While the EU has insisted hat revenue earned by member stats from the sale
of carbon permits should be used to combat climate change, Defra specifically
ruled out such a commitment, either in phase three of the ETS or in phase
two, which began this year.
Defra’s document was published on the same day that the CBI added its
voice to the growing campaign for earmarking of carbon permit revenues, known
as hypothecation. In an open letter to the Prime Minster, the CBI, is Climate
Change Task Force and the conservation group WWF-UK said phase two of the
ETS would raise at least £ 1.6bn in additional revenues for the Government
and called for a pledge that the money would b spent on “supporting
emerging climate change technologies”.
The European Commission has begun consulting on a directive that would make
it illegal for member states not to earmark carbon auction revenues for green
measures once phase three of the ETS begins. This move reflects growing irritation
among the EU’s officials in Brussels that governments across the bloc
have not given a commitment to spend the money raised by the scheme in this
way.
Environmental campaigners have argued that without hypothecation money raised
form green taxes could end up being spent on road building projects or other
initiatives that could actually exacerbate climate change.
The dispute is coming to a head now because business leaders and EU member
states expect phase two of the ETS to produce much more sizeable revenues
than phase one, which was undermined by the over-issuance of carbon emission
permits by many governments.
