March 4, 2011 / 9:12 AM / in 9 years

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

* Overlap between CRC and EU ETS will hinder CO2 cuts

* 90 mln T CO2 saved could be emitted by EU industry instead

By Nina Chestney

LONDON, March 4 (Reuters) - A UK corporate carbon reduction scheme will be largely unsuccessful in cutting emissions from UK businesses due to an overlap with the EU’s Emissions Trading Scheme, a report by offsetting firm Carbon Retirement said.

The Carbon Reduction Commitment (CRC) was introduced to force large public and private sector organisations to help cut Britain’s greenhouse gas emissions by 4 million tonnes and corporate energy bills by 1 billion pounds ($1.6 billion) a year by 2020.

Businesses using more than 6,000 megawatt hours of electricity per year must monitor usage and report their emissions annually. From 2012, they will also have to estimate future emissions and buy carbon permits under the scheme.

The Carbon Retirement study estimates that 87 percent of carbon dioxide saved by firms in the CRC will not translate into net emission reductions because of an overlap with the EU Emissions Trading Scheme (EU ETS).

“Between 2011 and 2020, the 90 million tonnes of savings CRC participants are expected to achieve through electrical efficiency will be emitted instead by heavy industry,” the report said on Friday.

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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