A EUROPEAN Union-wide emissions trading scheme, designed to combat global warming, could push up industry's costs without achieving its goal of curbing greenhouse gases, business groups and energy experts warned yesterday.
The scheme is due to take effect next January and will penalise those industries which produce excess amounts of carbon dioxide but reward those who beat their emissions targets by enabling them to trade surplus pollution permits. Transport and domestic emissions are excluded from the scheme.
The UK has agreed to cuts in its CO2 emissions which are 12.5 per cent greater than the targets it is committed to under the Kyoto agreement - raising fears that the scheme will put British industry at a competitive disadvantage with rivals inside the EU as well as in the rest of the world. The US, China, Russia and India have not signed up to Kyoto and have no plans to introduce any schemes to combat greenhouse gas emissions.
The scheme will cover 12,000 energy-producing and energy- intensive industries, such as steel, aluminium, glass and paper manufacturing, but in the first three years it will be limited largely to power stations. The UK will have to reduce CO2 emissions from power stations by 30 million tonnes a year, to 132 million tonnes.
The scheme is likely to increase the cost of wholesale electricity by between 10 and 30 per cent, based on power plants having to pay EUR8 to EUR10 for each tonne of CO2 they produce above their allocation.
Jeremy Nicholson, the director of the Energy Intensive Users Group, said a trading scheme was preferable to straightforward taxation of carbon emissions, but the impact could still be to drive investment offshore. "The scheme will place an administrative and financial burden on energy intensive companies which they will not be able to pass on to the end consumer because of the competitive nature of the markets in which they …