EU orders cut in Italy pollution allowances

European Union regulators on Wednesday ordered a nine per cent reduction in air pollution allowed by permits that Italy is giving industry, seeking to ensure companies buy some allowances as the EU emissions-trading market nears completion.
 
Italy must cut carbon-dioxide allowances to 232.5Mt a year on average from 255.5Mt to become the 24th nation in the EU trading system for energy and manufacturing companies, the European Commission said. The ruling on Italy’s plan leaves only Greece without an approved program for the 2005-2007 period. "Italy has accepted our arguments and significantly cut the number of allowances," the EU environment commissioner, Stavros Dimas, said in a statement.
 
The commission wants to support EU allowance prices - which reached a record high on Wednesday - as all the bloc’s countries join the system that imposes emissions limits on 12,000 power plants and factories owned by such companies as the utility Enel and the steel maker Corus Group. Companies that exceed their limits must buy permits from businesses that emit less or pay a €40, or $50, penalty for each extra ton of gas, creating an incentive to cut pollution. The EU said that Italy must also scrap a provision enabling future changes to the number of permits for individual installations.
 
The EU trading system is aimed at the most common greenhouse gas and is part of the bloc’s fight against climate change under the global Kyoto Protocol. It covers "combustion installations" including power plants as well as oil refineries and producers of steel, paper, pulp, glass, lime, brick, ceramics and cement. The allocation plan "lays out an emissions ceiling for Italian companies that recognizes their needs," the Italian environment minister, Altero Matteoli, said in a statement.
 
 But not all the heads of those companies were pleased. "Generally, Italian industry, particularly electricity generation, is being penalized by the reduction" demanded by the commission, said Felice Egidi, director of corporate development for Endesa Italia, a power producer. Giordano Serena, chairman of Assoelettrica, an Italian association of electricity producers, said the industry would account for two-thirds of the cut and Italian power prices, already the highest in Europe, would rise as a result. "This is very serious," Serena said. The reduction "could add a cost of €80 million a year" and "will increase the price of electricity."
 

Trading in EU allowances may exceed $5 billion this year, according to the European Climate Exchange, based in Amsterdam. EU allowances for 2005 reached a record €19.75 a ton in London compared with a low this year of €6.20 on Jan. 10, according to the exchange and Bloomberg data.