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Recycle revenue from carbon permits sale

A coalition of business and environment leaders are calling on the Government to use money raised by auctioning carbon emission permits to tackle climate change.

The Government is set to receive around £1.6 billion from selling permits between 2008 and 2012, as part of phase two of the European Union's (EU) Emissions Trading Scheme (ETS).

Yesterday, the heads of the Confederation of British Industry (CBI), its Climate Change Task Force, and the conservation group WWF-UK, along with the co-chair of the Energy Research Partnership, said the Government has a 'tremendous opportunity' to demonstrate its commitment to tackling climate change by announcing a similar scale investment programme in green technologies.

In its report last year, the CBI Climate Change Task Force argued that the two key pillars of moving to a low carbon economy are carbon trading and new technology. But the UK still lags behind other countries in investment in green research and development.

Today, in an open letter to the Prime Minister, the coalition of business and environment leaders called for positive action to address this.

 letter

Read the lettter in full
by clicking above

'We believe that climate change can be mitigated and the UK can meet its long-term emissions targets. But doing so will require imagination, innovation and, in particular, investment from across the public and private sectors,' they said.

This will require the UK 'substantially to increase spending on energy technology research, development, demonstration, commercialisation and deployment. Significant adaptation spending will be needed...to cope with climate change which is already occurring and prepare for those future impacts that are now inevitable.

'The UK Government will accrue significant revenues from the auctioning of allowances from the ETS. All of us support the case for auctioning of carbon allowances to sectors where this does not damage international competitiveness.

'But this is still a substantial additional transfer of funds from business and consumers to Government.

'This represents a tremendous opportunity for the government to demonstrate its real commitment by announcing an equivalent scale investment in securing the transition to a low-carbon economy and in adaptation.'

The letter has been signed by the director-general of the CBI, Richard Lambert, the chairman of its Climate Change Board, Ben Verwaayen (also the chief executive of BT), Paul Golby, co-chair of the Energy Research Partnership (and also chief executive of E.ON UK), and David Nussbaum, chief executive of WWF-UK.

Investing the revenues from the permit auction to support green technologies would have added significance, the CBI said, after some Government programmes to help companies limit their environmental impact have seen their funding shrink recently.

Richard Lambert, director-general of the CBI, added: 'If the Government does not recycle the revenue from its carbon permit auctions into green measures then it risks undermining the trust of business and the public in green taxes.

'They will be seen as a convenient revenue-raiser for the Government and not as genuine measures aimed at changing behaviour.'

David Nussbaum, chief executive of WWF-UK, said: 'Preventing dangerous climate change will require an energy revolution. Many of the sustainable low-carbon technologies that we need are within reach, but we need to bring them to full-scale development, in the UK and around the world.  Auctioning revenues offer an excellent opportunity for the Government to jump-start the industries that will help us build a One Planet Future.'

Under the second phase of the ETS, EU member states will distribute carbon emission permits to certain industry sectors to cap their emissions and then progressively lower them. If firms exceed their allowance they will have to buy permits from other businesses.

Some permits from those allocated to power generating companies in the UK will be sold by the government in an auction. This is expected to generate £300m-£400m a year for the Treasury between 2008 and 2012, and several times that in subsequent years.

In subsequent phases of the ETS it is proposed that other industry sectors will also have to buy permits at auction.

The signatories to the letter say the prime minister and the chancellor should spend an equivalent sum supporting emerging climate change technologies.

View the letter here.