On Wednesday, the European commission demanded from some EU counties, including Germany, to cut carbon credit permits for 2008-2012, under its European Trading Scheme (ETS), after over-supplying emission rights.
Germany has been giving out the most free carbon credits
The ETS aims to reduce greenhouse gases by 8 percent by 2012 as it promised under the 1997 Kyoto Protocol on climate change. The scheme, established last year and ending in 2007, aims to reduce carbon emissions by providing a market-based trading system. It is based on limiting the total amount of CO2 emissions, but can offer control over reductions flexibly and at a low-cost.
It is designed to put caps on the amount of carbon dioxide emitted by heavily polluting factories across Europe. But in 2006, the governments of some EU countries gave away free carbon pollution permits that exceeded the amount of pollution that was released -- which the European environment commission has decided to put a stop to.
Germany was the most generous, with France and Poland also handing out carbon credits faster than pollution can be emitted. Only a few countries -- such as Britain and Ireland -- distributed allowances that fairly matched the needs of big companies.
EU environment commissioner Stavros Dimas criticized several European countries, including Germany, Greece, Ireland, Latvia, Lithuania, Luxembourg, Malta, Slovakia and Sweden, for giving away too many pollution allowances that they hold in reserve for building new factories.
"Today's decision sends a strong signal that Europe is fully committed to achieving the Kyoto target and making the EU ETS a success," Dimas said in a statement.
The carbon trading scheme is working towards meeting Kyoto targets
Stephan Singer, the head of the European climate and energy policy unit in Brussels for the WWF, was pleased that the allowances for Germany to pollute have been reduced "quite drastically."
"Germany has proposed that once it gets an allocation for a coal fire station, the allocation would be valid for the next 14 years at least -- which the Commission objected to," Singer said. "This is particularly good, considering that Germany is the largest OECD country in the European Union."
Singer said the WWF would like to see the Commission "keep persistent and as straight forward, to help Europe to deliver on its Kyoto targets."
Germany under fire over carbon trading
Germany's coal industry will probably be affected by the Commissions ruling
Germany was the most generous with the emission credit surpluses, producing 21.4 million tons, or 4.3 percent less in emissions than its average annual cap allowance, according to a report in The New York Times.
France, Germany, Italy, Poland, Spain and UK make up for 73 percent of overall EU emissions. Singer said that the permits to pollute, based on an earlier draft by the German government, were "quite horrible.
"For a country that wants to lead the world in climate change and renewable energy, its allowances to grow its coal base in the power sector are a scandalous proposal to the commission," he said.
The German coal industry has come out against the Commissions stance, arguing that it will hurt the utilities sector.
Singer responded by saying that if the coal industry is complaining about the decision, then "I know that Dimas has done the right thing."
The WWF wants to see the Commission review allowing countries or coal-fired power stations to buy emissions, like through auctioning.
"Auctioning of pollution permits would represent the 'polluter pays principle' and the money then could be re-invested into climate protection measures," he said.