Green light for carbon credit saleBy David Litterick

Last Updated: 12:19am BST 30/07/2008

The Government yesterday unveiled its plans to auction off carbon credits in the first stage of a process that could eventually net the Treasury around £2bn a year.
The first auctions will take place later this year as part of European Union and Government plans to cut carbon emissions.
Over the next four years, the Department for Environment, Food and Rural Affairs, through the Debt Management Office will auction some 85m credits, each representing one tonne of carbon.

The auctions represent around 7pc of the credits the Government can allocate and is the second phase of its strategy for dealing with climate change.
Phase one of the scheme began in 2005 and was criticised for issuing too many permits and not offering enough incentives to cut emissions. As a result the number of permits has been tightened up and auctions will be held.
Companies, mainly those from heavy industry and the power sector, will name the amount they are prepared to pay for a given number of credits. A complex process will then allocate the credits.
With credits being bought and sold in the market for around £20, that could raise the Government around £1.7bn by 2012. At that point the Government is considering auctioning almost all the permits, which experts believe could raise around £2bn a year.
The Government, which has said the money raised will go to the Exchequer, remains on a collision course with the EU, which has insisted that any monies raised from carbon permit trading should be used to fund projects designed to combat climate change.