From: Reuters
Published January 15, 2008 02:33 PM

EU business blasts planned CO2 emissions auction

By Marcin Grajewski

BRUSSELS (Reuters) - Europe's top business lobby attacked on Tuesday European Commission plans for implementing deep cuts in greenhouse gas emissions, saying that auctioning pollution permits could hurt industry in global competition.

In a letter to Commission President Jose Manuel Barroso, BusinessEurope urged the European Union executive to avoid forcing firms to buy carbon dioxide emissions permits, rather than receiving them for free as they do now.

The plan to auction off most, and eventually all, emissions permits is a centerpiece of a major package of energy and climate change proposals to be unveiled next week.

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"In the absence of a comprehensive international agreement, auctioning of allowances will harm the competitiveness of European companies, especially in energy-intensive industries," BusinessEurope Secretary-General Philippe de Buck wrote.

"Increasing electricity prices will exacerbate the indirect impact on industries," said de Buck, whose organization says it represents about 20 million European companies.

He demanded "full free allocation" for manufacturing industries until there was a global deal to curb emissions.

Industry sources said oil majors Shell and BP were lobbying to have oil refineries excluded from the sectors that will have to buy emissions permits at auction.

The Commission will present draft legislation on January 23 that aims to improve the greenhouse emissions trading scheme (ETS), Europe's main tool to fight climate change.

The ETS sets limits on the amount of CO2 -- the main gas blamed for global warming -- that factories may emit. Companies buy or sell permits based on whether they overshoot or come in beneath their targets.

EU sources say the Commission wants an average of 60 percent of permits to be auctioned from 2013, the start of the next trading period, rising to 100 percent in 2020.

At present, governments largely hand them out for free, handing windfall profits especially to companies in the power sector, which EU regulators want to keep under control.

BusinessEurope also voiced concern that the Commission would limit current provisions whereby firms receive emissions credits for funding clean technology projects in developing countries.

The Commission is expected to propose allowing the poorest new central European member states to increase greenhouse gas emissions by up to 20 percent by 2020 over 2005, EU sources told Reuters this week.

The 15 old member states would thus bear the brunt of cuts required to meet the 27-nation EU's goal of an overall reduction of 20 percent by 2020 from 1990 levels, with national targets set according to gross domestic product per capita.

To become law, the Commission's draft will have to be approved in complex negotiations between the European Parliament and the bloc's governments.

(Editing by Paul Taylor)

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