Consumption-Based Emissions Reporting - Energy and Climate Change Contents

7  Conclusions and recommendations

Considering consumption-based emissions

1.  There is a clear divergence between the UK's territorial emissions and its consumption-based emissions. Furthermore, the rate at which the UK's territorial emissions have fallen has been outpaced by the growth in its consumption-emissions. We are concerned that the UK could be meeting its domestic carbon budgets at the expense of the global carbon budget. (Paragraph 15)

2.  We conclude that the fall in the UK's territorial emissions was not entirely or even mostly a consequence of the Government's climate policy. Rather, it was mainly a result of the switch from coal to gas-fired electricity generation that began in the early 1990s, and the shift in manufacturing industries away from the UK in response to the pressures of globalised markets. At the same time, the emissions embedded in the UK's imported goods have increased. To complement the UK's existing territorial carbon budgets, we recommend that DECC explore the options for setting emissions targets on a consumption-basis at the national level, and to set out the steps it will take to do this when responding to the Committee's report.
(Paragraph 22)

3.  We received no evidence that electricity-intensive industry investment decisions were being driven by the Government's climate policy, and therefore no evidence that the compensation for electricity-intensive industries announced by the Chancellor in his 2011 Autumn Statement is necessary. If electricity-intensive industries are to be "compensated" for increases in the cost of electricity—which are being driven primarily by volatility in the fossil fuel market, not climate policy—we recommend that the Government requires the beneficiaries to make clear commitments to increased energy efficiency. In its response to our Report, the Government must set out clearly what these commitments will be. (Paragraph 26)

Policy applications

4.  It is evident that the consideration of consumption-based emissions encourages the development of new policy options, as revealed by the experiences of regional authorities that have adopted a consumption-based approach to emissions accounting. We recommend that DECC explore the options for incorporating consumption-based emissions data into the policy making process, and set out the steps it will take when responding to the Committee's report. (Paragraph 39)

5.  The 9% fall in the UK's consumption-based emissions between 2008 and 2009 was primarily a result of the economic downturn, rather than of the UK's policies to reduce greenhouse gas emissions. Discounting the effects of the recession, the UK's consumption-based emissions have been on an upward trend since 1990.
(Paragraph 43)

6.  DECC's argument that there is insufficient, robust data on embedded emissions to make policy, overlooks the extent to which consumption-based emissions can be used to connect an individual's consumption to their impact on the climate. We are not convinced that consumption based emissions data are too complex or time consuming to gather, as Defra's work in this area shows. The experiences of regional authorities has demonstrated that there is sufficiently robust data available to encourage the development of new policy options and identify carbon-intensive behaviours that are overlooked by concentrating on territorial emissions alone. We recommend that in this case, the Government does not make the perfect the enemy of the good. In its response to the Committee's report, the Government should avoid using the uncertainties inherent to consumption-based emissions data as an excuse for inaction. (Paragraph 48)

7.  We conclude that that the UK's energy and climate change policy challenges do not lend themselves to simplistic analysis by a single data set. The growth in the UK's consumption-emissions does provide a counter-story to the one suggested by territorial emissions and we recommend that the Minister give more detailed consideration to the evidence gathered in our inquiry and presented here. We recommend that DECC no longer rely exclusively on territorial emissions as their primary policy driver. DECC's belief that territorial emissions are a better indicator of the UK's impact on the global climate is shortsighted and neglects the global impact of our consumption. Basing policy decisions on a single method of accounting for emissions is likely to have unintended consequences. In order to avoid perverse incentives, we recommend that DECC increase the extent to which they consider consumption-based emissions when making policy. (Paragraph 53)

8.  The Committee on Climate Change has stated that it would welcome the opportunity to explore the implications that consumption-based emissions accounting may have for the UK's carbon budgets, and that they could undertake such work after they publish their fourth progress report on the carbon budget in June 2012. We recommend that the Government commission the Committee on Climate Change to undertake this work. (Paragraph 56)

The Government's position

9.  DECC's claim that the UK is only responsible for 2% of global emissions—without acknowledgement of the caveat that this is on a territorial basis and does not take account of the emissions embedded in the goods we import—is unhelpful in terms of understanding our impact on the global climate. We recommend that when the Government refers to the proportion of global emissions that the UK is responsible for it should always state on what basis that proportion has been determined: territorial or consumption. (Paragraph 60)

10.  We recommend that Government departments work together to communicate the full picture of the UK's impact on the global climate. DECC is correct in stating that the UK's territorial emissions have been falling since 1990. Defra is also correct when it states that the UK's consumption emissions have been rising since 1990. It is only when these two perspectives are presented together that the full picture of the UK's impact on the climate is revealed. (Paragraph 63)

11.  We were concerned at the start of our inquiry that DECC officially regard consumption-based emissions as nothing more than an intellectual curiosity. Since then, possibly in response to our inquiry, there have been signs of positive developments in its understanding and approach. This is encouraging. Consumption-based emissions reporting does more than inform debate: it is an invaluable tool that should be used alongside data on territorial emissions when making energy and climate change policy. (Paragraph 67)

Climate change negotiations

12.  The UK has been a leader on climate policy for many years. If the UK wishes to lead on low-carbon growth—and encourage emissions reductions in countries that manufacture and export goods to the UK—we recommend that the Government acknowledges the growth in the UK's consumption-based emissions. The Committee is not proposing that a legally binding agreement on emissions reductions should be based on consumption rather than territorial emissions. However, we do recommend that the Government acknowledge that the UK's consumption is driving up territorial emissions in other countries. This admission could increase the UK's leverage over those emissions. DECC should not dismiss out of hand the potential leverage of a more holistic assessment of the UK's emissions, and an acknowledgement that the UK's consumption drives up territorial emissions elsewhere. (Paragraph 76)

13.  We accept that territorial emissions should remain the basis for international climate negotiations. However, the UK Government's emphasis on territorial emissions means that the responsibility for reducing emissions embedded in the products that we import lies with the—often, developing—countries where the goods are manufactured. We accept there is a risk that some exporters could have concerns that an increased emphasis on consumption-based emissions by the UK could be a precursor to anti-trade policies that penalised high-carbon products. On balance, however, we conclude that the potential benefits of an increased emphasis on consumption based emissions outweigh this risk. We recommend that the Government acknowledges the extent of our responsibility for these emissions in developing countries, in order to encourage a more equitable approach to reducing emissions globally. (Paragraph 80)

14.  We recognise that the introduction of border tariff adjustments, to account for the carbon embedded in a product as it crosses into a country, is unlikely to be welcomed by exporting countries, particular those whose economies are developing. We recommend that the Government examine the challenges and opportunities that border tariff adjustments present when considering ways to limit consumption emissions and mitigate leakage risks. The Committee on Climate Change has declared its willingness and availability to undertake an investigation into consumption-based emissions, including an exploration of border tariff adjustments. (Paragraph 83)

Changing behaviour

15.  We disagree with DECC's claim that the only way to affect emissions associated with UK consumption is for countries that export the products we consume to lower their carbon intensities. Reducing the carbon intensity of exporting countries is helpful, but it fails to address that emissions are also rising because the UK is consuming more. The UK's consumption cannot rise indefinitely and we see a role for consumption-based emissions reporting in addressing this unsustainable behaviour and in encouraging UK-based consumers and businesses to pay more attention to the overall carbon footprint of the goods and services they purchase. (Paragraph 88)

16.  We conclude that consumption-based emissions reporting can be used to inform people of the impacts of their own behaviour on global emissions. This has been demonstrated by the experience of regional authorities, which have used consumption-based emissions metrics to engage with their citizens more effectively. We recommend that this is reflected in the forthcoming demand-side work of the recently opened Energy Efficiency Development Office in DECC. (Paragraph 92)

17.  We acknowledge that progress has made on eco-labelling of products in order to encourage more sustainable consumption, but we conclude that more could be done to make use of the data that Defra collects on consumption-based emissions. Government should do more to make people aware of the consumption-based emissions data gathered by Defra. We recommend that DECC recognise the limitations of territorial emissions in trying to communicate to consumers how they can change their behaviour in order to reduce emissions globally. Even if an increased emphasis on consumption-based emissions has no impact on the UK's local territorial emissions, the UK has to address its consumption if it is to make an effective contribution to a global reduction in greenhouse gas emissions.
(Paragraph 96)

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Prepared 18 April 2012