B2.8.2 UK Emissions Trading Scheme


The UK Emissions Trading Scheme ended in December 2006, with final reconciliation completed in March 2007. This was the world’s first economy-wide greenhouse gas emissions trading scheme. It ended after the introduction of the European Emissions Trading Scheme.

Participating companies were allocated allowances, each allowance representing a tonne of the relevant emission. Emissions trading allowed companies to emit in excess of their allocation of allowances by purchasing allowances from the market. Companies that emitted less that their allocation sold their surplus allowances. This provided a greater degree of flexibility to meet emission reduction targets.

The environmental outcome was not affected because the amount of allowances allocated was fixed.


Carbon Tax

A Carbon Tax would impose a levy on polluters based on the amount of emissions they release to encourage polluters to reduce emissions. The money raised from the tax could then be channelled to research and develop low-carbon technologies and clean energy.

One advantage of introducing a tax is that there is an existing tax system in place, which would be used to collect the revenue. However, many believe that taxes do not have the desired affect and only serve to punish certain sectors. It has also been proven in the past that some polluters simply pass on the cost to consumers rather than actually reducing emissions.

The BBC reported in March 2010 that The European Commission is planning an EU-wide minimum tax on carbon (that would apply to fuel, natural gas and coal) but that the UK opposes such a move. To be successful, all 27 EU member states’ governments must be in agreement.

Carbon taxes already exist in the EU Member States of Sweden, Finland and Denmark. In France the idea is currently being debated.

At the end of 2009 the French President (Nicolas Sarkozy) announced plans for a new carbon tax to be set at 17 euros per tonne of emitted CO2 to be phased in gradually. It was intended to apply to households as well as enterprises, but not to the heavy industries and power firms included in the European Emissions Trading Scheme. As of March 2010, this proposal; had already been struck down.

However, the European Emissions Trading Scheme is facing severe criticism and many feel that an additional Carbon Tax is the only way to ensure a reduction in carbon.