House of Commons - Emissions Performance Standards

Emissions Performance Standards - Energy and Climate Change Contents

5 Increasing the UK's international influence

92. Climate change is a global problem requiring a global solution. The UK has demonstrated considerable leadership on the issue by setting legally binding emissions reduction targets for 2020 and 2050;[114] the first of their kind in the world. This section considers the potential international impacts of a UK-based EPS as well as examining how the Government could maximise its influence through the introduction of an EPS.

Europe

EMISSIONS PERFORMANCE STANDARDS IN EUROPE

93. There is no EPS currently in operation within the EU. However, the idea has been explored in some other Member States, as well as at a Europe-wide level.

94. The Dutch Parliament has considered plans to bring in an EPS of 350 gCO₂/kWh in 2020. However, the debate has not progressed since the Parliament re-formed following elections earlier this year.[115] Environmental law and policy organisation ClientEarth told us that "at least one EU Member State is set to release draft legislation including provisions for EPS for the power sector during 2010". The Member State in question was not identified.[116]

95. In 2008, the European Parliament Environment Committee voted to support an EU-wide Emissions Performance Standard from 2015 onwards as part of the EU Climate Package. The proposal was ultimately rejected by the Council of Ministers and was not included in the final agreement. The CO₂ Storage Directive already features a review in 2015 to consider whether an EU-wide EPS might be required.[117]

96. If the UK were to introduce an EPS, there could be an impact on policy development in other Member States. We heard from several organisations that a UK EPS could provide a useful model for other countries and could even lay the groundwork for a European-wide EPS.[118] Simon Skillings told us that the UK is a "thought" leader in Europe and that there is particular interest in the approach the UK takes to decarbonising its power sector. This is because the UK is currently dealing with questions about investment in new capacity that many other European countries are set to face in a few years' time.[119] However, despite this potential leadership role, the Minister told us that the Government had not yet engaged in any discussions with other Member States on this matter.[120]

97. E3G also told us that a Europe-wide, harmonised EPS would help to widen the market for low carbon technologies and help to achieve an integrated and more competitive European power market.[121] However, UK Coal and others pointed out that some European countries are still highly dependent on coal-fired electricity, which suggests that they would be resistant to the introduction of a Europe-wide scheme.[122] Green Alliance provided an alternative approach to promoting action at the European level, which was for a "vanguard Member State or grouping [to] take action first, which could then be taken up by neighbouring countries or by the EU as a whole".[123]

98. However, there are some risks to the UK introducing an EPS by itself, without similar action in other Member States. For example, as discussed in paragraph 79, a UK-only EPS could push generators to build new, cheaper, high-carbon capacity in neighbouring countries with interconnectors to the UK but with no EPS of their own.

99. The UK is an influential member of the EU and action taken by the UK in reducing its carbon emissions could provide an example for others. Several other Member States have expressed an interest in introducing their own EPSs and a UK EPS could provide a model for others to emulate. This is a valuable opportunity for the UK to shape the EU's approach to an important area of policy and we recommend that the Government must seize it. Equally, there may be lessons for the UK to learn from others. The Government must engage more closely with other Member States that are considering EPSs in order to share best practice and learning on EPS design and implementation.

100. The UK has been vocal within Europe in advocating a more liberalised energy market. However, the UK is now considering major changes to its own market structure in order to switch to a low-carbon economy, which may appear to contradict its previous doctrine of liberalisation. Lord Turner told us:

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Although the UK's liberalised electricity market has successfully delivered on its original aims, it is now clear that the market as it currently stands will not on its own incentivise the development and use of low-carbon and electricity storage technologies. Therefore, with these objectives in mind, it has to be modified. The EU must also take the need to decarbonise the electricity sector into account as changes are made to the European electricity market.

IMPACT ON THE EU ETS

101. We described the impact an EPS could have on the EU ETS carbon price in section three. In addition, we heard some concerns that the introduction of an EPS could be interpreted as a sign that the UK Government does not consider the EU ETS to be a sufficient mechanism to meet its climate change ambitions. This in turn, it was argued, could undermine confidence in the ETS and hamper efforts to introduce carbon trading schemes outside Europe.[125]The CBI claimed, unconvincingly in our view, "The introduction of an EPS would send out the message that the Government does not feel that the EU ETS is an effective policy tool in helping to meet carbon reduction targets".[126]

102. On the other hand, Mr Molho of WWF told us that the European Commission acknowledges that the impact of the recession on the EU ETS means that it will not provide an adequate route to decarbonisation.[127] It seems unlikely therefore that a UK-based EPS would result in additional reputational damage to the System, particularly since the Government is not proposing to replace the EU ETS with an EPS but rather to introduce it alongside the EU ETS.

103. We heard from several organisations that felt that the introduction of an EPS would demonstrate leadership on tackling climate change and would show a commitment to meeting the UK's 2020 and 2050 emissions targets. Specifically, it could demonstrate a willingness to invest in meeting our climate change targets (since there are potential costs associated with implementing an EPS) and could demonstrate a commitment not to permit the construction of new unabated fossil plants. Both these outcomes would show how serious the UK is about tackling climate change.[128]

104. We conclude that the risk that the introduction of a UK-based EPS could undermine the reputation of the EU ETS is easily outweighed by the positive leadership it would demonstrate. There is already a widespread acknowledgement that the EU ETS is not by itself delivering low-carbon investment, so any reputational damage caused would be minimal.

LEGALITY OF AN EPS UNDER EUROPEAN LAW

105. There appears to be some doubt as to whether a UK-based EPS would be permitted under the EU Industrial Emissions Directive (IED). A recent amendment to the IED states that the Directive does not prevent Member States from introducing more stringent measures, such as greenhouse gas emission requirements.[129] However, in order to prevent duplication of regulation with the existing EU ETS, Article 9 of the Directive prohibits the use of emission limit values for direct emissions of greenhouse gases.[130] Scottish and Southern Energy suggested that the introduction of an EPS might therefore be open to a legal challenge.[131] EURELECTRIC also questioned whether an EPS would constitute a more stringent measure or whether in fact it would really be an additional measure, in which case it would not be permitted under the terms of the IED.[132]

106. It is not clear whether a UK-based EPS would be permitted under the EU Industrial Emissions Directive. Article 9 of the Directive prohibits the use of emission limit values for greenhouse gases and although the preamble states that Member States may introduce more stringent measures, it is not clear whether an EPS might in fact be considered an additional measure. There is therefore a risk that the introduction of an EPS may result in a legal challenge. We call on Government to clarify the legality or otherwise of an EPS in its response to this report.

Wider international impact

107. As discussed above, the introduction of a UK-based EPS would demonstrate leadership and a clear commitment to meeting our climate change targets. This could lend some credibility to the UK in climate change negotiations on the international stage, although it should be remembered that the UK negotiates at the UNFCCC as part of the EU. Therefore, the UK's leadership role within Europe may be of more importance.

108. A UK-based EPS could also help international efforts to tackle climate change in a more practical sense. It could provide a model and policy template that could be useful to other countries looking to introduce an EPS of their own.[133] Sharing knowledge and best practice on climate policy could also help to build trust between countries; a vital ingredient if international negotiations are to move forward with any real impact.[134]

109. We heard some suggestions that if other countries were to adopt EPSs for their power sectors, this could help pave the way for sectoral agreements between countries and potentially help to secure future binding agreements to mitigate climate change.[135]

110. E3G told us that the use of EPSs in developing countries could help to improve the functioning of the Clean Development Mechanism (CDM). For example, an EPS could provide a clear minimum standard for the power sector, which could then be used as a baseline against which the carbon savings of CDM projects could be measured. The current system involves identifying baselines on a project-by-project basis, which is both subjective and costly. In addition, a well designed EPS that provided greater certainty and removed policy risk for investors could help to encourage private sector finance in low-carbon technologies in developing countries.[136]

111. Some respondents to our inquiry suggested that introducing a new policy measure—such as an EPS—would have little impact at the international level and that if the Government wanted to encourage greater efforts to reduce emissions in other countries that it would be better off focusing its efforts on more practical examples, such as the CCS demonstration project.[137]

112. Even though the introduction of an EPS may not be as influential at the international level as a successful demonstration of CCS technology, we nevertheless believe that it could bring significant benefits. We call on the Government to work with other countries to share best practice on EPS in order to facilitate global emissions reductions from the power sector.

Conclusion

113. The introduction of a UK-based EPS would bring a number of benefits at the international level. Within Europe, it would provide a template for other Member States to follow. Other Member States are considering EPSs of their own and leadership from the UK could help to encourage the uptake of EPSs elsewhere in Europe, particularly since the UK is viewed as a leader on climate change within the EU. At the international level, the introduction of a UK EPS would demonstrate commitment to tackling climate change. Providing a model for other countries to emulate could help bring forward sectoral agreements and help to achieve global emission reductions from the power sector.

114 These targets were set out in the Climate Change Act 2008. Back

115 Ev 61, Ev 70 and Ev w28 Back

116 Ev 79 Back

117 Ev 73, Ev w9 Back

118 Ev 43 (E3G), Ev 73 (Green Alliance), Ev 79 (ClientEarth) and Ev w24 (UKCCSC and UKERC) Back

119 Q 60 (Skillings) Back

120 Q 159 Back

121 Ev 43 (E3G) Back

122 Ev 70 (AEP), Ev w3 (UKC), Ev w7 (CoalPro) and Ev w33 (EDf) Back

123 Ev 73 (Green Alliance) Back

124 Q 31 (Turner) Back

125 Ev 68 (CBI), Ev 70 (AEP), Ev w28 (RWE npower), Ev w37 (E.ON) and Ev w64 (IPR) Back