NEWS RELEASE
Date: 20 May 2008
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Woolas praises Emissions Trading System’s remarkable progress
The final UK results for the first phase of the EU Emissions Trading System, which ended in December 2007, demonstrated that carbon trading can work and helped to cement the UK’s role at the centre of the global carbon market, Environment Minister Phil Woolas said today.
In 2007 the UK had a shortfall of 27.6 million allowances, meaning permits had to be purchased from elsewhere in the EU.
Across Phase I of the scheme the UK had a shortfall of 88 million allowances – a reflection of the fact that the caps set on emissions for installations in the UK were much more realistic than the overallocation seen in some other countries during Phase I.
Phil Woolas praised the robust performance of the system through its first phase, saying:
“Carbon trading is already playing a crucial role in the fight against climate change, and I am pleased that the UK is taking a lead within Europe in developing this market.
“For the second year running, compliance with the ETS has been 100 per cent. This shows that companies are taking their responsibilities seriously and that carbon reduction and trading has become a normal part of their business.
“With the tougher decisions made by the European Commission on other Member States’ national allocation plans, Phase II of the ETS is already operating strongly with realistic caps that ensure scarcity in the carbon market.”
You can find the full EU ETS results by sector here: www.defra.gov.uk/environment/climatechange/trading/eu/operators/compliance.htm
Notes to editors
1. The 2007 EU ETS results show that UK sites covered by the scheme emitted 256.4 million tonnes of CO2 in 2007, an increase of 5.4 million tonnes on 2006 levels.
This was caused by an additional 59 organisations joining the scheme in 2007. The total emissions of organisations already in the scheme decreased by 2.9 million tonnes of CO2.
2. The EU Emissions Trading System (EU ETS) aims to reduce emissions of carbon dioxide at least cost to industry. Participants are allocated trade emissions allowances that they can trade to help them meet their emissions reductions targets.
3. The scheme commenced on 1 January 2005. The first phase ran from 2005-2007 and the second phase will run from 2008-2012 to coincide with the first Kyoto Commitment Period.
4. The scheme works on a "cap and trade" basis. Member States governments are required to set an emissions cap for all installations covered by the scheme. Each installation will then be allocated allowances for the particular commitment period in question. The number of allowances allocated to each installation for any given period is specified in a document called the National Allocation Plan (NAP). Anyone who is not covered by the scheme will be able to open an account on the Registry and buy and sell allowances.
5. Each installation covered by the scheme has to hold a greenhouse gas emissions trading permit (in effect, a licence to operate and to emit carbon dioxide). Each permitted installation will then receive an allocation of allowances. Member states must ensure that by 30 April each year, the operator of each installation surrenders a number of allowances equal to the total emissions from that installation during the preceding calendar year. Installations are required to have these annual emissions independently verified. These allowances are then ‘retired’ from the Registry. Each installation has, in effect, three options:
- Reduce annual emissions to exactly the number of allowances it has been allocated for that year;
- Reduce annual emissions to below its cap and either sell the excess allowances it holds to another company or bank them (i.e. store them for future use); or
- Keep annual emissions at a level above the level of allowances it has been allocated and buy allowances from the market to cover the difference.
6. If an installation fails to surrender sufficient allowances to cover its annual emissions, they will face financial penalties (currently set at €40 per tonne), and also the requirement to surrender sufficient allowances the following year.
End
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Page published: 20 May 2008