Carbon Dioxide Emission limits might raise UK energy prices

Industry could also see a 6 per cent rise in power prices as limits on the amount of carbon dioxide released into the atmosphere are introduced.

The measures are viewed as a critical part of the strategy to mitigate the potential of extreme weather patterns, such as storms, flooding and drought, which are believed to be the result of too much CO2 being released into the environment from the combustion of fossil fuels.

Announcing the scheme recently, Stephen Timms, the energy minister, said: "Our suggestion is that industrial electricity prices will increase, on a reasonably conservative set of assumptions, by something like 6 per cent, not just in the UK but in major European industrial economies, in a fairly uniform way.

"The comparable figure for domestic bills would be about 3 per cent, but it may actually prove to be rather less. Those would be as good as you've got at the moment, in terms of indicative figures."

Scotland's energy intensive industries will also be consulted on the plans, with the operators of large industrial plants, including electricity generators, oil refineries and manufacturing plants, among those being asked to contribute to the reduction in CO2 emissions.

The government said it was committed to its goal of moving towards a 20 per cent reduction in CO2 by 2010.

However, under the changes, a factory that does not meet its carbon cap will not be penalised.

Instead, if it goes over its limit, it will have to buy allocations from other factories that have some to spare. When this is done, it can then emit more CO2 without the risk of a large fine.

But the number of allocations will be limited, thus raising the price of polluting and forcing firms to clean up their processes.

Allan Wilson, Scotland's deputy environment minister, said: "The Scottish Executive is fully committed to ensuring that we play our part in reducing the levels of CO2 released into the atmosphere. We have, on the whole, a good record for environmental management, with the majority of our industries fully behind measures to ensure we retain and enhance our environment."

He added: "Like the Executive, industry is aware climate change is a global threat to which Scotland is not immune."

"Most significantly for Scotland, we expect an increase in the risk of winter flooding and, recently, we heard predictions that some species could become extinct as a result of climate change. That is why action should be taken now."

The Executive's involvement in the strategy to limit climate change was immediately seized upon by the Green Party, who called it "not serious and hypocritical".

Patrick Harvie, a Green MSP for Glasgow, said: "The Executive knows its actions are running against the grain of their so-called environmental policies. It is not possible to pour billions into road-building like the M74 while public transport schemes gather dust on the shelf.

"It is promoting ever greater car use, it is subsidising ever more air routes with the goal of trebling air traffic, and still it is claiming to take climate change seriously.

"That's why they'll never publish sectoral targets for CO2 reductions - it would show up the emperor's new environment policies for what they are, contradictory and aimless."