UPDATE 3-EU tells Dutch, Belgians to cut carbon further

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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 next batch of decisions was due in February, the Commission said on Tuesday.

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.

But the Commission's tough approach may be storing up lawsuits as countries struggle to pacify domestic industrial lobbies worried about the impact of tough controls on their competitiveness.

Brussels in November slashed by 25 percent Bratislava's proposed cap, and Slovakia became the first country on Tuesday to confirm it was preparing to challenge the decision in court, citing a threat to economic growth.

The Commission said last week tough action on climate change was fully compatible with economic growth, as it annouced a new, more ambitious target to cut EU greenhouse gas emissions by at least a fifth by 2020.

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

Asked whether the Netherlands might launch legal actions a Dutch spokesman for the economy ministry said: "It's far too early to say."

Belgium said it would analyse the Commission's decision to see how it could put the cuts demanded in place.

LEGAL CHALLENGES

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, analysts and green groups have welcomed the Commission's stand on the second phase from 2008-12.

"The Commission seems to be on the right track in cutting the overall allocation, so limiting the surplus on the market," said Mahi Sideridou, EU climate policy director for Greenpeace.

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. Germany, which holds the EU presidency, has previously warned of legal action though a senior government source conceded last week that Berlin would have to bow to the Commission ruling. -- For details of the EC rulings double-click on [ID:nL27479214] (Additional reporting by Martin Santa in Bratislava, Karin Strohecker in Vienna, Anna Mudeva in Amsterdam and Philip Blenkinsop in Brussels)

[BRUSSELS/Reuters/Finance.cz]