By Roger Harrabin
BBC environment analyst
The German government has unveiled a plan to cut carbon emissions from business by less than 1% by 2012.
An unbalanced ETS could disadvantage some industries
The figures were revealed as part of Germany's submission to Europe's flagship environment policy, the EU Emissions Trading Scheme (ETS).
The German government depicts this as a 6% cut from the period 2000-2002.
But set against the real allocation for Germany industry in 2005 it amounts to a cut of only 0.63%, which campaign groups have greeted with dismay.
"These figures are unbelievable, pathetically unambitious," said Regina Gunther from WWF Germany. "It is shameful that our environment minister has agreed to this."
Critics are even more upset that the limits will not apply to new power plants for 14 years from 2008, and that the government has decided to hand industry all its emission permits free of charge.
The EU encourages member states to auction up to 10% of permits in order to create a more genuine market in which firms have to reveal their true intentions; but this has been rejected.
The UK says it will auction between 2% and 10% of permits.
'Ridiculous and depressing'
Professor Michael Grubb of the UK Carbon Trust, set up by the British government to help create a low-carbon economy, said: "I have been a big supporter of the EU ETS, but hearing the German news I feel more depressed than I ever have done about our ability to tackle climate change.
"I really believed that Europe would lead the way through the EU ETS, but now I wonder whether this will ever happen."
A German environment ministry spokesman, Michael Schroeren, argued that Germany's carbon targets up to 2012 were stricter than they appeared.
He said last year's carbon emissions total of 474 million tonnes from big industry might have been an anomaly, so Germany had to allow for that.
He said Germany was still committed to its Kyoto Protocol target, but would achieve carbon cuts through other measures. One plan is to cut three million tonnes of carbon by training motorists to drive more economically.
The normally temperate Prof Grubb poured scorn on the suggestion of an anomaly. "The German position is ridiculous - their emissions had been coming down over a long period of time - last year's figures are definitely not a blip and this agreement is certainly nothing to do with protecting the climate."
The decision represents a major success for the German business lobby.
Green groups believe the government was warned by power firms that they would be unwilling to invest in new plant unless they were exempted for a period from the compliance regime.
Last year German industries were so successful in lobbying that their government handed them 21 million more tonnes of carbon permits than they actually needed.
This pushed down the value of carbon in the EU ETS carbon market and made emissions savings less attractive to businesses across the EU.
The carbon price bounced back when traders found that some nations like the UK had forced unexpectedly large CO2 cuts on their power sectors.
Britain has previously announced that it will cut CO2 between three and eight million tonnes during ETS phase two, although a new figure may be imminent.
The UK government said it would wait on the German decision because in the previous phase of the ETS, British firms complained that their German peers had been given too many carbon permits which conferred a competitive advantage.
The Swedish government has agreed a lax cap on CO2 and is expected to stick to that unless Germany and the UK impose much stricter caps. This now looks most unlikely.
Germany's lax ETS target will have disproportionate impact because other European nations have relied more than Germany on the trading system for their CO2 cuts. There is now unlikely to be upward pressure on carbon prices to drive new investment in clean technology.
European weakness on ETS phase two targets will badly under-cut the EU's position in international negotiations on climate.
The German news came as the European Environment Agency released figures showing that the EU is badly under-achieving on its Kyoto targets.
EU emissions rose by 0.4% in 2004 relative to the previous year, with UK emissions rising by 0.2 %. In 2004, the combined EU-15 emissions were only 0.9% below 1990
Apart from its ETS performance, Germany has been one of Europe's most successful nations in cutting greenhouse gas emissions, thanks partly to the closure of inefficient East German plant. Emissions are now 17.5% below 1990 levels.
All EU states must submit their plans for phase two of the ETS, covering the period 2008-2012, to the European Commission by June 30. The Commission can reject plans if it deems them too soft on pollution.
On Thursday the UK's Institute for Public Policy Research (IPPR) will call for the Commission to take over the ETS to stop governments being too lax on their own industries.