The UK government is set to launch the first comprehensive national scheme for trading greenhouse gas emission permits as it attempts to lead Europe and make London the centre of the nascent market. As part of this scheme it will auction £215 million in government incentives for businesses willing to commit themselves to reduced emissions.

Companies that wished to be involved – at least 60 so far including Anglia Water, British Airways, BP, and Rolls Royce – had until 1 February to calculate and verify their baseline for emissions, based on averaged levels between 1998 and 2000, and to register for the auction. One category of company can already trade emission permits, the 3500 companies that have already agreed emission reduction targets to qualify for an 80 per cent reduction in the climate change levy introduced in the UK last April. Companies in this group that reduce their emissions by more than their targets can trade their surplus permits.

The financial incentive on offer is aimed at companies that have not agreed reductions or are not subject to the levy. To qualify they will have to bid levels of emission reduction at a price around £100/t of carbon.

Companies that fail to meet their agreed targets can buy additional permits on the market. Those that do not have permits for all their emissions will be penalised.