European Commission may force changes to UK emission trading

The European Commission has approved the UK scheme for trading in greenhouse gases, which is due to start in February 2002. However, as the UK scheme has some significant differences to the proposed European scheme, when the latter scheme comes in to force in 2005 Europe may force the UK scheme to become compatible.

The UK trading scheme will be voluntary, and includes £30 million in grants for five years and is designed to bring about substantial reductions in greenhouse gas emissions (see related story).

On the other hand, the European Commission emissions trading proposal will be on a mandatory basis, with no financial incentives (see related story). The European scheme will make electricity and heat production facilities directly responsible for their emissions, and is likely to include a financial penalty per tonne of carbon dioxide equivalent emitted over allowance holdings in addition to the obligation to make up for shortfalls.

Such differences are likely to lead to market distortions should both schemes run at the same time, says the Commission, and so, in time, is intending to propose modifications to the UK scheme in order to allow a smooth adaptation to EC legislation. However, it is hoped that the UK government will work towards the same objective on its own initiative.

Nevertheless, the Commission has welcomed the UK scheme, and is keen to use the initiative as an early learning experience.

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