To ask the Secretary of State for Environment, Food and Rural Affairs what estimate he has made of the total cost to the UK economy of the first phase of the European Union’s Emissions Trading Scheme. (137523)

An exercise carried out last year, looking at the regulations in force as at May 2005, estimated that the administrative cost to businesses in phase I of the EU Emissions Trading Scheme was around £175,000 for all 511 installations in England and Wales.

For phase II, the total administrative cost (including Scotland and Northern Ireland) is estimated to be around £125,000. This is lower than in phase I as all installations already have Greenhouse Gas (GHG) permits.

Further estimates of the costs to the UK of the EU Emissions Trading Scheme are available in the Regulatory impact assessments published by DEFRA. Copies of these are available in the Library of the House.

A tiered approach to subsistence charges and permit application fees has been adopted, where the charges reflect the scale of emissions from the installation. This is consistent with cost-reflectivity principles.

Following lessons learnt from phase I of the scheme, the Government have introduced a de minimis threshold and revised the interpretation of the definition of a ceramics site. 10 per cent. of installations have been removed from phase II of the scheme covering less than 0.3 per cent. of scheme emissions. The revision of the ceramics definition is expected to remove around 30 installations, representing 0.08 per cent. of total emissions within the scheme.

The Environment Agency commissioned a study that looked at the cost of compliance in the EU ETS. It found that in the first year of the scheme the costs for smaller emitters (emitting less than 10KtCO₂ a year) were between £1.08 and £2.77 per tonne of CO₂.

It is difficult to get an accurate picture of the actual cost of compliance as Government do not have access to the prices businesses pay for allowances. The regulatory impact assessment (RIA) for phase II of the scheme estimates that the cost of the scheme to the UK economy could be between £80 million and £640 million per year. This cost assumes a certain level of abatement will take place within the UK and also that the UK will purchase some allowances from the market. The final cost will therefore depend on the market price of carbon.

To ask the Secretary of State for Environment, Food and Rural Affairs what estimate he has made of the number of UK businesses that have decided to migrate from participation in the European Union's Emissions Trading Scheme following changes made to the ‘de minimis’ threshold of the scheme between its first phase and its second phase. (137557)

A voluntary ‘de minimis’ threshold was introduced for Phase II of the European Union's Emissions Trading Scheme (EU ETS) due to the disproportionate burden placed on some installations by participation in the scheme.

94 installations successfully applied to the ‘de minimis’ threshold and these will be excluded from Phase II. This has led to the removal of 10 per cent. of installations from the scheme, covering less than 0.3 per cent. of scheme emissions. Emissions at these installations are likely to be covered by the proposed Energy Performance Commitment or by Climate Change Agreements.