Large companies in the West Midlands have a responsibility to embrace "emissions trading" to help combat the increasing threat of climate change, the chairman of the Environment Agency has warned.
"The Midlands certainly hasn't escaped the effects of climate change, as the flooding of towns such as Bewdley has demonstrated," Sir John Harman said.
Sir John, who is currently touring the Midlands, visited Bilston-based pipe manufacturer Mueller. It has already met its carbon emission targets for 2010.
Launched in January the EU emissions trading scheme aims to give a market incentive to reduce emission levels to companies that release large quantities of carbon dioxide into the atmosphere.
The scheme currently covers large firms involved in energy-intensive activities, including power stations and the manufacturing of cement, glass, paper and metal products.
There are 1,100 companies participating UK-wide with 70 in the Midlands. Big names include Cadbury, Rugby Cement and power generator Eon.
Under the scheme, firms are rewarded with tax rebates for initiatives that increase energy efficiency or replace the use of fossil fuel-powered plants with more environmentally friendly alternatives.
Firms also have the opportunity to sell their unused CO2 quota - the first round of trading should begin around March 2006.
Those who do not meet their target are forced to buy from other companies or are fined.
Phase one will run until 2007, with the scheme likely to extend to other industries in 2008.
Critics have said that, rather than helping the UK meet its Kyoto targets, emissions trading slows down the rate at which CO2 levels are reduced, compared to traditional capping and fining.
However, Sir John said that this was no longer considered an effective option for business.
He said: "About 15 to 20 years ago, the Government probably would have gone for a classic regulatory tool. But this would have meant companies incurring costs that could damage them and the economy.
"By providing carbon trading a company is given the choice to decide which action is cheapest to take. It is part of the battery of weapons needed to meet UK carbon targets."
Jeff Rogers, qualityengineering manager for Mueller Europe, said that rather than an excuse not to reduce emissions, carbon trading had proved an incentive for companies to exceed targets.
"It's all about payback - you know you're going to get an added bonus if you go that extra mile.
"If you just had to meet a target to avoid being fined, what incentive is there to do any more?"
Mueller Europe has already reduced its carbon emissions by more than 12.5 per cent - the result of a £30 million investment in high-technology equipment at their Bilston factory.
Mr Rogers said: " The investment was made to increase production efficiency and keep the factory in the UK.
"We are now one of the lowest cost producers of copper tubes in Europe. In many ways the CO2 reduction was positive a spin-off."
The company will now use the money from selling its excess 7,000 tonnes of CO2 to further increase production efficiency.