Why do we need the EU ETS?
Sir Nicholas Stern argues that we must create a price signal for carbon in order for businesses to take full account of the cost of their carbon emissions and to drive emissions reductions.
It is vital for competitiveness that we reduce emissions through mechanisms which:
- do not generate unnecessary regulatory burdens
- allow businesses to make their own choices on priorities, and
- minimise the costs of reducing emissions.
Emissions trading meets these requirements and is the Government’s instrument of choice for pricing carbon. Trading is an economically efficient way of achieving emissions reductions since it provides companies with the flexibility to respond in the most cost-effective way. Other approaches such as direct regulation, taxes are less flexible and so could be more costly and more burdensome. Emissions trading also provides business opportunities. It is a driver for investment and innovation in low-carbon technologies. Establishing a price for carbon will help bring cleaner technologies to market as well as increasing demand for new technologies. A new commodity market requires new financial services – The UK ETS and EU ETS have already given UK companies providing emissions trading services, such as brokerage and verification, the opportunity to gain valuable experience that places London and UK financial services in a strong position as international emissions trading develops.
Page last modified: 17 September 2007
Page published: 8 September 2003