What is the UK Emissions Trading Scheme?
Emissions trading is a mechanism which lets companies meet environmental targets in a more flexible and cost-effective way by allowing those companies that over-achieve their targets to sell their surpluses to those companies who have missed their targets. In theory, trading allows an economically efficient way of channelling capital to the most cost-effective emissions reductions. Trading is also well suited to control greenhouse gas emissions, because there is no dependence of environmental impact on location of emissions. The UK-ETS is part of the UK Government’s strategy for managing climate change. It is the first of its kind in the world, in that it covers a broad range of sectors. The Government hopes that by introducing such a scheme early in the UK, it will give first mover advantage to UK companies. This recognises that similar schemes are being introduced both at the EU level (expected to be introduced around 2006 onwards) and global emissions trading under the Kyoto Protoco
