EU Raises 2013 CO2 Cap by 6% to Account for Aluminum, Chemicals

Oct. 22 （Bloomberg） -- The European Union raised the 2013 cap on carbon-dioxide pollution from energy and manufacturing companies by 6 percent to take account of the entry of aluminum and chemical makers into its emissions-trading system that year.

The European Commission set the ceiling on CO2 emissions at 2.039 billion metric tons in 2013 compared with a previous limit of 1.927 billion tons for power plants and factories currently in the trading program. The system requires companies to have a permit for each ton of CO2 they emit, with those that exceed their quotas having to buy more allowances and businesses that emit less being able to sell their surplus.

The EU decided two years ago to include the chemical and aluminum industries as of 2013 in the system, the world’s biggest greenhouse-gas market covering around 11,000 installations that produce energy and goods from paper to cement. The bloc also decided to add airlines as of 2012, a step that will lead to a further adjustment of the cap in a separate decision due by the end of this year.

The new cap is set “on the basis” of the EU’s goal to reduce greenhouse gases by 20 percent in 2020 compared with 1990, the commission, the 27-nation bloc’s regulatory arm, said in a statement today in Brussels.

Should the EU decide to deepen its reduction target over the period to 30 percent, the cap would be lowered, the commission said.

Climate Change

The emissions-trading program is a cornerstone of EU efforts to fight climate change, encompassing emitters that range from utility E.ON AG and oil refiner Royal Dutch Shell Plc to steelmaker ArcelorMittal and paper producer Stora Enso Oyj. The system, started in 2005 with a three-year trading period, is now in a second phase that ends in 2012 and will enter a third stage running from 2013 through 2020.

The overall supply of allowances over the periods is diminishing. To calculate its annual emissions caps in the third phase, the commission uses a linear reduction factor of 1.74 percentage points of the average annual total quantity of allowances issued in 2008-2012.

The annual cap for installations now in the system is due to fall by about 11 percent on average in 2013-2020 from 2008- 2012. In 2008, the commission said allowances for those polluters would decline to an average 1.85 billion tons of CO2 a year in the eight years through 2020 from 2.08 billion tons annually in 2008-2012.