Government backtracks over NAP to issue lower level allowances to industry
The Government has been forced to backtrack over its plan to weaken the National Allocation Plan (NAP) determining the level of greenhouse gases the country is allowed to emit, and issue allowances based on its original plan issued in April last year.It will still be initiating legal proceedings against the European Commission to allow it to increase its allocations in line with the revised plan it submitted in November last year.
The controversy began when the European Commission refused permission for this revised plan to go ahead as it would greatly increase the amount of carbon dioxide and other greenhouse gases that UK industrial plants would be allowed to emit. The EC argued that the revised levels were far in excess of those in the April 2004 plan which had been approved, and which were in themselves a watered down version of the draft plan which had been submitted in January 2004.
This means there are 736 million allowances, equivalent to 736 million tonnes of CO2, for British industry covered by the EU ETS rather then the 756 million allowances asked for in the November NAP.
The Government argues that projected emissions from UK plants are 56 million tonnes higher than when they first made the submission of the NAP to the EC and that a proposed increase of 20 million tonnes is perfectly reasonable for the first phase of the scheme. However, the EC rejected this and said the level of the April NAP cannot be exceeded.
It is expected that the electricity generating sector will be hardest hit, as the Government said it would have to lower the amount of allowances they would be allocated to cover the shortfall.
The UK is now applying to the Court of First Instance (CFI) for an expedited hearing to take place in the first half of 2006.
The CBI expressed disappointment that the Commission rejected the amended allocation plan and backed the legal action against the EC.
"In the meantime, businesses need certainty about their obligations under the trading scheme. Under the circumstances, the Government's decision to base allowances on the earlier figures is the right call to make - though that will put the spotlight on what more the power companies can do to cut emissions," said Michael Roberts, CBI Director of Business Environment. "But the Government also needs to learn from this episode. The whole process has not been handled well. With big decisions still to be taken about future phases in the scheme, it is important that Government works more effectively with business next time around."
By David Hopkins