UK Emissions Trading Scheme

Under the Kyoto Protocol, the UK's target is to cut its emissions by 12.5% below 1990 levels by 2012. However, the Government has committed to go further than Kyoto and has set a domestic goal to cut the UK's emissions of carbon dioxide by 20% below 1990 levels by 2010.

The UK Government has developed a Climate Change programme to meet this national target. The programme comprises a package of policies and measures. Many businesses will face cost increases from these measures and may need to make changes to products, processes and operations. However, there are opportunities to offset the costs through the benefits of increased energy efficiency, sales of low carbon technology and emissions trading both nationally and internationally.

Details of some of the key measures in the Programme are outlined below:

Climate Change Levy

The Climate Change Levy (CCL) is a tax on the use of energy in industry, commerce and the public sector, with offsetting cuts in employers' National Insurance Contributions and additional support for energy efficiency schemes and renewable sources of energy. Typically the levy will add up to 10-20% to a company's energy costs. Rebates of 80% of the levy are available to those sectors of industry who come within the framework of the IPPC regime, and who enter into climate change agreements with the Government, but participants will be required to meet energy or emission targets covering the next ten years. The levy package as a whole is expected to save at least 5 million tonnes of CO₂ per year by 2010.
Further information is available at: http://www.defra.gov.uk/environment/ccl

Emissions Trading Scheme

The UK Greenhouse Gas (GHG) Emissions Trading Scheme (ETS) was launched in April 2002 and is the world's first economy-wide greenhouse gas trading scheme. Thirty-one organisations volunteered to take on legally binding obligations to reduce their emissions against 1998-2000 levels in return for financial incentives from the Government. The aim is for the scheme to deliver over 4 million tonnes of CO₂ reductions by the final year of the scheme.

The scheme is also open to the 6000 companies with Climate Change Agreements. These negotiated agreements between business and Government set energy-related targets. Companies meeting their targets will receive an 80% discount from the Climate Change Levy, a tax on the business use of energy. These companies can use the scheme either to buy allowances to meet their targets, or to sell any over-achievement of these targets. Anyone can open an account on the registry to buy and sell allowances.

In the first year, the Direct Participants achieved emission reductions of 4.64 million tonnes CO₂e (carbon dioxide equivalent) against their baselines and in the second year they achieved emission reductions of nearly 5.2 million tonnes CO2e against their baselines.
Further information can be found at: http://www.defra.gov.uk/environment/climatechange/trading/index.htm#News

Kyoto Mechanisms

International "Kyoto mechanisms" offer UK business further opportunities to meet their emissions reduction targets. Under the protocol, countries are able to participate in international emissions trading, joint implementation (JI) and the clean development mechanism (CDM). This means that countries that implement policies and measures that take them beyond their national target can sell these 'excess' reductions to other countries. Many countries expect that they will not participate directly in the international emissions trading system, but will authorise companies to trade on their behalf. The UK Government intends to allow firms who take on an absolute carbon target in order to participate in the UK's trading scheme, to be able to use credits from JI or CDM projects to help them meet their domestic obligations (subject to the final form of the international rules).
For further information go to: http://www.dti.gov.uk/ccpo

Energy Efficiency Best Practice Programme

The Energy Efficiency Best Practice Programme (EEBPP) is designed to help organisations cut their energy bills by 10 - 20%. It provides independent, authoritative advice and assistance to UK private and public sector organisations. There are many actions and financial incentives outlined in the climate change programme which businesses can take to help reduce greenhouse gas emissions including through the IPPC regime and the new Building Regulations.
Additional information about these measures can be found at: http://www.defra.gov.uk/environment/climatechange