UPDATE 2-EU tells Dutch, Belgians to cut carbon further

...

By Sabina Zawadzki

The European Commission demanded that the Netherlands and Belgium cut their proposed emissions caps for 2008-12, underlining its tough stance on targets under the EU carbon trading scheme.

The ruling on Tuesday brought to 11 out of 12 the number of emissions plans that Brussels has so far ruled on and rejected -- to date it has only accepted Britain's proposal.

"The Commission is assessing all national plans in a consistent way to ensure equal treatment of member states and to create the necessary scarcity in the European carbon market," Environment Commissioner Stavros Dimas said in a statement.

The Commission cut Belgium's proposed cap by 7.6 percent and that of the Netherlands by 5 percent. It had been expected to reject the plan from Cyprus but Nicosia decided to re-submit.

The EU carbon market puts a price on carbon emissions by heavy industry and is the 27-nation bloc's main tool to steer it towards its targets under the Kyoto Protocol on global warming.

Under the scheme's first phase from 2005-07, now widely dubbed an experiment, the EC handed out too many emissions permits, prompting a carbon price collapse and underlining the need for tougher limits the second time round.

Carbon market traders and analysts have broadly welcomed the Commission's stand on the second phase from 2008-12.

"It's good to see the European Commission continues to be serious about creating a functioning emissions trading scheme," said Steven Drummond, managing director of Co2e, a greenhouse gas emissions broker.

LEGAL CHALLENGES

Commissioner Dimas has repeatedly said the Commission's demands are non-negotiable. But member states are allowed to challenge the decisions in court.

In November the Commission ruled that Germany, Greece, Ireland, Latvia, Lithuania, Luxembourg, Malta, Slovakia and Sweden should all toughen their emissions plans.

Slovakia said on Tuesday it was preparing legal action against the Commission's ruling to cut Bratislava's plan, saying the reduction could harm economic growth and failed to take into account the country's record GDP growth and new energy sources.

Germany, which holds the EU presidency, has also warned of legal action though a senior government source conceded last week that Berlin would have to bow to the Commission ruling.

Late on Monday Austria submitted its own plan to the Commission, proposing a smaller cut in its an annual quota compared to the first phase of the scheme. -- For details of the EC rulings double-click on [ID:nL27479214] (Additional reporting by Martin Santa in Bratislava, Karin Strohecker in Vienna and Gerard Wynn in London)

[BRUSSELS/Reuters/Finance.cz]