The EU's carbon trading scheme has increased electricity bills, given a windfall to power companies and failed to cut greenhouse gases, according to an investigation by BBC Radio 4's "File on 4" program. According to the consumer watchdog Energywatch, after two and half years the scheme has yet to cut in carbon dioxide emissions.

The EU's Emission Trading Scheme was launched in 2005 and created a trade in carbon allowances—which critics say is essentially a permit to pollute.

Power producers received their allowances free of charge but were nonetheless allowed to pass their value along in increased prices to the customers. Energywatch says this increased electricity bills by about 7% in 2005, delivering windfall profits to the generators.

Yet so far the carbon scheme has brought no clear payback in terms of cutting emissions. Provisional figures from the UK Department for Environment Food and Rural Affairs (DEFRA) suggest CO2 output in Britain actually went up by 1.25% last year, wiping out a slight drop of 0.01% in 2005. CO2 emissions across the EU also rose by between 1 and 1.5% over the last two years.

Said Energywatch director Allan Asher: "Consumers increasingly accept the need for reductions in carbon. However they are paying the price and not seeing the benefits. The big generators are banking huge amounts of money and consumers aren't benefiting."

UK Minister for Climate Change Ian Pearson told File on 4 that the carbon trading scheme has been an administrative success, yet admitted there have been problems in the first three year phase to the end of 2007: "If you are saying to me it hasn't achieved a massive amount so far when it comes to CO2 reductions, well I agree with you and I think Phase Two will be a big, big improvement...and a key instrument in helping us all to achieve our carbon reduction targets across Europe." (Reuters, June 6)

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