EU seeks to expand, strengthen Co2 trading scheme

The European Union sought to advance its emissions trading system on Monday, saying it would consider adding greenhouse gases and lengthening trading periods to make the scheme more effective at fighting climate change.
The EU's scheme - its key tool to battle global warming and meet emissions reduction targets under the Kyoto Protocol - puts a limit on the amount of carbon dioxide (Co2) big polluters such as power plants and oil refineries can emit.
Companies buy more rights to pollute if they overshoot their target or sell them if they come in below the cap. But 2005 data showed EU governments gave industry more emissions permits than it needed, leading to a Co2 price crash. Prices for the allowances hit a 22-month low on Monday.
The European Commission said it would study setting an EU-wide cap on Co2 permits and other gases that may be added to the scheme. Currently EU member states propose Co2 caps for their industry, which the Commission can approve or reject.
The Commission launched a review that will lay out ways to streamline how emissions rights are allocated to companies, study adding new gases and sectors to the scheme, strengthen the emissions monitoring and reporting process, and address how the scheme can be linked to similar ones being developed world-wide. "Climate change is the gravest challenge facing mankind and emissions trading is the most effective policy instrument for tackling it," Environment Commissioner Stavros Dimas said.
"We now need to see how we can further improve the (EU) scheme. The better its design, the easier it will be for other countries to adopt similar policies," he said in a statement.
The EU body will propose new legislation based on the results of the review in the second half of 2007. New sectors and gases may be added. The Commission said the scheme could cover nitrous oxide (N2O) from ammonia production and methane from coal mines, for example.
Brussels also endorsed creating longer trading periods. The current phase, considered a trial period, runs from 2005-2007 and the next one runs for five years, from 2008-2012. "The Commission shares the widely expressed view that giving greater certainty to investors for longer than five years ahead, as the scheme does currently, is desirable," it said in a statement.