Government has made 'basic errors' on CO<SUB>2</SUB> emissions

The energy industry has attacked the Government for miscalculating how much carbon dioxide it produces. It fears the errors will distort the carbon-reduction targets the Government will set next month before the European Union emissions trading scheme comes into force next January.

The oil industry's trade body, the UK Offshore Operators' Association (UKOOA), said officials had made basic errors in estimating oil companies' carbon emissions. Some onshore installations, such as National Grid Transco's transmission systems, had been incorrectly included in the offshore oil industry's allocation, a spokeswoman for the association said. Some refineries had been double counted, while others appear to have been forgotten altogether, she added.

The Government indicated it could back down if companies could prove it got the figures wrong. A spokesman at the Department for Environment, Food and Rural Affairs (Defra) admitted: "This is a very complex programme. But the targets are flexible."

The Association of Electricity Producers (AEP) met officials from Defra about the targets last week. It is concerned that the Government has underestimated how many tons of carbon are emitted each year by power stations, which are responsible for most of the CO2 output in the UK. This means they would have to cut their emissions even more to meet their allocations.

The Department of Trade and Industry, which provides the figures to Defra, estimates that industry as a whole produces 253 million tons of carbon dioxide each year, and has set a target to reduce this by 11 per cent between 2005 and 2007 for industry on average, and by 13 per cent for power generators. The Government wants to cut total carbon emissions by 20 per cent by 2010.

DTI officials based their estimates for the electricity industry on the average emissions of power stations between 1998 and 2002. But the AEP says that many power stations were not operating at full capacity during this period because they had only recently been built.

The Government also assumed that energy efficiency targets had been met when this is not the case, the AEP said, adding that less renewable generation is in operation than Whitehall thinks. It has demanded that the DTI explains how it reached them.

The DTI has said it will give more details at the end of March, but the AEP argues that this is too late, since this is when Defra's consultation period ends.

The offshore oil industry faces the largest cut, of 37.6 per cent between 2005 and 2007. The Government argues that because oil and gas production in the North Sea is declining, the industry will produce fewer emissions. The UKOOA says that production becomes more energy intensive as reserves fall, and that, if implemented, the cuts could lead to early closure of some North Sea gas fields.

Each EU member state must draw up a national allocation plan by the end of March. Once in operation, the EU emissions trading scheme will penalise companies that exceed their carbon emission allocation by requiring them to buy "carbon credits" from companies that have produced fewer emissions.