 10 actions are already contained in the Commission’s Green Paper on the Security of Energy Supply (see related story) and the recent White Paper on transport (see related story), with the EC intending to make specific proposals to implement these actions over the next two years. In addition, the Commission says it will present proposals for bringing the EU’s greenhouse gas monitoring mechanism in line with the requirements of the Kyoto Protocol, and on the use of emission credits from the Clean Development Mechanism and Joint Implementation under the Kyoto Protocol in the new EU emissions trading system. The Commission says that the 10 measures announced alone should be sufficient to nearly half of the gap between the EU’s forecasted emissions in 2010 and its Kyoto target at a low cost to the economy of below €20 (£12.5) per tonne of CO2 equivalent.

“The Communication is important in emphasising that the EC does not intend to meet its Kyoto commitments by concentrating on any one measure or sector, but to take action simultaneously on a broad range of fronts,” commented Environment Commissioner Margot Wallström. “I now expect the Council to adopt our proposals rapidly – time is running out .”

In its new proposed Directive for a framework for emissions trading and an EU-wide market for emissions, the Commission proposes that trading should start in 2005, and in a first phase cover CO2 emissions from large industrial and energy activities, which are estimated to account for about 46% of the EU’s total CO2 emissions in 2010, affecting about 4,000 to 5,000 installations. In 2004 the Commission says it will consider an extension of the Directive to other sectors and greenhouse gases.

Each installation covered will have to apply to the relevant authority in its member state for a permit allowing it to emit greenhouse gases with a minimum of bureaucracy, with EU members allocating emission allowances to each installation every year on the basis of the permits, with these allowances being gradually reduced to ensure that emissions fall. It is these allowances that can be traded, although no operator of an installation will be forced to trade, with each operator having to surrender a number of allowances equal to the emissions of its installation in the preceding calendar year by 31 March each year.

The Directive would set harmonised penalties to be paid by operators for not surrendering a sufficient number of allowances, with each member state allocating allowances free of charge from 2005-7 through a Commission-approved plan which avoids state aids and distortions of competition between sectors internationally. Each EU member will have to set up national registries to ensure the accurate accounting of the holding and transfer of allowances, and the Commission will designate a Central Administrator at Community level to keep an independent record of allowances.

“Emissions trading will play an increasingly important role over coming decades when we will extend it to other sectors and greenhouse gases,” Wallström said. “Our system will also be fully compatible with the emerging international emissions trading system. But, as a first step we must establish confidence in a system that is shown to work, with adequate controls.”