Mars fined for breaching EU carbon trading scheme

Mars, which trades as Masterfoods, was among the four companies that were handed penalties totallingabout €1.13m (£758,810). The other companies are Alphasteel, Scandstick and Daniel Platt.

The Environmental Agency said Mars breached the EU's Emissions Trading Scheme (ETS), a systemmeant to reduce manufacturing outputs of carbon dioxide, which is blamed for causing global warming.

Mars was issued the civil penalty for failing to surrender allowances for 2005 by the regulatory deadline. Mars UK verified emissions for 2005 were 1,952 tonnes,the Environmental Agency said.

Under ETS, companies are allocated allowances for the amount of carbon they can emit from theirplants. If they exceed the allowances, they must buy additional allocations from other companiesthrough a trading scheme to cover the excess.

"Unfortunately 4 companies out of 535 in England and Wales failed to surrender sufficientcarbon dioxide allowances by the due date to cover their emissions,"​ the EnvironmentalAgency said. "This is the cornerstone of the scheme. As such they are liable to automaticcivil penalties."​

Mars is one of the UK's biggest food manufacturers, with global sales of about £2bn a year.

The ETS scheme is part of the bloc's plan to reduce greenhouse gas emissions to meetinternational commitments under the Kyoto Protocol. The EU's "cap-and-trade" scheme, whichtook effect from January 2005, allows companies to buy and sell carbon dioxide (CO2) emissionsrights on specially constructed Internet sites.

Under the protocol the UK has agreed to reduce greenhouse gas emissions by 12.5 per cent and CO2 by 20 per cent by 2010.

Last week the European Commission cut the greenhouse gas allowance levels for the second phase of the scheme, which runs from 2008 to 2012. The Commission reduced total allowances by almost 7 per cent below the 2005 level that was proposed by member countries.

About 12,000 companies in the EU fall under the emission trading scheme, which includes othertypes of plant installations.

The food processing industry is a major energy consumer and discharger of greenhouse gas throughits reliance on cooking, refrigeration, freezing and air compressor systems.

The trading system covers combustion installations including some food industry plants. Companiesthat exceed their limits must buy permits from businesses that emit less than their allocations orface fines. They could also chose to cut emissions by taking action on cutting their energy use orby investing in anti-pollution equipment.

In the UK a total of 51 food and drink plants are covered by ETS, but 36 have opted-out of thescheme in the first trading period 2005 from 2007. The opt-out option would not be available in thesecond phase of the ETS scheme, which runs from 2008 to 2012.

The main food and drink sectors covered by the ETS include plants making sugar and starch,vegetable oils, milk and malt. Breweries are also covered. In general, food and drink sites arecovered by the ETS if they are operating combustion installations exceeding 20 Megawatt ratedthermal input.

The second trading period under ETS is significant because it coincides with the five-year periodin which the EU and member states must meet their targets for limiting or reducing emissions ofgreenhouse gases under Kyoto.

The UK in August announced a plan to expand its greenhouse gas emissions trading scheme to include more plants by next year.The plan is part of an EU programme to progressively put the brakes on industry's production of CO2.

In publishing the new plan the UK Department for Environment, Food and Rural Affairs (Defra) said that the second phase of the EU Emissions Trading Scheme (ETS) will cut maximum levels of CO2 production in the country by eight million tonnes each year from 2008 to 2012.

The second phase of the EU ETS will be expanded to cover additional activities at 160 installations, estimated to be responsible for collectively outputting 9.5 million tonnes of carbon dioxide. The plants are currently not covered in the current phase of the scheme.

Under the EU directive, companies which fail to account for their carbon emissions are fined€40 a tonne.

Trading in EU carbon allowances may exceed $5 billion this year, according to the Amsterdam-basedEuropean Climate Exchange.