Jan 23, 2008, 16:11 GMT
Brussels - The main aim of the European Union's proposed laws on climate change, announced Wednesday, is to cut the amount of carbon dioxide (CO2), the gas most linked with global warming, which the 27-member bloc emits.
In March, the EU's political leaders pledged to cut Europe's CO2 emissions to 20 per cent below 1990 levels by 2020. In 2005, EU emissions were 6 per cent below 1990 levels.
Wednesday's proposal from the European Commission sets out how EU states are to meet that commitment. It falls into two main parts.
The first part strengthens the EU's CO2 Emissions Trading Scheme (ETS), which was inaugurated in 2005.
The second part sets targets for cutting emissions which are not covered by the ETS.
Under the current ETS, the commission issues a set number of CO2-emission permits to each member state. Governments distribute those permits to industrial users such as steel mills and power stations.
Plants which emit more CO2 than the number of permits they hold have to buy extra permits, while installations which emit less CO2 than the permits they hold are allowed to sell the surplus.
The idea was to make it more expensive for companies to emit CO2 - thereby giving them an incentive to cut emissions.
But while the ETS was largely hailed as a success, critics said that it had allowed some industries to reap massive 'windfall' profits by receiving free permits from their governments, then billing their customers as if they had paid for them.
Another objection was that it failed to address key polluting sectors, especially transport.
The commission's proposals therefore scrap the system of free permits and bring in new rules for how sectors not covered by the ETS - including transport - should be handled.
Under the new-look ETS, to come into force in 2013, the commission would set a single EU-wide number of CO2 permits. Companies from anywhere in the EU would be allowed to bid for them at auction.
Officials in Brussels say that this would make the system more efficient and remove the problem of windfall profits.
However, in deference to the EU's powerful industrial lobby, the rules allow energy-intensive industries, which by their nature emit high levels of CO2, to receive free permits, since otherwise they could be at a disadvantage compared with non-EU rivals.
The proposals also expand the ETS to branches of industry and greenhouse gases not covered in the original scheme, and call for the EU to cut its CO2 emissions from non-ETS sources to 10 per cent below 2005 levels by 2020.
Because the EU's members vary widely in their levels of wealth, the commission proposes that the richest states should make the deepest cuts, with the poorest even being allowed to boost emissions.
The EU's richest states, Luxembourg, Denmark and Ireland, are expected to cut non-ETS emissions by 20 per cent, while its newest and poorest member, Bulgaria, is allowed to boost its emissions by 20 per cent.
Member states are left to choose how they make the cuts.
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