UK unmoved on EUETS auctioning revenue

The government remains opposed to moves to earmark 20% of revenue from emissions trading for low carbon policies

It set out its negotiating position on reforming the EU emissions trading scheme (EUETS) in a consultation document published on Wednesday. It supports most of the reforms proposed by the European Commission in January, but takes a tough line against moves to require a fifth of the revenue raised from auctioning allowances to be spent on climate policies.

“Hypothecation is an inefficient means of determining public expenditure priorities,” says the document. The proposals “would contravene the government’s principles on the sound management of public finances as well as the UK’s position on subsidiarity.”

The government is also opposed to giving poorer member states a bigger share of auctioning revenue.

Another sticking point is the Commission’s role in setting the level of auctioning. The UK wants Brussels to set a minimum level of auctioning leaving individual countries free to go beyond that on a sector by sector basis.

The UK welcomes the planned expansion of the scheme to other sectors and gases, but opposes the inclusion of the aluminium sector because it is exposed to international competition and has limited opportunities to pass on the cost of carbon. On the other hand the government wants to see methane emissions from active coal mines included in the scheme.

Other issues that feature in the document include cap setting, linking to foreign trading schemes, the use of project credits and monitoring, reporting and verification. The government has yet to reach a view on many of these issues.

Negotiations between member states, the Commission and the European Parliament are expected to last into 2009, with the reforms coming into force from 2013.