UPDATE 1-Czech govt to sue EU Commission over CO2 limit cut

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The Czech government agreed on Friday to sue the European Union's executive body over its demand that the country cut its proposed annual carbon dioxide (CO2) emissions in 2008-2012, the industry ministry said.

The Commission responded that it was confident its decision on the Czech plan would stand up to a challenge in court.

The European Commission has cut the annual allocation of carbon emission rights for the Czech Republic to 86.8 million tonnes per year in 2008-2012 from 101.9 million demanded by the Czechs, down from 97.6 million tonnes in 2005-2007.

"I believe that because of a complicated model and bad data, the European Commission damaged the Czech Republic in its allocation of emission rights," Czech Industry and Trade Minister Martin Riman said in a statement.

The ministry statement added the European Commission did not consult with the Czechs when calculating expected 2008 emissions.

The Czechs have said the lower emission rights could harm the economy, which is experiencing strong growth in large part due to the benefits of joining the European Union in May 2004.

But European Commission spokeswoman Barbara Helfferich told a news conference in Brussels that the decision would be upheld.

"We are confident the decision of the Commission stands up in court," she said.

The emissions trading scheme is the 27-nation EU's key tool to fight climate change and meet commitments to cut emissions under the Kyoto Protocol.

Neighbouring Slovakia filed a lawsuit against the EU's executive in February as the first EU member country to go to court over the Commission's demands to cut emissions.

Poland and Hungary are also said to be considering legal action against the Commission over their allocations.

(Additional reporting by Jeff Mason in Brussels)

[PRAGUE/Reuters/Finance.cz]