THE INDUSTRIAL emissions trading scheme in CO2 gases recently became law in Europe for 12,000 companies in various sectors. The list includes 248 Portuguese companies, which will be granted emissions licences from February.
This means that companies within countries that have signed up to the agreement can officially buy and sell emissions on an ‘emissions market’. Basically, each country is allocated the right to produce a certain amount of pollutants. If it doesn’t use up all its ‘emissions credits’, it can sell them to other countries.
In Portugal, the main activities responsible for pollutant emissions are cellulose and papermaking, energy generating sectors and the cement industry. Actual commercial transactions in emissions will begin in March or April and, until then, business will be calculated on an ‘emissions future’s market’.
Under the Kyoto Agreement Portugal has signed up for, the country can only produce 38.2 million tonnes of airborne CO2 pollutants per year, which means industrial companies will have to reduce their level of emissions annually by 740,000 tonnes over the next three years. The Secretary of State for the Environment, Jorge Moreira da Silva, said: “By the end of three years, we will have to have reduced our CO2 emissions by 2.2 million tonnes in line with the Kyoto Agreement.” There will be stiff penalties for companies that don’t keep within their allocated pollution limits.
In 1997, almost 200 countries signed the Kyoto protocol, which agreed quantitative targets for greenhouse gas emissions in developed countries. These targets are translated into emission allowances or rights to emit a certain quantity of pollutants, such as carbon dioxide, methane, nitrous oxide and fluorinated gases. Developed countries, which have ratified the Kyoto protocol and accepted emissions reduction targets, may meet these targets through clean development mechanisms and emissions trading with countries that have already met part of, or all of, their emissions targets.
This means that emission levels above or below the exposure implied by the allocations will require the sale or purchase of allowances in the emissions market by industry players in order to meet the targets and avoid mandatory penalties.