Silvio BERLUSCONI, the Prime Minister of Italy, launched the Italian Presidency by recalling that Italy was a founder member of the EU, and had a long experience of strengthening the Union. He stated that the EU was one of the greatest experiments in the history of mankind. He stated that it was a great honour for Italy to take over the Presidency at this moment since Europe was now in the process of modernising and growing economically. The Prime Minister paid tribute to Europe's abilities to overcome crises, its contribution to international law and to its technical expertise. Above all, he said, Europe is about the art of negotiation and mediation. However, he warned that negotiation sometimes led to bureaucratic stasis or stagnation.

On the European Convention, the Prime Minister welcomed what he called a "splendid" draft text and he also paid tribute to those participating in the Convention. The Convention, he underlined, enshrined Europe's values that it shares with US among others. The Constitution would make Europe stronger. As he put it, "it would enable Europe to avoid the Hamlet syndrome, Europe must have no doubts about its autonomy."

The Prime Minister also welcomed Javier SOLANA's document on the future of European security and said that it set out a basis of how Europe can avoid the differences of the past as illustrated by the war in Iraq.

Turning to the IGC, he called for the timetable set out in Thessaloniki to be respected. He stressed that it should focus on a few controversial points only and he hoped that a final decision could be reached by the end of December. He also stated, to applause, that representatives of the European Parliament would have a permanent role at the IGC and at the General Affairs Councils. The IGC, he also stated, must be short and avoid the excessive bureaucracy of previous IGCs. Prime Minister Berlusconi, however, stated that Italy was honoured by the agreement that the signing of the next European Treaty, given its symbolic significance, would be in Rome.

On the EU economy, he stressed that Europe's growth rates were too low. One of the priorities of the Italian Presidency, he said, would be to give greater support for Trans-European transport networks through increased public and private investment in particular from the European Investment Bank. A second priority, he said, would be to work on the sustainability of Europe's welfare systems. Europe faced an ageing population, and he stressed it would be important to increase the employment rate of the elderly and to reduce the number of people taking early retirement.

The third priority of the Italian Presidency, he stated, would be stability and security. He stated that the accession states would play a full role in European Council meetings, and he stressed that a "road map" for Bulgaria's and Romania's accession to the Union would be set out during the Presidency. He also said that active support should be give to Turkey so as to assist the reform process. On the Western Balkans, the Prime Minister underlined that it was now appropriate to step up co-operation as set out in the Zaghreb strategy. Europe should be proud of its peacekeeping efforts in the region and he hoped that the Kosovo crisis was the last time that blood would be shed in war on the European continent.

Special attention he said should be given to the Euro-Mediterranean relationship and he said that the Italian Presidency would work to achieve a Euro-Mediterranean free trade area. The Prime Minister underlined the importance of the region for Europe's security. The Italian Presidency, would create a new European Investment Bank and a Euromed parliamentary assembly for the region.

Re-launching and strengthening the Trans-Atlantic dialogue, would also be a priority of the Italian Presidency, he remarked. Rebuilding Iraq, and the "road map" to peace in the Middle East, through co-operation would be the perfect opportunities to bring the two continents once more closer together. The Prime Minster also stressed the importance of the EU's relationship with Latin America and Africa and called for increased trade.

Turning to immigration and asylum, the Prime Minister, called for increased budgets as well as an integrated EU border police force. He also said the Italian Presidency would take measures to strengthen Europol.

In conclusion, Mr Berlusconi, stated that Europe now had strong foundations, but with these foundations came increased responsibilities in the wider world.

In his address, Commission President, Romano PRODI looked forward to continued progress under the Italian Presidency, especially with regards to completing the timetable for constitutional reforms, although he repeated his dissatisfaction with certain chapters in the Convention such as what, he felt, was a limited extension of qualified majority voting and he emphasised his determination to try to seek further changes here. Otherwise he agreed on the importance of strengthening the EU's ties with new neighbouring countries, in particular the Balkans and the Mediterranean where, he felt, setting up a new "Euromed bank" could play a significant role in aiding economic development. He also strongly supported the "road map" for the Middle East and recognised the importance of further developing strong and stable relations with the USA. The EU would be in a much better position especially with regard to trade matters if it spoke with a single voice, he added.

Turning to the economy, while he recognised the difficulties caused by poor rates of growth in the European economy at the moment, he felt there was a need for closer co-operation with regard to economic and tax policy. The Commission had played its part by introducing an element of flexibility into the Stability and Growth Pact, he said, before expressing concern at low rates of investment in R & D across the EU. He emphasised the target of reaching 3% of GDP and warned that, without achieving this, there was a danger of yet more of Europe's leading scientists moving abroad to pursue careers. With a view to counteracting this, he said the Commission would be launching a new initiative with the specific view of involving the private sector. After expressing his support for the new Italian initiative on infrastructure projects, he expressed optimism that the Italian Presidency would be able to help economic recovery by reaching agreement on issues outstanding from the Greek Presidency such as further liberalisation of rail, the gas and electricity markets, public contracts and take-overs. In addition, he drew attention to the need to reach agreement in other areas such as the temporary workers and take-over directives as well as asylum procedures. For the long-term, the Commission would be looking to putting together a new financial perspective to take account of the EU's needs post 2006.

For the EPP/ED, Hans-Gert POETTERING (D) expressed the hope that the welcome given to Mr Berlusconi at the beginning of the Presidency would be repeated in December. His group would be judging the Italian Presidency by its results, he said, hoping that the Presidency would not be distracted by internal political divisions in the country. He emphasised the importance of reaching agreement on a new constitution and underlined Italy's historic role in developing European integration, dating back to the Treaty of Rome in 1957. He emphasised the importance of achieving balance in the EU between the institutions and the Member States. He concluded by expressing his support for the goals of the Italian Presidency.

For the PES, Enrique BARÓN CRESPO (E) looked forward to a positive approach from the Italian Presidency that would hopefully bring results. He welcomed what he saw was a change in priorities emphasising a more European approach and reminded the House of the European Parliament's obligation to make laws that were beneficial for all of Europe's citizens. On the Convention, he felt there was still a need for "fine tuning" and he underlined the importance of the European Parliament being represented on the IGC. While he welcomed what, he felt, was something of a conversion by an Italian Conservative Government in pushing the idea of public investment in infrastructure, he did express some concern that Mr Berlusconi had not outlined any further ideas as to how the Lisbon objective could be achieved and, he added, there were concerns over such issues as financing the welfare state, especially pensions in an increasingly ageing population and immigration. Another issue of concern was media concentration and he pointed out that the Commission should be offering guarantees to ensure pluralism here.

For the Liberals, Graham WATSON (South West), after pointing out that the programme of the Italian Presidency was only available in English and Italian, looked forward to progress in negotiations on the Convention with proper representation from both the European and national parliaments, although he was concerned about the possibility of national governments continuing to argue about points of difference, especially at a time when the European economy was not in good shape. As to the Italian plans for major infrastructure projects, while he welcomed the idea, he emphasised that this should be seen as a means to securing growth and not an end in itself. Furthermore, it was also necessary to ensure that spending would be compatible with the Stability and Growth Pact.

On foreign relations, he looked to the Italian Presidency to take the lead in strengthening ties with countries such as Albania and indeed the whole Mediterranean area. He also welcomed the commitment to rebuild the Transatlantic Alliance. As to immigration and asylum, he took the view that there was a need for a balanced approach here and that a policy just based on repatriation would not work.

It was then the turn of Francis WURTZ (F), speaking for the EUL/NGL to put on record those aspects of Italian society which he appreciated such as the fight to protect public services, workers' rights and indeed the anti-war stance recently shown by the Italian public at large. He rejected all ideas of elitism and intolerance, before expressing reservations about the major infrastructure projects proposed. While he recognised there was a need to modernise transport links in Europe, he was not convinced that the right priorities were being proposed under the Italian Presidency. Otherwise, he emphasised the importance of maintaining fundamental values such as respect for liberty, human rights and democracy.

Monica FRASSONI (B), speaking for the Greens, concentrated on the issue of media concentration and called on the Commission to use its powers and ensure respect for pluralism in this area. So far, she felt that the Commission had not acted strongly enough in applying the "TV across frontiers" legislation. She too was another speaker who was not convinced of the value of launching new major infrastructure projects and indeed drew attention to the failure of previous "Tens" programmes. There was a clear need to ensure respect for the environment and, she felt, Italy's record here left quite a lot to be desired. Otherwise she looked to the Italian Presidency using its influence with the USA and Russia to push for example for President Putin to ratify the Kyoto Treaty and the USA to show respect for the International Criminal Court.

Cristiana MUSCARDINI (I), for the UEN group, called for the Italian Presidency to take a new approach to politics. On the draft constitution, she stated that there should be a reference in the pre-amble to Europe's Greco-Roman / Judeo-Christian historic values as well as its secular traditions. She also called for one European Commissioner per Member State. Mrs Muscardini also stressed the importance of linguistic diversity within the Union. She also called for tougher measures to be taken against organised crime and underlined the need for integrated border control. Finally, Mrs Muscardini drew attention to the issues of the right of life, the dangers of the Internet and the need for increased spending on research and development.

For the EDD group Jens-Peter BONDE (DK), was concerned that the draft constitution had been drafted too quickly. He stated that not all the consequences of the text had been worked out. He stated that the European Court of Justice often increased the weight of certain articles of the Treaties, and he cited the European citizenship articles in the Treaty of Maastricht as an example. He also wanted to know if the protocol on Danish summerhouses as well as the Danish constitution would still be valid since, he felt, that articles in the draft constitution were in contradiction with these binding texts.

Marco PANNELLA (I), as a non-aligned Member, was concerned with relations with Israel, and he stated it was his group's position that Israel should become a full Member of the EU. He also called for a greater recognition of the reform process in Turkey. He also wanted to see a moratorium on the death penalty and for the UN to be reformed so as to make it more democratic.

J onathan EVANS (Wales), the leader of the British Conservatives, agreed with Mr Berlusconi that giving new impetus to the Lisbon Strategy should be the priority of the Italian Presidency. At a time of deflation and stagnation, he stated, Europe should continue with major liberalisation of its markets to create sustainable jobs. He said that the EU should focus less on tinkering with its institutions and more on the creation of jobs and prosperity. On the IGC, he recalled the Laeken Summit conclusions, which stated that the Convention should bring Europe closer to its citizens, Mr Evans doubted if this was the case. He also wanted to know if the accession states would have equal voting rights in the IGC. Mr Evans also agreed with the need to reinvigorate the Trans-Atlantic relationship and stressed that Europe's defence initiatives should not be antagonistic to those of NATO.

Gary TITLEY (PES, North West) was another speaker to comment on the lack of documentation from the Italian Presidency with regards to its programme for the next six months. He expressed concern that this was a clear sign that the Presidency was not prepared and able to face up to the challenges in the face of distraction through internal politics. He also contrasted "warm words" on issues such as promoting the European defence dimension with previous failures to approve specific projects. He trusted that the present aims would be turned into reality. There are also inconsistencies in statements on immigration policy and he underlined the need to develop a proper integrated approach to take account of the needs of migrants rather than adopt an instant reaction in the fact of immigration flows.

Other speakers in the debate such as Armando COSSUTTA (EUL/NGL, I) and Olle SCHMIDT (ELDR, S) took issue with specific policies of the Italian government such as the Prime Minister's control over the media, while Martin SCHULZ (PES, D) objected to statements on immigration from other members of the coalition government such as Mr Umberto Bossi.

Charles TANNOCK (EPP-ED, London) stated that he was a great friend of Italy and in particular Forza Italia and Alleanza Nazionale in the Italian parliament. He welcomed the Italian Presidency's position on strengthening links with Ukraine and Moldova, and in particular he called for formal recognition of these countries' right to join the Union as set out in Article 49 of the Treaty. However, he said that the fact that Italy, unlike the France and UK, did not have an embassy in Moldova was regrettable. He welcomed the plans for greater investment in European transport infrastructure and called for a fast train service between Brussels and Strasbourg.

Proinsias DE ROSSA (PES, Dublin) stated it would be for the Italian electorate to finally judge the success of the Italian Presidency. Italy's most important challenge, he underlined, would be to manage the IGC. He stressed the importance of transparent working methods within the IGC and for all information and documentation to be made available to the public.

In his response to the debate, Prime Minister Berlusconi thanked in particular the EPP-ED group for their support for the work of the Italian Presidency and stated that in general the debate had been carried out in a well mannered way. He did however stress that the ambitious programme for investment in European transport infrastructure arose from a Keynesian approach to increased economic demand. September 11, he said, had dealt a severe blow to stock markets around the world, and the European Investment Bank would have to raise both public and private financing for the projects. To the critics of his government, Mr Berlusconi stated that he had inherited an unprecedented difficult situation, and that his government had passed more than 350 reform bills. He also called on his critics to visit Italy's many museums and churches. He also said that he would bring forward Mr Pannella's idea for a moratorium on the death penalty to the UN.

Turning to the comments made by Mr Schulz earlier in the debate on Italy's immigration policy, Mr Berlusconi said that he knew of an Italian director who was making a film on Nazi concentration camps, and that Mr Schulz would be the ideal lead. The Prime Minister later said that the remarks were addressed in "an ironic manner." President Pat Cox personally regretted the remarks and the tone of this part of the debate.

Mr Berlusconi also rejected criticisms that Italy was subservient to the US and stated that Italy gave its full support to the UN for its reconstruction efforts in Iraq. As to a conflict of interest between media ownership and political office, he said the media that his family owned were his strongest critics and those who did not recognise this he called "tourist democrats." The Prime Minister also defended Italy's record on immigration and asylum. On the environment, he underlined that it would play a central role in the Presidency and Italy would encourage countries to sign up to the Kyoto protocol. Overall, he promised that the Italian Presidency would deliver a stronger Europe able to take difficult decisions at international level.

In his reply, commission President Romano Prodi emphasised the importance of the Commission's role as "guarantor" of both the current and any future treaty. He pledged the Commission's support to ensure the continuity of action under the Italian Presidency and its commitment to institutional reform, launching economic recovery and normalising relations with the USA. He undertook to take a rigorous analysis and appraisal of the costs and benefits of the proposed new infrastructure projects. He also emphasised the importance of a co-ordinated policy to strengthen relations with the EU new neighbours after enlargement.

Vote

MEPs voted 487 to 12 with 14 abstentions to approve Council's common position on prospectuses or information to be provided to investors by issuers raising capital across the EU, together with 21 compromise amendments. The legislation forms a key aspect of the Financial Services Action Plan designed to bring about an integrated market in financial services by 2005 and is based on the concept of a "single passport", which means that once such a prospectus is approved by a financial regulator in one Member State, then it can be circulated throughout the EU, without having to go through the burdensome process of seeking further approval in 14 different countries. This will enable the legislation to come into force immediately, thus avoiding conciliation.

The main amendment concerns freedom of choice of regulator for the issuers of bonds worth more than 1,000 euro or a similar amount in dollars. A further amendment takes up the question of the delegation of supervisory powers over the market, a question of particular importance for the smaller Member States. This provides for the Commission to review existing national arrangements after 5 years and only if the arrangements are not cleared by the Commission, will this arrangement have to come to an end after 8 years. Further improvements in investor protection can be seen in amendments which strengthen legal obligations relating to the summary in translation, safeguards against providing misleading information and allows national regulators to introduce higher standards.

The other amendments relate to the technical operations of the market, different financial products and timetables with regard to compliance.

During Monday's debate, rapporteur Chris HUHNE (ELDR, South East) welcomed the agreement emphasising that it was now more business friendly with less burdensome red tape. It reflected the "light" touch advocated by Parliament while at the same time containing provisions to ensure high standards of investor protection. Commissioner Frits BOLKESTEIN also welcomed the compromise.

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Vote

In voting at second reading on two co-decision reports by Stefano ZAPPALA' (EPP-ED, I), Parliament approved along with few 'technical' amendments the two Council’s common positions on new public procurement rules, based on two Commission proposals for a general and a sectoral directive, the former on co-ordinating procedures for the award of public works, public supply and public service contracts and the latter to cover entities operating in the water, energy, transport and postal services sectors.

In doing so Parliament in effect rejected the overwhelming majority of the more than 100 amendments proposed by its Legal Affairs Committee to the two reports along with many new amendments tabled by the several political groups for the vote in plenary. It looks now very likely that an agreement can be reached already in second reading, so that a third reading in the framework of the conciliation procedure won't be needed.

Among the few amendments that were able to gather the 314 votes required for adoption in second reading is one calling for the exclusion from the scope of the directive of public supply contracts for the purchase of schoolbooks in respect of which a fixed final retail price has been laid down by law in the Member State in which the purchase is made (AM 26). Another series of amendments seeks to ensure that public procurement rules will reflect better the needs of people with disabilities. On electronic tendering –one of the chief innovations of the new directive- Parliament says that enhanced data security requirements, in particularly regarding electronic signatures, should be safeguarded when tenders are submitted by electronic means (AM 52).

A few amendments on similar issues have also been approved in the second recommendation for the sectoral draft directive.

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Vote

Parliament adopted a draft legislative resolution on genetically modified food and feed, which amends Council's common position. The key amendments adopted by Parliament are as follows:
-  with regard to the derogation to the labelling requirements in the case of adventitious or technically unavoidable presence of GMOs, the maximum tolerance threshold will be 0.9% and not 0.5% for each ingredient as Parliament had originally wanted. Lower rates may be set at conciliation.

- measures should be taken to ensure the co-existence of GM production and non-GM production. The technical details of co-existence should be decided by means of the comitology procedure;

- food and feed which can also be used as seed should only be placed on the market if it has been authorised for all these uses;

- as regards emergency measures, the proposal should take up the wording of the provisions laid down in Directive 2001/18 (the GMO Release Directive), thereby enabling Member States to take emergency action themselves (rather than merely informing the EFSA and the Commission) in the event of severe risk.

Parliament also adopted a number of changes aimed at streamlining the procedures relating to applications for initial authorisations and for renewals and interim reports. The common position stipulates that applications for initial authorisations should be submitted to the national competent authority of a Member State but that all applications for renewals and all interim reports should be addressed to the Commission. MEPs point out that this division of responsibilities is contrary to the principles of proper administration and are calling for initial authorisations, renewals and interim reports to be submitted to the competent authority of the Member State where the initial authorisation was applied for.

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Vote

Parliament adopted a draft legislative resolution on the traceability and labelling of GMOs and the traceability of food and feed products produced from genetically modified organisms and amending Directive 2001/18/EC

With the Council's common position having accepted half Parliament's first-reading amendments entirely or in part, the committee wants to tighten up the traceability requirements only moderately. MEPs are opposed to the Council's wish to allow precise descriptions of mixtures of GMOs in a single product to be replaced by a "declaration of use" by the operator. Pre-packaged products produced from GMOs should, say MEPs in the committee, be described as such, using the words "This product is produced from GMOs" on the label and also as part of any display or advertising.

The House also agreed that in order to support the Member States in meeting the requirements the Commission will create a central register at Community level, which will contain all available sequencing information and reference material for GMOs authorised to be put into circulation in the Community. The competent authorities in the Member States shall have access to the register. The register will also contain, where available, relevant information concerning GMOs not authorised in the European Union.

N.B The adoption of these regulations does not result in an automatic lifting of the moratorium that certain Member States (not the EU as a whole) practice in the field of allowing new GMOs to enter their markets, however it does politically facilitate the lifting of the moratorium.

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Vote

Parliament adopted a legislative resolution on indicating the ingredients in food, thus broadly approving the Council's common position, which had incorporated many of the changes demanded by Parliament at first reading. However, Parliament adopted a few amendments as follows:

- the directive should avoid the disproportionate listing of substances used in food production which in fact have no allergenic potential (for example, derivatives used in beer and wine production), as this would cause allergy sufferers unjustified concern. Labelling requirements should therefore be restricted to substances contained in a food product "in an amount which scientific research has shown may cause allergic reactions". The indication of processing aids should not be required for alcoholic beverages;

-  after consulting the European Food Safety Authority, the Commission should adopt, on or before 1 January 2004, a provisional list of products which, although derived from a product listed in Annex IIIa, should be considered not to be allergenic and consequently not included in that Annex.

The aim of the proposed legislation is to amend the recent Labelling Directive, relating to the current possibility of not indicating the components of compound ingredients which form less than 25% of the final product.

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Vote

Parliament adopted this recommendation for second reading. In amendments tabled by the ELDR, EPP-ED, PES and Greens/EFA groups, Parliament took the view that it was appropriate to phase out the use of oestradiol 17 for oestrus induction over a given period. In view of the dangerousness of the substance, the use should also be strictly limited. There were a number of alternative drugs within the Community to achieve the same effects and they only should be used.

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Vote

Parliament adopted a legislative resolution for the revision of Directive 94/62/EC on packaging and packaging waste. The directive deals with a range of issues that have a huge impact on everyday lives of the public, including citizens of the new member states. Although the House left many points in the Council common position untouched, it did reintroduce specific cases of derogation to targets, as well as the scope of application to the directive. A conciliation committee may still be necessary in order to reach a final agreement.

Timetable fixed for recycling and recovering targets

Parliament has accepted the minimum percentage of targets for recovery and recycling of packaging waste contained in the Council's common position. It has also accepted the Council's common position view on the timetables. The EP calls on Member States to recover no later than 31 December 2008, at least 60% of the weight of packaging waste. The same date applies to the recycling of between 55% minimum and 80% as a maximum of the weight of package waste. By no later than 31 December 2008, should the following minimum recycling targets for materials contained in packaging waste be attained. In addition, Members States may set targets for recycling materials other than those stated in the report (60% for glass, 60% for paper and board, 50% for metals, 22,5% for plastics).

Derogations to targets

MEP's equally support to give Greece, Ireland and Portugal an extension of the deadline until 30 June 2010. The deadline for achieving the recovery and recycling targets for the new Member States will have to be dealt with at a later stage, preferably with the involvement of the representatives of these Member States and their members in the European Parliament. MEPs have suggested that accession States may postpone the attainment of the targets until a date of their own choosing which should not be set later than 18 months after the date of entry into force of this directive.

The scope of application of the directive

Parliament decided that the Commission shall determine necessary measures to deal with any difficulties encountered in applying the provisions of this Directive, in particular to quantities of which do not exceed 0.1% of all packaging put on the EU market, such as pharmaceutical products and small packaging. Furthermore, items shall be considered to be packaging according to the criteria set, unless it is part of a durable product that is necessary to contain, support or preserve the product throughout its lifetime.

As regards to the different exemptions to the directive, MEPs agreed that items such as CDs and video cases for short-term use will be regarded as packaging but flowerpots will not, unless they are added just to assist sales. Unsurprisingly, wrapping and gift paper sold as a separate product is also exempt.

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Vote

The European Parliament adopted today a legislative resolution on a directive establishing a scheme for greenhouse gas emission allowance trading. Eager to avoid conciliation with the Council, the MEPs remain united on the need to improve an ambitious new directive for trading greenhouse gas emission rights throughout the EU. By adopting compromise amendments co-signed by all political families, MEPs guarantee a good chance of reaching agreement with Council. It now remains unlikely that the legislation will be discussed in a conciliation committee.
In its second reading, the House continues to support the broadening of the scheme proposed by the Commission to include all greenhouse gases and not just carbon dioxide, and to widen the range of industries covered by the new legislation. Other amendments were adopted, such as how emissions permits should be allocated to the Member States and whether there should be a cap on the number of permits allocated to Member States.

The aim of the directive is to ensure the EU continues to lead the rest of the world in tackling climate change by adopting its own scheme for trading greenhouse gas allowances ahead of the international scheme to be set up in 2008 under the Kyoto Protocol. The directive would create a market in greenhouse gas emissions in the EU by introducing a system of permits authorising emissions from industrial installations, to be allocated by national authorities. The scheme should cut the cost to the EU of meeting its Kyoto Protocol targets by EUR 1.3 bn a year. It would enter into force in two stages, with a trial phase running from 2005 to 2007 and the second stage covering 2008 to 2012.

Which industries should be covered?

Parliament's position has consistently been to widen the range of industries covered by the new legislation. Parliament wanted at first reading to include chemical and aluminium industries in the directive over and above the industries proposed by the Commission, which were the energy sector (combustion, refineries, coke furnaces) and the ferrous metals, paper and mineral industries. Council rejected this demand.

As the common position currently stands policies and measures should be implemented at Member State level across "all sectors of the EU economy and not only within the industry and energy sectors" (am 32), in order to generate substantial emissions reductions. MEPs adopted today the position that "the Commission will consider policies and measures at Community level in order that the transport sector makes a substantial contribution to the Community and its Member States meeting their climate change obligations under the Kyoto Protocol". (am 32)

Furthermore, the Commission shall make a proposal on how and whether the Annex I should be amended to include "other relevant sectors, inter alia the chemicals, aluminium and transport sectors" with a view to further improving the economic efficiency of the scheme.

A mandatory or voluntary scheme?

On the contentious issue of whether the scheme should be mandatory from the outset, the Council agreed in principle to Parliament's first-reading amendment. This had said that Member States should be required to take part in the scheme from 2005, as the Commission proposed, but that governments should have (limited) rights to exempt individual installations, thus meeting the concerns of mainly British, Finnish and German MEPs. The Council, however, extended the possibility of temporary exclusion - only envisaged by Parliament for individual plants - to include whole industrial activities. This would open the way to various sectoral opt-outs, which were likely to upset the efficiency of the scheme.

Parliament underlined today that member States may apply to the Commission for installations to be temporarily excluded until 31 December 2007 (am 36). This amends the Council common position, in which such provision would apply for "certain" installations as well as "activities". (36)

Furthermore, the House agreed to a new amendment tabled by the Council allowing the Member States to authorise exceptions for individual plants in cases of force majeure. However, MEPs urge the Commission to provide guidelines on this issue (am 17, ENV committee).

Auctioning or "grandfathering" of licences

On another thorny issue, namely how to allocate the emissions permits to the Member States, MEPs passed at first reading an amendment providing for a "hybrid scheme" whereby - for the whole of the 2005-2012 period - 15 per cent of the permits would be sold and the rest allocated for free (the latter being the "grandfathering" system preferred by the Commission). Parliament justified this hybrid scheme by saying it would ensure the progressive application of the polluter pays principle, cause less distortions of competition and acknowledge the merit of companies which make reductions in emissions earlier. Council had agreed to this principle but changed the wording and interpretation: in the first period the allocations would be completely free and from 2008 at least 90 per cent would still be free.

In order to seek a compromise with the Council, Parliament backed today a compromise amendment calling for Member States to allocate at least 95% of the allowances free of charge for the three-year period beginning 1 January 2005.

Furthermore, the MEPs insisted for further harmonisation of the method of allocation to include auctioning for the time after 2012 (am 39).

Permits per Member State to be capped

At first reading, Parliament also wanted a cap on the number of permits issued to each Member State, in order to prevent distortions of competition. It said ceilings must be lowered after the new Member States join the EU to prevent a surplus of emissions. Quantities should be consistent to achieve the Kyoto targets. In accordance with Parliament's vote, "the total quantity of allowances to be allocated shall not be more than is likely to be needed for the strict application of the criteria of this Annex. Prior to 2008, the quantity shall be consistent with a path towards achieving or over-achieving each Member State's target under the Kyoto Protocol". (am 42)

To conclude, MEPs emphasised that priority should be given to domestic action. Project-based mechanisms, such as Joint Implementation (JI) and Clean Development Mechanism (CDM) should be supplemental to national rules.

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