EU industry carbon emissions flat in 2007

By Michael Szabo

LONDON (Reuters) - European Union industry emissions were roughly flat in 2007, preliminary EU executive Commission data showed on Wednesday, with low gas prices and a mild winter slowing growth.

As expected, emissions were less than industry's quotas of permits to emit the greenhouse gas carbon dioxide (CO2) under an EU climate change scheme meant to drive emissions cuts through permit shortages.

Brussels has addressed that flaw and a resulting carbon price collapse by cutting permit quotas in the second phase of its emissions trading scheme from 2008.

The carbon market is supposed to put a price on carbon emissions, and therefore energy use, and so force businesses and individuals to trim their contribution to climate change for example by being more energy efficient.

The Commission cut the allocation of carbon emissions permits, called EU allowances (EUAs), by about 9 percent for 2008-12, and the fact emissions were roughly unchanged last year has not undermined expectations of an EUA shortage in 2008.

"I expect a shortage this year simply because allocations have drastically gone down," said Fortis analyst Kris Voorspools, adding an estimate that EU industry emissions in the six largest countries rose some 1.2 percent last year.

New Carbon Finance estimated that emissions fell 0.25 percent.

While carbon prices dropped below 1 euro in 2007, EUAs for 2008 delivery were trading up 88 cents on Wednesday at 23.4 euros and analysts expect them to rise further.