European Union radically revamps Emissions Trading Scheme for power sector

23 January 2008 - The European Union (EU) is to slash the number of carbon dioxide (CO2) permits it issues to utilities under the Emissions Trading Scheme (ETS) and will auction all permits from 2013, Commission president Jose Manuel Barroso has announced.

The European Commission proposed that CO2 allowances in 2020 for the power industry now in the EU ETS be 21 per cent below actual emissions in 2005.

In addition, power producers will have to purchase their whole allotment as of 2013 and full auctioning should apply to other industries from 2020 after a phase-in.

The auctioning rights will be divided among national governments, which would pocket the revenue.

Another proposal would make legal changes to allow industry to capture CO2 from plants and store it underground. CO2 that is captured and stored would be treated as not emitted under the emissions-trading system.

The overhaul aims to make emissions more costly and help the EU meet a goal of reducing greenhouse gases by 20 per cent in 2020 compared with 1990.

"This is a very ambitious package," Barroso told the European Parliament in Brussels. Electricity prices could rise 10 per cent to 15 per cent as a result of the proposals, he added.

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