EU firms call for rigorous gas trading rules

Greenhouse gas emissions trading vital but must have strong rules, says UNICE

European industry has called for a "rigorous" system to manage the way companies and countries are allowed to trade greenhouse gas emissions reductions under the Kyoto climate change protocol.

In a position paper released today, the European employers' federation, UNICE, sets out its opinion on how the treaty's "flexible mechanisms" should work. It describes emissions trading as "one of the potentially most efficient instruments to handle greenhouse gas emissions," but stresses the need for a well-designed system governing the trade.

The statement is likely to please environmental groups, which have campaigned against flexible mechanisms, fearing them to be "loopholes" which would allow countries to achieve their Kyoto emissions cut with no domestic action.

The Kyoto protocol allows for the use of flexible mechanisms to enable countries to take the credit for reducing greenhouse gas emission cuts in three ways: by emissions trading between countries, by transfer of project related emissions credits known as joint implementation, and by transferring technology to developing countries under the clean development mechanism.

Although the protocol itself mentions only the possibility of governments participating in emissions trading, UNICE stresses that companies should be allowed to trade as well. "Industry is well placed to understand the opportunities for and costs of reducing emissions," the federation said today.

UNICE's position paper calls for a well thought-out system governing the use of flexible mechanisms. "It is impossible to overstate the need to develop emission trading models with a great deal of rigour." European industry would be harmed, rather than helped, by an unsatisfactory emissions trading regime, it claims. "Failure to address design issues properly could generate major risks for companies."

The way flexible mechanisms will work in practice remains unclear and is the subject of on-going negotiations between the signatories to the treaty. The European Commission is due to publish a strategy document on emissions trading next month, which will also touch on other issues raise by the UNICE paper, including its call for companies to be able to "bank" emission reduction units, to use at a later date.

According to Commission sources, neither direct industry involvement in emissions trading schemes nor emissions banking are "unthinkable," though it remains too early to say what the Commission will propose. Companies might be allowed to trade emissions, an official said, but choices would have to be made about allocating which companies or industries could do so and to what extent.

Follow Up:
UNICE, tel: +32 2 237 6511.

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