Supplementary memorandum submitted by
the Committee on Climate Change
This letter responds to your questions on the
use of offset credits and the scientific analysis underpinning
the Committee's advice. I will also answer Colin Challen's question
on measurement uncertainty.
THE USE
OF OFFSET
CREDITS IN
EU ETS
The main scope for emissions reductions over
the first three budget periods within EU ETS comes from the power
sector. The Committee's position is that the use of offset credits
in EU ETS should be complementary to decarbonisation of the power
sector required to be on track to meeting longer-term emissions
reduction goals.
In our December report, we questioned whether
the EU ETS price would be sufficiently robust to support investment
in low-carbon generation in the absence of other measures. We
concluded that other levers would also be required to support
investment in wind generation and CCS demonstration, with the
possible need for intervention to support investment in nuclear
new build.
In new modelling of future carbon prices that
we have undertaken for our report to Parliament in October 2009
we reflect a number of changes that have ensued since our December
report, including:
— Lower emissions from the energy intensive
sectors as a result of the recession.
— Increased use of offset credits in the
final agreed package in comparison with the EC's January proposals.
— Increased emissions reductions required
as a result of moving from an all departing to an all departing/all
arriving methodology for inclusion of aviation emissions in EU
ETS.
The new modelling suggests that whilst the carbon
price will still be determined by the cost of gas fired relative
to coal fired generation, this will be lower than we had previously
projected. It therefore makes our previous concerns about the
level and volatility of the carbon price and its ability to incentivise
low-carbon generation investment more pronounced.
We will set out the analysis in full in the
report to Parliament, where we will also consider appropriate
policy responses (eg tightening the EU ETS cap, limiting the use
of offset credits within EU ETS, underpinning the carbon price,
intervening in the power market, etc).
THE USE
OF OFFSET
CREDITS TO
MEET ECONOMY
WIDE EMISSIONS
REDUCTION TARGETS
When we wrote that an EU reduction of 20% GHG
in 2020 would be too low, but a 30% reduction would be adequate
with commensurate commitments from other countries, we were referring
to responsibility for emissions reductions (ie emissions reductions
to be achieved domestically, or through the purchase of EUAs/offset
credits).
We will consider whether the 30% cut is in fact
adequate given commitments from other countries when we give advice
on the appropriate level of the Intended budget following a global
deal [our recommendation in the December report was indicative,
pending a global deal].
Our advice was that we should aim to meet the
Interim budgets (ie corresponding to the EU's 20% target) through
domestic emissions reductions, with possible purchase of offset
credits to meet the non-traded sector Intended budget (ie corresponding
to the EU's 30% target). We will set out our latest analysis of
domestic emissions reduction potential in our October report drawing
out any implications for the balance of effort between domestic
emissions reductions and the purchase of offset credits to meet
the Intended budget.
To the extent that purchase of offset credits
may be appropriate to meet the Intended budget, we note proposals
for strengthening existing mechanisms put forward in Mark Lazaarowics'
recent report (eg sectoral trading and crediting, and strengthening
CDM).
THE COMMITTEE'S
APPROACH TO
CLIMATE CHANGE
SCIENCE
The scientific modelling upon which the Committee
based its advice was consistent with the latest science (2 years
beyond IPCC 2007) and accounted for all the climate processes
which are currently understood and quantified.
The Committee used the MAGICC model to assess
the climate impacts of alternative emissions trajectories. This
is a "simple" coupled model—including an interactive
carbon cycle—which has been used extensively by the IPCC
to make global average climate projections (see IPCC WG1 AR4 Section
10.5.3).
We ran MAGICC hundreds of times for each emissions
trajectory, sampling values for carbon cycle feedbacks and climate
sensitivity from distributions covering the range in the C4MIP
experiment, which is the most up to date and comprehensive comparison
of the world's leading climate models (see Annex 1 of our December
report for more details). Our analysis therefore incorporates
all the major feedback processes that are currently included in
the leading models.
The Committee's approach was to adopt a climate
change objective based on assessment of damages at different temperature
increases, and feasibility/cost of options for mitigation. It
was not, as you suggest in your letter, to select a trajectory
for feasible emissions reductions and use this to frame an objective.
Our climate objective was to keep the likely global mean temperature
increase at or close to 2 degrees, and to keep the probability
of dangerous climate change (ie more than 4 degrees) at very low
levels (eg less than 1%). Consistent with the latest thinking,
we also allowed a transient overshoot in atmospheric CO2 levels
rather than seeking to stabilise at a certain concentration.
Our analysis suggested that global emissions
should peak before 2020 with a subsequent annual emissions reduction
of at least 3/4% to achieve our climate objective. This path is
similar to that set out in the Synthesis Report from the March
2009 science conference in Copenhagen.
The results reported in IPCC WG1 AR4 (Figure
10.21c) are generated from three simple coupled models (ie not
models from the C4MIP comparison) which consider CO2 only. This
is in contrast to our modelling, which also accounted for non-CO2
emissions including aerosols and other Kyoto gases in addition
to CO2.
By inspection, for a 450ppm stabilisation scenario
these models appear to suggest a range for global emissions reductions
of 45-80% relative to peak year. The cut proposed by the Committee
is around 65% when compared to the peak year, and is therefore
within the range of cuts proposed by the three models.
The Committee's proposals do reflect a judgment,
and a different judgment could be made, for example, if greater
weight were to be attached to the probability of limiting temperature
change below 2 degrees, or if there were new evidence on feasible
abatement.
The Committee recognises uncertainty in the
science and that new results will emerge, and has proposed that
this be allowed for by periodic review of the scientific evidence
base and adjustment of emissions reduction targets as appropriate;
we will next review the science in the context of our advice on
the fourth budget period (2023-2027), to be published at the end
of 2010.
EMISSIONS MEASUREMENT
UNCERTAINTY
We considered the issue of measurement uncertainty
in the context of developing our advice over whether carbon budgets
should relate only to CO2 or cover all GHGs. In this context,
we distinguished between level and trend uncertainty:
— There is much more uncertainty over the
level of other GHG emissions (14%) than CO2 emissions (2%). This
reflects, for example, lack of precision measuring methane emissions
in agriculture relative to carbon emissions through the burning
of fossil fuels.
— There is less trend uncertainty, however,
manifest in the convention that inventory revisions are typically
applied consistently over time (ie historically and going forward).
This would allow a measurement change to be accommodated by a
technical adjustment to carbon budgets rather than any significant
adjustment to climate change strategy.
Given significant benefits from inclusion of
non-CO2 gases (eg providing incentives for emissions reduction
in agriculture), the Committee therefore recommended that carbon
budgets should cover all GHGs. The Committee will continue to
track any changes in the methodology (eg development of the smart
inventory for agriculture) and related changes in measured emissions,
drawing out implications for carbon budgets/carbon budget management.
24 August 2009
| 
