UK CO2 trade scheme won't cut net emissions-report

Fri Mar 4, 2011 9:10am GMT

A UK government adviser has warned that 70 percent of emissions covered by the CRC are also covered by the EU ETS.

Under the EU ETS, Europe's heavy industry and utilities receive carbon permits equivalent to their emissions output. If their output goes down, they can sell them. If output rises, they buy more to cover their emissions.

If the CRC works, UK firms will invest in energy efficiency and reduce their electricity and gas use.

"This is problematic because if 87 percent of reductions through the CRC are from a reduction in electricity, this will reduce demand on electricity providers (for EU permits)," Emily Haynes, Carbon Retirement's assistant director, told Reuters.

"Because the amount of permits across the EU ETS is fixed, those that would have been purchased by electricity producers will instead be purchased and used elsewhere -- resulting in no net reduction of CO2," she added.

The UK government is currently seeking to simplify the CRC.

The report suggests that the government should calculate the the volume of CO2 reductions made by CRC participants each year.

It could then retire permits from its national allocation under the EU ETS to match this volume so they are not available for other industries to purchase.

Alternatively, CRC participants could buy and retire EU carbon permits rather than buying CRC permits.

(Editing by Jane Baird)

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