British government says EU emissions trading system broken

British Energy Secretary Ed Davey said Monday the European Union can lead the fight against climate change, but only if certain reforms are enacted.

"Europe has the opportunity to show the world how we can cut emissions while creating investment, jobs and growth, but only if we reform the system and reform it fast," he said in a statement. "Otherwise we're facing increasing costs for businesses, uncertainty for investment and ultimately higher costs for consumers, which isn't acceptable."

Davey said his government was proposing a way to make an emissions trading system work better in the European economy. As it stands, with a skewed trading balance, the system is increasing the overall costs of meeting future carbon reduction obligations, he said.

His comments followed criticism from European Commission President Jose Manuel Barroso, who took a swipe at British consideration for leaving the European Union.

Addressing think thank Chatham House, the outgoing president said he was encouraged by British government support for climate policies in the EU, which Friday examines tighter emission reduction targets.

"When the United Kingdom engages, your voice carries weight, your arguments motivate and your pragmatism convinces," he said in his Sunday address.

Leaving, he said, would hinder the British government's own ambitions.