Energy watchdog doubts carbon trading will work

The world's leading energy watchdog gave a lukewarm response to the call by the Stern Review for a global carbon trading system as the way to tackle climate change.

The Independent Energy Agency said yesterday it doubted that the scheme would gain sufficient agreement by world governments to be viable.

Fatih Birol, the IEA's chief economist, said he believed the right formula was a mix of increasing energy efficiency in industry and transport, a shift to renewable technologies, and a major investment in nuclear power in countries where it was "acceptable".

He said following this path would deliver massive reductions in CO2 emissions as well as meeting the IEA's goal of ensuring governments maintained security over their energy supply.

A carbon market could be part of the answer, but he added: "I don't easily see how easy or how difficult it is to have a global trading framework world-wide with different economic development levels and different policy choices."

Sir Nicholas Stern, a former chief economist at the World Bank, proposed three key policies - putting a price on carbon through trading or tax, boosting low-carbon technologies and encouraging people to change their behaviour.

Mr Birol's comments are a hint that Tuesday's IEA World Energy Outlook will not put carbon trading at the top of its list of priorities to tackle the emission of harmful gases by the energy sector.