Emissions Trading Plan Riles Industry

Last week, German Environment Minister Jürgen Trittin unveiled the first public draft of his plan for the controversial allotments. The proposal has not been greeted with open arms by industry leaders, who say it could put Germany at a serious competitive disadvantage compared to other industrial nations with looser environmental regulations.

Environmental groups have also criticized Trittin's plan, saying it would water down German climate protection goals already agreed to.

Allotments involve a system of tradable emissions permits that allow companies that voluntarily reduce emissions below a certain level to sell the difference to others as unused "rights" to pollute.

An 8 percent reduction by 2012

In order to protect the world climate, the European Union has committed to reducing emissions of greenhouse gases by 8 percent in the period between 2008 and 2012, compared to 1990 levels.

In the long term, the EU has targeted a 70 percent reduction from 1990 levels. It is seeking to achieve that goal by allotting emissions allowances to EU members who will then distribute them to companies, effectively creating a market in greenhouse emissions allowances. The system is scheduled to take effect beginning in 2005.

Trittin (photo) has prepared his plan in compliance with a directive from the European Commission requiring that all member states, including Germany, compile and submit to Brussels a list of 2,600 companies and their proposed emissions credit allocations by March.

Disagreement in Berlin

The plan has run up against criticism not only from industry, but also from Germany’s Economics Ministry, which is afraid the allocations could harm the country's coal industry.

A spokesman for Economics Minister Wolfgang Clement (photo) told the news agency DPA that the ministry had not signed off on the proposal, but would seek to come to an agreement with the Environmental Ministry.

So far, German Chancellor Gerhard Schröder has not stepped in to mediate.

"The chancellor does not intend to intervene," said government spokesman Hans Langguth. "But I can yet again underscore the fact that the so-called national allocations plan will be in place by March 31 no matter what."

Industry: Plan goes further than we agreed

One reason companies are unhappy with Trittin's plan is that it orders companies to eliminate an additional 7.5 percent in emissions on top of climate protection measures they have already volunteered to implement. As a justification for the new caps, Trittin has reminded companies of their July 2002 agreement to a voluntary deal to reduce carbon dioxide emissions by 45 million tons by 2010.

Industry, however, claims the deal was premised on a government pledge that it would not burden companies with additional costs when it implemented the emissions voucher system.

Environmental groups are also taking Trittin to task, saying the proposal goes to the limits of what is environmentally acceptable.

"We can hardly still go along with it," said Regine Günther, a climate expert for the World Wide Fund for Nature. "Industry got everything, I mean everything, they demanded. Nothing more was demanded of them than what they already voluntarily agreed to do on their own.

She said industry now wants to increase their emissions and are asking for a so-called needs-oriented program, which would allow them as many credits as they asked for.

“If everyone gets what they want, the price of these certificates will be zero, and then there won't be any market for them," she said.

Disparate demands

The dispute has several different sides, numerous groups and an often conflicting array of interests. The coal industry, for example, wants any incentives for shifting from coal to natural gas to be removed from Trittin's plan.

Other companies, like E.ON and Ruhrgas, want additional pollution rights as compensation for the planned phasing out of nuclear energy. For their part, the electricity-intensive cement, chemical and steel industries fear the government will reach a deal with utility companies at their expense.

The only shared opinion among business representatives seems to be that Trittin's allocations plan should be rejected.

On Monday, the Federation of German Industries (BDI) said if the government fails to find a consensus on the greenhouse gas credits, it must delay submitting its plan to Brussels until a deal can be reached.

However, a BDI spokesman said the organization would continue to work with the government to find a workable deal and denied a weekend report in the newsweekly Der Spiegel that German industry was planning to abandon negotiations with the government.

Tritten has rejected the criticism and has vowed to push on.

Under the Kyoto protocol limits, which have since been set in EU law, by 2010 Germany must reduce its carbon dioxide emissions to a maximum total of 846 million tons, which includes emissions from private households, traffic, industry, and energy production.

Trittin's plan calls for the industry and energy sectors alone to implement a 1.5 percent reduction in carbon dioxide emissions each year down to 480 million tons compared to 1998's 508 million.