The ruling is the latest stage in a scrap with the European Commission that has dented the Government’s reputation as a leader on climate change.
In April 2004, the Government submitted a national allocation plan for the first phase of the ETS. Five months later it announced that it wanted to increase the total allocation from 736 to 756 million tonnes. The Commission ruled that the amendment was inadmissible.
The Government eventually allocated the lower amount to allow British business to take part in the trading scheme. But it also pursued the case at the European Court of First Instance (CFI) – where it argued that the original, lower allocation was provisional and explicitly based on interim emission projections.
On 23 November, the Court ruled that the Commission must consider the UK’s application. It rejected the Commission’s argument that an increased allocation would have a destabilising impact on the carbon market.
Even so, it remains uncertain whether the Commission will agree to the increased allocation. The Government says the increase is needed to take account of revised emission factors for coal and gas; revised forecasts of electricity demand; and renegotiated targets under climate change agreements with heavy industry, which were weaker than initially expected. Any increased allocation would go to the power generators.
Friends of the Earth’s director Tony Juniper said: “The UK’s global warming strategy is already in tatters, and emissions are rising instead of falling. Ministers should be finding ways to cut carbon dioxide levels rather than mounting legal challenges to increase them.”