Tax incentives for voluntary cancellation of permits

Proposal to introduce tax incentives for voluntary cancellation of permits

The UK is now liable to meet legally enforceable carbon budgets.

To account for the fact that ~50% of emissions of CO2 are covered by the EU ETS Government has chosen to count traded effort towards the meeting of these budget (as opposed to counting actual emissions). This is supported by the argument that emissions reductions are valid contributions to countering global climate change irrespective of where they occur and that trading helps to minimise cost by uncovering least cost abatement.

It is the initial allocation of permits that therefore contributes towards the budget. That is to say purchased permits/credits can be used to counteract or ‘offset’ any emission occurring above the initial allocation. Similarly any under emission resulting in sold or banked permits cannot be counted towards the budget (since they result in emissions occurring somewhere else).


Posted on

4 March 2009