Environmental Audit Committee Press Notice


The role of carbon markets in preventing dangerous climate change

The Environmental Audit Committee (EAC) is today launching a major inquiry into the role of emissions trading in delivering UK and international climate change objectives. This inquiry will build on two previous EAC reports on the EU Emissions Trading Scheme (EU ETS). It will also draw on a new study by the National Audit Office.

This inquiry will examine the role of emissions trading (notably the EU ETS) in delivering the kinds of emissions reductions required to stabilise greenhouse gases at a "safe" level. The inquiry will consider the progress made in Phase II of the EU Emissions Trading Scheme, and prospects for Phase III; the development of trading schemes in other countries (principally the United States), and prospects of linking them together; and the relationship of emissions trading to the UK carbon budgets and targets established under the Climate Change Act 2008.

The Government has repeatedly affirmed its commitment to tackling climate change through developing emissions trading schemes. The Prime Minister has stated: "A global carbon market is at the heart of our approach, [...] harnessing the power of the market to set the global price for carbon, rewarding the most efficient and innovative action to tackle climate change [...] Now a global carbon market will also facilitate a transfer of technology and resources so that developing countries can bypass the polluting 20th century path to industrialisation and move straight to the clean energy technologies of the new era."

Others have criticised emissions trading for failing to deliver on its promise of cutting emissions. Some have argued that emissions trading enables industries and countries with high levels of emissions to carry on much as normal, by buying carbon credits from other sectors and poorer countries. Criticisms have also focused on the extent to which credits from developing nations and former Eastern Bloc countries actually represent cuts in emissions. Some have recommended the use of a carbon tax instead.

The Committee invites organisations and members of the public to submit memoranda setting out their views on these issues. Some specific subjects on which the Committee would welcome comments are set out below, although respondents are free to comment on any issues that they consider relevant:


€ Potential contribution of international emissions trading to delivering a global greenhouse gas stabilisation target, consistent with the UK's goal of limiting global warming to 2oC

€ Whether, and under what circumstances, emissions trading ought to be supplemented or replaced by tax or regulation

The EU Emissions Trading Scheme

€ The record of Phase II of the EU ETS, and prospects for the success of Phase III

€ Extent to which the carbon price will be sufficient to drive low carbon investment, in particular decarbonisation of energy

€ Impacts of economic recession on the workings of the EU ETS

€ Impacts on and responses by UK firms covered by the EU ETS

€ Implications of the EU ETS for business competitiveness, and how to address them

€ Effects of the expansion of the EU ETS to encompass aviation

€ Allocation or auctioning of EU ETS credits, and the use of auctioning revenues

Development of a global carbon market

€ Progress of cap and trade schemes in other countries (notably, the United States), and the prospects for, and practicalities of, linking between them

€ The robustness and effectiveness of "offset" schemes (i.e. those without a cap), such as the Clean Development Mechanism (CDM), and the issues around linking them to cap and trade schemes

UK carbon budgets

€ The relationship between emissions credits and the UK carbon budgets set up under the Climate Change Act

€ Transparency of and justification for counting the purchase of emissions credits (especially from "offset" schemes) as decreasing emissions from the UK

The Committee asks for written submissions in accordance with the guidelines stated below by Tuesday 3 March 2009. Evidence sessions are likely to take place from late March to late May.

Please note

Each submission should:

€ Be no more than 3,000 words in length;

€ Begin with a short summary in bullet point form;

€ Have numbered paragraphs; and

€ Be in Word format with as little use of colour or logos as possible.

A copy of the submission should be sent by e-mail to [email protected] and marked 'Emissions Trading Inquiry'. An additional paper copy should be sent to:

Clerk of the Committee

Environmental Audit Committee

House of Commons

7 Millbank



It would be helpful, for Data Protection purposes, if individuals submitting written evidence send their contact details separately in a covering letter. You should be aware that there may be circumstances in which the House of Commons will be required to communicate information to third parties on request, in order to comply with its obligations under the Freedom of Information Act 2000.

Please supply a postal address so a copy of the Committee's report can be sent to you upon publication.

A guide for written submissions to Select Committees may be found on the parliamentary website at:


Please also note that:

€ Material published elsewhere should not form the basis of a submission, but may be referred to within a proposed memorandum, in which case a hard copy of the published work should be included.

€ Memoranda submitted must be kept confidential until published by the Committee, unless publication by the person or organisation submitting it is specifically authorised.

€ Once submitted, evidence is the property of the Committee. The Committee normally, though not always, chooses to make public the written evidence it receives, by publishing it on the internet (where it will be searchable), by printing it or by making it available through the Parliamentary Archives. If there is any information you believe to be sensitive you should highlight it and explain what harm you believe would result from its disclosure. The Committee will take this into account in deciding whether to publish or further disclose the evidence.

€ Select Committees are unable to investigate individual cases.


1. The Stern Review stressed the importance of making carbon markets as big as possible, so as to improve their efficiency and effectiveness. In response, the Government published "Emissions Trading: UK Government Vision", which stated that "the EU ETS can become the basis of a global carbon market", and called on the EU to consider expanding it to:

Link with schemes in other countries to develop a truly global carbon market: An increasing number of countries and regions are developing and proposing emissions trading schemes [...] Properly constructed links to such schemes would increase the liquidity of the carbon market, and benefit all participants and the wider public interest.

In examining the progress towards linking different carbon markets together, in this inquiry the Committee will be paying particular attention to the development of trading schemes in the United States. This will involve looking both at planned and existing schemes at state level (such as the Regional Greenhouse Gas Initiative, and West Coast Initiative) and the emergence of a potential national cap and trade scheme.

2. Membership:

Chairman: Mr Tim Yeo, MP

Mr Gregory Barker MP Mr Nick Hurd MP Mrs Linda Riordan MP

Mr Martin Caton MP Ms Jane Kennedy MP* Mr Graham Stuart MP

Mr Colin Challen MP Mr Mark Lazarowicz MP Jo Swinson MP

Mr David Chaytor MP Mr Ian Liddell-Grainger MP Dr Desmond Turner MP

Mr Martin Horwood MP Mr Shahid Malik MP Joan Walley MP

* The Minister for the Environment has ex-officio membership of the Committee in like manner to the Financial Secretary's membership of the Committee of Public Accounts.

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