EU Industry Carbon Emissions Flat In 2007 UK: April 3, 2008 LONDON - European Union industry emissions were roughly flat in 2007, preliminary EU executive Commission data showed on Wednesday, with low gas prices and a mild winter slowing growth. As expected, emissions were less than industry's quotas of permits to emit the greenhouse gas carbon dioxide (CO2) under an EU climate change scheme meant to drive emissions cuts through permit shortages. Brussels has addressed that flaw and a resulting carbon price collapse by cutting permit quotas in the second phase of its emissions trading scheme from 2008. The carbon market is supposed to put a price on carbon emissions, and therefore energy use, and so force businesses and individuals to trim their contribution to climate change for example by being more energy efficient. The Commission cut the allocation of carbon emissions permits, called EU allowances (EUAs), by about 9 percent for 2008-12, and the fact emissions were roughly unchanged last year has not undermined expectations of an EUA shortage in 2008. "I expect a shortage this year simply because allocations have drastically gone down," said Fortis analyst Kris Voorspools, adding an estimate that EU industry emissions in the six largest countries rose some 1.2 percent last year. New Carbon Finance estimated that emissions fell 0.25 percent. While carbon prices dropped below 1 euro in 2007, EUAs for 2008 delivery were trading up 88 cents on Wednesday at 23.4 euros and analysts expect them to rise further. That will raise electricity prices for all EU citizens because power generators pass these costs on to consumers. It will also raise costs for participating businesses which have to buy permits to cover their own emissions above a certain quota, including electricity generators, the oil and gas industry, pulp, paper, steel and cement. CRITICISM Reuters analysis of Wednesday's incomplete data suggested that the supply of EUAs exceeded by 1.5 percent actual emissions in 2007, so far reported, of 1.884 billion tonnes. The preliminary data accounted for more than 94 percent of emissions the previous year, the European Commission said earlier Wednesday. One continuing criticism of the emissions trading scheme is that affected businesses get almost all their permits for free, in an initial quota handed out by EU member states. That has allowed electricity generators across Europe to makes tens of billions of euros of windfall profits by passing on the costs of free permits until 2013, when the Commission proposes utilities will get no free allocation. The 28 billion euro ($43.76 billion) EU carbon market is the hub of a 40 billion euro global carbon market which is expected to be swelled by a US federal scheme which all remaining US presidential candidates support. (Reporting by Michael Szabo; Writing by Gerard Wynn; editing by James Jukwey) Story by Michael Szabo REUTERS NEWS SERVICE