Parliament's spending watchdog has praised the role of the government's emissions trading scheme in reducing greenhouse gases.

Government Response: Department for Environment, Food and Rural Affairs

A spokesperson for DEFRA said: "The UK has been successful in delivering emission reductions and setting up monitoring, reporting and verification processes, consultancies and trading in advance of international schemes like the forthcoming EU emissions trading scheme.

"Participants in the scheme initially bid emissions reductions for government incentive money. They are given allocations at the beginning of each year to cover their projected emissions of greenhouse gases.

"If they emit less than their allocations they are free to sell the surplus and if they emit more they can buy allowances to meet their targets.

"Participants whose over-achievement has led to a surplus of allowances in the market are talking to Defra to discuss possible solutions."

Forum Response: Chemical Industries Association

Rob Siddall, the CIA's head of competitiveness and utilities, said: "The Chemical Industries Association fully supports the principle of emissions trading as the best means of addressing climate change commitments, while maintaining flexibility and allowing emissions reductions to be delivered at least cost.

"As the transition to the EU Emissions Trading Scheme progresses, however, the association is concerned that the competitiveness of the UK chemical industry may suffer.

"The growing gap between the UK and other EU members states in the national allocation plan, where the UK has set a much tougher cap, must be addressed, as must the present incompatibility within the existing UK climate change policy mix - in particular the Climate Change Agreements and the Climate Change Levy - and the European Emissions Trading Scheme

"It's right that the UK chemical industry should play its part in reducing emissions, but other EU member states must do the same. There is now a real sense of urgency as our sector faces the prospect of a double blow, in terms of both emissions caps and energy prices, compared with its competitors elsewhere in Europe. The UK government must act quickly to prevent distortions within Europe and simplify its policy mix at home."

Forum Response: Construction Products Association

Rita Singh, head of environment and industry performance at the Construction Products Association, said:  "We welcome the National Audit Office's report on the impacts and benefits of the UK ETS since its launch in 2002.  The scheme gave companies incentives to participate in a trading market in return for emission reductions and significant reductions of greenhouse gases emissions were achieved as a result.

"We support the recommendations emerging from this report for future market-based tools to improve environmental performance, although it may be too late to apply to the EU Emissions Trading Scheme, which is expected to come into force from January 2005.

"The EU ETS will be a mandatory tool and will be applied to generators and energy intensive companies across the Members States.  The National Allocation Plan which determines the overall national emission level and the sector and site-specific targets, will be critical in determining the success of this scheme.

"Currently the government’s proposed targets far exceed the national Kyoto commitment and are significantly tighter than those being proposed by other member states for the first phase of the scheme.  They will therefore have a considerably damaging impact on the competitiveness of our industry. 

"The UK ETS was developed through voluntary means and led to greater reductions than anticipated.  In light of its success, we would urge government to set targets that reflect its international commitments but which then rely on the market to deliver reductions.  Imposing substantially greater emission targets than our European competitors is unlikely to achieve the government’s objective of meeting its emission reduction commitments through a cost-effective market-led mechanism."

Forum Response: Corporation of London

Michael Snyder the chairman of Policy and Resources at the Corporation of London said: "The Corporation of London is delighted that the programme it helped to initiate back in January 1999 has begun to bear fruit so successfully, to the benefit of both business and the environment.  There is still much work to be done, however, in both the European and International arenas: the Corporation is fully committed to facilitating and supporting new initiatives ahead of the launch of the European Emissions Trading Scheme in 2005 and beyond. "