Carbon Trading

Participation in the UK Climate Change Agreements and Emissions Trading Scheme over the last four years has provided useful experience in the run up to the introduction of the European Emissions Trading Scheme (EUETS) in January 2005.

A number of national allocation plans, setting out emission allowances at installation level, have yet to be finalised. Consequently, not all individual installations have been allocated an allowance. At the end of 2005 installations were required to surrender sufficient allowances to meet their actual emissions.

EUETS covers Pilkington float and rolled glass manufacturing and other plants with largescale combustion processes. Risk modelling has been used to explore the likely exposure of the business, based on expected national and individual installation carbon allocations over the period 2005 to 2008. As a result, Pilkington believes that, despite marked differences in the approach taken to allocations by individual member states, the allocated allowances for the Group will, with good energy management, be sufficient to cover expected emissions during this period.

The company has made a full contribution to the debate on the implementation of carbon trading through engagement with industry trade associations, government bodies, officials and regulators at national and European levels.

Climate change is considered to be a serious global issue and carbon trading a useful tool for industries economically to meet their obligations for reducing carbon emissions. Concerns remain that carbon trading should not be seen, particularly by governments, as a substitute for sound policies and actions.

There are also concerns that insufficient account is being taken of the contribution made to climate change programmes by Pilkington's energy efficient products and that reductions in greenhouse gases in the EU may be offset by increases in countries not bound by the Kyoto protocol.