Emissions Trading

Emissions trading creates a market-based mechanism for reducing carbon emissions. It caps the carbon emission of companies, only allowing them to increase emissions by buying credits from those who pollute less.

The largest scheme in the world is the EU Emissions Trading Scheme (EU ETS). It is one of the EU’s key policy tools for meeting carbon emissions reduction targets adopted under the Kyoto Protocol. British Gas Business and Centrica, our parent company, have been working with the EU Emissions Trading Scheme since it started in 2005.

What the EU emissions trading scheme covers

Centrica owns 11 installations covered by the scheme, including power stations and gas production and storage facilities. These installations contribute to overall carbon emissions targets.

Our participation in the EU scheme

Phase I of the EU Emissions Trading Scheme operated between 2005 and 2007. It was a learning phase where we robustly monitored and reported emissions, and succeeded in putting a price on carbon. Centrica is participating in the EU’s review of the scheme which will establish its framework beyond 2012. The plan is to ensure that cleaner, less carbon-intensive generation is rewarded by the trading scheme.

International trading

As participants in the EU Emissions Trading Scheme we can also import a quota of emission reduction credits from other countries (mainly developing nations). This is done through the Kyoto Protocol’s flexible mechanisms, governed by the UN. It encourages countries to develop sustainably using modern technology as credits are awarded to emissions reducing projects that meet stringent environmental criteria. These credits can then be sold to other countries to help them meet their emission targets.

We have been a strong supporter of international trading. Climate change is a global issue and we believe project credits like these are a vital step towards global engagement in reducing carbon emissions. At the same time these also provide an incentive for clean technology investments in developing countries.

We have made investments in many projects across a range of technologies all around the world. Amongst others, we buy the credits from a small hydro plant in Fiji and a swimming pool heated with waste gas from a landfill site in New Zealand. In 2006 we entered into a significant relationship with Climate Change Capital (CCC) and invested in their second Carbon Fund. Through this relationship we have secured access to credits from a range of projects and have participated in some ground breaking deals.

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