From: Jeff Mason, Reuters
Published May 22, 2006 12:00 AM

EU Says U.S., China Open to Global Emissions Trade

EISENSTADT, Austria — The European Union's environment chief said Friday the United States was open to discussing a global greenhouse gas emissions market, but the U.S. government said it remained opposed to mandatory caps on emissions as called for by the Kyoto Protocol.

EU Environment Commissioner Stavros Dimas expressed optimism that the United States, China and India would be ready to discuss a global system that lets industries that cut their emissions under set limits to sell credits allowing other industries to keep releasing greenhouse gasses.

Asked about Dimas's comments, a U.S. State Department official Friday deferred to comments earlier in the week from an Environmental Protection Agency spokeswoman.

The EPA spokeswoman had said the agency's head had talked with Dimas about U.S. plans to cut oil dependency, not about curbing emissions after the first phase of Kyoto runs out in 2012.

The State Department official also deferred to comments from Harlan Watson, the chief U.S. climate negotiator, who told Reuters Thursday at U.N. climate talks in Germany that Washington was not reconsidering its opposition to Kyoto.

The United States, the world's biggest emitter of greenhouse gases, agreed last year to participate in a U.N.non-binding exchange of information on how to combat climate change beyond Kyoto's first phase.

The EU's own emissions trading scheme, which limits greenhouse gas carbon dioxide (CO2), came into force last year and is the 25-nation bloc's key instrument for meeting its legally-binding Kyoto targets to reduce global warming.

"In my own discussions with officials from the United States but also developing countries like China and India -- I met them in New York -- there is willingness to go ahead with discussions on sort of a global emissions trading system, which means cap and trade," Dimas told reporters.

"The importance of the European emissions trading system is more underlined by this," Dimas said at a meeting of EU environment ministers in Austria.

U.S. President Bush pulled the United States out of Kyoto in 2001, citing a lack of targets for developing nations and concerns the caps would cost U.S. jobs.

But Dimas said there was pressure on Washington from U.S. states, cities, citizens and the scientific community to take a more proactive position on climate change, and market-based mechanisms were considered the best way to go forward.

"This is a way that could bring us together," he said.


The EU scheme has taken a beating in recent weeks with carbon prices diving after data showed most companies used fewer CO2 permits in 2005 than they were given by their governments.

Dimas said EU member states had allocated too many CO2 permits to industry in 2005 and must take that into account when planning for the next trading phase, which runs from 2008-2012.

"The problem that we found out a few days ago was that member states have allocated more than the actual emissions (in 2005)," Dimas said, adding businesses may have overestimated their expected growth prospects and asked governments for more emissions allowances as a result.

Dimas stressed the 2005-2007 trading phase was a learning period but warned member states to apply those lessons for their plans for the next phase, due at the end of June.

He said higher carbon prices created more of a need for companies to make investments to cut pollution, but that a price level of 15 euros ($19.10) per tonne -- roughly where it has stabilised this week -- would still achieve that goal.

"Even at 15 euros there is an incentive for making investments." Friday, carbon traded at 16.15 euros.

($1-.7844 euro)

(Additional reporting by Timothy Gardner in New York)

Source: Reuters

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