European Commission Approves Danish CO₂ Emissions Trading

March 29, 2000—Bloomberg reports that the European Commission has approved a Danish plan to establish a CO₂ emissions credit exchange.

Under the plan, the Danish government will apply and objective formula to allocate credits to current electricity producers and new producers entering the electricity market before the end of 2003. Creation of the emissions markets system is intended to let emission sources collectively find the least-cost methods for reducing greenhouse gases.

The Danish plan was welcomed by the Commission, which is looking to the Danish program as a way to test the idea of a CO₂ credit exchange before an international exchange comes into force before 2008, as outlined by the Kyoto Protocol.

The Kyoto Protocol, signed in 1997, obligates the European Community to reduce its net greenhouse gas emissions (including CO₂) to 8% below 1990 levels over the 2008-2012 time window. Under the EU’s "burden sharing" agreement, Denmark agreed to cut its emissions to 21% below 1990 levels, while other less wealthy countries, such as Portugal, were allowed to increase emissions above 1990 levels.