Serious wrangling has broken out amongst the EU members on allocation of carbon permits to its industries. The former Soviet Block countries namely Poland and Estonia have won a case against the European Comission in the European Court of Justice winning the rights to allocate its Emission allowances under the EU-ETS scheme to its polluting domestic energy industry despite the fact that it is not exposed to external competition which makes such grants admissable. It is true
that during the nineties the former Soviet block countries actually witnessed a sharp drop in emissions. As a matter of fact the countries with large carbon footprint in Europe are essentially the very rich Scandenevian countries besides the Swiss, U.K. and Cyprus. The Soviet block countries despite having obsolete and old technology done commendably well to keep their carbon footprints low.
Country Footprint per capita
[ton CO2 equ./person]
United States 29
Australia 21
Canada 20
Switzerland 18
Finland 18
Netherlands 17
Belgium 17
Ireland 16
Cyprus 16
United Kingdom 15
Denmark 15
EU ETS allowances are distributed by European governments to cover most needs by industry. The problem was however that in the first few years of 2005-2007 few national governments had given out too many allowances, fearing a closure of industries once the carbon regime became functional. Up until then, the EUA market collapsed in 2007, the price varied in the €10-30 per ton before dropping further by half after 2008. In that period, it became obvious that power companies who had allowances for free passed almost all of the costs through to the customers – as if they had paid for the allowances. As a result, the carbon market generated windfall profits for power generators and redistributed tens of billions of Euros from electricity consumers to producers – apparent in the balance sheet of utilities.
The over allocation of EUAs and the resulting collapse of the carbon market was an embarrassing for the European Commission, which responded by restricting the national allocation of allowances by member states for the 2008-2012 period. Estonia and Poland were not satisfied with the amount of allowances they were allowed to distribute and sued the EC in front of the European Court of Justice. In September 2009, the Court ruled in favor of Estonia and Poland. It said it was up to member states not the EC to set national emissions targets. It is uncertain how this wrangle will continue, but Eastern European member states have received a joker in the political tug-of-war about emissions rights.
As a matter of fact other members like Hungary, Romania, Slovakia, Czech Republic and several others are planning to sue the European Comission on similar grounds. If that happens it will open yet another pandoras box in Europes complex but ambitious Carbon trading aspirations. Already the drop of Carbon prices and the frauds in Carbon trading have become major headaches fo the EC. Can it survive more such pressures when carbon revenue generation has been lower than expected.
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