The sums behind the smoke screen
Euromoney Limited, Registered in England & Wales, Company number 15236090
4 Bouverie Street, London, EC4Y 8AX
Copyright © Euromoney Limited 2024
Accessibility | Terms of Use | Privacy Policy | Modern Slavery Statement
Foreign Exchange

The sums behind the smoke screen

What do the European Union's new rules on curbing pollution mean for utilities? The plans to cut carbon emissions over the next seven years to sub-1990 levels will hit the biggest polluters hardest. Utilities account for about a third of European carbon emissions.

The answer is that the polluting sheep will be separated from the lilywhite goats. Not immediately, but over time. And it is possible to discern the sheep and the goats straightaway.

Things won't change that much for power generators on day one. Under the EU scheme, member states have agreed emission quotas, which are broken down into permits that are then issued to companies covered by the scheme. As most of these permits are issued for free, utilities won't automatically be penalized. They will only have to cough up if they exceed these quotas. And although quotas will be made smaller over time, they will initially stand at about 95% of existing levels.

What's more, the pollution reductions implied by the quotas aren't that steep – at least initially. The real change will take place in 2008 and later as quotas are cut and penalties are strengthened.

Gift this article