UK spells out plans for carbon trading scheme for smaller businesses
25 May 2007
The UK government this week presented plans for a mandatory domestic carbon trading scheme, intended to cover businesses and organisations that are too small to be covered by the EU emissions trading scheme (ETS).
The government outlined plans for the Carbon Reduction Commitment (CRC) scheme last year, but they have since become more concrete after initial consultations with stakeholders. The government raised the threshold for participation to organisations that consume at least 6,000 MWh per year.
The domestic trading scheme is part of a broader energy package that aims to put the UK on track to cut carbon-dioxide emissions by 60 per cent below 1990 levels by 2050, and to provide more energy security by developing renewable energy sources and nuclear power.
"The new Carbon Reduction Commitment will be a cost-effective scheme that will save over a million tonnes of carbon per year by 2020, while enabling businesses to continue to show real leadership in tackling climate change," Environment Secretary David Miliband said in a statement yesterday.
The CRC is expected to reduce 1.2 million tonnes per year of CO2 emission by 2020, with up to 5,000 organisations included in the scheme.
"The primary way that this is intended to be simpler is by reducing the burden of reporting," said Daniel Radov of economic consultants Nera, which has been advising the UK government on this scheme.
Radov said it was hard to assess the efficiency of the proposed scheme at this stage, and specifically highlighted the uncertainties associated with the rules for auctioning and how the revenue would be recycled.
Tony Ward of consultancy Ernst & Young said trading schemes could influence the way corporations think about their investments.
"Trading schemes are essentially proxies for creating the right signals to achieve technological advances and behavioural change; they are not in themselves a substitute for, nor sole solution to, the need for a reduction in emissions," he said.
The scheme will be made public for commentary in June and will not be operational until 2009 at the earliest, according to a UK government spokesperson.
