SARAJEVO (Reuters) - The European Union’s energy watchdog praised Montenegro on Monday for introducing legislation to limit the emission of greenhouse gases (GHG) as well as an emission trading scheme for large industrial emitters.

“Montenegro continues to lead the way ... in the establishment of a complete system required to reduce GHG, protect the ozone layer and adapt to climate change,” the Energy Community, established by the EU and nine aspiring member states to extend EU energy policy to would-be members, said in a statement.

The legislation specifies the operators participating in emissions trading and also determines the total amount and minimum price of 24 euros ($26) per tonne of carbon dioxide (CO2) of emission credits to be auctioned.

It also established a stabilization reserve, the method of recording allocated emission credits, their transfer and use.

The funds raised from the emission credits auction would be transferred into the Environmental Protection Fund and used for environmental protection measures, renewables support and the financing of innovations.

Montenegro last year scrapped plans to add a 254 megawatt (MW) unit at the Pljevlja coal-fired power plant, becoming the first Western Balkans country in the coal-reliant region to take tougher stance on air pollution from coal.

The EU candidate country also aims to add new wind and solar capacity to help meet the bloc’s renewable energy targets and cut greenhouse gas emissions.

Most Western Balkan countries have failed to fulfil the first requirement to meet EU industrial emissions standards despite commitments governments made in 2005.

Environmentalists want the EU to impose a tax on carbon dioxide or a border carbon tax to ensure the region’s heavy polluters stop using a lack of investment in pollution control as a market advantage when exporting power to the bloc.