Daniel Fineren

Just two countries have so far met a deadline on Thursday to allocate to their industry permits to emit carbon dioxide, the European Union’s executive Commission said, likely delaying a 2008 carbon spot market

LONDON, UK; February 29, 2008.- The EU’s carbon trading scheme is the 27 nation bloc’s main strategy to fight climate change, and sets an overall cap on permits to emit the greenhouse gas carbon dioxide (CO2) to energy-intensive industry, but allows companies to trade these EU Allowances (EUAs) among themselves.

While the Commission has decided what EUA quota each state is allowed to give to its industry, it was clear on Thursday that most affected companies would not get those permits by the Feb 28 deadline.

Thirteen countries have submitted the necessary information to the Commission regarding allocation, but only five have received Commission approval to issue.

Of those five, just two have issued EUAs - Austria and Denmark, the Commission said.

Of the remaining three, Britain and the Czech Republic have said they will not allocate EUAs, while the Commission said it was unsure about Finland’s plans.

“Issuance is delayed and Czech may allocate in April, although there’s no firm date yet,” said Czech climate change department official, Pavel Zamyslicky.

Britain said that it would not issue EUAs until the European Commission announced when its emissions trading scheme would link with a separate carbon trading scheme under the Kyoto Protocol on global warming, which the Commission has previously said may not happen before 2009.

“Following discussion with UK carbon market participants, the UK Government believes the (Kyoto-linked) carbon trading registry system…must be established before November at the latest,” the UK environment ministry said.

The fact most countries were set to miss the Feb 28 deadline will have limited immediate consequences.

Affected businesses will not have to hand in enough permits to match their 2008 emissions until early next year.

And ballooning EUA trade involving investment banks, hedge funds, brokers and companies mostly takes place through futures contracts which settle annually in December.

But a spot market for immediate physical EUA delivery does exist, especially in eastern Europe according to market participants, and that market is now effectively put on hold.

Thursday was the deadline for all EU member states to allocate EUAs to more than 10,000 European energy-intensive installations in 2008, the first year of the second trading cycle of the EU emissions trading scheme from 2008-12.

(Reuters)

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