"The increase wipes out all the savings due to wind energy we currently have in the UK," said David Milborrow, an independent renewable energy consultant.

The increase is bad news for the British government, which faces a battle to meet its target of cutting emissions of CO2, the gas widely blamed for causing global warming.

Emissions have risen over the last couple of years as generators switched to coal generation after a steep rise in natural gas prices, reversing a downwards trend in the 1990s when utilities switched to less polluting gas.

A government report seen by Reuters on Wednesday showed investment in energy efficient combined heat and power plants has collapsed, partly as a result of the new market which penalises small generators - like many CHP plants - which cannot guarantee their output.

EXTRA CO2 EMISSIONS

Milborrow estimated the UK's power stations puffed out between 0.5 million and 0.8 million tonnes of extra carbon in the year since the launch of the new electricity trading arrangements (NETA) last March.

His figures were confirmed by a separate study by another independent analyst Peter Bedson of IPA Energy.

Britain produced 154 million tonnes of carbon in 2001, up 1.5 percent on 2000, with nearly 30 percent from the power sector.

NETA, introduced to bring down electricity prices, penalises generators that need to buy power at the last minute.

As a result, utilities are keeping more gas and coal-fired plants running at under full capacity so they can ramp up output suddenly and avoid hefty charges if they are out of balance.

"This is inefficient. A fall in efficiency is equal to a rise in emissions," said Milborrow.

Generators admit they are keeping extra plant running to avoid buying power in NETA's central balancing market where prices can be as high as a 100 pounds ($155) a megawatt hour, over five times the open market price.

"With the way NETA works, people are keeping more plant humming," said a spokesman for one firm with several coal-fired plants.

According to Milborrow, about 400 megawatts of plant used to run part-loaded in the days of the Electricity Pool, the wholesale market before NETA, but this jumped to around 4,000 megawatts last winter.

Regulator Ofgem, which supervised the launch of NETA, says however, it has not seen any significant increase in the amount of plant running part-loaded over the last year.

Ofgem is due to publish a report at the end of July into the first year of NETA's operations.