But the limits do not apply to new power plants, including heavily polluting coal plants, for 14 years from 2008, the start of the new 2008-12 phase.

This potentially undermines the emissions limits set under the plan, and could allow Germany to avoid replacing its nuclear power plants. Nuclear is carbon-free but faces some public opposition.

All EU states must submit their phase 2 plans to the European Commission by June 30, and the European Commission can reject plans if it deems these too soft on pollution.

The new German carbon dioxide (CO2) quota is 482 million tonnes per year, down from 499 million tonnes in the first phase of the trading scheme, 2005-07, and includes 12 million tonnes to be handed out to new power plants.

German CO2 emissions by heavy industry in 2005 were 474 million tonnes, and the new plan proposes to include an additional 11 million tonnes emissions, from so-called chemical cracker units, implying 485 million tonnes emissions which the new quota will cut by 3 million tonnes.

The plan cuts the quota disproportionately more for utilities, to combat windfall profits in 2005.

But the overall quota is also diluted by allowing German firms to buy up to 60 million tonnes a year of CO2 pollution permits from abroad through a trading tool allowed under the Kyoto Protocol.

The trading scheme accounts for some 55 percent of all German CO2 emissions. Transport and households are not included in the scheme but are set reduction targets of their own under national climate measures.

The World Wildlife Fund said the plan was too weak and suggested the EU Commission reject it.

"In our assessment, the plan is a climate political sell-out and kowtows to the interests of the big energy companies," it said in a statement.