Europe plans revamp of carbon trading

By James Kanter and Stephen Castle

BRUSSELS: European Union officials will propose this week a major overhaul of the bloc's sometimes dysfunctional carbon emissions trading system, aiming to reduce corporate influence and make polluting more expensive. The new system would oblige more factories in Europe to pay for pollution and aims to reduce the oversupply of permits. That, in turn, could push up their cost.

It also would be governed centrally in Brussels, rather than partly by member countries, as is now done, with the aim of reducing the ability of companies to profit by lobbying pliant governments for more pollution permits than they need. The draft proposal, seen by the International Herald Tribune, is to be presented to the European Parliament on Wednesday by the president of the European Commission, José Manuel Barroso.

"It's highly laudable that the EU is pulling out all the stops and doing everything in its power to meet the targets it has set itself," said John Hay, a spokesman for the United Nations Framework Convention on Climate Change, which is based in Bonn and oversaw the negotiations that led to the Kyoto Protocol. "This is certainly an example of what many developed countries need to do to stabilize greenhouse gases using stringent national policies and effective market mechanisms," Hay said.

Lobbying from energy-intensive industries, particularly in high-wage western Europe, still could mean the legislation faces obstacles to approval. The review by Parliament and EU governments could take more than a year. In a concession to governments, national capitals would be allowed to keep money raised by selling permits that could amount to between €30 billion and €50 billion, or $44 billion and $73 billion, annually by the end of the next decade, according to EU officials who spoke on condition of anonymity because of the sensitivity of the plans. Governments, however, still could be urged - and may even be required - to put a portion of the revenue toward programs like funding research and development for reducing emissions and encouraging renewable sources of power, the officials said. Those details still are being finalized, they said.

Henrik Hasselknippe, the director of EU emissions trading analysis for Point Carbon, a research and consulting company based in Oslo, Norway, said one of the most important aspects of the announcement this week is a commitment to make polluters buy many more - and in some cases all - of their permits starting in 2013. Industries currently in the system, including steel and cement factories, are allocated most of their permits by national governments and use the trading system to buy more or sell surplus.

Europeans took an early lead in efforts to curb global warming by championing the Kyoto climate treaty and by establishing the largest carbon-management system in the world. The 3-year-old system involves complicated quotas that cap emissions from thousands of factories across the trade bloc. Companies buy or sell permits based on whether they overshoot or come in beneath their pollution targets. Supporters of the system say limiting supply by stopping government handouts of permits would eventually drive up the cost of polluting and force companies to make emissions reductions and to adopt low-carbon technological innovations.

So far the United States has resisted adopting a European-style system. Even so, several other countries and U.S. states have adopted similar systems, and Europeans hope fixing some of the flaws in the current system would encourage more to follow their example. In mid-2006, the market price for permits collapsed in Europe, along with the incentive to cut emissions, seriously undermining the credibility of the program. That happened after news leaked of a significant difference between how many permits industries were granted and how many permits they actually needed.

Partly because of such problems, Mahi Sideridou, the EU climate policy director for Greenpeace, said the European system so far had not succeeded in reducing emissions in Europe. She also criticized the EU for continuing to allow companies based in Europe to buy permits from overseas to offset their pollution in the new system. Even so, Sideridou said the plan to be presented this week represented progress. "Eliminating the governments as middle men is a good thing in our view," she said. "Governments were under a lot of pressure from industry," she said.

In the past, many of the sectors like steel and cement had benefited from over-allocations by selling excess credits, according to Hasselknippe of Point Carbon. Electricity producers like E.On and RWE in Germany and Vattenfall, the Swedish energy company, also benefited from free allowances, but mainly by passing on costs to their customers, he said.

To be continue in other article...

(Jakarta, Kamis 21 February 2008, 07.39 pagi)

Re-publish by Jacob Paradox from link (www.routers.com),(www.iht.com), (www.routers.com), (www.nytimes.com)