BRUSSELS (Reuters) - Eastern European member states could receive two levels of funding to secure their support for an EU plan to cut carbon in the fight against climate change, according to a final draft text prepared for leaders on Friday.
The nine former communist nations are seen as the final main blockage to agreeing a package of measures aimed at tackling climate change but which will ramp up costs for their highly polluting coal-fired power sectors.
Ten percent of revenues from the EU's flagship emissions trading scheme (ETS) would be distributed to them via the so-called "solidarity and growth" fund, according to the text seen by Reuters and which is yet to be approved by leaders.
That would be followed by a further two percentage points for the nine countries that reduced emissions when industry collapsed in the wake of communism.
Their power sectors were also partially exempted from paying for emissions permits from the ETS, with the level they must buy set at 30 percent in 2013, rising to 100 percent in 2020.
Diplomats said Hungary had raised particular concerns about the package and it was not clear whether it would agree to the measures set out in the final draft.
Measures were proposed to reduce the risk that carbon curbs would force up costs for European industry and reduce its ability to compete against less regulated rivals overseas -- an issue that had worried Germany and Italy.
At-risk industries will receive free emissions permits if they will see an increase in costs of 5 percent or more and are over 10 percent exposed to international competition.
The measure is viewed as covering over 90 percent of EU industry. Such an approach has been criticized for removing the main incentive to cut emissions, but benchmarks have been introduced to exclude the worst performers from the exemption.
The fraction of industry that is not deemed at risk from international competition will have to pay for 20 percent of emissions permits in 2013, rising to 70 percent in 2020.
Measures were also proposed to fund put billions of euros of public funds behind cutting-edge technology to trap and bury global warming gases underground -- but funds were only worth two fifths of that proposed by the European Parliament.
(Reporting by Ingrid Melander and Pete Harrison; editing by Mark John)
