Britain has to set emission limits on 1,500 installations responsible for half the country's CO2 pollution under new European Union rules on reducing greenhouse gas emissions.

According to provisional government figures released this week, the offshore oil and gas industry, the second largest industrial CO2 polluter, will have to cut its carbon emissions by 37.6 percent from levels in 1998-2002 by 2007.

But the industry argues emissions are bound to rise from the mature sector as more energy is needed to extract dwindling reserves and that action to offset carbon levels could force producers to abandon uneconomic fields earlier than planned.

"The additional costs may be enough to take them over economic margins for some fields. It could hasten the early demise of the UK Continental Shelf," said a spokeswoman for the UK Offshore Operators' Association (UKOOA).

"Our forecast is that emissions will be rising, not declining by 2010 and then will drop off after that as fields are decommissioned."

She said that talks with the government were ongoing and she hoped that the figures would be revised.

Extra production costs for the North Sea sector could stem either from new equipment designed to lower emissions or the cost of buying credits under a European Union-wide emissions trading scheme due to launch in January.

Under the scheme, companies which exceed their quotas will be able to buy extra pollution rights from those which undershoot their targets.

GENERATORS FACE LOWER PERCENTAGE CUT

According to Tuesday's government figures, electricity generators, the biggest CO2 producers, will have to cut their emissions by 13.2 percent below average annual emissions in 1998-2002 by 2007. In terms of volume, the power sector cuts are far greater than for other industries.

Britain has a target of cutting its CO2 emissions by 20 percent from 1990 levels by 2010, exceeding its obligations to curb greenhouse gas pollution under the Kyoto Protocol on climate change.

German-owned Powergen, one of the largest generators in the UK, said it was disappointed the government had decided to exceed its international obligations and was forcing the power sector to bear the brunt of the cuts.

"We note that the government has suggested power prices are likely to rise as a result. We will do our best to minimize an increase but a rise in bills will be inevitable," a spokesman said.

The government has said it expects the power sector to shoulder most cuts because it faces little international competition and can recoup the costs through higher prices.

Wholesale power prices from early 2005 have rallied recently in anticipation of the start of the EU emissions scheme.