Czechs say Reach CO2 Emissions Deal with EU

"I informed Directorate General Environment that we accept the number 97.6. I expect this to be the final result," he said.

"This is a solid result which takes into account higher growth of the Czech economy and plans for higher exports of electricity."

The result is a cut of 9.4 percent compared with a 16.2 percent cut previously demanded by the EU.

It removes the option that the Commission would order a deeper cut, which was the case of Poland which was ordered to slash its emission plan by 16.5 percent last month.

The overall emissions figure represents the limit of permits to pollute which governments can distribute to their companies in each of 2005, 2006 and 2007.

The allowances are the centrepiece of the EU's efforts to meet the targets for lowering emissions set in the Kyoto Protocol of 1997.

Companies must not issue any more of the greenhouse gas than the number of allowances they hold. If they cut emissions more, they can sell their surplus permits on the market. If they want to pollute more, they must buy them.

The idea of the trading system is that emissions are cut where it is cheapest.

The EU is expected to approve the Czech allocation plan later this week.

In the Czech Republic, the company most concerned by the outcome is power group CEZ. Other power firms as well as oil and chemicals group Unipetrol are also following the allocation plans closely.

Unlike western European countries, the Czechs and other new EU members have already cut emissions substantially due to industrial restructuring after the fall of Communism in 1989.

They easily fulfil the Kyoto targets, so their companies do not need to cut. But they argue they need more permits for the future because they have begun to grow again and need room to pollute more as the eastern European economies catch up with the richer west.

The EU however suspects that governments are trying to pad the allocation plans, which could be considered as an illegal state aid.