The government’s advisory Committee on Climate Change has set three tough ‘intended’ five-year carbon budgets for up to 2022.1
If accepted by the government next spring, these first three budgets will see UK greenhouse gas emissions in 2020 cut by 42% compared with 1990 levels.
However, the committee has also recommended softer ‘interim’ budgets, with a cut of only 34% by 2020 in the absence of an international agreement at Copenhagen, one year from now, to succeed the Kyoto Protocol.
The budgets, covering the periods 2008-2012, 2013-2017 and 2018-2022, are intended to put the UK on a path to cutting emissions of the six main greenhouse gases by 80% by 2050 compared with a 1990 base year (see figure). That objective is enshrined in the Climate Change Act, as part of a hoped for global emissions reduction effort required to prevent disastrous climate change.
In fact these first UK carbon budgets are a little less demanding than they first appear, because in 2007 the UK had already made an 18% cut in greenhouse gas emissions. The ‘intended’ budgets now imply an average 2.8% cut each year between 2007 and 2020, while the softer ‘interim’ budgets imply a 1.8% annual reduction over that period.
The analysis in the committee’s inaugural report makes it clear that government policies to deliver these cuts are not in place.
It also says some of the carbon-cutting options which should be pursued from now will cost more to deliver than the £40 per tonne price of carbon it predicts for 2020. "It is important to pursue these options, to foster technology innovation and to ensure that the UK is on the path to meeting the 80% target in 2050," it says.
Launching the report, Lord Adair Turner, the committee’s outgoing chairman, said the economic recession was "perversely favourable" to meeting the budgets in the next few years, with energy use reduced. But beyond 2010, he expected it to make little difference.
He called on the government to step up programmes to improve home insulation and energy efficiency and install microrenewable energy sources. "It is trades like plumbing, building and electricians where there’s fast rising unemployment, and where intensifying these policies could help," he said.
The committee’s recommended budgets and underpinning analysis were set out in the weighty 500-page report. The eight-member committee must recommend five-yearly emission-cutting budgets and set out how these, and the eventual 80% cut, can be delivered. It will also report annually on progress.
The government hopes to respond to the committee’s recommendations by setting out its own carbon budgets when the Chancellor delivers his financial Budget in March.
The committee says the overall cost to the economy of meeting the budgets will be less than 1% of GDP in 2020. This, it says, is "equivalent to losing half of one years’ growth… this cost should be acceptable given the consequences and costs of not acting."
It says most of the 80% emissions cut by 2050 will have to be achieved by actions in the UK, rather than by buying allowances for emissions reductions overseas. This is because "low cost opportunities to cut emissions in developing countries will diminish".
For the nearer future, it says that if its softer ‘interim’ budgets are followed until 2022, the UK should not be allowed to buy emission offsets from outside the EU.
The exception would be UK companies covered by the EU Emissions Trading Scheme (EUETS); these should be able to buy some of allowances from outside the EU, equivalent to a few percent of total UK emissions.
If, however, a global climate deal is struck next year and the ‘intended’ budgets apply, much heavier use can be made of overseas emissions credits, both by UK firms covered by the EUETS and by the UK government. Up to 20% of overall emission reductions could be claimed by using these foreign credits. The committee proposes no limit on emission allowances bought through the EUETS.
The committee says emissions from aviation and shipping should not be included in the budgets. Its justification for their exclusion is complex, but in a nutshell the report says including them is just too difficult at this stage. These international transport emissions, are, however, covered by the 80% cut by 2050 target; if they cannot be substantially reduced, then other sectors will have to make even larger cuts.
In the shorter term, the report calls for clear UK strategies to reduce aviation and shipping emissions with reports on these accompanying the committee’s annual progress reports.
Three factors shaped the committee’s 2008-2022 carbon budgets for the UK. First, there was the need to put Britain firmly on the path to the 80% cut by 2050. Second is the EU’s ambitious emissions-cutting strategies still being debated as the report was being written. The third factor was the committee’s own "bottom up, sector-by-sector analysis" of what all the UK’s significant greenhouse gas emitters could do to make cuts.
As part of this analysis, it drew up three scenarios, named ‘current ambition’, ‘extended ambition’ and ‘stretch ambition,’ the most radical one. The current ambition scenario includes "identified measures which would cost less per tonne than its forecast carbon price [of £40 tonne], and/or which are covered by policies already in place", with significant progress towards low-carbon generation and some progress on new car fuel efficiency.
The committee’s report focuses mainly on the more ambitious extended ambition scenario. It sees this as key to achieving both the first three carbon budgets and the 2050 targets, although some purchases of overseas offsets may be needed. In this scenario, measures are adopted "which would cost appreciably more per tonne of carbon abated than the predicted carbon price". It includes widespread uptake of renewable heat for buildings, from sources such as biomass and biogas, and "some lifestyle changes in homes and transport".
If just one big idea can be distilled from such a big report, then it is decarbonising electricity generation, which currently accounts for about 25% of emissions. The committee sees this as essential to both its first three budgets and the 2050 target.
It wants the CO2 emitted per kilowatt hour of electricity supplied to be nearly halved by 2020 compared with 1990 levels, then taken down to almost zero by 2050.
Wind and nuclear power will make the biggest contribution to this up to 2020. By then, carbon capture and storage (CCS) technology may become economically viable. Wave and tidal power could only start to make a significant contribution after then.
Radically reducing emissions from power generation would also pave the way for lower transport emissions (through electric cars) and lower home heating emissions (by switching from gas-fired boilers to electrically powered heat pumps). The committee points out this could lead to higher electricity demand, but stresses this is a secondary concern compared with avoiding climate change.
Its analysis sees big emissions savings from housing, commercial and public sector buildings. These would entail improved insulation and more efficient heating systems, but the report also says photovoltaic panels on homes, heat pumps and heat from biomass could together deliver a 10Mt per annum CO2 cut by 2020.
By then, radical improvements in fuel efficiency of cars and vans, plus some uptake of electric vehicles and plug-in hybrid cars, could deliver a 15Mt per annum reduction.
The committee says the government should now make it clear that all remaining coal-fired power stations must have CCS fitted by 2020. It suggests any built without CCS between now and then must either be set a deadline for retrofitting the CCS plant of no later than 2025 or have their operating hours radically curtailed. Eventually, gas-fired power stations would also need CCS. This would help avoid locking the UK into new carbon-intensive infrastructure which lasts for decades.
The committee also recommends that over the first three carbon budget periods, 70% of the overall "emissions reduction effort" should go into the sector covered by the EUETS. This accounts for some 45% of total emissions.
Its report plays down the issue of carbon ‘leakage’ - energy intensive manufacturing industries such as steel shifting overseas to avoid high carbon prices in the EU. These sectors, it says, account for only 1% of GDP and there is likely to be negligible impact on competitiveness for more than 90% of UK manufacturing.
But it accepts that iron and steel, petroleum and aluminium are more exposed to non-EU competition. On cement, the high cost of transport relative to value is likely to limit leakage, it says.
The committee argues that an appropriate policy framework could limit leakage, with remedial measures possible under the next phase of the EUETS currently under discussion.
The committee also recognises that the low-carbon policies it advocates will push up energy prices substantially, tending to increase fuel poverty. Actions to tackle this would include energy-efficiency measures for 400,000 of affected households, but the remainder will involve a mix of subsidies and changes to gas and electricity tariffs amounting to some £500 million a year by 2020.
The Committee’s inaugural report came shortly after the Climate Change Act 2008 passed into law. This is the world’s first such legislation. It sets legal interim and long-term emissions reduction targets, although there are no actual sanctions for failing to hit them, beyond severe criticism and embarrassment.
Other key provisions include standardised procedures for UK carbon accounting (see pp 47-48 ), annual reporting obligations for government and business, including an obligation for government to set out mitigation strategies, and principles to ensure credibility in management and trading of carbon credits, including limits on the use of offsets relative to domestic emissions reduction. The impacts of climate change and adaptation strategies must also be reported.