Carbon trade scheme 'is failing'

By Julian O' Halloran BBC File On 4

The government's own figures show an increase in greenhouse gases

The EU's carbon trading scheme has increased electricity bills, given a windfall to power companies and failed to cut greenhouse gases, it is claimed.

An investigation by BBC Radio 4's File on 4 programme has found that after two and half years the scheme has yet to cut in carbon dioxide emissions.

The consumer body Energywatch said customers are getting a raw deal.

But a government minister has promised that the scheme's next phase will be a big improvement.

The EU's Emission Trading Scheme - a key part of the UK Government's drive to combat climate change - began in 2005 and created a trade in carbon allowances.

It is essentially a permit to pollute.

Power generators received their allowances free of charge but were allowed to reflect the value of those in increased prices to customers, as if the companies had actually had to buy the allowances.

Energywatch believes this increased electricity bills by about 7% in 2005.

'Windfall profits'

And according to one government estimate, that delivered windfall profits of up to £1.3bn to the generators in that year - higher than environmental campaigners had claimed last year.

However, so far the carbon scheme has brought no clear payback in terms of cutting emissions.

Provisional government figures from the Department for Environment Food and Rural Affairs (DEFRA) suggest CO2 output in Britain actually went up, by 1.25% last year wiping out a slight drop of 0.01% in 2005.

It is also reckoned that CO2 emissions across the EU also rose by between 1 and 1.5% over the last two years.

Carbon reduction

The chief executive of Energywatch, Allan Asher, said , "Consumers increasingly accept the need for reductions in carbon.

"However they are paying the price and not seeing the benefits. The big generators are banking huge amounts of money and consumers aren't benefiting."

But the Minister for Climate Change, Ian Pearson, told File on 4 that the carbon trading scheme has been an administrative success yet concedes there have been problems in the first three year phase to the end of 2007.

"If you are saying to me it hasn't achieved a massive amount so far when it comes to CO2 reductions, well I agree with you and I think Phase Two will be a big, big improvement...and a key instrument in helping us all to achieve our carbon reduction targets across Europe."

File On 4 is broadcast Tuesday 5 June 2007 at 2000 BST and repeated on Sunday 10 June 2007.

Energy heads back carbon market

Tony Blair was one of the leaders present at the forum

Business leaders from the Energy industry have called for global carbon markets to help tackle climate change.

Speaking ahead of the G8 summit of industrialised nations, they said they wanted a market in which carbon prices were transparent and consistent.

The idea of carbon trading is that firms can either cut emissions or buy the right to keep polluting.

It is hoped that such a global market would encourage the development of cleaner technologies.

"I believe that unlocking the ability of a competitive market to innovate and change behaviours will achieve the lost cost solution to climate change," said Tony Hayward, the newly appointed chief executive of BP.

Energy sector leaders are keen that there should be a single price for carbon emissions throughout the world.

They were taking part in a two-day event in Berlin organised by the environmental network Globe International ahead of this week's G8 summit.

It was attended by legislators and business leaders from the G8 countries as well as emerging economies such as Mexico, Brazil, China and India.