Britain risks exceeding carbon budget by 2015

Economic forecaster Cambridge Econometrics predicts the UK could miss its 34% target for greenhouse gas emissions in 2020 despite the recession

An analysis of UK greenhouse gas emissions trends and climate policies by leading economic forecasters Cambridge Econometrics has revealed that emissions are unlikely to fall enough to meet Britain’s third legally binding five year carbon budget from 2018 as the economy recovers.

The latest CE forecast released on 21 September notes a sharp drop in emissions as a result of the recession will make it easier to meet the first two budgets from 2008-17. The report says UK emissions plunged by 10% in 2009, and look set to reach 18.75% below 1990 levels in 2010. This brings them almost within range of Labour’s 1997 election pledge to cut emissions 20% by 2010 relative to 1990. It finds the UK should comfortably reach its Kyoto Protocol target of a 12.5% drop relative to 1990. 

Major falls in primary energy demand from heavy industries played a large part in the period 2008-09, but there was also a reduction in carbon intensity due to fuel switching from coal to gas and a reduction in demand at peak times. Renewable electricity also started to make an impact. 

But it warns that “this should not be mistaken for a sustainable trend of falling emissions over the longer term”. There is a risk that downward trends will slow to 0.5% annually from 2010 and then stall over 2015-20 unless the government takes further steps to meet renewable targets or cut energy demand, it says. That would mean the UK missing its legally binding 34% target for 2020 relative to 1990 and overshooting its third carbon budget by 54 million tonnes CO<sub>2</sub> equivalent.   

The prediction is in line with warnings from the Committee on Climate Change (ENDS Report, July 2010), but the energy and climate department (DECC) has predicted it will narrowly meet the third budget (ENDS Report, June 2010). 

Already, modest economic recovery in 2010 will see the rate of reduction slowing to just 0.25%, it says. This is because falls of 1% each in power generation emissions and in road transport will be offset by a modest rise in emissions from the energy-intensive industries (0.75%), other industry (2.25%), and commerce (0.75%) as the recovery kicks in. Power station emissions are falling in 2010 due to fuel-switching since 2009, while falls in road transport emissions are attributed to higher oil prices and fuel duty, it says. 

A major factor in CE’s latest pessimistic forecast is that gas prices are now likely to rise more slowly from 2015 as unconventional sources ease shortages. This is likely to encourage the current dash-for-gas in power generation (ENDS Report, May 2010), which accounts for a third of total UK emissions. Electricity demand is set to rise 1% annually, while ageing nuclear plant will be replaced by gas turbines, it says.

Another key factor will be the UK’s failure to meet its 15% target for renewable energy by 2020, says the report. It predicts this will increase from 3.25% in 2010 to just 5.5% by 2020. And it says the UK will derive just 13% of electricity from renewables against its 30% target for 2020, with cheaper gas turbines undermining progress. 

The study stresses that the Coalition will need to move beyond policy formulation and implement targets set under Labour more aggressively. But it will also need to put in place new policies to meet 2020 targets, especially in sectors outside the EU emissions trading scheme, and turn those outlined policies in the annual energy statement into reality, it says (ENDS Report, August 2010). 

CE took no account of several key policies, including possible new nuclear generation, the Renewable Heat Incentive, Carbon Reduction Commitment Energy Efficiency Scheme, domestic energy efficiency upgrade through the Green Deal, wider use of feed-in tariffs for renewables and a carbon floor price for allowances within the EU ETS. These policies are either uncertain or lacking in detail, it said.