Lithuania joins EU awkward squad by suing over carbon emissions

By bne IntelliNews August 14, 2007

Nicholas Watson in Prague -

What began as an isolated protest by the EU's most awkward new member Poland has turned into a full-blown revolt as Lithuania announced August 9 it would become the seventh country to take the European Commission to court over cuts to its carbon dioxide emission allowances.

Lithuania is taking the Commission to the European Court of Justice over the decision by the EU executive to cut its annual CO2 emissions by half to 8.8m tonnes for the period 2008-2012. Lithuania had recommended a cut in its CO2 allowance for the new period, but only to 11.2m tonnes a year (t/y) for the period 2008-2012.

The cuts by the Commission, which is responsible for approving member states' proposed EU emission allowance allocations as part of the bloc's drive to curb emissions under the Kyoto Protocol, are an attempt to tighten up the carbon limiting scheme after it was widely derided for not being strict enough. The over-generous allowances caused the price of carbon credits to collapse, underlining the need for tougher limits second time around.

However, Lithuania and the other complainants, which also include Hungary, the Czech Republic, Slovakia, Latvia and Estonia, argue the Commission has exceeded its authority and is using the wrong calculation methods when it told them to slash their planned emissions.

Harmful cuts

The cuts have certainly been severe. Poland was allocated 208.5m t/y of emissions for the period 2008-2012 period, down by nearly 27% from the 285m t/yr it had sought. And the Czech Republic originally sought a quota of 101.9m t/y in its plan submitted to Brussels for 2008-12, but the Commission cut that by 15m t/y to 86.8m t/yr.

What worries these countries is that the stricter carbon caps will crimp the sterling economic growth they are enjoying, which is helping their economies converge toward those of their fellow EU members in the West. Slovakia's GDP grew 9% in the first quarter from the year before, Poland's rose 7.4% and the Czech Republic's grew 6.1%. Even Hungary, which is struggling under an austerity programme designed to iron out the country's fiscal problems, managed to put in growth of 2.8%. This compares with GDP growth of 3.0% in the Eurozone.

Such economic growth needs fuel and for the foreseeable future this will come primarily from coal. Poland has spent nearly $4bn on modernizing its industry over the past 18 years and leads Europe in reducing emissions, having slashed greenhouse gases by 32% since 1988. However, it still is the EU's third-largest polluter, as it relies on its vast coal reserves to produce 95% of its electricity.

In explaining the decision to sue earlier this year, Polish Environment Minister Jan Szyszko argued the Commission not only ignored Poland's progress, but has "punished" it instead of rewarding it with higher allowances. The cap is slightly above Poland's actual emissions in 2005, but the minister argues it's unfair to use 2005, a warmer-than-average year, to calculate the new limit. "We need a higher limit of emissions," Szyszko said. "It is a vital issue for our economy."

The latest litigant Lithuania also says it will have to produce more electricity from fossil fuel plants because it is being forced by the EU to close its remaining Soviet-built nuclear reactor by 2009. Officials said the shutdown of the plant will increase emissions by 4.7m t/y.

However, the prospects for these suits don’t look terribly good. A spokeswoman for EU Environment Commissioner Stavros Dimas told newswires that the Commission was confident its decision would hold up in court. And in July, the Commission received a boost when Poland's attempt to get a quick decision in its case was dismissed by the Court of First Instance.

"(The) request from Poland to treat it's case against the Commission by way of an expedited procedure has been rejected by the Court of First Instance," Reuters reported an EU source as saying 13 July. "This means (the European Court of Justice) ruling in any of the cases launched so far will only take place two to three years down the line."

Lithuania joins EU awkward squad by suing over carbon emissions

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