Germany eyes EU emissions trading with US

BERLIN, July 6 (Reuters) Germany is exploring ways to link up the European Union's carbon dioxide emissions trading scheme with the United States as it tries to broaden efforts to tackle climate change, officials said today.

To this end, Foreign Minister Frank-Walter Steinmeier will travel to California in August to discuss the options with governor Arnold Schwarzenneger and companies in the state.

''As the world's leading industrialised countries and top polluters, the burden is on the United States and Europe to lead the way,'' a foreign ministry official told reporters.

''This would give a signal to other countries, like China and India, who we want to join efforts to fight climate change.'' US President George W Bush joined other Group of Eight (G8) countries at a summit in Germany last month in pledging to cut emissions significantly, but he has resisted adopting Europe's so-called ''cap and trade'' model.

By negotiating with individual US states, Germany may be hoping to win backing without going through the White House.

The officials, who requested anonymity, said talks were at an early stage and many technical aspects still had to be hammered out.

''We are still at a philosophical stage, but there is a concept,'' said a second German official who was vague about the timing of any agreement, which could end up being with individual US states or the country as a whole.

The EU's CO2 emissions trading scheme is the lynchpin of the 27-member bloc's efforts to meet climate change targets under the Kyoto Protocol.

It makes companies or countries which find it too expensive to meet their targets pay those that can cut carbon emissions by the same amount more cheaply.

In the EU, limits on CO2 emissions -- a key contributor to global warming -- are set through the allocation of allowances set by national governments.

The officials said Germany was also keen to ensure European companies were not at a competitive disadvantage because of the obligatory trading scheme although carbon markets are widely seen as a business-friendly way to squeeze emissions.

California has passed legislation against global warming and Austrian-born Schwarzenegger wants the state -- one of the world's 10 biggest economies -- to embrace carbon trading.

Nine northeastern US states plan to start a system in 2009 while California, five other states and the Canadian province of British Columbia are planning a regional scheme.

The EU is also working with Norway and Switzerland and the German officials noted that Steinmeier would visit Norway on his way to California.

They acknowledged that any tie-up could reduce the pressure on European companies to fight climate change as the United States might set lower targets and issue more trading certificates.

Those rights could flood the market and act as a disincentive for companies to modernise their technology.

''It could reduce pressure in the EU but it is really important to get the United States involved -- that would raise pressure to tackle climate change in the world overall,'' said Ottmar Edenhofer of the Potsdam Institute for Climate Research.

Edenhofer, who has written a study for the ministry, said a key question would be whether CO2 caps could be harmonised.

REUTERS GT BST1857