Policy Hub
A report published by the House of Commons Environmental Audit Committee (EAC) on 8 February 2010 warns that the EU's flagship emissions trading system is failing to deliver vital green investment, after a collapse in carbon prices magnified by the recession.
The committee is calling on the government to consider measures that would guarantee a minimum price for carbon, such as a new carbon tax.
The EU emissions trading system (EU ETS) is central to the UK's efforts to cut emissions, but is currently failing to reduce carbon dioxide levels. The cap on emissions in phase I (2005 - 2007) was too weak and allowances were over-allocated. Caps in phase II (2008 - 2012) were supposed to be tighter, but have been seriously undermined by the impact of the recession.
Big firms were allocated free emissions allowances on the basis of business-as-usual projections made before the downturn. As economic activity has slowed due to the recession many firms have found themselves with more carbon allowances than they need, resulting in a suppressed price for carbon and making green investment look much less attractive.
The role of carbon markets in preventing dangerous climate change (PDF)