EUROPE’S controversial carbon emissions trading scheme — designed to cut greenhouse gas production — will have absolutely no impact on emissions of carbon dioxide (CO2), according to a new study.
Carbon emissions are, at best, unlikely to fall below last year’s levels but could even increase, according to a report by Global Insight economists.
The report, on the Western European power sector, suggests that oil and gas prices will stay relatively high, compared with coal, leaving generators reluctant to switch to fuels that emit fewer greenhouse gases.
Also, generous allocations set for manufacturers and power generators by each country mean that carbon prices are not as high as some expected.
Trevor Sikorski, of Global Insight, said: “The generous level of National Allocation Plan credits and the rules of the EU emissions trading schemes that allow market participants to import CO2 credits from outside the EU means that the price of CO2 is largely independent of movements in the relative prices of gas and coal.”
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In the second phase of the emissions trading scheme, to start in 2008, total output of emissions will be affected by closure of low carbon-emitting nuclear plant. The removal of such power stations means that efforts to increase energy efficiency and higher CO2 prices will be offset by greater reliance on fossil fuels.
Global Insight says that the trading scheme’s main effect will be to increase the price of power in Britain compared with other European markets, while having no real effect on the sector’s emission levels.
The economists’ views chime with UK manufacturers who argue that their industries will be uncompetitive, compared with European counterparts, because of higher energy prices.
The emissions trading scheme has been beset by controversy since its launch six weeks ago. On Monday the Government put itself on course for a fight with the EU when it announced a national allocation plan that is more generous to industry but hurts the power generation sector.