Magazine article Public Finance

UK Carbon Scheme 'Not Learning from EU's Errors'

Magazine article Public Finance

UK Carbon Scheme 'Not Learning from EU's Errors'

Article excerpt

The chair of an influential MPs' panel on the environment has claimed that a new carbon emissions trading scheme covering much of the public sector could prove to be ineffective.

Tim Yeo, chair of the Commons environmental audit select committee, said important lessons had not been learnt from the European Union Emissions Trading Scheme, which had so far failed to stimulate green industries or reduce emissions.

The committee's Februarys report, The role of carbon markets in preventing dangerous climate change, outlined weaknesses in the EU scheme.

Under the trading scheme, organisations have to buy carbon allowances to cover their emissions. But the MPs found that the allowances were priced too low to encourage investment in low-carbon technology. They said a reserve price should be introduced for carbon credit auctions, to ensure prices did not drop below a minimum level.

The report also found the recession had led to a faster reduction in carbon outputs than the EU scheme would have caused on its own, because its cap on allowances was not strict enough.

Yeo told Public Finance that the UK's Carbon Reduction Commitment scheme, which will cover all Whitehall departments and most larger local authorities when it begins this April, could be improved by taking into account the shortcomings of the European scheme. …

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