Climate body warns government on carbon offsets

LONDON (Reuters) - Britain should not rely on using carbon offset credits to reduce its greenhouse gas emissions by 34 percent by 2020, Britain's chief climate change adviser said on Monday.

The Committee on Climate Change, which advises the British government on how it can meet its goals to cut planet-warming emissions, said the government should place a limit on offset credits which could count towards meeting its reduction target.

It also said that British households could face a hike of 25 percent in electricity prices by 2022.

Under the U.N.'s clean development mechanism, companies from rich nations can invest in clean energy projects in developing countries like China or India, and in return receive offset credits which may be used towards emissions targets or sold for profit.

In its first report, the committee advised that both offset credits purchased by the British private sector in the European Union's Emissions Trading Scheme (EU ETS) and by the government should have a limit.

No limit should be imposed for the purchase of carbon emissions permits, however, as they were more likely to ensure emissions reductions in Europe.

"These purchases will ensure reductions elsewhere in Europe, and since they would be a fiscal burden on the government, this will place a clear incentive on (it) to achieve domestic reductions rather than face this cost," the report said.

The EU ETS forces businesses to buy carbon emissions permits. Carbon prices can direct the daily operation of power generators, potentially encouraging them to switch to gas from higher carbon-emitting coal. In addition, they could drive longer term investments into low carbon sources of electricity.

The committee also said a price floor for carbon emissions permits would prevent them from falling too much and may support investment decisions in renewable energy sources or carbon capture and storage technology.