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Industry emissions rise in carbon price boost
BRUSSELS (Reuters) - Carbon dioxide emissions from businesses included in the European Union's Emission Trading Scheme rose 0.68 percent in 2007 compared with 2006, the European Commission said on Friday.
This confirms an increase in emissions as suggested by preliminary data published on April 2, and implies a shortage of carbon emissions permits in 2008 which could drive up carbon and electricity prices across the 27 member states.
The scheme is meant to drive a fight against climate change by allocating a shortage of carbon permits to energy-intensive industries, but in its first phase from 2005-07 states issued a surplus by mistake.
"While well below the 2.8 percent growth in the EU's gross domestic product recorded last year, the slight increase in emissions underlines the need for the tighter emission caps that have been set for the 2008-2012 trading period," it said.
The rise was adjusted to take account of changes in the number of companies covered, the Commission said in a statement.
Cap and trade schemes force participants including power generators to buy permits to emit greenhouse gases such as carbon dioxide, which is produced from burning fossil fuels, and utilities add the extra cost to electricity prices.
The European Commission has tightened caps on carbon emissions by industries under the second phase of the scheme from 2008-12 by about 8 percent compared to 2007, and the scheme is now expected to drive emissions cuts.
Friday's data suggested EU ETS emissions by all 27 member states were on track to hit 2.2 billion tonnes or more of carbon dioxide this year, forcing cuts against an allocation of emissions permits of about 2.0 billion tonnes, analysts say.
Companies can make cuts either by curbing their emissions now, buy permits from other EU firms, borrow from their own allocations next year, or offset their emissions by funding cuts in developing countries under the UN-led Kyoto Protocol.
Benchmark carbon emissions permits called EU allowances (EUAs) were trading at 26.2 euros ($41.3) on Friday. Many analysts forecast EU carbon prices to hit 30 euros in the next year or two.
The European Union launched its cap and trade scheme in 2005, and now other governments are turning to emissions trading as a weapon to fight climate change in a carbon market worth $64 billion last year.
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(Reporting by William Schomberg; writing by Gerard Wynn)
