UK Climate Change Programme 2006 - JNCC - Defra

Business
51
ETS allowances has developed rapidly across
Europe with the City of London emerging as one
of the main centres of trade.
by the electricity supply industry, which is
relatively less subject to international competition
and able to pass on costs.
38. The second phase of the scheme runs from 2008
to 2012, coinciding with the first Kyoto Protocol
commitment period. In developing their National
Allocation Plans for the next phase, Member
States will have to demonstrate how they intend
to use the scheme and other policies and
measures to achieve their targets under the
burden sharing agreement. Over the last year, the
Government has been working with the European
Commission and other Member States to ensure
that the lessons learned from the implementation
of the scheme are applied for the second phase.
39. For the purpose of assessing the contribution of
the EU emissions trading scheme to the
Government’s 2010 domestic carbon dioxide
goal, the key issue is the total quantity of
allowances to be allocated to UK installations.
Installations in the EU emissions trading scheme
can meet their obligations by purchasing
allowances, which might come from installations
in other EU countries, and credits from the Kyoto
Protocol project mechanisms, which will come
from outside the UK and might come from
reducing emissions of greenhouse gases other
than carbon dioxide. This means that the
emissions reductions expected from the second
phase of the scheme and included in this
Programme (see below), will not necessarily take
place in the UK, nor will they necessarily be of
carbon dioxide. Nevertheless, as the chapter “UK
Emissions Inventory and Projections” explains 4 ,
the Government will include allowances or
project credits surrendered by installations in its
assessment of the UK’s progress towards the
2010 domestic carbon dioxide goal.
40. The Government has decided that the overall cap
for the second phase of the EU emissions trading
scheme should be set within a range which
would achieve average annual emission
reductions of between 3.0 and 8.0 MtC. In the
draft National Allocation Plan, the Government
proposes that the reductions in allowances
against business as usual would be borne entirely
Key priorities for the second phase of
the EU emissions trading scheme
1 Contribution to UK emissions reduction
targets: The Government has said that the
total quantity of allowances allocated for
the second phase should be consistent with
ensuring that the trading sector makes an
appropriate contribution to the domestic
goal to reduce carbon dioxide emissions by
20 per cent below 1990 levels by 2010 and
ensure it contributes to making progress
towards the long-term targets set out in the
Energy White Paper.
2 Maintain the competitive position of UK
industry: The Government has been
working with other Member States and the
European Commission to improve
consistency of implementation of the
Directive and welcomes the further
clarification provided by the Commission’s
guidance for the second phase. Application
of the guidance will minimise distortions
that have arisen through different
interpretations in the first phase and the
Government will work to encourage robust
and transparent assessment of National
Allocation Plans for the second phase.
3 Facilitate development of an economically
efficient EU-wide trading market that
incentivises emissions reductions and
provides appropriate signals for long term
investment. A key consideration has been to
look for ways in which to improve the
scheme for the second phase by providing
appropriate messages to industry and
signalling the long term direction of the
Government’s policy.
41. The EU emissions trading scheme will continue
after 2012 and, as noted by the European
Environment Council in October 2005, will remain
an essential instrument in the EU’s medium and
4 paragraph 4.