Europe wrangles over quotas

France, Italy and several other EU countries weighed their chances of haggling up their EU carbon emissions quotas yesterday, one day after Poland and Estonia successfully challenged theirs in court.

The two east European countries won their appeal on Wednesday for more generous caps on industrial emissions in the Emissions Trading Scheme (ETS), the EU's main tool for ratcheting down gases blamed for climate change.

The ruling by the European Court of First Instance, the bloc's second highest court, threw European carbon markets into uncertainty and the International Emissions Trading Association (IETA) asked countries to refrain from challenging their own quotas.

Italian Prime Minister Silvio Berlusconi had already written last week to the European Commission pointing out Italy's difficulties with meeting carbon quotas, an Italian government spokesman said.

A shortage of carbon permits could cost Italy about €500 million in the short term, mounting to a total of €800 million by 2012, said another Italian government official.

Poland was cautious about its victory yesterday, weighing the possibility that any re-negotiated quota might be based on emissions data from 2008, a year when industry's emissions fell as it slowed down because of the economic crisis. European Environment Commissioner Stavros Dimas confirmed that would result in little change to the cap.

"It would appear unlikely that there would be any material difference concerning the total number of allowances," he said in a statement.

Elsewhere there was little sign of restraint, with Italy complaining about its quotas and Lithuania and the Czech Republic optimistic about their own pending court appeals.

European Commission spokesman Barbara Helfferich played down the chances of renegotiation.

"There is no way of increasing the allowances," she said. "The ceilings have been established already."

Lithuania and the Czech Republic, which are pursuing a similar appeal to Poland, were encouraged by Wednesday's court decision.