Essays in Honour of Colin Robinson
Edited by Lester C. Hunt
Chapter 11: UK emissions targets: modelling incentive mechanisms
11. UK emissions targets: modelling incentive mechanisms Bridget Rosewell and Laurence Smith INTRODUCTION As a method for achieving the UK’s Kyoto Protocol target reduction in greenhouse gas emissions levels of 12.5 per cent on 1990 levels, and the government’s own 20 per cent reduction in carbon dioxide emissions, the government is in the process of introducing a domestic emissions trading scheme. This chapter describes part of the contribution of ‘the Environment Business’ to the design of the UK Emissions Trading Scheme (ETS).1 The development of the ETS has proceeded largely through the actions of a group of businesses which came together to form the Emissions Trading Group (ETG). This group of companies has worked with the Department for the Environment, Transport and the Regions (DETR), the Department of Trade and Industry (DTI) and HM Treasury (HMT) to put forward an emissions trading scheme which would be acceptable to business and the government. The Environment Business is part of the ETG. The main part of the UK ETS will be a cap-and-trade scheme, where companies will accept absolute emissions targets in each year of the scheme. They will be given enough emissions permits to cover their target and will have to have enough permits at the end of each year to cover their emissions for that year. Companies will be able to trade in these permits, selling permits if they produce fewer emissions than their target, or buying permits if they produce more emissions than their target. At the time...
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