EU Drafts Ambitious Climate Emissions Trade Plan

A wide range of major European Union industries will be forced to take part in buying and selling the right to emit carbon dioxide (CO2), under a draft EU law.

The plan - drawn up by the European Commission's environment department - is a key part of the EU's policy to achieve the cuts in the emissions gases blamed for global warming in the 1997 Kyoto protocol on climate change.

The draft law on emissions trading would require governments to grant industrial installations the right to emit a certain annual amount of CO2 - a gas produced as an inevitable result of burning fuel which makes up 80 percent of the total greenhouse gas emissions covered by Kyoto.

If firms failed to reduce their emissions, or to buy credits to make up for the any shortfall, they would have to pay 200 euros ($170.8) for every excess tonne of C02 - 10 times the amount the Commission reckons emissions will trade for.

The Commission says emissions trading will not in itself reduce greenhouse gases, but will allow industry to find the cheapest ways of cutting emissions.

Emissions trading in the acidifying pollutant sulphur dioxide is already well established in the United States and some European countries, such as Denmark and Britain, have started work on their own CO2 trading systems.

But the EU-wide scheme would be the first major international CO2 emissions trading scheme and could be a pre-cursor to an international market, the draft says.

Emissions trading is one of the main "flexible mechanisms" allowed under the Kyoto pact and is seen as critical tool for some countries to be able to meet their emissions targets.