The National Audit Office has lauded the UK emissions trading scheme (UKETS) as a "pioneering initiative with significant achievements".1 Its report confirms many of the scheme's flaws - but pulls its punches on crucial issues such as over-allocation to key participants, the interface with pollution control regulations and the difficulty of meshing the scheme with the new EU emissions trading framework. Meanwhile, a handful of participants are accumulating a vast surplus of allowances - swamping the market and undermining the drive to reduce energy use under the climate change agreements (CCAs).

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