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Last Updated: Wednesday, 1 February 2006, 12:32 GMT
Smaller firms could trade carbon
By Roger Harrabin
BBC News environment correspondent

Lights in the City
New sectors may soon have to start trading carbon credits
Small and medium-sized firms may face pollution limits in the UK's drive to cut carbon dioxide (CO2) emissions.

The Department of Trade and Industry (DTI) is considering a scheme for the companies to be allocated a ration of permits to emit CO2.

If they overshoot their ration, the firms would have to buy extra permits.

It follows a report by the Carbon Trust that showed many firms - particularly in retail and commerce - were guilty of squandering energy.

The authors noted that many shops blew hot air through open doorways, and offices left computers and lights on all night when employees had left the building.

Emissions from heavy industry and the power sector are already rationed under the EU Emissions Trading Scheme, to help the European bloc hit its Kyoto targets on greenhouse gases.

Individual emissions

The plan for smaller firms would operate only within the UK. Officials want to be sure that they can devise a scheme that will not add to the burden of "red tape". The very smallest traders would be exempted.

Ministers hope the plan will find favour with the Confederation of British Industry (CBI). Many of the firms likely to be involved, such as supermarkets, do not face international competition so there is less chance of their competitiveness being damaged by the introduction of a UK-only scheme.

Brazilian oil refinery

On current government forecasts, the UK will only manage to cut emissions by 10% by 2010. The Department for Environment, Food and Rural Affairs (Defra) wants large cuts from the biggest polluters.

It sees the EU trading scheme as the most certain way of delivering the huge cuts that will be needed if the government is to keep its manifesto commitment on CO2.

However, this would still leave massive problems with emissions from roads and households.

The government's climate strategy review should be published in the next few weeks. The task of drafting it has been so fraught that it has been delayed since last May.

'Realistic' targets

The trading scheme being considered by the government was proposed by the Carbon Trust.

The CBI says it is talking to the trust about the idea but will not comment on government plans until it sees them. The CBI views the UK's domestic target of reducing CO2 emissions by 20% (below 1990 levels) by 2010 as unrealistic.

"Since 1990, business has reduced its greenhouse gases by something like 17%, whereas we as citizens - householders and domestic transport users - have only reduced our emissions by 3.5%," deputy director-general of the CBI, John Cridland, told the BBC's Today programme.

"Business has got to do an awful lot more, it will need to carry a lot more 'pain'; but only alongside other parts of society, including us as individuals, where the government hasn't had the nerve to tell us we've got to change our lifestyles."

Tom Burke, visiting professor of environmental policy at Imperial College and University College London, commented: "The business community is going to have to live in a world in which we've got to move to a low-carbon economy.

"It is constantly asking that there be a long-run framework in which it can make investment decisions, and this sort of scheme will provide exactly that kind of framework."

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