Carbon Budgets - Environmental Audit Committee Contents


2  The Government's ambition

Fourth carbon budget

9. The Committee on Climate Change is the Government's independent adviser on climate change, and reports to Parliament on progress against targets for reducing greenhouse gas emissions. The Government is required to consider, but not necessarily follow, the CCC's advice. The CCC advised the Government in December 2010 to set the fourth carbon budget equivalent to a 50% reduction in emissions by 2025, relative to 1990 levels (Figure 1).[13] In May 2011, the Government published a 'high-level response' to the CCC's advice.[14] This accepted the CCC's recommended level for the fourth carbon budget, but did not accept many of its other recommendations (Figure 2), which we return to later in this Report. We welcome the Government's decision to follow the Committee on Climate Change's advice to set a fourth carbon budget equivalent to a 50% reduction in emissions by 2025, consistent with the trajectory required by the Climate Change Act to cut emissions by 80% by 2050. However, we are concerned that the proposed review of the carbon budgets in 2014 risks negating the benefits of that commitment.

10. It is our view that Parliament is not sufficiently engaged with the urgency surrounding climate change and the need for a step change in emissions reduction that the Committee on Climate Change have repeatedly called for. There should be greater engagement by Parliament with the work of the Committee on Climate Change. That is not helped by a lack of transparency in the way the Government responds to the Committee on Climate Change's recommendations. To improve transparency, in future carbon budget-setting rounds the Government should systematically respond to each recommendation made by the Committee on Climate Change, including any which address other actions needed to deliver the budgets.

Figure 2: The Government's response to the Committee on Climate Change's December 2010 recommendations
Committee on Climate Change's recommendation Government's response to that recommendation Source of Government's response See
Set a fourth carbon budget equivalent to a 50% reduction in emissions relative to 1990 levels in 2025. The Government agreed and set fourth carbon budget at 50% reduction. However this will be subject to a review in 2014 and may be revised. fourth carbon budget proposal Para 9
The fourth carbon budget should be met through domestic emissions reductions without relying on the use of international carbon offset credits. The Government intends to meet the budget through domestic action alone, but will keep the option of using offsets to retain maximum flexibility. fourth carbon budget proposal Paras 24, 25, 26
Set an indicative 2030 target to reduce emissions by 60% relative to 1990 levels. The Government will not set an indicative target as there is no requirement in the Climate Change Act to do so and it would pre-empt the decision on the fifth carbon budget. in a letter to the CCC on the fourth carbon budget advice Para 16
Commit to a more ambitious budget if and when a global deal covering the 2020s is agreed. The Government will tighten the budgets currently set in legislation as part of collective EU action. fourth carbon budget proposal Paras 16, 20, 21
The fourth carbon budget recommendations must be seen as the minimum reductions necessary if the 2050 target is to be attainable. The Government did not specify whether it accepts this principle. It plans a review in 2014 and may revise the budget up to ensure consistency with the EU emissions targets and the Emissions Trading System. n/aPara 33
The second and third carbon budgets should be tightened to reflect the level of ambition in the intended budget for the non-traded sector, giving an economy-wide reduction of 37% in 2020 relative to 1990. The Government will not adjust the second and third budgets until the EU moves towards tougher targets for the 2020s. fourth carbon budget proposal Paras 20, 21
The Government should commit not to bank over-performance of the first carbon budget to help meet the second budget. The Government did not specify whether it accepts this principle. n/aPara 21

Carbon budgets and limiting global temperaturerise

11. In 2008, the Committee on Climate Change recommended that the UK's climate change objective should be to keep the increase in average mean global temperature by 2100 'as close to 2°C above pre-industrial levels as possible', and the probability of the increase in global mean temperature exceeding 2-4°C as low as possible. The CCC noted at that time that 'it is no longer possible with certainty, or even with high probability, to avoid this danger zone' and that adaptation strategies should be adopted for temperature rises of above 2°C.[15] It recently reconfirmed these objectives in its advice on the fourth carbon budget.[16]

12. The Climate Change Act targets, and their associated carbon budgets, were accordingly designed to reflect the UK's contribution to deliver emission reductions by 2050 so that this climate change objective can be met. But, increasingly, the 2°C figure is seen as a potentially unsafe temperature rise. The Intergovernmental Panel on Climate Change's Fourth Assessment Report found that 'even if global emissions fall by 50-85% (from 2000 levels) by 2050, then warming of 2.0-2.4°C is likely to result'.[17] Our predecessor Committee recommend in 2010 that Government should prioritise reducing the likelihood that temperatures will exceed 2°C, down from a level that is 'as likely as not' to at least 'unlikely'.[18] WWF were concerned that 'significant risks' exist even at warming of 2°C, and associated CO2 concentrations threaten 'severe damage' to marine ecosystems.[19] Dr Alice Bows of the Sustainable Consumption Institute, and her colleagues at Tyndall Manchester, considered that 'the impacts associated with 2°C have been revised, sufficiently so that 2°C now more appropriately represents the threshold between dangerous and extremely dangerous climate change'.[20]

13. Internationally, there is increasing pressure not just to agree targets to restrict temperature rise to 2°C, but to go further than that. The Accord signed at the 2009 UN climate change conference in Copenhagen set an objective of securing international agreement on limiting global temperature increases to below 2°C. Such an international agreement was reached a year later at the Cancun conference,[21] along with an agreement to consider by 2015 strengthening the objective to limit global temperature increases to 1.5°C.[22] Also, more recently the Executive Secretary of the UN Framework Convention on Climate Change has called for action on climate change to limit increases in global temperature to 1.5°C.[23] Some have expressed concerns that the approach to setting the carbon budgets and targets is 'exceptionally risky'.[24] The carbon budgets and targets set are premised on a 'greater than 50% chance of exceeding 2°C, when Governments have agreed the goal is to not exceed 2°C ... If the goal is to not exceed something, then a greater than 50:50 chance is not compatible with this goal'.[25] Dr Alice Bows of the Sustainable Consumption Institute, and her colleagues at Tyndall Manchester, were of the opinion that 'a genuine commitment to a low likelihood, between 5 and 33% [chance of] avoiding a 2°C rise,' would imply emissions reductions in the order of 70% by 2020 and near 100% by 2050, relative to a 1990 baseline.[26]

14. The European Union committed itself in 2007 to reduce its overall greenhouse gas emissions by at least 20% below 1990 levels by 2020, and to increase this to 30% if the international conditions are right. It has also set targets to increase the share of renewables in energy use to 20% by 2020, and to save 20% on energy consumption by 2020 through increased energy efficiency (the so called 20:20:20 targets).[27] In March 2011, the European Commission published a Roadmap for moving to a competitive low carbon economy by 2050,[28] which set out a cost-efficient trajectory for reducing emissions by 2050, consistent with the EU's long-term goal of reducing emissions by 80-95% in order to keep climate change below 2ºC. It envisaged a 25% reduction in EU domestic emissions in 2020, rising to 40% in 2030 and 60% in 2040.[29]

15. The Government said that it aims to contribute fully to the review into a possible 1.5°C limit on temperature rise initiated at Cancun, but for the time being 'the conclusions of the Committee on Climate Change that limiting global greenhouse gas emissions so that the expected temperature increase is below 2°C remains the right objective to manage the risks of the most serious impacts of climate change'.[30] In the meantime, the Government's aim is to seek an increase in the current EU target to 30% by 2020,[31] which is intended to provide further help to limit temperature rise to 2°C, and a higher carbon price within the EU ETS.[32] On 4 July 2011, the European Parliament voted against calling on the European Commission to come forward with proposals to increase Europe's climate ambition to a 30% emissions reduction for 2020,[33] although a motion to increase the target could be discussed again at a later date.

16. In providing advice to Government since 2008, the Committee on Climate Change has regularly proposed two possible budgets; one to apply for the period before a global deal is reached (the 'interim' budgets) and reflecting the existing EU target of 20% emission cuts by 2020, the other to follow a global deal on emissions reductions and reflecting a tightened EU target of 30% emission cuts by 2020 (the 'intended' budget).[34] In its advice on the fourth carbon budget, the CCC recommended aiming for an intended target for 2030 of 60% emissions reductions and warned that the Government should aim to deliver the intended rather than interim targets, or face significant risks and increased costs.[35] The Government has chosen to adopt the less ambitious interim targets, and not to adopt the CCC's target for 2030 as 'there is no requirement under the Climate Change Act to set a 2030 target and doing so would pre-empt the decision on the level of the fifth carbon budget, which we need to set in 2016'.[36] The Government's assessment is that the fourth carbon budget, reflecting the CCC's recommended 'interim' targets, 'is consistent with what the UK needs to do to play its part in international efforts to keep global temperatures from rising more than 2°C.[37] The Secretary of State for Energy and Climate Change told us that "if we altered or did not accept the CCC's recommendation for the fourth carbon budget, then I think that will be a legitimate point, but we did accept that".[38]

17. As we discuss in part 3, the Government's proposed review of the carbon budgets in 2014 may ease the carbon budgets if the EU Emissions Trading System puts too much pressure for emissions reductions on the 'non-traded sector'. In the meantime, the developing science and international dialogue is building the case for seeking more ambitious emissions reductions, not less.

Tightening the first three carbon budgets

18. A 'carbon accounting system' is required under the Climate Change Act to determine compliance with the carbon budgets and the targets in the Act.[39] The rules determine that the carbon budgets are made up of emissions from the 'traded sector' (power generation and heavy industry sectors covered by the EU ETS) and the 'non-traded sector' (everything else such as agriculture, transport, buildings etc). The UK's share of the EU ETS cap represents the 'traded sector' component of the carbon budgets. Any over-performance of emissions reduction in the traded sector cannot be used to meet the carbon budgets, but any shortfall has to be made good by additional emissions reductions in the non-traded sector.[40]

19. The Committee on Climate Change recommended that the Government should 'legislate to adjust the first three budgets to reflect non-traded sector emissions under the intended budgets'. Achieving the fourth carbon budget will only be feasible if the UK's non-traded sector emissions in the 2020s are in line with the tighter 'intended' budget rather than the legislated 'interim' third carbon budget.[41] The Committee on Climate Change reports that emissions from the 'non-traded' sector are on course to be within the first carbon budget, largely due to the impact of the recession rather than the implementation of emissions reduction measures.[42] Emissions in the non-traded sector increased in 2010 but stayed within budgetary levels. However 'continued performance at the underlying rate of progress achieved in 2010 would be insufficient to meet the [second and third] carbon budgets', because GDP growth had been 1% in 2010 compared to the trend growth of 2.5-3.0% envisaged when the economy recovers.[43] Therefore, there was still a need for a 'step change' in the pace of emissions reductions in the non-traded sector.[44]

20. The CCC told us that the current legislated third carbon budget is 'inconsistent with the fourth budget, given the acceleration in the pace of emissions reductions required between these budgets'.[45] WWF warned that the first three carbon budgets represented 'business as usual' and were not ambitious enough.[46]

21. The Government has committed to 'tighten the budgets currently set in legislation ... As part of collective EU action ... as a priority we continue to push for this increase in ambition with our EU partners'.[47] We asked the Secretary of State why the Government did not take the Committee on Climate Change's advice to tighten the first three carbon budgets. He told us that the Government was "playing it safe" by keeping the first three carbon budgets as they are, as there was uncertainty about "how much emissions are likely to bounce back with the bounce-back of economic activity" and that the Government did not want to prejudice any negotiations there might be with other European States.[48] The Government has also not responded to the CCC's recommendation that it should commit not to bank over-performance against the first carbon budget to meet the second budget.[49]

22. The Government is 'playing it safe' by sticking to the previously-set emissions targets in the first three carbon budgets, despite the fact that the Committee on Climate Change has warned that achieving the fourth carbon budget will only be feasible if the UK's non-traded sector emissions in the 2020s are in line with the tighter 'intended' budgets. Playing it safe is not consistent with the bold and ambitious action needed to tackle global climate change. Emissions reductions in the non-traded sector continuing their 2010 trajectory would not be sufficient, post-recession, to meet the second and third carbon budgets. A major change in the pace of emissions reductions is therefore required. The Government should reconsider whether to tighten the second and third carbon budgets when the CCC produces its next progress report, and in the meantime set out in its finalised Carbon Plan how the Government will deliver the required step change in non-traded sector emissions.

23. In responding to this Report, the Government should explicitly commit itself to not banking over-performance against the first carbon budget to help meet subsequent budgets, or else explain why it will carry over that recession-driven over-performance.

International carbon offset credits

24. The Climate Change Act requires the Government to set a limit on how many international carbon credits might be taken into account in order to meet the carbon budgets 18 months in advance of the start of each carbon budget.[50] EEF were of the opinion that the use of carbon credits to meet domestic targets should not be ruled out because 'emissions should be reduced where it is most cost-effective to do so'. It noted, however, that the benefit of offsetting would only be achieved if 'assurances exist that emission reductions associated with such credits are genuine, sustainable and fully verifiable to a standard comparable to that agreed by the [UN] Clean Development Mechanism executive board'.[51] Our predecessor Committee was similarly concerned that any credits should only be purchased from countries that have implemented equivalent national emissions targets and managed to cut emissions below them, to ensure the credits represented genuine reductions.[52]

25. For the fourth carbon budget, as with previous budgets, the Committee on Climate Change advised the Government to aim to achieve the budgets purely through domestic action without recourse to offset credits, including through the EU ETS. It considered that 'a minimum level of domestic action is required in developed nations in order to ensure sufficient progress towards delivering longer-term targets'. The CCC also noted that opportunities to buy such credits will reduce as a result of a strong downward emissions trend in the longer term, and that 'developed nations should demonstrate that a low-carbon economy is possible and compatible with economic prosperity'.[53]

26. Similarly, for the second budget period, the Committee on Climate Change recommended that secondary legislation in June 2011 allow no use of offset credits because 'use of credits would substitute for appropriate domestic ambition'.[54] The Department of Energy and Climate Change estimates that the UK is on course to out-perform the first, second and third carbon budgets by 85 MtCO2e, 114 MtCO2e and 96 MtCO2e respectively.[55] Nevertheless, the Government has set itself a 55 MtCO2e limit on the purchase of international offset credits for the second carbon budget 'as a contingency measure'.[56] The Secretary of State told us that this preserved a degree of flexibility when there were "enormous uncertainties",[57] with gaps in the data on the impact on carbon emissions of the economic cycle.[58] He told the House that it was the Government's intention to meet the carbon budget through emission reductions in the UK as far as is practical and affordable, but that the Government 'also intended to keep our carbon trading options open, to maintain maximum flexibility and minimise costs in the medium to long term. Given the uncertainty involved in looking so far ahead, that is a pragmatic approach'.[59]

27. The Government has not ruled out the use of international carbon offset credits to meet the carbon budget for 2013-17, against the advice from the Committee on Climate Change and despite Government projections that it will achieve that carbon budget through domestic action alone. Allowing the use of international offset credits in that second budget period would make achievement of subsequent carbon budgets more difficult because it could reduce pressure to secure domestic action. If and when international credits are used to meet carbon budgets, the Government should notify the House in advance and facilitate a debate on the possible consequences of this for meeting the Climate Change Act targets.

Accounting for carbon emissions

28. The UK's national greenhouse gas and carbon budgets reporting regime is based on the production of emissions in the UK. They do not take account of 'outsourced emissions' resulting from the consumption of goods and services imported into the UK.[60] The Public Interest Research Centre was concerned that outsourced emissions are a 'large and growing problem', where the UK's performance is 'particularly poor' - the UK's consumption emissions are 34% higher than our production emissions, a ratio higher than for Germany, Japan and the USA.[61] Research by the Carnegie Institute of Washington found that UK demand for imported goods is responsible for more emissions abroad than any other European country, and the third highest worldwide.[62] The UK is responsible for producing less than 2% of global emissions,[63] but if carbon emissions are calculated on the basis of consumption, the UK's emissions record between 1990 and 2005 is transformed from a 19% reduction to a 15% increase.[64] Only accounting for production emissions means that the UK and other developed nations are 'effectively depositing responsibility for cleaning up production processes onto developing countries'.[65]

29. The Aldersgate Group called for greater transparency about the UK's total carbon footprint, including consumption of imported goods and services, to enable the carbon budgets more effectively to manage global climate change.[66] As part of its 'Sustainable Consumption and Production' programme, Defra has been working to identify the lifecycle carbon and other environmental impacts associated with UK consumption. Defra had developed an indicator, but the Government did not consider the estimates used to be sufficiently reliable for use in monitoring or setting targets.[67] It has nevertheless recently let a contract to update this indicator and to monitor the greenhouse gas emissions associated with UK consumption for the next five years.[68] At the same time, the Committee on Climate Change has signalled an interest in examining whether 'policy should focus solely on a production-based definition of emissions or also on the UK's consumption of carbon-intensive imports'.[69]

30. We asked the Secretary of State about the case for using consumption emissions, and he told us that:

The reality is that if you were to tell most members of the United Nations that their territorial sovereignty would henceforth be suspended because we intended to take account of our imported embedded emissions, I think there would be an absolute firefight. The reality is that the territorial principle is very well established. We are responsible for our own territory, and while that remains the case, that is the bit that we can take responsibility for.[70]

He also favoured a focus on actions to tackle climate change rather than "unleashing a tremendous row" about who is responsible for particular emissions.[71]

31. We do not share the Secretary of State's reluctance for monitoring consumption emissions. Monitoring UK emissions on a consumption basis would facilitate a more rigorous approach to controlling our contribution to climate change. The Government should request the Committee on Climate Change to review the scope for measuring emissions on such a basis and how that might be worked into the carbon budgets regime, if necessary to complement the continuing production-based reporting needed internationally.


13   The Fourth Carbon Budget - Reducing emissions through the 2020s, op cit.  Back

14   HM Government, Implementing the Climate Change Act 2008: The Government's proposal for setting the fourth carbon budget, May 2011. Back

15   Building a low-carbon economy - the UK's contribution to tackling climate change, op cit, page 16. Back

16   The Fourth Carbon Budget - Reducing emissions through the 2020s, op cit, page 16.  Back

17   Ev w24 Back

18   Environmental Audit Committee, Third Report of Session 2009-10, Carbon budgets, HC 228. Back

19   Ev w24 Back

20   Ev w34 Back

21   UN Climate Change Conference, Cancun 2010. Back

22   Department of Energy and Climate Change, Impact Assessment of Fourth Carbon Budget Level, May 2011. Back

23   Article in Guardian, 1 June 2011, http://www.guardian.co.uk/environment/2011/jun/01/christiana-figueres-climate-2c-rise/print  Back

24   Ev w37 Back

25   Ev w34; Ev w37. Back

26   Ev w34 Back

27   European Commission, 20 20 by 2020 - Europe's climate change opportunity, January 2008. Also, see http://ec.europa.eu/clima/policies/package/index_en.htm  Back

28   The Roadmap takes the form of a Communication that is addressed to the Council, European Parliament and EU bodies. The Commission invites them, Member States and stakeholders to take the Roadmap into account in the further development of EU and national policies for achieving a low carbon economy by 2050. Back

29   European Commission, A Roadmap for moving to a competitive low carbon economy in 2050, March 2011. Back

30   Impact Assessment of Fourth Carbon Budget Level, op cit.  Back

31   HM Government, The Coalition: our programme for government, May 2010, page 16. Back

32   Q 19 Back

33   See: http://www.europarl.europa.eu/sides/getDoc.do?type=REPORT&reference=A7-2011-0219&language=EN  Back

34   Committee on Climate Change, Building a low-carbon economy - the UK's contribution to tackling climate change, December 2008, page 89. Back

35   Committee on Climate Change, The Fourth Carbon Budget - Reducing emissions through the 2020s, December 2010, page 100. Back

36   Letter from the Rt Hon Chris Huhne MP, Secretary of State for Energy and Climate Change, to Lord Turner, Chairman, Committee on Climate Change, dated 24 May 2011.(http://www.decc.gov.uk/assets/decc/What%20we%20do/A%20low%20carbon%20UK/Carbon%20budgets/1703-chris-huhne-lord-turner-4thcarbonbudget.pdf ) Back

37   HM Government, Implementing the Climate Change Act 2008: The Government's proposal for setting the fourth Carbon Budget, May 2011. Back

38   Q 11 Back

39   The Carbon Accounting Rules can be found on the Department of Energy and Climate Change's website: http://www.decc.gov.uk/en/content/cms/emissions/carbon_budgets/carbon_budgets.aspx  Back

40   Implementing the Climate Change Act 2008: The Government's proposal for setting the fourth carbon budget, op cit, p7  Back

41   The Fourth Carbon Budget - Reducing emissions through the 2020s, op cit, page 37. Back

42   Committee on Climate Change, Meeting Carbon Budgets - 3rd Progress Report to Parliament, June 2011. Back

43   Ibid, page 13. Back

44   ibid, page 14. Back

45   Ev w1 Back

46   Ev w24 Back

47   Letter from the Rt Hon Chris Huhne MP, Secretary of State for Energy and Climate Change, to Lord Turner, Chairman, Committee on Climate Change, dated 24 May 2011. http://www.decc.gov.uk/assets/decc/What%20we%20do/A%20low%20carbon%20UK/Carbon%20budgets/1703-chris-huhne-lord-turner-4thcarbonbudget.pdf  Back

48   Qq 41, 42 Back

49   The Fourth Carbon Budget - Reducing emissions through the 2020s, op citBack

50   Climate Change Act 2008, section 11.  Back

51   Ev w1 Back

52   Environmental Audit Committee, Third Report of Session 2009-10, Carbon Budgets, HC 228. Back

53   Committee on Climate Change, The Fourth Carbon Budget - Reducing emissions through the 2020s, December 2010, page 140; Meeting Carbon Budgets - 3rd Progress Report to Parliament, op citBack

54   Letter from Adair Turner, Chairman, Committee on Climate Change, to the Rt Hon Chris Huhne MP, Secretary of State for Energy and Climate Change, dated 22 March 2011. http://hmccc.s3.amazonaws.com/Letter_Lord%20Turner_Chris%20Huhne%20MP_220311.pdf Back

55   Ev 26 Back

56   Ev 26; In June 2011 the Government set a limit on offset credits for the Second Carbon Budget of 55MtCO2e over the five year period; The Climate Change Act 2008 (Credit Limit) Order 2011 (SI 2011/1602). Back

57   Q 14 Back

58   Q 16 Back

59   HC Deb, 17 May 2011, col 176. Back

60   Ev w15 Back

61   ibid Back

62   Carnegie Institute of Washington in California, 2008. Back

63   Q 11 Back

64   Ev w9 Back

65   Ev w15  Back

66   Ev w9 Back

67   HC Deb, 28 February 2011, col 236 - 37W. Back

68   See: http://randd.defra.gov.uk/Default.aspx?Menu=Menu&Module=More&Location=None&ProjectID=17729&FromSearch=Y&Publisher=1&SearchText=embedded&SortString=ProjectCode&SortOrder=Asc&Paging=10#Description  Back

69   The Fourth Carbon Budget - Reducing emissions through the 2020s, op cit. Back

70   Q 12 Back

71   Q 21 Back


 
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© Parliamentary copyright 2011
Prepared 11 October 2011