The European Union (EU) may penalize Bulgaria because it is not likely to harmonize its legislation with part of the amended directive on quota trading of greenhouse gases.

Radoslav Mikov, a member of law firm DLA Piper, made this prediction on Wednesday at a seminar organized jointly by the British Embassy in Sofia and Barclays Capital, to discuss: "Climate change and the European scheme for emissions trading".

The EU Directive, adopted in April this year, must be transformed in its entirety into domestic law not later than December 31, 2012, with the exception of one Article that has to be incorporated by the end of 2010.

The directive regulates the size of quotas that will be issued for the entire EU after 2013, when the current national distribution of emissions will become interstate.

The change in the quantity of quotas issued each year across the EU must be reduced by a linear coefficient of 1.74% as of mid-period 2008 – 2012.

EU member states will be obliged to ensure that operators provide sufficient evidence and documentation to ensure correction of the quantity of quotas to be issued for the entire community.

Data are to be handed to the relevant authorities no later than April 30, 2010. From 2013 there will be no free quotas, and every company will purchase its necessary quantities by means of government auctions.

"Our experience with the industry so far has shown that, at the beginning, companies did not want to deal with emissions but they subsequently realized that in this way they did not earn anything, and even lost out," explained Harshika Patel, sales director at Barclays Capital.

The British bank is working with four types of customers in terms of emissions - governments, utility companies, industrial companies and speculators. The main methods used for trading carbon dioxide emissions were risk-hedging, swaps, and securing funding.

"Currently, Bulgarian companies cannot still trade in emissions because there is no approved plan for the allocation of quotas between enterprises in the country. The latest version is currently being coordinated with various ministries, and is awaiting approval by the Council of Ministers and the European Commission,"  Radoslav Mikov stated.

"So far, we did not get any co-ordination of the plan by Brussels, because the conditions for allocation of quotas did not reflect the fundamental principles enshrined in the EC - consistency, transparency and efficiency," he added.

Usually, the transaction for purchase or sale of emissions can be completed within two days of application, explained the Barclays Capital representative, Harshika Patel.

Under the new directive of 2013, 88% of quotas will be allocated among EU member states, and 10% of the emissions will be put to auction. The remaining 2% will be allocated among countries that are technologically backward, with indicators for the realization of their emissions at 20% below those in developed countries.

"These are primarily countries of Central and Eastern Europe, including Bulgaria," said Mikov.