Environment ministers could have made better use of taxpayers' cash when implementing a scheme to cut greenhouse gas emissions, MPs have said.

A report published on Tuesday by the Commons public accounts committee said the government's emissions trading scheme was an "imaginative alternative to the traditional use of regulation to control or limit emissions".

But the MPs warned that the first attempt to implement the policy could have delivered better value for money.

The Department for Environment, Food and Rural Affairs (Defra) allocated £215 million in incentive funding over the five years to 2006 to companies and other organisations in return for promised emissions reductions.

Yet while the department had originally estimated that up to around 3,000 companies might benefit, just 34 companies eventually participated in the scheme.

"Despite the small number of participants, the department did not reduce the amount of planned incentive funding from £215 million, although it had the opportunity to do so at the end of the first round of bids," said the report.

"The department might have reduced the incentive funding at this stage, and retained some funds for another, subsequent auction armed with a better understanding of participant's auction behaviours and emission reduction practices, to obtain better value for money."

There were also concerns over the way in which the incentive payments were based on reductions below a baseline relating to participants' average emissions levels in the three years to 2000.

Defra was urged to "seek concessions" from companies which "benefited unduly from generous baseline positions".

"Such action is essential if incentive money paid from public funds is to deliver additional emissions reductions and if confidence in the effectiveness of the scheme is to be maintained," said the report.

Committee chairman Edward Leigh welcomed the "substantial reductions in emissions of greenhouse gases" that resulted from the scheme.

"But it is disappointing to find that this could have been achieved at lower cost to the taxpayer," he said.

"In many cases, Defra set targets for companies that were too easily attainable or that had already been met, and did not design the auction to result in the lowest level of public incentives the market would bear.

"Defra must learn from this in designing future schemes."