Ministers agree to start emissions trading

European countries will begin trading in carbon dioxide emissions by 2005, with other greenhouse gases brought into the scheme before the end of the decade.

At the latest EU Council meeting, European ministers agreed to start trading in greenhouse gases emissions. In the first phase of trading, solely with carbon dioxide, companies will be allocated CO2 quotas with permits to emit according to their allowance, and will be able to buy and sell quotas of emissions. Penalties will be imposed on those who exceed their quotas, from €40 for each excess tonne of CO2 emitted from 2005 to €100 per tonne from 2008.

Once approved by the European Parliament, CO2 capping will begin in 2005 and will cover large emitters in the steel, cement, glass, tile, paper and cardboard production industries. For the second phase of the scheme, starting in 2008, trading will be extended to other sectors and other greenhouse gases.

“This is a landmark decision for the EU’s strategy to fight climate change”, said Environment Commissioner Margot Wallström. “It proves that the EU is taking action on climate change, and that we do so in a way that minimises the cost to the economy.”

Trading is expected to cut costs to the economy by 35%. About half of the EU’s total CO2 emissions will be covered by the scheme, with 5,000 firms taking part. In the first phase only, installations will be able to opt out of trading if they can prove that they are achieving the same emissions reductions as those involved in trading. Companies will also be able to pool their emission allocations until 2012. Allocations will be free of charge, but from 2008 10% of allowances will be auctioned.

Norwegian Environment Minister Børge Brende welcomed the Council’s decision but expressed disappointment that trading would be restricted to carbon dioxide. He said he couldn’t understand why other sectors and greenhouse gases could not be opted in until 2008. Brende also questioned the free allocation of permits in the first phase and 10% auctioning in the second, stating that failure to impose charges contravened the polluter pays principle.

Other points raised at the Council meeting included the proposed directives on nuclear safety and waste (see related story). Three countries rejected the European Commission’s request to raise the ceiling on EUROATOM loans for nuclear installations to improve safety and handle waste.

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