Emissions trading is one of the government's tools in its strategy for reducing greenhouse gas emissions. Commencement of trading will coincide with the introduction of the government's climate change levy (CCL) on businesses' use of energy. The scheme has been designed to run alongside the levy, providing a cost effective way for companies to cut their emissions. Energy intensive users who are negotiating CCL discounts in exchange for reductions in their emissions will be able to participate in the trading scheme on the basis of their agreed targets. "By providing flexibility in meeting environmental targets, it will encourage a wider range of firms to take on emission reduction targets," explains Charles Nicholson from BP Amoco and chairman of the Emissions Trading Technical Committee.
The ETG was set up in June 1999 by the Confederation of British Industry (CBI) and Advisory Committee on Business and the Environment on the recommendations of a government task force, led by Lord Marshall, for an emissions trading scheme. Some 30 companies have been involved in developing the scheme so far, and more are expected to join once it is operational.
In particular, financial incentives, available to firms not involved in negotiated reduction agreements, will encourage a much wider group of companies to take part. The need for such incentives was accepted recently by Chancellor of the Exchequer Gordon Brown. He promises the government will work closely with the ETG on the trading framework.
"If there were no incentives in the first years of a UK scheme, firms would face unacceptable risks in agreeing absolute targets to cut their emissions," comments Peter Agar from the CBI.