DEPARTMENT FOR
ENVIRONMENT, FOOD AND RURAL AFFAIRS News Release (News Release ref :
136/07) issued by The Government News Network on 17 May 2007
The results for UK
installations of the second year of the EU Emissions Trading
Scheme (EU ETS), which sets a cap on total carbon dioxide (CO2)
emissions from European industries, were published today.
UK sites covered by the scheme emitted 251.1 million tonnes of
carbon dioxide (MtCO2) in 2006, an increase of 8.8MtCO2, or 3.6%,
from 2005. The power sector increased its emissions by 9.3MtCO2,
while other industry sectors decreased their emissions by 0.5MtCO2
in 2006. The total UK cap for 2006 was 217.3MtCO2, meaning that
33.8 MtCO2 were purchased through emissions trading to keep within
the overall cap.
Under the scheme, installations which emit more CO2 than their
allocation need to buy allowances to cover the extra emissions,
and installations that emit less are able to sell allowances.
This creates an incentive for industry to reduce emissions and
improve energy efficiency.
The overall increase in emissions from UK installations, reflect
the provisional CO2 statistics published in March, which showed a
11/4% increase in overall CO2 emissions in the UK. This increase
was due mainly to unusually high international gas prices, which
led to a switch to coal in electricity generation. Coal-fired
power stations emit approximately twice as much as gas-fired power
stations per unit of electricity generated.
Our provisional estimate of CO2 emissions in 2006 is that they
were about 5.3% below 1990 levels. However, when the effect of the
EU ETS is taken into account, UK emissions were about 11.0% below
1990 levels, the same as in 2005.
The results also show that in 2006, UK installations were 100%
compliant with the scheme's requirements to report emissions
and surrender an equal number of allowances.
Climate Change and Environment Minister Ian Pearson said:
"The UK remains committed to a strong, effective carbon
market as a central part of our efforts to combat climate change.
The first phase of the EU ETS was designed as a learning phase,
and important lessons have been applied to the second phase.
"These figures reinforce the fact that the trading mechanism
works. The 2006 results across the EU reiterate the need to
increase the scarcity of allowances in the carbon market. We are
greatly encouraged by the Commission's decisions on Member
States' Phase II National Allocation Plans, which show a
clear determination to ensure real scarcity in the carbon market
and to use the ETS to drive down carbon dioxide emissions in line
with the EU's Kyoto targets.
"The 100% compliance with the requirements of the scheme is
outstanding, and reflects the effort made by operators, verifiers
and regulators in meeting the mandatory deadlines and the prompt
enforcement action taken by the regulators against those who were
non-compliant in 2005."
The 2006 results across the EU show that other Member States had
more allowances than needed to cover their emissions. This
reiterates the need for market scarcity for Phase II in order to
drive cost-effective emission reductions. The Commission's
decisions on Phase II NAPs to date recognise this.
The sector-level summary of 2006 EU ETS results in the UK will be
available at:http://www.defra.gov.uk/environment/climatechange/trading/eu/results/index.htm
Over the coming months, Defra will produce a summary report
examining the results in more depth.
Notes to editors
1. The EU Emissions Trading Scheme (EU ETS) aims to reduce
emissions of carbon dioxide at least cost to industry.
Participants are allocated tradeable emissions allowances that
they can trade to help them in meeting their emissions reductions targets.
2. The scheme commenced on 1 January 2005. The first phase runs
from 2005-2007 and the second phase will run from 2008-2012 to
coincide with the first Kyoto Commitment Period.
3. 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.
4. 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.
5. If an installation fails to surrender sufficient allowances to
cover its annual emissions, they will face financial penalties
(currently set at E40 per tonne), and also the requirement to
surrender sufficient allowances the following year.
Public enquiries 08459 335577;
Press notices are available on our website http://www.defra.gov.uk
Defra's aim is sustainable development
To subscribe or unsubscribe to Defra's mailing list go to:
http://www.gnn.gov.uk/
Once on the GNN website see Sign up
Nobel House
17 Smith Square
London SW1P 3JR
Website
http://www.defra.gov.uk