Industry buys up allowances to meet carbon targets

Figures released this week show that for the first time all 762 UK installations which are involved in the cap and trade scheme last year have complied with their obligations even though total carbon emissions were considerably higher than they had been in 2005.

Following the first trading period in 2005, four companies received civil penalties totalling £759,000 for failing to surrender enough allowances to match their emissions.

In 2005, the total allocation for all 762 installations was 215.2 megatonnes of CO2 while recorded emissions were 27.1Mt CO2 over that, at 27.1Mt CO2.

Last year the agreed allocation was slightly higher, set at 217.3 Mt CO2 but despite this the gap between the target and emissions widened to 33.8 Mt CO2.

The Environment Agency, which regulates the scheme in the UK, says that the figures are not a cause for concern arguing that while the ETS should reduce carbon emissions in the long run, the current goal is just to demonstrate that the system can work.

“The first phase of the EU ETS (2005-2007) is focused primarily on making sure the system works, by achieving a high level of confidence in the carbon reporting system, emissions registries and overall trading arrangements,” said Tricia Henton, the EA’s director of environmental protection.

“To achieve 100% compliance across UK industry by the second year of the scheme is an outstanding result and reflects the amount of hard work carried out to ensure a rigorous, consistent and effective approach to regulation and enforcement.

“The surge in carbon emissions over and above our national allocation was due to the UK’s stringent phase one cap and the increasing use of coal in the power sector in response to high gas prices, and demand for oil and iron and steel – forcing UK industry to buy allowances from the European trading market.

“Despite this outcome, the first phase of the EU ETS has exposed crucial information about prices and emissions that will mean tougher caps are put in place during the second phase (2008-2012) to ensure environmental benefits are achieved.

“And we must not forget that last year CO2 emissions in the UK were 11% below 1990 levels when the EU ETS is taken into account. It demonstrates that the United Kingdom is serious about cutting industry emissions by setting one of most stringent carbon caps in Europe.

“The ETS is a blueprint for a post-2012 global scheme to reduce carbon emissions and the EU has a vital leadership role to play. There are interested observers world wide watching to see how the EU ETS develops and the scheme must not fail.”

Sam Bond