Carbon Budgets - Environmental Audit Committee Contents

4  The Carbon Plan

39. The Carbon Plan was published initially as a draft in March 2011, taking into account the first three carbon budgets. The Government will publish an updated 'final' Carbon Plan in November to fulfil its commitment under the Climate Change Act to set out its policies and proposals for meeting the carbon budgets.[89] This will take into account the fourth carbon budget and include details of quantitative indicators against which progress will be monitored.[90] The Carbon Plan replaces the previous Government's UK Low Carbon Transition Plan, published in 2009, which set out measures to meet the first three carbon budgets.[91] The Committee on Climate Change plans to assess whether the Carbon Plan provides adequate policies to meet the fourth carbon budget and we have not sought to duplicate that work.[92]

The Plan as an aid to managing emissions reductions

40. It is difficult to assess whether the policies in the draft Carbon Plan are likely to deliver the carbon budgets. The Plan pulls together existing policies in Departmental Business Plans, including on electricity market reform, a carbon floor price, funding and policies to support development of technologies and new markets, together with a number of new initiatives (e.g. a commitment to publish a strategy for electric car infrastructure). The Committee on Climate Change's Third Progress Report, published after the draft Carbon Plan was published, continues to call for a 'step change' in the pace of emissions reduction. The CCC explained that that would require new policies, including 'approaches to energy efficiency improvement in residential and non-residential buildings, consumer behaviour change in transport, and more widespread use of carbon-efficient practices on farms'.[93] In a similar vein, the Government noted that 'meeting the fourth carbon budget will mean developing current and new policies and measures to ensure a greener and more energy efficient economy with better insulated homes, more power from low carbon sources, and more of us driving electric and low carbon vehicles'.[94] However, the Government has concluded that 'meeting the fourth carbon budget requires no new policies this Parliament.[95] We questioned the Secretary of State on how the Carbon Plan will be updated. He told us: "I hope it is not going to be very different from the draft Carbon Plan that is out there, but the objectives will be agreed and signed up to with the deadlines for each of the departments".[96]

41. The Carbon Plan aims to 'enable the Government to transparently and effectively manage the transformation of the economy and our way of life' by setting out 'specific practical actions across government, month by month, department by department'.[97] Some witnesses questioned whether enough information was provided in the draft Carbon Plan to enable this. WWF believed that the previous Low Carbon Transition Plan offered a more robust basis for monitoring and evaluating progress than the draft Carbon Plan, providing 'considerably more data and analysis' than the draft Carbon Plan, including expected carbon savings each year and from each broad sector of the economy and for the main policies and measures involved.[98] EEF questioned whether the Carbon Plan should be called a 'Plan' at all:

If we accept that the definition of a 'Plan' is a detailed scheme for reaching an objective, then the Carbon "Plan" fails to achieve this. It makes no effort to quantify what amount of [greenhouse gases] each scheme, policy and regulation is predicated to reduce. Neither does it set out whether Government has looked at alternatives to achieve the [the UK's Climate Change targets].[99]

42. Departments must consider the change in greenhouse gas emissions from new policies as part of the Impact Assessment process.[100] The Committee on Climate Change has developed a set of indicators and milestones against which it monitors progress on particular initiatives for reducing emissions; for example on cavity wall insulation, renewable power generation, electricity market reform and residential energy efficiency.[101] The CCC's Third Progress Report in June 2011 noted that performance so far against its indicators and policy milestones had been mixed. The CCC plans to review the Government's strategy for delivering the fourth carbon budget against its indicator framework in June 2012.[102] When we questioned the Secretary of State as to whether the final Carbon Plan would include quantified impacts, he was very cautious:

The fourth carbon budget is meant to be a credible response, so that will involve making stabs at numbers. Again, I would caution ... about thinking that these things are more precise or more accurate than they are, and when you are dealing particularly with a period as far away as 2023 or 2027, when there can be all sorts of major changes in technology, which we do not know about as yet, these are the best guess we have at the time, and I would certainly not want to put a lot of weight on them. If you think back to 20 or 30 years ago and the enormous technological changes that have taken place, the internet and so forth, I think that makes sense.[103]

43. As well as a lack of quantitative emissions data in the Plan, the ambition underpinning the policies and expected outcomes is not specified. For example, the Committee on Climate Change recommended a 'radical' decarbonisation of the energy sector by 2030 in order to put the UK on the path to meeting the 2050 target, with carbon intensity cut from today's level of around 500 gCO2/kWh to around 50 gCO2/kWh in 2030.[104] The Government's plans to deliver this decarbonisation, however, models a carbon intensity of 100 gCO2/kWh.[105] The Energy and Climate Change Committee made recommendations that the Electricity Market Reform White Paper set out an indicative carbon intensity pathway for the power sector to 2030, to deliver a 40-60gCO2/kWh carbon intensity in electricity generation by 2030.[106] The draft Carbon Plan has provided no data on carbon intensity, and no mention of the Government's ambition in this area.

44. There are uncertainties about the exact future level of global warming and its consequences are inherently uncertain.[107] Coupled with uncertainties over future technological developments, costs, the strength of the economy and the availability of capital for investment in new low carbon technologies, it is impossible to set out the precise mix of different technologies that will deliver a particular carbon budget.[108] The Government acknowledged this uncertainty in its Impact Assessment on the fourth carbon budget, stating that 'if the underlying assumptions turn out to be significantly different from those forecasted, emissions projections, abatement potential and costs could be higher or lower than anticipated'.[109] The Grantham Institute were concerned that the draft Carbon Plan did not reflect this acknowledged uncertainty by setting out a risk management strategy to achieve the carbon budgets and called for this to be addressed in the final Carbon Plan.[110]

45. It is difficult to assess whether the policies in the draft Carbon Plan are likely to deliver the carbon budgets. Some policies in the Plan are yet to begin to be implemented. The final Plan should clearly identify where new policies, not currently listed in the Plan, will need to be added to deliver the carbon budgets.

46. Without a baseline quantification of the emissions reductions expected from each policy in the Carbon Plan, it is not possible to conclude whether the Plan will deliver the necessary emissions reductions. We accept that there are uncertainties associated with such quantifications, but the Carbon Plan could be amended to include indicative emissions reductions for each policy as impact assessments are undertaken. The final Plan should include indicators, perhaps reflecting those developed by the Committee on Climate Change, through which progress in delivering the Plan, but also more importantly the scale of emissions reduction required, can be monitored.

47. In the final Carbon Plan the Government should set out its risk management approach for ensuring policies deliver the overall emissions reduction required to meet the carbon budgets. This should include how it plans to monitor changing estimates of emissions reductions, utilising the Committee on Climate Change's annual Progress Reviews to focus its own review of those policies that are not delivering the emissions reductions forecast.

Departmental incentives and accountability

48. Under the 2009 Low Carbon Transition Plan, departments were each assigned a share of the carbon budgets based on the economic sectors within their sphere of influence. These Departmental Carbon Budgets were approximate, but were intended to 'give departments a stake in reducing emissions from a given sector' and encourage 'departments to recognise the range of economic sectors their policies influence and encourage collaborative work within the eight sectors [of the economy] to reduce emissions'.[111] Departments were to be required to produce a Departmental Carbon Reduction Plan setting out the actions they planned to take to reduce emissions in their sectors, as well as from their own estate and use of transport.

49. In reviewing these arrangements after the election in 2010, the Government found that departments were held accountable for 'things that were not precisely measurable and that they could not control'.[112] When we questioned the Secretary of State about why Department Carbon Budgets were abandoned, he told us:

... we have a view that getting excessively involved in quantitative planning is really not very sensible given the flexibility and uncertainty around technological solutions. ... the idea that we literally divvy up the overall carbon budget between Departments and local authorities, and say, "We want you to meet this." A lot of the instruments are simply not at that level because the uncertainties are very great ... I think it is just not very sensible and the last time I came across a system that was going to be that interventionist and pernickety was when I visited the Soviet Union ...[113]

DECC considered that Departmental Carbon Budgets created a 'perverse incentive' that 'did not create the right incentive for departments to come forward with policies and measures aimed at reducing emissions, as doing so would increase a department's level of accountability for emissions reductions'.[114]

50. We find the Government's reasons for abandoning the pilot Departmental Carbon Budgets regime unconvincing, not least because the Government has agreed an emissions monitoring role for local authorities which appears to closely resemble the 'spheres of influence' approach of the previous Departmental Budgets (paragraph 54). Any 'perverse incentives' found by DECC, it seems to us, might be eliminated by explicitly making departments responsible for emissions reduction outcomes rather than delivering initiatives, and leaving it to them to find the means to deliver those outcomes. Departmental Carbon Budgets could provide a useful way of understanding the quantum of effort required by each department and provide a way focusing departments' policies in their sphere of influence on their emissions reduction impacts. The risk of the approach taken in the draft Carbon Plan is that there is no real incentive to seek out further initiatives if those listed in the Plan do not deliver all that is expected of them. The Government should consider how incentives for departmental action could be built into the final Carbon Plan.

51. The draft Carbon Plan envisages departments being held accountable for delivery of carbon budgets 'through a framework of regular monitoring and reporting against their actions and indicators of progress'.[115] The Government will publish quarterly online updates on progress against the Carbon Plan which will show whether it has met the milestones set, and if not what corrective action it will take.[116] The Government will also set out more detailed updates by sector in its response to annual progress reports by the Committee on Climate Change.[117] The Aldersgate Group suggested that an independent body, such as the CCC, monitoring progress against the Plan and linking the achievement of targets to annual performance reviews of senior civil servants would improve delivery.[118] We questioned the Secretary of State about the levers he had available if departments were not delivering on the Carbon Plan. He told us that:

There is no power to enforce. The whole system is remarkably, surprisingly consensual ... Inevitably, when you get disagreements, as you inevitably do, they tend to be resolved by the centre, by the Cabinet Office, and the Prime Minister ultimately has to get involved if it is important to get a resolution ... I think the fact that the Prime Minister is committed, and the Deputy Prime Minister is committed, is a really important guarantee that we are going to deliver on this.[119]

52. We welcome the support for the Carbon Plan at the highest levels of the Government. Nevertheless, given the importance of delivering the carbon budgets, the final Carbon Plan should make it clear exactly how departments will be accountable for their performance against the Plan.

Role of local authorities and businesses

53. The 2006 Local Government White Paper introduced a new performance framework for local government, with National Indicators supporting Local Area Agreements. Local authorities were required to report their performance to Government annually against 35 indicators selected locally (from the 196 available). The two climate change National Indicators were selected by two-thirds of local authorities.[120] In October 2010, DECC published data on emissions by local authority area, assigned to them on an 'end-user basis',[121] to help track progress against the NIs.[122] Since 2007, emissions have decreased in 333 local authorities (77%) and increased in 101 (23%). The Government has now abolished Local Area Agreements and National Indicators in line with its localism agenda. From April 2011, local authorities will provide Government with a more 'streamlined' set of data.[123]

54. The Minister for Climate Change told the House in March 2011 that the Government had no plans to introduce carbon budgets for local authorities; instead a voluntary approach would be adopted.[124] Later that month, a voluntary and non-legally binding memorandum of understanding (MOU) was signed by the Secretary of State for Energy and Climate Change and the Local Government Association on how they will work together to reduce carbon emissions at a local level, including to meet climate change, fuel poverty and renewable energy targets.[125] Progress against this MOU was to be reviewed annually and a report produced jointly by DECC and the Local Government Group by the end of May each year. In addition, the MOU will be reviewed at the end of each national five-year carbon budget period - starting in 2013 (for 2008-12) - to 'evaluate the success of the MOU in making progress in meeting climate change mitigation and related objectives'. Emissions from local authorities' own estate and operations and local homes, businesses and transport within local authority control and influence will be covered by the MOU. This appears to contradict somewhat the approach now being followed in Central Government where Departmental Carbon Budgets encompassing departments' wider sphere of influence have been abandoned (paragraph 49).

55. Friends of the Earth believed that a voluntary approach to local action on climate change had not delivered the action needed, noting that less than a third of councils had voluntarily set any kind of medium-term target to cut emissions in their local area.[126] It recommended that the Committee on Climate Change should advise local authorities on what they need to do 'to play their full role in national carbon budgets' and councils should be required to produce a local climate change strategy.[127] The CCC has stated that it could advise local authorities on developing local carbon budgets, if formally tasked by the Government to do so, at a cost of £100,000.[128] The Government was against a top-down approach, however, favouring local decision-making and accountability.[129] The Communities and Local Government Committee has concluded that with the demise of the Audit Commission there will be a lack of comprehensive and consistent data on which authorities can be compared,[130] and that localism will require a strengthening of local democratic accountability.[131] The Secretary of State highlighted a need for local authorities to be able to influence emissions in their areas and be accountable for their actions.[132] DECC officials told us that:

You have to align power with responsibility, and if you take the key behaviour changes we want—we want car manufacturers to build different types of cars, builders to build zero-carbon homes, energy companies to save energy and build low-carbon plants—we should force the behaviour changes on those particular actors, and that is what we are doing through EU vehicle emissions standards or the EU ETS or electricity market reform. What we want local authorities to do is play a facilitative role to enable, to convene, but I don't think we should hold them to account for things they cannot deliver.[133]

56. We welcome the commitment to set out an approach for monitoring emissions reductions at a local level, reflecting local circumstances and potential for emission reductions. A voluntary approach will not be enough, however, to ensure that all local authorities make a full contribution to emissions reduction. Local authorities should be required to set emission reductions targets. The Government should task the Committee on Climate Change with supporting local authorities in setting such targets, and the Committee should be charged with monitoring progress against those targets.

57. An annual review of performance by local authorities should be submitted to Parliament by Ministers, to present as full a picture as possible of emissions reduction performance.

58. Measuring and reporting emissions can enable businesses to manage better the risks to their business and can act as a tool for embedding sustainability in a company. Although not enough to drive emissions reductions in itself, measuring emissions is an important first step, providing an understanding of the sources of emissions and then identifying where and what to tackle.[134] At present, measuring and reporting emissions is not done consistently by businesses. Some Government schemes already require some large businesses to measure and submit details of their emissions.[135] Separately, some businesses report their emissions as part of the environmental information in the directors' report in their Annual Accounts. There are also voluntary initiatives that aim to capture information on emissions from businesses, such as the Carbon Disclosure Project. The Government has produced guidance for businesses wishing to report their emissions.[136]

59. The Climate Change Act requires the Government to consider strengthening the reporting of emissions by businesses. The Government must make regulations by 6 April 2012, under the Companies Act 2006, requiring the directors' report of a company to include information about greenhouse gas emissions, or else to lay a report before Parliament explaining why no such regulations have been made.[137] The Government consulted earlier this year on options to promote more widespread and consistent emissions reporting. [138] The Government is considering its response and will make an announcement in the Autumn.[139] In order to aid transparency and illustrate the contributions that businesses are making, and need to make, to help tackle climate change, we recommend that the Government should introduce mandatory reporting by businesses at the earliest opportunity.

89   Climate Change Act 2008, sections 13 and 14; HC Deb, 17 May 2011, col 176; Department of Energy and Climate Change, Business Plan 2011-15Back

90   Ev 26  Back

91   HM Government, The UK Low Carbon Transition Plan - National strategy for climate and energy, July 2009. Back

92   Committee on Climate Change, Meeting Carbon Budgets - 3rd Progress Report to Parliament, June 2011, page 32. Back

93   Committee on Climate Change, The Fourth Carbon Budget - Reducing emissions through the 2020s, December 2010, page 146. Back

94   Ev 26 Back

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

96   Q 27 Back

97   HM Government, Carbon Plan, March 2011, pages 10 and 11. Back

98   Ev w24 Back

99   Ev w1 Back

100; Back

101   Committee on Climate Change, Meeting Carbon Budgets - the need for a step change, October 2009. Back

102   Meeting Carbon Budgets - 3rd Progress Report to Parliament, op cit, page 32. Back

103   Q 23 Back

104   The Fourth Carbon Budget - Reducing emissions through the 2020s, op cit, page 33. Back

105   Electricity Market Reform White Paper 2011. Back

106   Energy and Climate Change Committee, Fourth Report of Session 2010-12, Electricity Market Reform, HC 742. Back

107   The Fourth Carbon Budget - Reducing emissions through the 2020s, op cit, page 60. Back

108   ibid, page 22; Ev w31 Back

109   Ev 26 Back

110   Ev w31 Back

111   HM Government, The UK Low Carbon Transition Plan - National strategy for climate and energy, July 2009; HM Government, Climate Change: taking action, March 2010. Back

112   Ev 26 Back

113   Q 26 Back

114   Ev 26 Back

115   HM Government, Carbon Plan, March 2011. Back

116   ibid Back

117   Ev 26 Back

118   Ev w9 Back

119   Q 29 Back

120   See:  Back

121   End user basis: emissions from energy production are allocated according to where energy is actually consumed by householders and businesses, rather than where the source of the energy produced is located. The remaining emissions are assigned to local areas on the basis of other local information such as traffic, population, employment and data on household fuel types. Back

122   See:  Back

123   HC Deb, 13 October 2010, col 21WS. Back

124   HC Deb, 8 March 2011, col 970W.  Back

125   Memorandum of Understanding between the Local Government Group and the Department of Energy and Climate Change, 9 March 2011, see; LGA website, see: Back

126   Ev w37 Back

127   ibid Back

128   Unpublished correspondence between Lord Turner and Chair. Back

129   HC Deb, 17 May 2011, col 187; Q 30. Back

130   Communities and Local Government Committee, Fourth Report of Session 2010-12, Audit and inspection of local authorities, HC 763. Back

131   Communities and Local Government Committee, Third Report of Session 2010-12, Localism, HC 547; Q 30. Back

132   Qq 26, 50, 56 Back

133   Q 50  Back

134   Department for Environment, Food and Rural Affairs, The contribution that reporting of greenhouse gas emissions makes to the UK meeting its climate change objectives: A review of the current evidence, November 2010. Back

135   EU Emissions Trading System, CRC Energy Efficiency Scheme, Climate Change Levy agreements. Back

136   As required by section 83 of the Climate Change Act; Department for Environment, Food and Rural Affairs, Guidance on how to measure and report your greenhouse gas emissions, September 2009. Back

137   Climate Change Act 2008, section 85. Back

138   Department for Environment, Food and Rural Affairs, Measuring and reporting of greenhouse gas emissions by UK companies: a consultation on options, May 2011. Back

139   HC Deb, 6 September 2011, col 374W. Back

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Prepared 11 October 2011