Europe is awarding too many carbon-dioxide permits

European Union nations are proposing to grant too many carbon dioxide emission permits in the five years through 2012, potentially creating a bigger surplus than in the previous three years, said an analyst at Ecofys. EU nations are completing their 2008-2012 permit-allocation plans, the second phase of a compulsory emissions-trading system designed to cut output of greenhouse gases blamed for global warming. The first period runs for three years, through 2007. “We might have even more over-allocation” in phase two than in phase one, Alyssa Gilbert, a senior consultant for Ecofys, said at an Environmental Finance conference in Brussels today. Ecofys is a climate-change research and advisory firm that has analyzed national permit plans. The 12 nations that have indicated their permit plans for the five years say they want to grant about 1.53 billion metric tons of allowances a year, Gilbert said. That's about 7.3% more than the 1.42 billion tons those installations actually emitted in 2005 and 2.5% more than the average 1.49 billion permits a year they granted in the three years through 2007. Those plans are for installations that make up about 68% of the region's total. Poland's plan to grant about 280 million metric tons of permits a year in the five-year phase, compared with 239 million in the first phase, “is something that may be seen skeptically” by the European Commission, which must approve plans over the next few months, Gilbert said. Poland is the third-largest emitter of carbon dioxide in the EU based on phase-one grants. The EU imposes limits on emissions from about 11,400 power plants and factories. Under the system, companies that exceed their caps must purchase permits from businesses that emit less, or pay a penalty. The European Commission, the administrative arm of the European Union, said in December that starting in 2008, allocations should average 6% less than in earlier years. (Bloomberg)