Archived press release

Carbon Emissions Trading Scheme Starts Without UK on Board

24 December 2004

On January 1st 2005 the EU Emissions Trading Directive comes into force - the most important piece of climate change legislation anywhere in the world to date. But last minute decisionshave meant that the UK is not yet ready to take part.

Under the scheme, power stations, refineries and heavy industry across Europe, accounting for approximately half of EU carbon dioxide emissions, will be given a limit on how much carbon dioxide they can emit. Participants in the scheme need to hold sufficient carbon dioxide allowances to match their levels of pollution from Jan 1st. Butcompanies which do not have enough at the end of 2008must pay stiff fines or buy spare allowances from the companies which have managed to reduce their emissions.

The scheme is potentially very powerful and could ensureEurope meets its Kyoto target of an 8% cut in emissions of carbon dioxide by 2012 compared to 1990. But individual countries decide what allowances to give their own industries - and the UK's last minute decision to increase allocations has meant that the UK will not be ready to take part.

Friends of the Earth Climate CampaignerBryony Worthington said:

"The trading scheme is potentially a huge step forward in the race to tackle climate change, but it has been undermined by the lack of ambition countries have shown in bringing it into action. The UKhas provided a classic example of how not to do it. Lengthy negotiations mean the scheme will start late and industry will not be faced with any real incentive to make significant emission cuts."

The UK's last-minute decision angered the European Commission and means that when the scheme starts on Jan 1st, companies in the UK will not yet know how many allowances they have and cannot begin trading.This places the UK in the same category ascountries like Greece, who have yet to submit a plan, and Italy, Poland and the Czech Republic who have been told to reconsider their plans.

This is despite claims from the UK Prime Minister, Tony Blair that he wants to demonstrate leadership on the issue of climate change when he holds the Presidencies of both the G8 and the EU in 2005.

The generous hand out means that UK companies will not berequired to reducepollution levelsat all comparedagainst recentfigures. This is despite the fact that Government recently admitted that they were not on track to meet their target of a 20% cut in carbon dioxide by 2010. Since coming in to power in 1997, Labour has failed todeliver any reductions in emissions.

Fears over the impact on European competitiveness have led to generous allocations being made to industry across Europe, undermining the effectiveness of the scheme. Tighter allocations will need to be made in the second phase of trading starting in 2008 if Europe is going to hit its target.

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Published by Friends of the Earth Trust