Higher taxes may be needed to meet Kyoto's reduced emissions targets

The Government may have to introduce fresh taxes on energy use if Britain is to have any hope of meeting its targets under the Kyoto Protocol for reducing greenhouse gas emissions, a think-tank warns today.

Cambridge Econometrics calculates that the UK will miss its target by a substantial margin and says efforts to encourage greater energy efficiency may have to be accompanied by fiscal measures.

The target signed up to by Britain at Kyoto was to cut CO2 emissions by 20 per cent by 2010 compared with 1990 levels. But Cambridge Econometrics estimates that emissions will have fallen by only 6.5 per cent.

The report is likely to be seized on by the nuclear lobby as further evidence that if Britain is to make a serious contribution to tackling global warming, then ministers will ultimately have to sanction a new generation of nuclear reactors.

The report puts most of the blame on the sharp rise in gas prices which has led to a big increase in the amount of electricity generated from coal, which produces more greenhouse gases.

Last year about a third of Britain's electricity was coal-fired compared with a low of 12-13 per cent two years ago.

But Cambridge Econometrics also criticises the Government, saying that new electricity trading measures introduced last year coupled with increased competition in the generation market have reduced prices and encouraged higher consumption in households and factories.

As a result, it estimates that household carbon emissions were four million tonnes higher last year than had been forecast just a year previously. Far from falling below their 1990 levels, the report forecasts that household carbon emissions will be 19 per cent higher and emissions from commerce 5 per cent higher by 2010.

With CO2 emissions from transport expected to be broadly unchanged from their 1990 levels, Britain will be largely dependent on lower emissions from industry in order to achieve any reduction by 2010.

The Government has already introduced the controversial Climate Change Levy, which penalises energy intensive industries if they fail to reduce consumption. But the study says it may have to go further otherwise lower prices will inevitably lead to increased demand.

"The Government appears not to have learnt this lesson. Its 2010 carbon emissions targets are most unlikely to be met until it does," says the report.