Barroso faces business backlash

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European Commission president Jose Manuel Barroso is under pressure to respond to fears that new proposals on climate change will harm industry.

Some of Europe's top business leaders warn the plans could hit the amount firms invest in the field and actually be worse for the environment.

Industrialists say changing the carbon emissions trading system is premature.

In a speech on Monday, Mr Barroso will urge business to pick up the baton and seize the opportunity with both hands.

He will tell a business audience in London that the EU's emissions trading system (ETS) has to be developed "with common rules to ensure a level playing field".

Auction shift

In particular, the commission president will say that the free allocation of permits to pollute will be "less generous", with increasing focus on firms having to buy the rights to emit carbon dioxide at auction.

But the European Round Table of Industrialists (ERT) tells the commission that extending the auction system could be the problem.

A letter, signed by Shell Chief Executive Jeroen van der Veer and British Airways Chairman Martin Broughton, says that where product prices are driven by international competition, "full free allocation" of permits must take place.

They say that "environmental objectives are not advanced by arbitrarily destroying shareholder value in existing firms".

There was a similar message last week from BusinessEurope which feared that auctioning allowances would affect the competitiveness of European companies.

'Business opportunity'

But the head of the European Commission will argue that the climate change agenda should be seen as a "business opportunity".

Although the precise details of the commission's plans are not yet known, it is widely thought that free allocations of permits will be cut gradually in order to meet the EU's target of cutting emissions by 20% by 2020, based on 1990 levels.

Mr Barroso will argue that the EU should take a lead. "We need to incentivise the saving of the planet," he will say.