Carbon permit cash should 'combat climate change'

The money raised through the sale of the UK's carbon emissions allocation should be used for energy and environmental programmes, a think-tank has recommended.

An estimated €72m (£60m) was being raised from the government auction of seven per cent of the UK's carbon permits on Wednesday, distributed under the new phase of the EU's emissions trading scheme (ETS).

And the Institute for Public Policy Research (IPPR) said the money could be used to invest in low-carbon technology.

Between 2008 and 2012, 85 million national carbon allowances will be auctioned and Wednesday's sale related to the initial four million.

The IPPR said that some European countries such as Austria, Hungary and the Netherlands are pledging the money they raise from the ETS towards fighting climate change, and the UK should follow their lead.

IPPR co-director Lisa Harker said: "This is a great opportunity to help poorer households make their homes both cheaper to heat and warmer, and create jobs through investment in new green technologies."

In response, a spokesman for the Department of Energy and Climate Change said: "The government has proved that we are committed to domestic reductions in emissions but we do not hypothecate revenue."

Meanwhile, providing his backing for the auction, climate change minister Mike O'Brien said: "Today's first ever auction demonstrates continued UK leadership in reducing carbon emissions as part of the fight against dangerous climate change.

"The EU ETS is central to keeping the price of tackling climate change as low as possible to industry and the economy."