DEFRA lowers sights on climate change agreements

The Environment Department has completed work on revising climate change agreements (CCAs) for the 22 sectors which overlap with the EU emissions trading scheme (EUETS). The new targets are considerably weaker than expected - a key reason for the Government's decision to ask for an increased allocation under the EUETS.

DEFRA's "opening negotiating position" was that the 2006 target for each sector should be tightened by 5%, or by the over-achievement against the 2002 target if this was greater. The figures in the NAP approved by the Commission in the summer were based on this assumption. In the event, DEFRA settled for much less (see table). So far, it has only released information on new targets for the 2006 milestone year.

Targets were tightened by 5% or more for the aluminium and rubber tyre sectors and a subset of the ceramics industry. However, most other sectors secured a tightening of just 1-3% - and targets have not been changed at all for several sectors, including major emitters such as the cement and lime industries. The fletton brick industry's target was felt to be "unrealistic", and was relaxed by 11.5%.

The steel industry is a key player in the CCAs because it is a very significant emitter and, unusually, has an absolute target. A steep fall in production led to massive over-achievement against its target in 2002 (ENDS Report 339, pp 23-26 ). DEFRA says that steel production is forecast to rise by over 55% from the 2002 level - and claims that the 0.22% tightening in the industry's 2010 target represents a 14% improvement relative to output in the late 1990s.

DEFRA claims that the overall package will reduce emissions in 2006 by an additional 2.1mtCO2. This reduction needs to be seen in the context of the massive over-supply of allowances in the UK carbon market, which recent voluntary action by key direct participants will only partially resolve (ENDS Report 359, pp 15-16 )

DEFRA is still negotiating revised CCA targets for the 20 remaining sectors which do not overlap with the EUETS. A conclusion is expected by April.

Last year, the Government decided to extend eligibility for CCAs to a wider range of energy-intensive industries. However, work is proceeding extremely slowly. DEFRA had hoped that new CCAs would be in place by the start of 2005 (ENDS Report 355, p 9 ). It has yet to obtain state aid clearance from the Commission and has entered into discussions with just two sectors, industrial gases and kaolin manufacturers.

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