EU Leaves Polish CO2 Cap Intact, Ends Legal Wrangle

Posted on 20 April 2010

The European Union approved Poland's proposal to leave its carbon-dioxide emissions cap unchanged, putting an end to a legal wrangle that threatened the world's biggest carbon market.


Poland asked for an annual limit of 208.5 million tons in a revised proposal. The country, which successfully challenged the commission's authority to review national plans for allocating carbon allowances in an EU court last year, dropped demands earlier this month for a higher cap after the recession reduced industrial discharges.


Poland's annual cap for 2008-2012 represents about 10 percent of the overall EU limit on energy and manufacturing companies in the world's largest cap-and-trade system. Poland is the biggest economy among nine central and east European states that sued over emission caps, arguing the limits imposed by the commission would hurt their competitiveness and growth.


'The commission's decision has removed uncertainty for Polish companies and most importantly maintains the environmental integrity of the EU Emissions Trading System,' Climate Commissioner Connie Hedegaard said in a statement.


Following the EU approval, Poland's emissions registry will start allocating permits today to about 800 installations in the Emissions Trading System, the environment ministry said in an e- mailed statement.


The Polish plan envisages allocating 201 million tons of CO2 for 2008, 202 million tons for 2009 and 202.2 million tons for each of the remaining years, the government said on April 6. The difference between the average and the actual amount distributed will be kept as a reserve.


‘Additional Advantage'


'Conditions for companies are unchanged compared with previous years,' Environment Minister Andrzej Kraszewski said in the statement. 'An additional advantage for Poland is a possibility of using 13 million tons of permits for joint implementation projects, or reduction of greenhouse-gas emissions with foreign partners.'


EU permits for December gained as much as 2.3 percent to 14.75 euros a metric ton on the European Climate Exchange in London. The contract closed at 14.57 euros, extending its gain to 14 percent this month.


Poland took the commission to court in 2007 after the EU regulator cut the country's plan for carbon allocation by 27 percent from the originally sought 285 million tons. Last year Poland and Estonia won rulings by the European Court of First Instance overturning the commission's decisions to award 73 percent of the allowances demanded by Poland and 52 percent of those Estonia requested for the five years through 2012.


‘Very Restricted'


The EU lower court said the commission has 'very restricted' authority to review national plans for allocating carbon allowances. In response, the EU appealed the verdicts for Poland and Estonia in December, saying the court 'has interpreted too narrowly the power of the commission.'


Court challenges to national CO2 caps are pending from the Czech Republic, Hungary, Romania, Latvia and Lithuania. They are among 10 nations once under Soviet domination that have joined the EU since 2004. Slovakia's case was withdrawn in 2008 and Bulgaria dropped its claim last month.


The commission has repeatedly signaled that it was seeking to convince Poland that the court victory didn't justify a higher limit. The regulator cited the need for stability in the emissions-trading system as well as the economic slowdown.


Carbon-dioxide discharges in the EU fell 11 percent to 1.69 billion metric tons in 2009, the biggest decline since the bloc started its cap-and-trade program, according to preliminary data published by the commission on April 1.


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