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EU Emissions Trading Scheme

Volume 461: debated on Monday 11 June 2007

To ask the Secretary of State for Environment, Food and Rural Affairs what assessment he has made of the impact of the EU Emissions Trading Scheme on emissions of carbon dioxide in (a) the UK and (b) other participating nations in each year since its commencement; and if he will make a statement. (141655)

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 emissions reductions referred to above may not therefore all take place in the UK.

Comparing 2003 and 2005 emissions in the UK from incumbent installations in the EU Emissions Trading Scheme shows a reduction of around 10 million tones (Mt) of carbon dioxide (CO2). This equates to 4 per cent. However, a number of new installations commenced operation and entered the scheme in 2004 and 2005, emitting a total of around 5 Mt CO2 in 2005. Therefore, the net total reduction in emissions from UK installations (incumbent and new) in the EU ETS was approximately 5 Mt CO2 between 2003 and 2005.

The 2006 EU ETS results in the UK show an increase in emissions from 2005 of 8.8 Mt CO2. This increase was due mainly to unusually high international gas prices leading to a switch to coal in electricity generation. It is difficult to assess what the level of emissions would have been if the scheme had not been in place, but they are likely to have been higher.

A study carried out last year estimated that emissions reductions (abatement) across the EU resulting from the implementation of EU ETS in 2005 could be somewhere in the region of 50 Mt CO2 to 200 Mt CO2. We are not aware of similar analysis for 2006.

The Government are committed to a strong and effective carbon market as a key factor in combating climate change. Phase I of the scheme is a learning phase and, for this reason, caution should be exercised when trying to draw conclusions from the results.