Costs of pollution are setto soar

Feb 19 2008 by Sue Scott, Evening Gazette

A PECUNIARY black cloud hangs on the business horizon, as Europe enters phase two of its carbon permit trading scheme, which saw the real cost of pollution showing on the bottom line of some of the UK’s dirtiest industries last year.

Having plummeted to just 5 Euro cents per carbon tonne at the end of 2007, certificates, which in effect give firms permission to pollute beyond their agreed emissions cap, climbed back up to 19 Euro cents last month.

Introduced by Europe in 2005/6 as part of its commitment to reduce greenhouse gases under the Kyoto agreement, the carbon emissions trading scheme was designed to force companies to clean up production.

“Emissions were allocated to different countries and cascaded down to polluters within those countries,” explains Paul Wylie, a trader with Lloyds TSB, one of only a small number of banks worldwide dealing in carbon credits. “Those companies were allocated certain amounts of CO2 emissions. If they went above that they had to go into the market and buy additional permits to allow them to pollute. If they polluted less they could sell those certificates to those that wanted to buy more.”

Currently, the legislation covers only the biggest polluters - principally heavy industry and the energy companies .

Teesside steelmaker, Corus, which described its latest credit allocation as “challenging”, is part of a wider consortium doing precisely what Europe intended under the scheme. It has co-funded a £30m project to find ways of reducing atmospheric pollution by the steel industry, which is said to account for 5% to 6% of all man-made CO2. It has set out to cut emissions by half using breakthrough technologies.

But it is concerned the existing scheme will do little to persuade other polluters to follow suit and has called for fundamental changes.

“As the EU’s emissions trading scheme is presently devised, there is no real incentive to invest in carbon reduction technology,” it said.

Every Tees Valley manufacturer should now look to include pollution to their balance sheet in the not-too-distant future, added Mr Wylie. “If you go forward to 2012 and phase three, the companies that are affected will be taken down to the next level. Mid market companies are going to be hit by this system.”