BRUSSELS - The European Commission said on Thursday it had appealed against a successful court challenge by Poland and Estonia to their carbon quotas.
The decision raises the specter of tougher carbon quotas for the two countries, which rely heavily on highly polluting coal to generate their power and need large amounts of carbon permits to cover the resulting carbon dioxide emissions.
The Commission appealed on several grounds, Commission environment spokeswoman Barbara Helfferich told reporters. Most importantly, the Commission considered that the court has interpreted too narrowly the powers of the Commission.
The European Court of First Instance ruled in September that the Commission had exceeded its authority by rejecting carbon quotas suggested by Poland and Estonia for 2008-2012 and cutting them by 27 percent and 48 percent respectively.
The decision sparked a 9 percent fall over two days in the Emissions Trading System (ETS), the European Union's main tool for ratcheting down carbon dioxide emissions in the fight against climate change.
The benchmark carbon price rose nearly 3 percent toward 14 euros a tonne on Thursday.
Emissions traders welcomed news of an appeal but said it was largely expected. Increased buying from financial institutions to build up positions ahead of a U.N. climate summit next week was mainly driving prices on Thursday.
Poland and Estonia's victory was short-lived, however, after it became apparent that their quotas might now have to be recalculated using newer data, including from 2008.
Emissions under the scheme fell by over 3 percent in 2008 as EU industry slowed due to the economic crisis, meaning that any new Commission assessment is likely to result in tougher quotas.
The Court of First Instance has not sufficiently taken into account the fundamental purpose of the EU ETS to reduce overall EU emissions of greenhouse gases and the need to ensure equal treatment of member states during the assessment process, said Helfferich.
We are assessing the original plans that were submitted to us by Estonia and Poland, and we will rule on those plans as soon as we can... according to the best available data, she added.
(Reporting by Pete Harrison, editing by William Hardy)