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In the UK, emissions from heavy industry such as power generation, chemical processing and cement production, are capped under the EU Emission Trading Scheme. The UK Government has now made over €1bn from selling ‘pollution permits’ under this scheme, and carbon offsetting company Carbon Retirement is calling for this money to be ring-fenced for green projects.
The EU Emission Trading Scheme (EU ETS) is the key tool that European governments use to meet the emission reduction targets they have signed up to in the Kyoto Protocol.
Member states allocate a fixed number of emission allowances (EUAs or allowances) to industrial plants within several carbon intensive industries, which account for around 40% of the EU’s total greenhouse gas emissions. At the end of each year, the emissions from each plant are measured and the companies that own them must present to their government an equal number of allowances. The allowances are tradable and a large and liquid secondary market has grown.
Between 19 November 2008 and 10 February 2011 the UK Government has auctioned over 77m allowances to heavy industry. The auction on 10th February tipped the Government’s revenue from auctioning these allowances over €1bn. Projections show that this revenue is due to increase significantly, reaching up to €64bn by 2020. At the moment this money goes straight to the Treasury.
Earmarking this revenue (i.e. devoting a particular part of it for a specific expenditure) for green projects is something that the European Commission has proposed but that the UK Government has not yet adopted.
Making polluters pay the price of their carbon emissions through the EU ETS is certainly a positive step toward reducing emissions. But Carbon Retirement, a carbon offsetting company that removes allowances from the EU ETS as a way for companies to offset, has released a report questioning whether the UK Government will be as fully committed to mitigating climate change when it comes to spending the money.
They suggest that the money should be earmarked for green projects. In particular they suggest using the revenue to a) address fuel poverty, b) provide green funds for developing countries and c) help meet UK climate change targets.
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