Lord Turner has criticised the European Union’s carbon trading scheme for continuing to give billions of pounds in windfall profits to manufacturers.

The carbon trading scheme, which is meant to penalise heavy polluters and
reward those who reduce their emissions, currently gives out large numbers
of “allowances” to companies for free, which can then be sold for
cash on the open market.

A new report by Climate
Strategies found that some industries, such as cement-making, will
pick up an extra €10bn to €20bn (£9bn to £18bn) over the next few years
without having to put any effort into reducing their carbon dioxide
emissions.

This will happen even as the scheme moves into its strictest phase, when free
allowances are meant to be limited.

Professor Michael Grubb, author of the report and a climate change adviser for
the Government, said that the European Union needs to stop the “inefficient
and ineffective” practice of giving out so many free allowances.

He also called for excise duty on the carbon content of some goods – known as
border levelling duty – to stop companies from simply moving their
production facilities abroad to avoid the carbon trading system in Europe.

Lord Turner chairman of the UK Committee on Climate Change, who also chairs
the UK financial regulator, said: “We can’t solve the problem by giving
out emission allowances for free as the only option for internationally
trading manufacturing sectors. Border carbon price levelling should not be
excluded.”