Under New EU ETS, UK Will Have to Get More Renewable

January 21, 2008

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Under the European Union’s emissions trading scheme to reduce GHG, the UK, currently taking three percent of its energy from renewable resources, will have to quintuple that to 15 percent by 2020, reports the Guardian. The move will force power generators, refiners and other industries such as steel, cement and paper to bid for permits to emit CO2. According to this article, free energy permits have thus far given big energy producers large windfall profits.

The new ETS scheme will impose an auction for emissions permits from 2013, when two-thirds of permits for nearly 11,000 plants should be subject to bidding. These industries will have to cut emissions by 21 percent below 2005 levels.

Strengthening the ETS by lowering emissions levels is seen as necessary to ensure long-term credible prices for carbon, but a recent article cited the burden it would place on some heavy industries. In order to keep these industries competitive, the EU has considered carbon tariffs on imports from places where emissions standards are lower.

Jake Ulrich, managing director of Centrica Energy, said that putting a high price on CO2 emissions would create a scarcity value for permits, and “only then will there be an incentive to really go out and invest more in cleaner but more expensive generation plant.

“The British government supports the move towards full auction for permits but is worried about how it will affect some sectors. One measure the UK is considering is a controversial plan to build a hydro-electric barrage across the Severn, which could generate five percent of Britain’s electricity demand.

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