The European Commission has formally
rejected the UK’s request to introduce revised emission trading allowances
for British industry. Brussels said on Tuesday that the request was inadmissible
as it fell outside the scope for amendments allowed by a previous decision
in July 2004.

Under the European Emissions Trading Scheme, every EU member state
has to set a limit - a National Allocation Plan (NAP) - on the amount of
carbon dioxide which its industrial plants can produce during the next three
Each government must then divide up this limit between the companies involved,
each company receiving an "allowance", which it can trade with other
companies at a rate set by the market. The aim is to reduce carbon dioxide
emissions in a business-friendly fashion.

The UK announced in March that it
would begin legal proceedings against the Commission over the right to
increase emission allowances. The UK’s Department for Trade and Industry has launched
legal proceedings at the Court of First Instance, to force the Commission to
look again at its revised allocation.

The UK set a provisional total in its
National Allocation Plan of 736 million tonnes of CO2 allowances in April
2004, with the caveat that this figure could be subject to change. After reviewing
the UK installations that would be covered by the EU’s emissions
trading scheme, London revised their NAP to a less stringent 756 million
tonnes, and
submitted the amended total to Brussels in November 2004. The reason,
said Environment Secretary Margaret Beckett, was that forecasts of Britain's
demand had changed - the country would need more energy in the next three
years, and so would need to produce more CO2. Environmental groups accused
the government
of caving in to demands from big business, and the Commission was clearly
not convinced that the UK, alone among EU countries, had a case for raising
emissions cap. The Commission said it had already conveyed its view that
the UK request could not be accepted, both in meetings with the UK authorities
and publicly.

The UK also announced in March that it would start issuing emissions
trading allowances to UK operators as soon as possible under the original
NAP allowance to allow to UK industry to begin participating in the scheme.

environment chief Stavros Dimas said the decision should not come as
a surprise to the British government.

“We had told the UK authorities that its request
was not acceptable,” said Dimas.

“On the other hand I warmly welcome
that the UK has nonetheless chosen to issue the originally planned number of
allowances, which we had approved. This will allow UK companies to start participating
fully in emissions trading.”

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