EU reports on greenhouse gas emissions

Carbon dioxide (CO2) emissions from plants participating in the EU Emissions Trading Scheme (ETS) increased by 0.3 per cent in 2006, indicating that manufacturers are working to become more environmentally-friendly.

The 0.3 per cent figure is adjusted for the entry of new installations into the scheme last year. It compares with the 3 per cent growth in EU gross domestic product recorded last year

All but 1 per cent of installations surrendered emission allowances equal to their verified 2006 emissions by the 1 May deadline.

The ETS scheme ensures that greenhouse gas emissions from the energy and industry sectors covered are cut at least cost to the economy, environment commissioner Stavros Dimas said.

"It is very encouraging to see that the mechanics of the EU ETS are working well and that the vast majority of installations have complied with their obligation to surrender allowances," he said. "While emissions will not necessarily fall in each year of a trading period, it is important to note that the rise last year was very limited and far below the rate of economic growth."

He said he is convinced that the strict caps the Commission is putting on allowances for the second phase of the ETS starting next year will contribute further to cuts in emissions.

Last year was the middle year of the first EU ETS trading period, which started with the scheme's launch on 1 January 2005 and ends on 31 December this year.

The second trading period will begin on 1 January 2008 and run for five years, coinciding with the period during which the Kyoto Protocol targets must be met.

The total amount of verified emissions from EU ETS installations in the EU-25 last year was 2.026 billion tonnes of CO2, 0.8 per cent higher than the 2.010 billion tonnes recorded in 2005.

About 300 additional installations participated in the scheme since 2005. Of the 10,605 installations participating in the scheme last year, 380 failed to meet a 1 May 2007 deadline to surrender a number of allowances equal to their verified emissions.

The Commission plans to provide public reports on the compliance situation at installation level in each member state in June.

"A lack of independently verified emissions data for the years before the EU ETS was launched makes it difficult to measure the scheme's full impact on emissions," the Commission stated. "However, some early academic research indicates that emissions may have fallen by several per cent in 2005 compared with their level before the start of the EU ETS."

The EU's ETS is part of the bloc's plan to reduce greenhouse gas emissions to meet international commitments under the Kyoto Protocol.

The "cap-and-trade" scheme, which took effect from January 2005, sets limits on each manufacturer's CO2 outputs. Companies can then to buy and sell CO2 emissions rights according to need on specially constructed Internet sites.

Plants that emit more CO2 than their allocation need to buy allowances to cover the extra emissions. Companies that emit less than their allocation are able to sell the allowances to companies that need them.

Under the system the Commission first set country limits. Then each country allocates emission rights to particular plants and companies.

The food processing industry is an energy consumer and discharger of greenhouse gas through its reliance on cooking, refrigeration, freezing and air compressor systems.

ETS is mandatory for food and drink companies operating combustion installations with a rated thermal input exceeding 20 MW.

The importance of the scheme for the food and drink sector is reflected in the fact that, for instance, in France 13.6 per cent of all ETS installations are food and drink sites.

In the UK the food and drink industry make up 3.1 per cent of the estimated allocations.

Preliminary data from the first year of the EU's greenhouse gas trading scheme served to highlight problems in the allocation of plant outputs and in the tracking of CO2 emissions.

The data indicated that the Commission had set allocation limits at too high a level. Figures published in May 2006 showed that CO2 emissions were 44 million tonnes under the level permitted in 2005. The result was that carbon prices under the trading scheme fell dramatically, reducing the incentive for companies to cut emissions.

This year the Commission proposed to cut greenhouse gases by 20 per cent by 2020 compared with 1990 levels. Germany supports a 30 per cent reduction, according to Eupolitix.com, an online newssource.

Under the scheme companies can be fined about €40 per excess tonne of CO2 emitted, a price above allocations being traded on the market.

During the second phase the Commission plans to include additional, smaller sites below the current capacity threshold. Below a rated thermal input of 20 MW, actual direct emissions wouldtypically be less than 5,000 tonnes CO2/year.

The second phase of the EU ETS will be expanded to cover additional activities at 160 installations, estimated to be responsible for collectively outputting 9.5 million tonnes of carbon dioxide. The plants are currently not covered in the current phase of the scheme