By Mathew Carr and Jonathan Stearns
Oct. 26 (Bloomberg) -- The European Union cut the number of carbon dioxide permits that Romania and Bulgaria can grant in the five years through 2012, to create scarcity in the world's largest greenhouse gas trading program.
The European Commission, regulator of the system, said Romania can hand out 75.9 million metric tons of permits a year starting next year, 21 percent less than its request for 95.7 million tons a year, according to a statement on an EU Web site. Bulgaria can issue 42.3 million tons a year, 37 percent less than the 67.6 million tons a year requested, the statement said.
The EU has said it wants to curb emissions by at least 20 percent by 2020, compared with 1990 levels, in a bid to help keep global temperatures from rising 2 degrees Celsius. Emission permits for 2008 have gained 25 percent so far this year, helping boost German power futures to records.
``If you believe the EU has the political will to get to the 20 percent target, the price has to go up,'' Mark Lewis, a Paris- based analyst at Deutsche Bank AG, said today by telephone. The cut to Bulgaria's plan is ``much more severe than we expected.''
EU carbon dioxide permits for December 2008 fell 13 cents to 22.65 euros a metric ton on the European Climate Exchange in London at 3:52 p.m. local time. Lewis forecasts they will rise to 35 euros.
`Robust Market'
The total cap for EU nations will be 2.08 billion tons of permits a year for the five years through 2012. That's 10.5 percent less than the amount originally proposed.
``We have assured a robust market with real emission reductions,'' EU Environment Commissioner Stavros Dimas said in today's statement.
The commission, the 27-nation EU's regulatory arm, wants to restore investor confidence in the emissions-trading system after letting governments hand out too many allowances for the current period from 2005 through 2007. The surplus caused a slump in permit prices for the first phase to as low as 5 euro cents on the ECX.
Bulgaria said it may sue the commission because of the size of its phase-two cut.
``This would have a significant negative impact on our businesses,'' Bulgarian Environment Minister Djevdet Chakarov said in a statement on the ministry's Web site. ``That is why we will seek a fair decision for Bulgaria by all possible means, including a court procedure.''
Bulgaria's current carbon dioxide emissions levels are about 52 percent of the 127.5 million metric tons allowed under the 1997 Kyoto Protocol, an agreement between nations to curb climate change, the ministry said.
More Lawsuits Possible
Seven other member states are challenging commission grant decisions for the five-year period, commission environment spokeswoman Barbara Helfferich said today. Poland, Hungary, Czech Republic, Slovakia, Estonia, Latvia and Lithuania have signaled they will sue.
Romania's grant in 2007, the last year of the first phase, should be no more than 74.8 million tons, the commission said today. Bulgaria's allocation in 2007 should not exceed 42.3 million, it said.
Separately, the commission allowed Germany to boost imported emission credits to 20 percent from 12 percent of allocations, the statement said.
To contact the reporter on this story: Mathew Carr in London at m.carr@bloomberg.netjstearns2@bloomberg.net Jonathan Stearns in Brussels at
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