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EU Emissions Trading Scheme

Volume 460: debated on Thursday 24 May 2007

To ask the Secretary of State for Environment, Food and Rural Affairs what estimate he has made of the extent of the reduction in (a) UK and (b) EU emissions which will result from the first phase of the European Union’s Emissions Trading Scheme. (137524)

The approved UK National Allocation Plan (NAP) for Phase I (2005-07) of the EU Emissions Trading Scheme is set to deliver carbon dioxide emissions savings of around 65 million tonnes (roughly 8 per cent.) below the projected business-as-usual emissions of the installations covered by the scheme during phase I. The rationale behind emission trading is to ensure that the emission reductions take place where the cost of the reduction is lowest, thus lowering the overall costs of tackling climate change. The aforementioned emission reductions referred to may not, therefore, all take place in the UK.

As phase I has not yet finished, it is difficult to quantify what the overall emission reductions will be across the EU. A study by the Massachusetts Institute of Technology and others has suggested that emission reductions (abatement) across the EU resulting from the implementation of EU ETS in 2005 could be somewhere in the region of 50MtCO2 to 200MtCO2. A survey by Point Carbon showed that about two-thirds of the 800 or so EU ETS participants who responded stated they had initiated internal abatement projects as a result of the EU ETS. Another survey for the European Commission conducted by McKinsey and Ecofys also found that the EU ETS is impacting on corporate behaviour. Based on this scheme, CO2 involves a real cost. About half the companies already ‘price in’ the value of CO2 allowances and over 70 per cent. intend to do so in the future.