Poland and the Czech Republic have threatened to sue the European Commission over its imposition of swingeing cuts in carbon dioxide allowances under the European Union’s Emissions Trading System (ETS).

The Commission yesterday ordered the Czech Republic to reduce its allocation from 101.9 million tonnes to 86.8 million tonnes, a 15 per cent cut. Poland will suffer a 27 per cent reduction from its original proposal of 284.6 million tonnes.

Martin Riman, the Czech Trade Minister, said that his country would appeal. “I’ll inform the Government on Wednesday and one of my proposals will be to lodge a suit against the Commission’s decision,” the minister said.

The Polish Government condemned the Commission’s decision, arguing that it would harm the Polish economy.

“The decision is very hurtful to us and there is a large chance that we will take it to the Court of Justice,” a government official said.

The Emissions Trading System determines limits on the volume of carbon dioxide that each country can emit and the amount of allowances that companies in each country will receive. Companies that reduce their emissions can sell allowances, while those that emit more carbon dioxide than their limit can purchase extra allowances.

The ETS fell into disrepute in its first phase, which ends this year, after it emerged that too many allowances were issued by governments, causing the ETS carbon price to collapse.

Poland requested an allowance limit of 284.6 million tonnes of CO2 for the second phase of the scheme, from 2008 to 2012, compared to the country’s actual emissions in 2005 of 203 million tonnes.

Poland is the EU’s third-largest carbon dioxide polluter, thanks to its reliance on its own coal reserves to generate electricity. The Polish Government argues that it must be given more allowances if its economy is to grow.

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