“The EU Directive has driven a coach and horses through UK climate policy and has turned the UK’s early start in emissions trading into a false start,” said the reports author, Steve Sorrell of Science and Technology Policy Research (SPRU) at Sussex University. He also stated that the full implications of the discrepancy have not yet been appreciated by government and industry.
The directive also has implications for the Renewables Obligation, a recently proposed scheme for emission reduction projects, and the implementation of the Integrated Pollution Prevention and Control directive. In each case, the emissions trading directive causes problems with double regulation, double crediting, and ‘linking’, where there are attempts to trade commodities between different trading schemes.
The UK government has been aware of the discrepancies between the two schemes since at least November 2001, when the European Commission approved the UK scheme. At the time, the Commission noted that UK emissions trading would have to become compatible with the European scheme when it comes into effect in 2005 (see related story).
According to the SPRU, solutions include removing the Climate Change Levy from electricity and extending it to all fossil fuels, replacing excise duties on oil; and facilities currently subject to climate change agreements which would not be eligible for the EU scheme should renegotiate their agreements so that their targets relate to fuel consumption only.