Campaigners say EU carbon trading is flawed

BRUSSELS — Climate change campaigners claimed Monday that flaws in the European Union’s carbon trading program could allow major polluters avoid any real reduction in greenhouse gas emissions during the economic downturn.

Cap-and-trade forms the main plank of EU efforts to slash carbon dioxide output by a fifth by 2020. Power plants and heavy industry are told to keep emissions under a limit and must buy extra pollution permits to release more. They can profit by selling them if they emit less.

British environmental group Sandbag said the current system can’t cope with falling demand as the economic recession curbs demand for electricity and goods. It says this will store up a surplus of permits that won’t give companies any incentive to curb emissions.

“They will either be able to sell their surplus for windfall profits of over euro5 billion at current market value or bank them for future use,” the British-based nonprofit group said in a report.

It is calling for tighter limits by canceling extra permits that could be issued to new plants and by setting reserve prices for government auctions of permits.

Sandbag tries to buy up permits to help create shortage in the carbon permit market that would force polluters to scale back emissions or introduce cleaner technology to their plants.

The EU’s first phase of carbon trading from 2005 to 2007 is widely regarded as a failure because polluters received far more permits than they needed and were not forced to reduce emissions. The European Commission has tried to set tighter controls for 2008 to 2012.