Government announces £30 million for UK emissions trading scheme

The Government has announced a £30 million investment in a scheme to trade greenhouse gas emissions, which, it says, will give UK businesses and the City a head-start in what will become an international market.

Developed in consultation with environmental NGOs, the money is to fund an incentive scheme, which will work through companies being allocated binding limits on their emissions of greenhouse gases, with emissions permits corresponding to these targets. Companies will ensure that their actual emissions are covered by their permits, either by cutting emissions, or by buying permits from other companies. Those who are able to sell permits because they have cut greenhouse gas emissions will receive the associated financial reward.

Initially there will be an induction period in which trading will begin in 2001, and transfer of permits in 2002, a DETR spokesman told edie. By the beginning of the 2003-04 financial year, companies will have established the size of the reduction in greenhouse gas emissions which they can achieve, and will be allocated a corresponding proportion of the £30 million. The figure has been calculated by the UK Emissions Trading Group (ETG) as the amount required to compensate businesses for the cost of cutting emissions.

“The announcement of funding for an emissions trading incentive will provide the impetus required to kick-start an emissions trading scheme in the UK,” said Environment Minister, Michael Meacher. “The Government is giving concrete backing to an initiative which will deliver a significant reduction in greenhouse gas emissions, while enhancing the UK’s competitive position in a major new international market.”

“Details of the scheme will be worked out in detail over the coming months, with a view to starting the scheme as soon as possible,” Meacher continued. “This will maintain the UK’s position at the forefront of international developments in this new and exciting policy area.”

The funding is part of the Spending Review 2000, and follows a statement made in the budget that the Government is in favour of financial incentives for companies to achieve emission reduction targets.

“I’m very pleased that the Chancellor has allocated money to support emissions trading,” said Stephen Timms, Financial Secretary to the Treasury. “This is an example of the Government putting sustainable development into practice: delivering improvement and helping British businesses to take the lead in developing innovative ways to save energy and reduce greenhouse gas emissions.”

The scheme still requires development, says the Government, who will continue to work closely with ETG, a body set up in 1999, by the Confederation of British Industry (CBI), and the Advisory Committee on Business and the Environment (ACBE)(see related story).

Key issues that still need to be resolved include the detailed design of the incentive; the way in which it links to the allocation of targets in the trading scheme; the establishment of a verifiable emissions baseline; and consideration of the role of the electricity generators in the trading scheme (see related story).

According to the DETR, consideration also has to be given to the implications of the European Commission Green Paper on emissions trading published in March as part of the European Climate Change Programme (see related story).

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