BRUSSELS, Dec 8 (Reuters) European Union nations today dug in for a battle over the costs of tackling climate change, with few signs of compromise emerging ahead of a summit of EU leaders later this week. Two groups have emerged to demand changes to the plan, threatening the chance of a successful deal to curb greenhouse gas emissions. The margin between success and failure will be narrow, Czech Deputy Prime Minister Alexandr Vondra told Reuters ahead of the two-day summit of EU leaders that starts on Thursday. The EU's largest obstacle is Poland's objection to proposals to make power stations buy permits to pollute from 2013. The plan could ramp up costs for Poland's power sector, which is about 95 per cent dependent on highly polluting coal. The country wants more time to prepare for carbon caps. The other major issue comes from Germany and Italy, which fear that plans to make industry pay for permits to pollute will damage their countries' abilities to compete in global markets, putting thousands of jobs at risk. The two countries are calling for large swathes of industry facing higher costs and tough international competition to be 80-100 per cent exempt from buying emissions permits from the EU's flagship Emissions Trading Scheme (ETS). ''We want a compromise, but not at any price,'' Italian Foreign Minister Franco Frattini told reporters today. ''We want to protect small and medium enterprises ... We cannot hit the economy at this very moment of economic and financial crisis.'' ''SOLIDARITY'' FUNDS NEEDED However, a healthy flow of funds through the ETS is crucial to defuse the opposition from Poland and the other coal-reliant Eastern European countries in the ''group of nine'', which has threatened to veto the climate plan unless the costs for coal users are made more bearable. The other countries with Poland in the group of nine are Czech Republic, Slovakia, Bulgaria, Romania, Hungary, Lithuania, Latvia and Estonia. About 10 per cent of ETS revenues has been earmarked for a 7.5 billion euro ''solidarity fund'' to compensate these former communist nations for the heavy cost of overhauling their power stations. Any exemptions for West European industry would reduce the portion available to Poland and its allies. ''We are not really going towards meeting the concerns of the group of nine,'' Poland's EU affairs minister Mikolaj Dowgielewicz said recently. ''We are actually going in the opposite direction.'' Poland is now pushing for the solidarity fund to be topped up, but meeting stiff resistance from Britain and Germany. ''We do not want an extra rule for Poland and other similar countries,'' German economics minister Michael Glos told reporters at a meeting of energy ministers in Brussels today. A British diplomat said the package would be challenging for all EU nations, adding: ''If there is any further need for solidarity, then we believe this should be dealt with through the EU's budget and not through the EU ETS.'' Time is short, with European Parliament elections next year, making a deal this year under the French presidency of the EU especially important. ''I keep my fingers crossed for the French,'' said Czech Deputy Prime Minister Vondra. He also stressed the importance of keeping all sides happy. ''The deal must be a win-win situation,'' Vondra said.

Source