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The UK government auctioned 4 million emission allowances (EUAs) to companies in the EU Emission Trading Scheme in 2008, raising around £55m. During 2009 another 25 million will be auctioned, which in today's market would raise almost £250m. Between 2008 and 2012 the government stands to gain in the region of £1bn to £2bn.

Companies pass the costs of the allowances onto their customers, so we end up paying for them in things like our electricity bills.

As with all revenue, the government's policy is to spend this money on whatever it wants, arguing that assigning it to something specific would restrict its ability to manage its spending priorities.

But there are good reasons why the money should be spend on environmental projects. For one thing, the money is not just another tax - the government has collected it by selling rights to the atmosphere, which is really global public property. Perhaps more importantly, the EU Emission Trading Scheme can hit poor people hardest because they spend a large proportion of their income on energy and the money should be used to soften the impact.

If we were in Alistair Darling's boots, here's what we'd spend our auction money on:

• Helping out those in fuel poverty by paying for home insulation;
• Subsidising wind farms and other sources of clean energy, to help us toward the national target for renewable energy; and
• Putting some money aside to contribute to emission reduction projects in the developing world.

British consumers will pay a large amount of money in hidden carbon costs over the next few years. We've written to Ed Miliband, Secretary of State for Energy and Climate Change, to ask him to earmark this cash for the environment and we'll let you know his response in our next newsletter. Here's his address in case you want to do the same: 3-8 Whitehall place, London SW1A 2WH, or milibande@parliament.uk.