The UK's carbon emissions rose by 8.8 million tonnes or 3.6 percent in 2006, exceeding its quota set by the European  Commission and forcing companies to purchase extra allowances, the government said on Thursday.In the second year of Phase I of the EU's Emissions Trading Scheme (ETS), UK installations emitted 251.1 million tonnes of  carbon dioxide (CO2), more than a 2006 cap of 217.3 million tonnes set by the Commission, the European Union's executive.

As a result, companies had to purchase 33.8 million tonnes worth of 2006 credits through the scheme. The trading scheme is the 27-nation EU's key instrument to meet commitments agreed under the Kyoto Protocol, which aims for  global emissions to be reduced by eight percent below 1990 levels. Its first phase is from 2005-2007 and the second from  2008-2012. "Our provisional estimate of (2006 levels) is that they were about 5.3 percent below 1990 levels. However, when  the effect of the EU ETS is taken into account, UK emissions were about 11.0 percent below 1990 levels, the same as in 2005,"  the Department for Environment, Food and Rural Affairs said in a statement.

Increases were mainly seen in the power sector, where emissions rose by 9.3 million tonnes of CO2. Other industry sectors decreased emissions by 0.5 million tonnes. "The first phase of the EU ETS was designed as a learning phase, and important lessons have been applied to the second  phase," Climate Change and Environment Minister Ian Pearson said. In the first two years of the scheme, participant country  emissions were well below the quotas set by the Commission, creating a market surplus in carbon credits and forcing prices  down below one euro.

European Union emission Allowances (EUAs) expiring in December 2007 were trading at 30 euro cents a tonne on Thursday  afternoon, well below the contract high of 32.05 euros set in April 2006. "These (emissions) figures reinforce the fact that  the trading mechanism works. The 2006 results across the EU reiterate the need to increase the scarcity of allowances in the carbon market," Pearson said.

The Commission ruled on Italy's Phase II plan on Tuesday, slashing its proposed 2008-2012 cap by 6.3 percent. Other big EU states, including Germany and Poland, have already faced major cuts from Brussels to their proposed caps. The Commission has accepted only three of the 21 plans on which it has ruled so far. "We are greatly encouraged by the Commission's decisions on Member States' Phase II National Allocation Plans, which show a clear determination to... use the ETS to drive down CO2 emissions in line with the EU's Kyoto targets," Pearson said.

(By Michael Szabo, Planet Ark, 18/05/2007)