EU High Court Rules Against Businesses on Carbon Credits
April 28 2016 - 2:40PM
Dow Jones News
The European Union's highest court on Thursday ordered the
European Commission to adjust its emissions-trading program in a
way that could raise costs for some of the bloc's biggest
companies.
The European Court of Justice ruling reinforced the EU's efforts
to more aggressively cap carbon-dioxide emissions in the years to
come, following a landmark agreement in Paris last year among world
leaders to address climate change.
The court rejected the arguments of big companies with high
emissions like Borealis, OMV AG and Esso, a unit of Exxon Mobil
Corp., that had argued the European Commission unfairly reduced
the amount of free emissions credits they were entitled to.
Companies regulated under the European Emissions Trading Scheme
are allowed to produce a certain amount of carbon pollution each
year. Those that pollute less than their allowance can sell
credits, known as allowances, to those who pollute more.
Businesses argued that they were entitled to more credits than
were granted by the European Commission. But the court ruled the
commission actually gave out too many allowances when it expanded
the emissions program in 2013.
Over the next 10 months, the court ruled, the European
Commission must recalculate how many allowances it needs to recover
from polluters to ensure the bloc's effort to reduce carbon-dioxide
emissions by 21% below 2005 levels by 2020 is fairly
distributed.
The ruling isn't expected to reduce the allowances by a
significant amount, though.
Emil Dimantchev, an analyst at research firm Point Carbon said
the European Commission could claw back more than €660 million
($746 million) of carbon allowances at current prices, or up to
1.6% of the total free allowances to be issued up to 2020.
The effect should be relatively limited, he said, because Europe
is expected to be well-supplied with allowances until 2020, keeping
them relatively cheap. The price of an EU carbon allowance was
about €6.30 a ton on Thursday and is forecast to rise to €9.50 a
ton by 2020, according to Point Carbon—far less than in the initial
years of the program.
"The commission will study in detail the implications of the
judgment and will make further announcements in due time," an EU
spokeswoman said.
Borealis and OMV didn't immediately respond to requests for
comment.
An Esso spokesman said, "We are aware of the ruling and are
studying the content. "
Write to Alex MacDonald at alex.macdonald@wsj.com
(END) Dow Jones Newswires
April 28, 2016 14:25 ET (18:25 GMT)
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