The Commission was obliged to investigate the scheme because companies will be able to sell the permits if their emissions fall below their quotas, thus potentially making a profit. It said its main concern was that the scheme should conserve the "freedom of establishment" - ensuring that it did not disadvantage companies entering the electricity generation market after the quotas had been agreed.
Under the Danish initiative, power firms - which currently generate 40% of the country's CO2 emissions - will receive permits for emissions totalling 22m tonnes (Mt) in 2001, falling to 21Mt in 2002 and 20Mt in 2003, when the scheme ends. Permits will be allocated based on historical emissions from 1994-1998 and new market entrants will be allocated permits based on "objective and non-discriminatory" criteria.
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