Protests as UK dithers on use of £54 million carbon permits for climate change

The UK government is facing protests from various quarters after it said that the proceeds of the sale of carbon permits would not necessarily be used to tackle climate change issues.

Campaign groups are now protesting after Europe's first auction of carbon emission permits that the UK government said would not necessarily be used to tackle climate change. The Treasury said it raised £54 million through the sale of four million permits for £13.60 per tonne under the next stage of the European Union's Emissions Trading Scheme (ETS). 

The auction marks a move away from the previous policy of handing out permits to industry for free.

By 2012, during the second phase of the scheme, 85 million permits would be auctioned that are estimated to raise over £1 billion for the Treasury. That number is expected to go beyond £2.5 billion per annum, says environmental consultancy WSP.

Critics of the Emissions Trading Scheme (ETS) have been saying that the programme would eventually peter out to being a green tax. Now, campaigners are saying that the Treasury's decision to put the proceeds into its coffers instead of using them for environmental projects will reinforce just that view.

The media quoted a number of climate change activists and campaigners as saying that while investments in low-carbon technology to make homes and businesses more efficient would have been good news for the UK, hoarding revenues from the emissions trading scheme will only allow the government to erode trust in the concept of green taxes. They are now advocating that the UK follow the example of the Netherlands and Germany, who have pledged to spend the money generated on measures such as improved energy efficiency and alternative energy projects.

The ETS has capped emissions from around 12,000 factories and power plants across the EU, holding them accountable for around half of the region's emissions. Companies will now inherit a set quota of allowances that they can then trade, in the bargain creating a price for polluting. The EU's rules governing the scheme allow member states to auction around 10 per cent of the allowances allocated from 2008 to 2012.

Starting 2013, the EU, which set out the objective of cutting carbon emissions by 20 per cent by 2020, is expected to move towards 100 per cent auctioning of the permits. The auction is proposed to raise billions for member states.