EU backs first Kyoto trading scheme

European Commission approves Danish initiative to trade carbon reduction credits

The European Commission today ruled that a Danish proposal to create the EU's first national greenhouse gas emission trading scheme, does not contravene rules on state subsidies to industry. The scheme will "contribute to the development of environmental protection," the Commission said. Announced last year and due to be launched this, the initiative will impose carbon dioxide emission quotas on Danish electricity firms while granting them free of charge an equal number of emission permits (ENDS Daily 28 May 1999).

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.

Follow Up:
European Commission, tel: +32 2 299 1111; and press release IP/00/304 dated 29/3/00 available on Rapid.

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