Emissions trading could leave UK in the dark

The CBI warned this week that the risk to UK business from new government environmental targets could become excessive if other European Union economies fail to deliver on their targets.

The risk to UK business from tough new government environmental targets could become excessive if other European Union economies do not deliver on their targets, according to the Confederation of British Industry (CBI).

In its submission to the government’s consultation on implementation of the EU emissions trading scheme the CBI said the government must ensure it does not impose a damaging handicap on UK business, which other EU countries are not planning for themselves.

The emissions trading scheme will allocate carbon emissions quotas to individual plants. Sites that emit less than their allocation will be able sell their excess quota while those that emit more will have to buy in allowances.

CBI Deputy Director-General, John Cridland, said: ‘British business is already demonstrating it takes the threat of climate change very seriously. But it is extremely concerned that the UK is making too large a commitment if other countries do not deliver. This could damage business competitiveness in key industrial sectors, especially if electricity prices rise faster than the government expects.

‘Germany is expected to protect its electricity generation sector while the UK’s will bear the brunt of the emissions reduction obligation with the extra costs passed to UK power users.

‘The CBI supports emissions trading and does not want it to be discredited. The government must implement rules and targets for the UK that do not undermine the ability of companies and plants to compete and it must ensure consistency across the EU. If the government cannot achieve this and all member states cannot meet the EU deadline the government must be prepared to revisit the UK’s proposed plan.’

The British government must avoid severe damage to the competitiveness of affected sectors or companies by ensuring all data are as accurate as possible.

The CBI said it is also concerned that inaccurate data is adding to uncertainties about the impact of the targets on UK business. Lack of clarity is making it difficult to be sure that figures for past emissions, and projections for the future, are accurate. Some plants have been missed out or wrongly categorised, others have been given quotas so low that they could suffer huge extra charges.

If the government cannot ensure accurate data and equivalent effort across the EU in time to meet the scheme’s 1 January 2005 introduction date it must be prepared to adjust the targets or relax the rules. The CBI believes it is more important to produce an emissions trading scheme that works than to rush things through to meet EU deadlines.

John Cridland added: ‘The UK produces about two per cent of the world’s greenhouse gas emissions. Even the severest reductions here would mean very little in global terms.

‘The UK is putting itself on the line, expecting others to follow but it’s increasingly clear that they are not going to. For this small but important gain, the government risks driving jobs abroad to countries where conditions are less onerous.’