EU Demands Sharp Cut in Polish Emissions Plan

That is the largest reduction in real terms demanded by the Commission since it started approving plans last year, a spokeswoman said.

"All companies listed in the Polish plan qualify for trading, but they will be able to start doing so only once Poland has reduced the total number of allowances and amended the allocation plans as requested," the European Commission said in a statement.

Officials at the Polish Environment Ministry were unavailable for comment.

Poland's plan is one of the four largest in the 25-nation bloc and covers more than 1,100 installations.

Prices for European carbon dioxide allowances rallied eight percent after the decision. CO2 allowances for 2005 gained 80 cents to a high of 10.30 euros a tonnes before easing back to 10.10 euros.

"This is bullish," said one trader. "A Polish cut was expected but this is rather more of a cut than a lot of people expected," he said.

Emissions trading is a key way in which the union seeks to meet its environmental commitments under the Kyoto protocol.

The EU scheme sets national limits on how much CO2 industrial plants can emit and allows them to buy or sell extra allowances if they overshoot or come below their targets.

The Commission's decision on Tuesday -- a conditional approval of the plan -- requires Poland to cut the volume of allowances it distributes to industry by 141.3 million tonnes for the period 2005 to 2007.

The EU executive said Poland's original plan had allowed allocations that exceeded the amount of projected emissions. The scheme aims to cut back on C02, which many scientists say is the greenhouse gas most responsible for global warming.

The scheme started officially in January but spot trading has got off to a slow start. Greece, Italy and the Czech Republic must still have their plans approved, and Britain is seeking Commission approval to water down its plan.

"We are looking at the information that was provided by the UK," said Commission spokeswoman Barbara Helfferich. "We will take a formal Commission decison in a few weeks time."

A decision on the Czech plan would come in the next two weeks, while the others would be made before the end of April, she said.

(additional reporting by Stuart Penson in London and Patrick Graham in Warsaw)