UK vows carbon trading is here to stay as it sets ETS cap

The UK has announced tougher targets for the second phase of the European Emissions Trading Scheme, saying it wants to demonstrate leadership and a commitment to the environment.

Power companies will be expected to bear the brunt of the emissions reductions as other industries will be allowed to continue business as usual to avoid damaging their international competitiveness.

“The [power] sector is mainly insulated from international competition and this sector’s allowances should therefore be set at a lower level,” said David Miliband, Environment Secretary.

Other industries will of course benefit from reducing their own carbon emissions, as they would then be able to sell their excess allowances.

Power companies will be encouraged to invest in low-carbon technologies or buy carbon credits through the Clean Development programme, which sees authorised carbon reduction initiatives in the developing world, such as forest planting and renewable energy schemes, to make up some of the shortfall in meeting targets domestically.

The UK’s cap will save an additional 8 million tonnes of carbon each year, roughly equivalent to the emissions of 4.5 million homes and at the upper limit of the scale Defra consulted on.

Figures on the table had ranged from a business-friendly 3 million tonnes to an eco-leaning 8 million tonnes.

The targets are 12.5% lower than those set for the current period and would see the UK reduce its CO2 emissions by 16.2% on 1990 levels by 2010, still missing the Government’s self-imposed target of 20%.

The figures will nevertheless go some way towards appeasing environmentalists, who had been concerned by Germany’s weak targets announced earlier this week (see related story).

“We think this is the right thing to do environmentally, economically and also diplomatically,” said Mr Miliband.

Mr Miliband also announced the creation of a new Environmental Transformation Fund, which would invest some of the cash raised by auctioning 7% of the UK’s carbon allowances into renewable energies and other non-nuclear low carbon technologies.

While Mr Miliband refused to say all funds raised from auctions would all be ring fenced and go straight to the new fund, he insisted it would substantially benefit from their sale.

Sam Bond

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