Submitted by Andrew Lord.
The EU has been extensively criticized for doling out too many greenhouse gas emissions allowances during the first phase of the European Trading System (EU ETS). The EU Commission recently responded by announcing that it has adjusted the EU-wide cap for Phase II (2008-2012) to give Members an average of 10% fewer emissions allowances.
The 10% reduction was confirmed by Environment Commissioner Stavros Dimas on October 26, 2007. The remarks were included in the announcement that the EU Commission had finalized the Phase II allowances for Bulgaria, the last of the countries to have their national allocation plans approved.
Several countries received significantly fewer allowances than they had requested. Bulgaria's allowances, for example, fell 37% of expectations. According to one source, Hungary, Latvia, Malta and Lithuania, Poland and the Czech Republic all plan to challenge the decisions of the EU in court on the basis that their meager allotments will unduly harm their industries.
However, overall reaction to the tougher targets has been positive in the EU . Many members were eager to prevent a collapse in the price of carbon similar to that which occurred during the first phase. Assuming the new scarcity drives up the price of carbon in the EU, trading under the EU ETS may provide a more reliable source of funds and financing leverage in the next 5 years.