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Europe may cut emissions permit grants 10%, Point Carbon says

The European Union will probably ask its members to cut requests for emission permits for the five years through 2012 by an average 10%, to make sure the EU is in position to meet its 1997 Kyoto Protocol target.

The European Commission, which administers the EU's compulsory trading system for carbon dioxide permits, may ask the 25 EU nations to curb their annual allocation of permits by 240 million tons, to 2.08 billion tons a year from a proposed 2.32 billion, said Point Carbon an Oslo research and publishing firm  in an e-mailed statement. In the first phase of the trading system, from 2005 through 2007, the commission requested an 11% cut. Permit prices plunged as much as 73% in the month through May 15 of this year, after traders realized nations had still granted too many permits, making them less valuable. Although in the first phase the market probably will have too many permits, “we don't expect this to be repeated this time around,” Henrik Hasselknippe, the manager of Point Carbon's EU Emissions Trading Scheme team, said in the statement. “Having learned from mistakes made in the first phase, we expect the commission to make the market short, at least initially.” The UK, which proposed the third-biggest grant of permits, said it would to grant 246 million tons a year of permits, 47 million below what it might have been allowed to grant and still meet its share of the Kyoto target, Point Carbon said. “Britain is leading the way again, ensuring that the CO2 market continues to function,” Stig Schjoelset, a senior policy analyst at Point Carbon, said in the statement. Poland, Germany, France and Italy will probably be asked by the commission to reduce their allocation for the five years, Point Carbon said. (Bloomberg)