The Environment Agency has written to 1,000 businesses and organizations in the first stage of implementing a Europe-wide emissions trading scheme in the UK. The scheme is designed to cut businesses greenhouse gas emissions and reduce the impact of climate change.

Under the Kyoto Protocol, the UK has agreed to reduce emissions by 12.5 per cent from 1990 levels by 2008-2012. The UK Government has also set a domestic target of a 20 per cent reduction of CO2 emissions, below 1990 levels, by 2010. The EU Emissions Trading Directive will be instrumental in delivering these targets.

Businesses and organizations affected by the forthcoming regulations include those involved in the manufacture of paper and board as well as producers of pulp.

The Department for Environment, Food, and Rural Affairs will be setting a cap on the combined amount of carbon dioxide that can be emitted from these business activities in the first two-year phase. Each individual business and other affected organizations will be awarded a proportion of this cap. Those affected by the regulations must receive a permit from the Environment Agency by March 31, 2004. Applications should be submitted to the agency between by January 31, 2004, to ensure permits are issued on time.

This type of trading scheme is known as ‘cap and trade’, whereby, the proportion of the ‘cap’ that businesses/organizations receive are known as allowances, which are tradable. Companies who deliver greater efficiencies in energy use can then trade surplus allowances of carbon dioxide to others that find it more expensive to reduce emissions. Emissions trading gives businesses the flexibility to meet emission targets according to their own strategy.

When the European greenhouse gas trading scheme starts on January 1, 2005, it will cover over 40 per cent of European carbon dioxide emissions, representing an important contribution to the efforts by European countries to implement their Kyoto commitments.

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The Environment Agency