Latvia joins revolt against EU CO2 caps

The small Baltic state has become the sixth EU member to initiate legal action against the European Commission following its decision to slash the amount of carbon allowances that the country can allocate to companies under the European Emissions Trading Scheme (ETS).

Latvia, on 31 July, joined Poland, Hungary, the Czech Republic, Slovakia and Estonia in challenging the EU’s emissions trading scheme, after the Commission ordered it to lower its proposed cap for industrial carbon dioxide emissions to 3.43 million tonnes annually, between 2008 and 2012, rather than the 6.25 million it had asked for. 

The Eastern European countries are arguing that the strict limits imposed by the EU executive are too low and will hurt their economies at a time when they are still playing catch-up to the rest of the Union. 

”We need the extra capacity,” said Latvian Prime Minister Aigars Kalvitis, announcing his government’s decision to take the Commission to the European Court of Justice. 

But the Commission appeared undaunted. ”We are confident that our decisions that have been challenged will stand up in court,” said environment spokeswoman Barbara Helfferich, insisting that the Commission had “applied the rules fairly” and had not ”discriminated in any way”. 

Decisions in the six cases could take up to two years, but if the Commission does lose and has to increase member states’ CO2 allowances, experts predict it would throw the entire carbon market out of balance. 

The first phase of the EU’s ETS, from 2005 to 2007, was already seriously undermined because governments grossly over-estimated the amount of pollution credits required by their industries. This vast over-allocation sent carbon prices crashing, and a repeat scenario is feared if the countries win their case. 

The legal battle highlights growing tension in the EU over the sacrifices needed to fight climate change ahead of a tough debate between governments, due this autumn, over how the 27 member states should share out the burden of cutting CO2 emissions by 20% by 2020 – a target agreed by EU leaders at the March European Council. 

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