The Greenhouse Gas Emissions Trading Scheme


August 23, 2002

What is the UK Emissions Trading Scheme?

The British Government has implemented the world's first economy-wide greenhouse gas trading scheme - a scheme which is underpinned by the emissions verifications that BSI is accredited to handle.

Along with 159 other countries, the UK Government ratified the Kyoto Protocol to the UN Convention on Climate Change in 1997.

The Protocol commits industrialised countries to reduce their collective greenhouses gas (GHG) emissions by at least 5% compared to the 1990 level by the period 2008-2012.

The UK committed to reducing its greenhouse gas emissions by 12.5% by the period 2008 - 2012.

Towards achieving this target, the UK Government put in place a Climate Change Programme. Part of this is the Climate Change Levy (CCL) for which all UK businesses became liable in April 2001. The CCL is an energy tax that adds about 15% to typical energy bills.

Industry sectors that are intensive users of energy are able to sign-up to Climate Change Levy Agreements (CCAs) which help mitigate the effects of this tax. Under these agreements, businesses that accept and subsequently meet emissions-reduction targets will receive an 80% discount until the year 2013. 40 industry sectors representing 6,000 companies have signed-up to CCA's.

In addition, from April 2002, the UK Treasury set aside up to £215m to offer extra incentives to the top 50 'emitters' in the UK. Of these, 34 organizations have voluntarily taken up a legally binding obligation to reduce their emissions against their 1998-2000 baseline levels under the UK Emissions Trading Scheme.

These 34 organizations are known as Direct Participants.

The targets, and the level of incentive payment for Direct Participants were set through a competitive bidding process in March 2002, which determined that each Direct Participant would receive £53.35 per tonne of CO2 equivalent reduction in its emissions, as long as it achieves its target emissions reductions on an annual basis over five years.

The 6,000 organizations participating in the CCAs will also be eligible to join the Emissions Trading Scheme. Basically this means these organizations can buy allowances to meet their targets, or sell any over-achievement of their targets at the market rate which is currently around £8 per tonne of CO2 equivalent emissions reduction.

In order for these schemes to work, the first step is to get a third-party to verify your baseline emission level, against which subsequent reductions will be compared. Which is where BSI's new accreditation comes in. The UK scheme is also expected to link up with an EU scheme due to come into effect in 2005.


Wilma Tulloch on +44 (0)20 8996 6330 OR
Marc Edney on +44 (0)20 8996 6330