CBI calls for carbon credit cash to be ring fenced

Business leaders urge government to reinvest revenue raised from carbon credit auctions in green initiatives

An influential coalition of environmental and business leaders has today sent an open letter to Gordon Brown calling on him to ensure that money raised from auctioning carbon emission permits under the European Emissions Trading Scheme (ETS) is reinvested in tackling climate change.

The letter – which is signed by CBI director-general Richard Lambert, chairman of the CBI Climate Change Board and BT chief executive Ben Verwaayen, co-chair of the Energy Research Partnership and E.ON UK chief executive Paul Golby, and David Nussbaum, chief executive of WWF-UK – argues that with the government expected to raise £1.6bn from selling emission permits between 2008 and 2012 it has been presented with a "tremendous opportunity" to underline its commitment to tackling climate change.

The letter claims that while the group supports the case for auctioning carbon credits as part of the cap-and-trade scheme it still represents a " substantial additional transfer of funds from business and consumers to government", and as such the government should announce "an equivalent scale investment in securing the transition to a low-carbon economy and in adaptation ".

Lambert warned that a failure to ring fence auction revenues in this way would undermine the government's attempts to secure business support for its climate change policies. "[Auctioning of credits] will be seen as a convenient revenue-raiser for the government and not as genuine measures aimed at changing behaviour," he said.

The revenue could also help jump-start the UK clean-tech sector, according to Nussbaum, helping to ensure many of the green technologies that are currently " within reach" are deployed on a larger scale.

The letter is the latest in a line of calls on the government for it to introduce hypothesised green taxes whereby revenue raised is earmarked for investment in environmental initiatives.

However, the Treasury has consistently rejected such calls arguing that it diminishes the ability of government to react to unexpected spending requirements. Earlier this year the government scrapped one of its few hypothesised taxes, severing the link between revenue raised through the landfill levy and funding for recycling and waste management projects.