Halt global carbon trade expansion: Friends of the Earth

LONDON (Reuters) - Global emissions trade expansion should be stopped because the schemes will not deliver emissions cuts in time to curb global warming, environmental group Friends of the Earth (FoE) said in a report on Thursday.

Carbon markets allow polluters to buy rights to emit greenhouse gases such as carbon dioxide and are often seen as more politically acceptable than carbon taxes.

Established schemes include the European Union's Emissions Trading Scheme (EU ETS) which caps emissions on 11,000 industrial installations and the U.N.'s Clean Development Mechanism (CDM), which enables companies to buy carbon offsets from projects in developing countries.

"We definitely want to scrap the CDM. The EU ETS will have to be reformed, taking out offsetting and setting a lot lower caps on emissions," Sarah-Jayne Clifton, FoE international climate campaigner and author of the report, told Reuters.

Analysts say linking the EU ETS with a future U.S. cap-and-trade scheme is a crucial first step toward a global carbon market, which will help achieve real emissions cuts in greenhouse gases.

The EU wants to see a global market in which emissions trading schemes are linked by 2020. The United States is still debating emissions trading legislation but the emergence of a federal system looks increasingly likely.

The FoE argues that it is implausible to establish a global cap-and-trade scheme within the timeframe necessary to avoid dangerous climate change.

Expansion goes on regardless. The global carbon market grew to $126 billion last year, nearly 12 times its value in 2005, according to the World Bank.

Several firms are beefing up their emissions desks in anticipation of a new global climate agreement in Copenhagen this December and a U.S. cap-and-trade market.

In recognition of some of the flaws in the EU ETS, some changes are planned from 2013, when industry will have to pay for carbon permits which they currently receive for free.

Proposals to reform the CDM from 2013 will be on the table at the U.N. climate summit on December 7-18.

Such reform is "a waste of time," according to the FoE. Instead, the group favors direct regulation over sectors or plants producing emissions, taxation and increased government spending on renewable energy sources.

(Reporting by Nina Chestney; Editing by Sue Thomas)