House of Commons - Environment, Transport and Regional Affairs

Select Committee on Environment, Transport and Regional Affairs Fifth Report

FIFTH REPORT

The Environment, Transport and Regional Affairs Committee has agreed to the following Report:—

UK CLIMATE CHANGE PROGRAMME

1. Climate change is perceived by Governments as a serious environmental threat. The impacts around the world will be many and varied and there is an acceptance that the challenge of reducing emissions of greenhouse gases must be dealt with in a global manner. At the third Conference of the Parties to the Framework Convention on Climate Change (FCCC) in Kyoto in December 1997, limits were agreed for emissions of greenhouse gases from developed countries. As part of the Kyoto Protocol and a subsequent agreement within the EU, the UK has a target of reducing a basket of six greenhouse gases[8] by 12.5% from 1990 levels by 2010. In addition to this target, the Labour Party committed itself in its 1997 manifesto to reducing emissions of carbon dioxide to 20% below 1990 levels by 2010.

2.On the basis of these commitments and targets, the Government published its paper "UK Climate Change Programme: Consultation Paper" in October 1998. This document provided the focus of our inquiry which we undertook with the following terms of reference:

the desirability of the options contained in the UK Climate Change Strategy in the light of non EU countries' commitments;

the role of the Climate Change Strategy as the first step towards greater reductions in emissions in the longer term, ie beyond 2010, with particular reference to the need for behavioural change;

the Government's timetable for producing and implementing its Climate Change Strategy;

the role of different sectors of the economy in meeting the emissions reductions targets and the merits of sectoral targets;

the policies from the consultation paper on Climate Change Strategy which will be required to meet the UK's legally binding target for the basket of six greenhouse gases and the domestic target for carbon dioxide emissions;

the uncertainties involved in emissions projections and the impact of policies upon those projections;

the mechanisms required to monitor the effectiveness of policies in reducing emissions;

the extent to which 'flexible mechanisms' should be used in achieving the legally binding target; and

the economic and other costs of the options in the Climate Change Strategy.

On 9 March 2000, the Government published Climate Change: Draft UK Programme. We had completed our inquiry before this document was published. The body of the report does not therefore reflect the content of the Draft Programme but we have noted where it is of relevance to our conclusions and recommendations.

3.We wish to thank all those who submitted written and oral evidence to our inquiry. We are also grateful for the thoughtful assistance provided by our specialist advisers, Jim Skea of the Policy Studies Institute and Malcolm Fergusson from the Institute for European Environmental Policy.

4.We recognise that the subject of climate change is a controversial one, both scientifically and politically. The Committee took no evidence as to whether or not climate change exists, nor - if it does - to what it is attributable. Some witnesses told us of their doubts about the existence or likely scale of climate change[9] and we acknowledge the problems posed by such an issue, where science has not as yet provided definitive answers to some critical questions. This study starts from the presumption that climate change may be occurring, and that it may be partially at least attributable to emissions resulting from human activity. The Intergovernmental Panel on Climate Change (IPCC)[10] concluded in its second report that "observations suggest a discernible human influence on climate change."[11] The majority of submissions to our inquiry implicitly accepted this conclusion and focused on how emissions could be reduced. Indeed, even some of those witnesses who were rather sceptical about climate change still accepted the need to reduce emissions as an 'insurance policy'.[12] Nevertheless, alongside the right and proper use of the 'precautionary principle' in taking action to reduce emissions, it is also important to ensure that policies to reduce emissions do not have an excessive cost to the economy and to industry.

The Kyoto Protocol and the International Context

5.International efforts to tackle climate change have been in the public eye since the Earth Summit in Rio de Janeiro in June 1992 at which the Climate Change Convention was adopted. The Convention included the aim that developed countries should return emissions of carbon dioxide to 1990 levels by the year 2000. This did not amount to a firm commitment and its weakness is demonstrated by the fact that the UK is likely to be one of the very few countries to meet the target. Following the Rio conference, the threat of climate change and the need for more ambitious emissions reductions were increasingly recognised by the international community. As a result, at the third conference of parties to the Framework Convention on Climate Change in Kyoto in December 1997, it was agreed that industrialised countries (often referred to as Annex I countries, after the countries listed in Annex I of the Climate Change Convention) would reduce their total greenhouse emissions by 5.2% from 1990 levels by the period 2008-2012. This overall target of 5.2% is made up by individual targets for each country or block of countries. In contrast to the agreement at Rio, the requirements for emissions reductions will be both explicit and legally binding once the Kyoto Protocol is ratified. In addition to setting emissions targets, the Protocol outlined so-called "flexible mechanisms"[13] which will enable countries to meet part of their commitment by taking action overseas.

6.A number of witnesses noted that there had been a real risk of no agreement being reached at Kyoto and that the actions of the UK Government, particularly the Deputy Prime Minister, had been critical in ensuring that a text was agreed.[14] We wish to commend this and the previous Government for the prominent and positive role they have played within the European Union and in negotiations from Rio to Buenos Aires. We hope that the Government will continue to demonstrate leadership in future negotiations, particularly those to set targets for emissions reductions beyond 2012.

7.There remain problems with the Kyoto Protocol. For example, there are serious doubts as to whether some countries (notably the US) will ratify the agreement. Also, the meeting of the conference of the parties in Buenos Aires in November 1998 failed to put much flesh on the bones of the Protocol.[15] The question of the contribution of flexible mechanisms to emissions reductions remains fraught, with some countries arguing that there should be no limit on the proportion of a country's target which can be met using these mechanisms.[16] However, if the UK is to press ahead with an ambitious strategy to reduce UK emissions and provide the basis for long-term reductions, it is important that other developed countries take action at home as well. Other issues of concern are the rules which will be used to organise emissions trading[17] and the problem of trading in 'hot air' (non-existent emissions due to the decline of industry, particularly in Russia and Ukraine).[18] Fundamentally, these issues should be resolved so that the Protocol delivers genuine emissions reductions and does not allow signatories to escape taking action at home. Unless these and other details are resolved rapidly, signatories to the Kyoto Protocol will be left unsure of the strategies they need to adopt to meet their targets. We urge the Government to continue pressing for the ratification of the Kyoto Protocol by all Annex I countries. Further, the details of the Protocol must be resolved as soon as possible. In particular, if 'flexible mechanisms' are to be supplemental to domestic action, we believe that a cap must be placed on the contribution they can make to meeting a country's target. However, such a cap must neither be too high, which would permit 'trading in hot air', nor too low, which would act as a disincentive to signatory countries from making use of the mechanism altogether. The level of the cap must be set with sensitivity, and by mutual agreement of all signatory countries wishing to take part in the trading mechanism.

8.At Kyoto, the European Union agreed to reduce emissions of the basket of six greenhouse gases by 8% from 1990 levels by 2008-2012. Subsequently, the EU Member States reached a 'burden sharing' agreement which effectively divides up this target amongst the Member States, with the UK taking a target of a 12.5% reduction. Although this is amongst the more ambitious, it is worth noting that both Denmark and Germany took a target of a 21% reduction. One important point about the 'burden sharing' targets is that although the Government routinely refers to the UK's target as 'legally binding', it is not clear that this is the case. Further, it is not apparent what sanctions could be applied in the event of a Member State failing to meet its target.[19] We urge the UK to press for improved clarity of the status of the 'burden sharing' agreement within the EU. We also believe that a system of penalties for non-compliance should be sought so that all Member States are clear what the consequences would be of failing to meet their targets. An effective and credible system for monitoring emissions throughout the EU must be established to complement any non-compliance mechanisms. We urge the Government to press the European Commission to ensure that every possible action is taken against Member States which fail to meet their targets.

Targets and Projections

9.The success or otherwise of the UK climate change policy must be assessed on whether it delivers the necessary reductions in emissions. As noted earlier, the UK has two meaningful targets for reducing emissions: the one derived from the Kyoto Protocol agreements (12.5% reduction of six greenhouse gases from 1990 levels by 2010) and the one declared in the Labour Party's manifesto before the last election (reducing CO₂ emissions by 20% from 1990 levels by 2010).

Table 1: UK Greenhouse Gas Emissions projections 1990-2010

Gas	1990 (Million tonnes of Carbon (MtC) equivalent)[20]	2000 (MtC equivalent)	2010 (MtC equivalent)	Change from 1990-2010
Carbon Dioxide	168	157	163	-3%
Other Greenhouse Gases	48	32	31	-35%
Total	216	189	194	-10%

10.Table 1 shows the projections of emissions from the consultation document which include all planned policies and actions. Carbon dioxide is presented separately from the other five greenhouse gases, because it is the main contributor, has its own target and is the gas which is most difficult to reduce since emissions are spread throughout society and across all sectors. It is immediately apparent that the trend in total emissions is downwards between 1990 and 2000 but upwards again before 2010, entirely as a result of increasing emissions of carbon dioxide. We return to this point and its implications later in the report. Table 2 shows comparative figures for emissions projections for other countries. Table 3 shows the projected impact of policies outlined in the consultation paper upon emissions in 2010.

Table 2: Comparative Table of Carbon Dioxide Projections (Including Planned Policies and Actions)[21]

Country	Emissions of Carbon Dioxide (Million tonnes Carbon equivalent)
	1990	2000	2010	Change (1990-2010)
UK[22]	168	157	163	-3%
Australia	72	85	100	+40%
France	104	102	112	+8%
Germany	277	244	233	-16%
Japan	307		369	+20%
Russian Federation	647	477	627	-3%
US	1353	1535	1669	+23%

Table 3: UK Emissions Projections for 2010 under different policy scenarios

Gas	Target	Current Projection	Gap between Target and Current Projection	'Possible measures'	'Further Possible Measures'
All greenhouse gases	Kyoto: -12.5%	-10%	5 MtC	-15%	-24%
Carbon Dioxide Only	Manifesto Commitment: -20%	-3%	29 MtC	-9%	-20%

11.Table 3 gives a clear picture of the relative difficulty of meeting the two targets. For the Kyoto-based target, only a small further emissions reduction (5 MtC from all greenhouse gases) is required beyond the 'business as usual' projections and the 'possible measures' would seem to secure this. For the 20% carbon dioxide target, a major shortfall of 17% (29 MtC from CO₂ only) is projected if no additional measures are implemented. Only with all the measures discussed in the consultation document is the 20% target met and even then, there is no 'headroom' to allow for variation in the projections or impacts of policies. Clearly, this is an ambitious target and would require a vigorous climate change strategy to achieve.

12.Given the relative ambition of the two targets, we were not surprised by the emphasis placed by the Government on meeting the Kyoto target. Whilst we accept that this must be the first goal as it derives from an international commitment, the existence of the 20% target cannot be ignored. Witnesses were divided about the merits of trying to achieve it: some industrial representatives considered that it would seriously damage the UK's competitiveness.[23] Against this, others suggested that the policies required would bring large benefits to the UK in terms of increased employment and more energy-efficient houses and businesses.[24] We consider the issues of costs and competitiveness in greater detail later in this report.

13.The status of the 20% target is a great cause for concern: there are contrasting stances amongst Ministers and Government Departments to the commitment.[25] This is reflected in subtle changes of language and the replacement of 'target' with 'goal' or 'aim', and 'achieving' with 'moving toward'.[26] Such distinctions are not merely semantic as they send confusing signals to the public and industry about the Government's will to reduce emissions. We were encouraged by the Environment Minister's commitment to the 20% target: he told us that he "would regard it as a severe disappointment and a significant setback if we did not achieve it."[27] However, in spite of this statement, confusion still exists amongst business, environment groups and the general public.[28]

14.For targets to be worthwhile, they should be both credible and ambitious. The two targets do not fulfil these requirements: the Kyoto target is certainly credible but not stretching or ambitious and the 20% CO₂ target is not currently credible. If the Kyoto target is relatively easily met and the 20% target is not being taken seriously, then we risk developing a complacent attitude to reducing greenhouse gas emissions. This would probably result in a period of inaction for the next 10 years or so which, it must be remembered, is projected to be a period of increasing emissions. If then, as the Government repeatedly told us,[29] much more ambitious international targets will be agreed for the period after 2010, the UK could be caught without the necessary long-term framework to deliver continuing reductions. The less than total commitment to this target serves to undermine the climate change strategy and reinforce the public's scepticism about the need for action. Government Ministers and Departments have shown a lack of clarity in respect of the target of reducing carbon dioxide emissions to 20% below 1990 levels by 2010. This must be remedied as it risks undermining the Climate Change Programme. If the Government is to reach its 20% target, there must be a commitment from all Government Departments and Ministers to its achievement.

SECTORAL TARGETS

15.Witnesses were divided on the merits of setting emissions targets for the different sectors (such as business, transport and domestic). Many supported the use of such targets to provide transparency and galvanise all sectors into action.[30] The format of the consultation paper and the Government's approach to climate change would also seem to make this a natural choice. Others suggested that sectoral targets were unnecessary, would result in policies with a cross-sectoral impact being neglected and also the implementation of some of the less cost-effective policies.[31] We have concluded that sectoral targets should be established, set at levels to ensure that the national targets are met. These sectoral targets should provide a loose framework to stimulate all sectors of industry and society into changing their decisions and patterns of behaviour. We believe that they should enable identification of those sectors where more action is required or actions to date have failed to impact upon emissions. For sectoral targets to be most effective, they must be flexible and reviewed regularly to take account of changing conditions and new developments. Care should also be taken so that policy assessment does not disadvantage those policies which might impact across more than one sector. We recommend that the Government develop a set of emissions reduction targets for the different sectors to deliver the national targets. The targets should be consulted on as soon as possible and reviewed every five years to take account of changing circumstances and new developments.

EMISSIONS PROJECTIONS AND UNCERTAINTY

16.Inevitably, the task of projecting emissions and the impact of policies upon those projections is subject to a large degree of uncertainty.[32] This has implications for the process of developing climate change policy. We did not set out to examine the overall accuracy of the emissions projections themselves but a number of witnesses did comment on the inadequacy and lack of transparency of the information provided in the consultation paper.[33] The Government's assessment of the impact of particular policies was also questioned in some cases and we comment on these in the relevant sections later in the report.

17.A sizeable number of witnesses told us of their dissatisfaction with the quality and quantity of the information provided in the consultation paper.[34] Many commented to us that the contribution they could make to the process was effectively limited by only sketchy details of emissions projections and the methodologies used to determine the impact of the various policies discussed.[35] For example, the Electricity Association noted that:

18.It is worth recognising the practical implications of the first point. The emissions reductions from the 'energy supply' sector are effectively shown twice: in the energy supply sector and then shared out between the domestic and business sectors. The Electricity Association produced a table which demonstrates the effect of this for the domestic sector:[37]

Table 4: Carbon Dioxide Emissions from Domestic Sector (Million tonnes Carbon equivalent)

	1990	2010	Change
Domestic Sector including energy supply industry	43	38	-5
Domestic Sector excluding energy supply industry	22	24	+2

It is unfortunate that the figures were presented in the consultation document as shown in the first row of the table as it undoubtedly distorts the real 'business as usual' picture of the domestic and business sectors. The second row shows that reductions in the energy supply industry are effectively masking the trend of increasing emissions in the domestic sector. This is important because by removing the energy supply figures, it is clear that no real progress is being made in reducing emissions from the domestic sector.

Although the Department of the Environment, Transport and the Regions did provide details of projections to some interested parties, the usefulness of the consultation period could have been dramatically enhanced by including greater detail with the paper. We believe that much greater detail of emissions projections, methodologies and the assumptions used should have been provided alongside the consultation paper. The lack of transparency in the projections and some aspects of their presentation have diminished the quality of responses. We therefore welcome the greater level of detail provided alongside the Draft Programme. We encourage the Government to abandon entirely the double-counting approach in order to identify better the targets of carbon saving measures.

19.Careful thought is also required to deal with the uncertainty in the projections and its implications for reaching the targets discussed above. The uncertainty arises from a number of sources: there are the underlying assumptions about economic growth and other factors, the methodology used in modelling the projections themselves and finally, uncertainty about how businesses and individuals might respond to specific policies. The Department of the Environment, Transport and the Regions noted in its memorandum that the economic assumptions brought an uncertainty of +/- 5% in the projection of emissions for 2010 with a further +/-5% as a result of changes in inventory methodology and an error of +/-20% in the impacts of policies upon emissions.[38] One of the implications of all this uncertainty is that the Government should allow a margin of error in introducing policies to reduce emissions to meet the emissions reduction targets.[39] To establish how much 'headroom' is required, further work must be carried out to assess the uncertainty and sensitivity of the emissions projections and policy impacts. We hope that the Government is fully aware of this problem and look forward to publication of the details of this analysis and the amount of 'headroom' which is being allowed to ensure that the emissions reduction targets will be met. Further, regular monitoring of emissions and comparisons with the projections should be used to refine and refocus climate change policies where necessary.