Conclusions and recommendations
Climate Change and emissions forecasts
1. While
some scientific uncertainties still remain in relation to some
aspects of the global warming process, the time for querying the
science is long past. Nor should policy makers still hope that
science can come up with a definitive "safe limit" to
global warming. Governments must act as a matter of urgency and
on an unprecedented scale: a Marshall plan for climate change
is now required. (Paragraph 13)
2. The world will,
in the absence of urgent and strenuous mitigation actions in the
next 20 years, almost certainly experience a temperature rise
of between about 0.5°C and 2°C by 2050. The fact that
the tipping point for the irreversible melting of the Greenland
ice sheet is now thought to fall well within this range is a matter
of extreme concern. Indeed, in the light of such findings Sir
David King has suggested that the UK's 60% carbon reduction target
which the UK Government has set for 2050 may need to be increased
to 80%. (Paragraph 14)
3. We would like to
pay tribute to the Government Chief Scientist, Sir David King,
for all his efforts to communicate, in both national and international
fora, the seriousness of the threat which global warming poses.
He has displayed courage and commitment in not only highlighting
the scale of potential impacts, but also in emphasising to policy
makers the need for urgent action. (Paragraph 15)
4. The energy demand
scenarios of the International Energy Agency, the US DoE, and
major oil companies predict that the rate of emissions will actually
increase to 2030 and beyond. By contrast, environmental scientists
emphasise the need to stabilise emissions by 2030 or earlier and
thereafter reduce them if catastrophic climate change impacts
are to be avoided. Given the yawning chasm between these two
scenarios and the scale of future investments in power generation,
it is essential that governments take all possible steps to ensure
that such investment are oriented towards the development of low-carbon
approaches. (Paragraph 21)
The EU Emissions Trading System
5. Phase
1 of the EU ETS has rightly been described as a "race to
the bottom" in terms of the target caps set by individual
member states. As a result, there is little prospect that it will
yield any significant carbon reductions and this is reflected
in the low price at which carbon is trading. Far tougher targets
will need to be set in Phase 2 of the scheme and should be based
on agreeing an overall cap for the EU. Indeed, it is only the
existence of the Kyoto targets which will provide the driver for
this process. This demonstrates the importance of such absolute
targets within a post-2012 framework. (Paragraph 30)
6. In Phase 1, not
all aspects of implementation were precisely defined. There are
therefore differences between arrangements in individual member
states—including the extent to which auctioning of permits
is used, and the size of any new entrants' reserve. The UK should
work to ensure that there is greater harmonisation and consistency
in the way in which Phase 2 of the scheme is implemented. (Paragraph
32)
7. It is widely accepted
that UK power generators are likely to make substantial windfall
profits from the EU ETS amounting to £500 million a year
or more. We regard this as unacceptable and particularly ironic
in view of the complaints from the power sector over the targets
set for them under the UK National Allocation Plan. The Government
must take steps to address this issue by promoting the greater
use of auctioning of emissions permits for the power generation
sector in Phase 2, or by ensuring that windfall profits are re-invested
in renewable and low-carbon technologies. (Paragraph 35)
8. In attempting to
revise upwards its emissions cap for Phase 1 after the EU deadline
had passed, the UK Government has become embroiled in a damaging
legal argument with the European Commission and is in danger of
wantonly squandering its reputation for leadership on climate
change. We find the UK position particularly surprising since
the cost of the disputed amount—some £33 million a
year over the three year period of Phase 1—would be borne
by the power generating sector and pales into insignificance beside
the £500 million a year in windfall profits they are likely
to earn from the scheme. (Paragraph 40)
9. The difficulties
the DTI has experienced in providing reliable energy forecasts
are reflected in the sheer scale of the upward revisions to the
emissions cap in the UK NAP during 2004. Such difficulties undermine
the very concept of "business-as-usual" (BAU) as a reliable
basis on which to set targets and we therefore favour the adoption
of absolute targets wherever possible. (Paragraph 43)
10. The concept of
Domestic Tradable Quotas provides a possible mechanism which could
prove effective in bringing about behavioural change in the transport
sector, and we would urge the Government to give serious consideration
to introducing such a policy which could be more palatable than
further increases in carbon-related taxation. (Paragraph 45)
11. We are sceptical
of the desirability of incorporating other greenhouse gases and
sectors within Phase 2 of the EU ETS. We are also concerned that
this may destabilise carbon-trading markets and undermine investment
at precisely the time when far more stringent targets need to
be set. The UK government should therefore work to ensure that
there are minimal significant changes to the shape and scope of
the scheme, and that non-carbon greenhouse gases are addressed
through regulation rather than trading. (Paragraph 46)
12. We see no possibility
of the UK Government achieving its objective of incorporating
aviation in Phase 2 of the EU ETS, and we continue to think that
a mixture of other policies—including the scope for taxation
and emissions charging—should be pursued. (Paragraph 48)
13. We would support
the inclusion of aviation within a rigorous emissions trading
system only on the basis that our concerns over allocations and
global warming impacts were addressed. In such circumstances we
accept that, as there is currently no possibility of achieving
significant reductions in aviation emissions, emissions trading
would act on aviation as a demand management tool and this would
be reflected in very considerable increases in the price of air
travel. If the Government is really concerned about the impacts
on social equity, it should explore other avenues to address this—including,
for example, the concept of Domestic Tradable Quotas. (Paragraph
52)
14. Emissions trading
can provide an effective means for reducing carbon emissions but
only in the context of a strong regulatory and legal framework
within which absolute caps and tough compliance penalties can
be enforced. Such a framework exists within the EU. Not only
does the EU ETS contain within itself sufficiently draconian penalties,
but also member states cannot simply walk away if the going gets
tough because of the complex web of economic, regulatory and legal
ties which bind them together. However, no such framework exists
at an international level and we see little willingness on the
part of national governments to put one in place. (Paragraph 53)
15. In the final analysis,
emissions trading will only work effectively if it results in
an increase in the price of energy for industry, business and
even domestic consumers. Only then will the necessary incentives
to prompt behavioural change and investment in low-carbon technologies
arise. Moreover, if technological improvements cannot deliver
sufficient emission reductions, "cap and trade" systems
will result in large price increases and will therefore become
demand management policy instruments rationing activity in certain
areas. (Paragraph 56)
The UNFCCC and the Kyoto Protocol
16. There
is a widespread consensus that the targets set in the Kyoto Protocol
are weak, and that far more challenging targets will need to be
set in subsequent commitment periods. Yet the difficulties facing
many developed nations in achieving even their Kyoto targets reflect
the intricate dependence of modern economies on energy and the
consequent need for far greater priority to be accorded by governments
to mainstreaming environmental objectives. (Paragraph 62)
17. et (a 20% reduction
by 2010). We believe it would be entirely inappropriate for the
UK Government to sell any surplus Kyoto credits. Instead, it
should ensure that it incorporates within Phase 2 of the EU ETS
a far more challenging emissions cap based on the need to
achieve its domestic carbon reduction target.
(Paragraph 66)
18. We note the concerns
raised over the impact of the CDM—in particular, the slow
rate of project approval, the kinds of projects being approved,
and the difficulties involved in assessing savings against business-as-usual
forecasts. We are also concerned that many less developed countries
will not have the expertise and resources to partake in the CDM,
and capacity building therefore remains a major issue. (Paragraph
70)
A post-2012 Framework
19. The
challenge of climate change is so great that action is required
on all fronts if we are to achieve the scale of emission reductions
required. We therefore endorse the broad swathe of proposals
suggested by the International Climate Change Task Force. Indeed,
we have ourselves emphasised key aspects of those proposals in
previous reports—in particular, the need for large increases
in government support for renewables and for energy efficiency,
and the need to embed environmental and sustainable development
objectives in key organisations both nationally and internationally.
(Paragraph 74)
20. We do not believe,
however, that complementary policies alone will be sufficient.
And we are particularly concerned at the continuing reliance
which the US and to a lesser extent the UK appear to place on
technological development and the removal of market barriers as
the main way of combating climate change—as reflected in
the Prime Minister's recent speech at Davos. (Paragraph 75)
21. It seems to us
that much of the discussion on the future of the Kyoto Protocol
fails to address a central question—namely, the basis on
which targets should be set for developed and rapidly developing
economies. The failure to confront this issue more directly is
likely to give rise to a similar process of political bartering
which was involved in the original Kyoto negotiations. In such
circumstances, we have no confidence that far more demanding targets
will in fact be set, and if such targets are to be agreed it seems
to us inescapable that they must be based on an agreed set of
criteria.(Paragraph 78)
22. Any framework
which involves radical emission reductions would in practice resemble
the Contraction and Convergence approach advocated by the Global
Commons Institute. Indeed, in terms of domestic policy aims,
the UK Government has already implicitly accepted this approach
in adopting the 60% carbon reduction target for 2050; and it is
therefore inconsistent not to adopt such an approach internationally.
We do not see any credible alternative and none was suggested
in evidence to our inquiry. We therefore recommend that the UK
Government should formally adopt and promote Contraction and Convergence
as the basis for future international agreements to reduce emissions.
(Paragraph 86)
UK Government objectives for 2005
23. We
appreciate the role the FCO is playing in relation to climate
change. But, given the overriding importance of this issue and
the priority accorded to it by the Prime Minister, it is disappointing
that there is no mention of either climate change or global warming
in its latest PSA. Indeed, the PSA does not contain any clear
environmental objective or target of any kind—in marked
contrast to the priority accorded to terrorism and security objectives.
(Paragraph 92)
24. The agenda the
UK is expecting to take forward during its presidency of the EU
is set out in the recent command paper "The Prospects for
the EU in 2005". We are disappointed that this had so little
to say on the subject of climate change, and that by contrast
other issues appear to receive far greater priority. As with
the FCO's PSA, the low priority accorded to this issue does not
appear to reflect the claims made by the Prime Minister. (Paragraph
94)
25. We entirely endorse
the view of the RSPB that a key task of the UK presidency should
be to review progress towards meeting its emission reduction targets
and initiate processes and policies to address the shortfall.
We have also raised elsewhere in this report other issues which
the UK could usefully pursue, particularly in relation to the
further development of the EU ETS. (Paragraph 95)
26. We would urge
the Government not to see its role during 2005 as being simply
to broker international discussion. It should rather provide
leadership by promoting specific objectives and targets. In that
light we would make the following recommendations: (Paragraph
101)
- The UK Government should commit
itself to Contraction and Convergence as the framework within
which future international agreements to tackle climate change
are negotiated; and it should actively seek to engage support
for this position during 2005 in advance of the next Conference
of the Parties.
- Within the UNFCCC negotiating framework, the
UK should press for a review of the adequacy of the commitments
in the Convention, and focus its efforts on the need to agree
more challenging absolute emission reduction targets within a
post-2012 agreement.
- The UK should also actively pursue these objectives
within the context of Commonwealth institutions where it could
aim to promote a consensus with key nations such as India and
Australia.
- In the context of the G8, the UK could pursue
a broader range of complementary policies, including the need
for greater coordinated effort low-carbon research, the scope
for developing forms of international taxation, and in particular
the need to embed environmental objectives more firmly within
a range of international organisations.
27. We
take issue with the Prime Minister's view, expressed in his recent
speech at Davos, that science and technology provide the means
to tackle climate change. Whilst we understand the desire to
adopt such an approach in an effort to bring the US Government
on board, it is simply not credible to suggest that the scale
of the reductions which are required can possibly be achieved
without significant behavioural change. In focussing on science
and technology, the Government is creating the appearance of activity
around the problem of Climate Change whilst evading the harder
national and international political decisions which must be made
if there is to be any solution. (Paragraph 102)
28. In our view the
challenge of climate change is now so serious that it demands
a degree of political commitment which is virtually unprecedented.
Whether the political leaders of the world are up to the task
remains to be seen. Leadership on this issue calls for something
more than pragmatism or posturing. It requires qualities of courage,
determination and inspiration which are rare in peacetime. In
according priority to climate change, the Prime Minister has set
himself and his Government a mighty challenge and we must hope
they rise to it. (Paragraph 103)
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