Energy and Climate Change CommitteeWritten evidence submitted by the Government

Summary

The Government welcomes this opportunity to respond to the Environmental Audit Committee’s follow-up inquiry into progress on carbon budgets.

The Government believes that the emissions reduction targets in the Climate Change Act are still an appropriate UK contribution to a global effort to avoid dangerous climate change.

The Government believes that a legally binding global deal would provide the best opportunity of keeping the global temperature increase below 2°C. The challenge and complexity of climate negotiations and the need for a shift of political conditions makes it vitally important that the UK is able to influence and encourage others to take action. The Climate Change Act in its current form enables us to do this.

The Act also provides a robust framework of interim milestones through carbon budgets and an effective system of legal accountability. The Committee on Climate Change report annually on the Government’s progress against carbon budgets and updated annual projections provide a forward look of sector-specific emissions savings.

Meeting the carbon budgets is a cross-Government endeavour, reliant on the actions of all Departments, but in particular six key Departments which lead on the majority of policies that affect emissions.1 The National Emissions Target (NET) Board is the principal governance mechanism for co-coordinating action across Government and ensuring that departments are accountable for their share of emissions reductions.

We maintain that it was the right decision to abandon Departmental Carbon Budgets (DCBs). The DCBs pilot revealed that departments did not feel able to influence the sector emissions they were held accountable for, and as a result the approach lacked credibility across Whitehall. This is in contrast to the collaborative approach underpinning the current carbon budget management framework which gives departments the freedom to come forward and agree on future cost-effective abatement measures.

We are unable to comment on the Government’s likely response to the CCC’s June 2013 assessment of emissions reduction performance assessment. As a body independent of Government, the CCC is not obliged to share its report before publication.

Inquiry foci

In the light of current climate change assessments, whether the emissions reduction targets in the Climate Change Act (which underpin the UK Carbon Budgets) are still valid as an appropriate UK contribution to avoiding dangerous global climate change; and if not, whether the Act and/or the Carbon Budgets should be revised

1. Global average surface temperatures have risen by approximately 0.8°C since around 1900, with most of that warming happening in the last 50 years. This long-term rise in temperature is continuing, though more slowly over recent years; 2001 to 2010 was by far the warmest ten year period in the instrumental record, going back to 1850.

2. To avoid the worst effects of climate change, we need to keep global temperature rises to below 2°C. In order to achieve this, urgent action is required to cut global emissions further. At best, the current emissions reductions that have been pledged will only deliver us half the required action to achieve this goal.

3. The 2012 United Nations Environment Programme (UNEP) Emissions Gap report makes clear that meeting this objective is still technically achievable. While acknowledging that existing levels of global mitigation ambition are not enough to put us on a cost-effective 2°C trajectory, it indicates that there is still more than enough global emissions reduction potential to reduce emissions levels by 2020 that would be consistent with 2°C. However, realising this potential will require the political will across all countries to step up action.

4. The global 2°C goal was agreed at the UN Conference of the Parties in Cancun in 2010. The emissions reduction targets in the Climate Change Act reflect the Committee on Climate Change’s (CCC) views of an appropriate UK contribution to global mitigation action. To remain in line with the effort the UK might be expected to make, the Government accepted the advice received from the CCC on 1 December 2008, and made a statutory commitment to reduce emissions by at least 80% by 2050 relative to a 1990 baseline.

5. The Climate Act gives the UK a solid base on which to push for increased ambition internationally; leveraging greater impact than we would achieve alone.

6. The 80% target in the Climate Change Act demonstrates the UK’s commitment to tackling climate change and taking responsibility for its share of emissions, which will help to maintain our leadership and influence in the international climate change negotiating process. The UK contributes only around 1.2%2 of global emissions, so we need to encourage action from others. The Climate Change Act and the Carbon Plan show UK leadership, making us a credible negotiator, and provides a compelling example to other countries, some of whom are taking forward their own climate legislation based on the UK’s experience.

7. The Climate Change Act is structured to provide a degree of flexibility, setting a framework to motivate and enable policy action without being too prescriptive about how the framework should be applied. This is required to address the inherent unpredictability around future emissions projections and to ensure that mitigation is not unnecessarily costly. In this vein, the Climate Change Act allows for a carbon budget level to be amended if it appears to Government that there have been significant changes affecting the basis on which the previous decision was made.

8. We are committed to reviewing the fourth carbon budget in 2014 to ascertain whether the basis on which the budget was calculated has significantly changed. If at that point our domestic commitments place us on a different emissions trajectory than the EU ETS trajectory agreed by the EU, we will, as appropriate, revise up our budget to align it with the actual EU trajectory. In line with the Coalition Agreement, Government will continue to argue for the EU move to a 30% emissions reduction target for 2020.

The operation and management of the Carbon Budgets, including: the accountability and governance arrangements, and the extent to which the EAC’s previous concerns and recommendations have been addressed; the effectiveness of the overall management system, including for meeting carbon budgets by sector; and the current status, operation and impact of the National Emissions Target Board

9. The Climate Change Act provides for an effective system of legal accountability. Each year in June the independent Committee on Climate Change publishes a report in which it scrutinises Government’s progress on meeting carbon budgets. The Government has to lay before Parliament by 15 October each year a response to the points raised by the Committee. The Climate Change Act also requires the government to publish an annual statement of emissions and to produce a report on policies after a new budget has been set. The annual statement of emissions for 2011 was published on 25 March 2013.3

10. The Climate Change Act requires that carbon budgets are set by certain specified deadlines. The first, second, third and fourth carbon budgets have been set. The Carbon Plan sets out progress and policies in place to meet our first three carbon budgets and scenarios for meeting the fourth carbon budget. It articulates the Government’s vision to 2050 to achieve the 80% reduction target and outlines shorter-term actions the Government commits to undertake and key milestones to keep us on track to delivering our climate change goals. It includes a detailed carbon budgets annex which sets out the emissions savings expected from climate and energy policies. The Carbon Plan also included details of specific actions and milestones that would be undertaken by individual Government Departments.

11. Sector specific policy emissions savings are published annually each October in the energy and emissions projections. These projections take into account the estimated impact of government policies and proposals announced to date. They suggest that the UK will meet its first three legislated carbon budgets but that existing policies will not be sufficient to deliver the savings required by the fourth carbon budget.4 The Government expects to reduce emissions to below the first three budgets by 90, 132, and 71 MtCO2e respectively on central forecasts.5 The projections are an important tool for guiding our efforts to ensure the carbon budgets are met. As a result, the government is working hard to develop policy options and bridge the projected shortfall over the fourth carbon budget. The Carbon Plan set out scenarios for what action might be required to do this, recognising that Government did not yet have detailed policies agreed for a period that far in the future.

12. Our ability to meet the carbon budgets relies on actions from the whole of Government, but in particular the six Departments that lead on reducing emissions.6 We have a robust carbon management (CBM) framework in place to ensure that all policies and enabling actions are sufficiently ambitious and that government departments are held to account. This is primarily delivered through collaborative discussion and analysis with other government departments. Estimated policy emissions savings provided by departments enable progress to be tracked and risks to be monitored. The Government also reports on progress against the actions in the Carbon Plan on a quarterly basis via the No.10 website.

13. The principal governance mechanism of the CBM framework is the National Emissions Target (NET) Board. The Board provides senior oversight of carbon budgets and national climate change policy. Chaired by the SRO for carbon budgets within DECC, membership includes the Directors General for the six key Departments and the Cabinet Office (the Departmental SROs). Specifically, the Board aims to:

Provide senior level oversight of carbon budget management across Whitehall including ensuring legislative requirements are met;

Monitor cross-Government performance against carbon budgets;

Ensure policies to deliver carbon budgets are identified and delivered, and to challenge policies that could potentially make budgets harder to meet;

Consider broader policy on carbon budgets eg cost-effectiveness of meeting budgets, balance of policy tools, setting of future budgets, tackling aviation and shipping, financial penalties;

Be closely plugged into the decision-making process and being an ambassador for Government action on climate change.

It also considers implications of carbon budget policy on other Government priority issues and provides a connection to discussions on international climate change and energy. The Board meets on a biannual basis.

14. The NET Board provides a forum for discussion at a senior level enabling action to be collectively agreed and ensuring an appropriate level of oversight. The NET Board takes a particularly active role at key decision points, and for example provided cross-Government scrutiny and sign-off of the analysis and scenarios that underpinned the Carbon Plan, following their development by the working level Carbon Budgets Analysts Group, which brings together the analytical community across Government Departments. Given the expected difficulties in meeting carbon budget four, recent NET Board discussions have focused on identifying and reviewing the main risks to meeting the fourth carbon budget, in particular in buildings (heat), transport, power and industry. At its last meeting, in April 2013, the NET Board considered a “deep dive” analysis of the buildings sector, which examined the scale of action required, what would be delivered by existing policy, and the main barriers to additional deployment of relevant measures.

15. A biannual carbon scorecard is used by NET Board to manage performance. This shows progress against the carbon budgets and key sectoral trends in historical and projected emissions. Where possible, the scorecard also shows progress made in key policy areas against targeted levels and scenarios put forward in the Carbon Plan, and progress and trajectories for deployment of significant technologies.

16. We maintain that it was the right decision to abandon Departmental Carbon Budgets (DCBs). The DCBs pilot revealed that departments did not feel able to influence the sector emissions they were held accountable for, and as a result the approach lacked credibility across Whitehall. This is in contrast to the collaborative approach underpinning the current CBM framework which gives departments the freedom to come forward and agree on future cost-effective abatement measures.

17. The Government has made progress in addressing the EAC’s previous concerns and recommendations.7 We have updated our response in regard to the following recommendations:

Recommendation 5. 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.

The latest projections suggest the UK is on track to meet its first three budgets with current planned policies. The Government expects to reduce emissions to below the first three budgets by 90, 132, and 71 MtCO2e respectively on central forecasts.8

Under the Climate Change Act, emissions reductions by the UK’s industrial and power sectors are determined by the UK’s share of the EU Emissions Trading System cap. That protects the UK industrial and power sectors from exceeding EU requirements. However, if the EU ETS cap is insufficiently ambitious, disproportionate strain could be placed on sectors outside the EU ETS such as transport.

To overcome that problem and to provide clearer signals for businesses and investors, the Government will review progress towards the EU emissions goal in early 2014. If at that point our domestic commitments place us on a different trajectory from the one agreed by our partners in the EU under the EU ETS, we will revise up our budget as appropriate to align it with the actual EU trajectory.

There is strong scientific evidence that the Earth’s climate is changing—global average temperatures continue to rise decade-on-decade. This consistent picture comes from several independent datasets. The scientific evidence for recent global warming is robust and continues to strengthen each year, and it is likely that most of this warming is largely a result of greenhouse gas emissions due to human activity; and without action, there is a high risk of global warming well beyond a 2°C increase over pre-industrial temperatures, with significant adverse impacts on human society and the natural world.

We are already seeing the global, regional, and local impacts of rising temperatures and we now know from attribution studies that the chances of certain extreme weather events have already increased because of human greenhouse gas emissions. For example, research by UK scientists has shown it is very likely that human influence has more than doubled the probability of an extreme European hot summer like that of 2003, which caused up to 35,000 excess deaths,9 and that such events are very likely to become commonplace in as little as 40 years.10 Likewise, recent attribution work into the devastating UK floods in autumn 2000, which cost the UK insurance industry £1.3 billion,11 has indicated that 20th century anthropogenic greenhouse gas emissions significantly increased England and Wales flood risk, roughly doubling the chance of that extreme event happening now compared to a century ago.12

Taking sufficient action globally to bring us back on track to meeting the 2°C goal to avoid the worst effects of climate change becomes more difficult and costly every year we delay action. Emissions need to peak as soon as possible—almost certainly before 2020—and decline steeply thereafter in order to meet this goal. Current global emission reduction pledges at best get us less than halfway to this goal, so there is an urgent need for significant additional action. The UK is continuing to press for increased action at the international level and considers that the best chance of securing that is through a legally binding global agreement under the UNFCCC.

Recommendation 6. 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.

There have been no further carbon-budget setting rounds since the previous EAC inquiry. The next carbon-budget setting round will be in 2016 to agree the level of the fifth carbon budget. Government will take into account the advice of the CCC at the time of taking final decisions.

Recommendation 10. 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 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.

Since the last EAC inquiry, the Government has taken steps to increase the transparency of the emissions reporting process and published, on 18 October 2012, new guidance (“Alternative approaches to reporting UK Greenhouse Gas Emissions”) on the Department of Energy and Climate Change’s website. This guidance explains why the Government uses different approaches for reporting greenhouse gas estimates and details a comparison of the different methodologies used.

The Government is also working closely with the Committee on Climate Change to determine how we might, in the future, take better account of consumption-based emissions in the policy making process. In December 2012, the Government commissioned the Committee on Climate Change to provide analysis of:

Estimates of past and current consumption emissions;

Possible pathways for UK consumption emissions towards 2050;

Data/methodological issues around establishing consumption emissions;

Priority technologies/products in terms of UK consumption emissions;

The merits of a two stage approach for monitoring consumption based emissions—in which input-output data is supplemented with life cycle analysis data for specific priority product groups; and

Implications of current and future consumption emission trends on the design of existing and future policies, but not including the framework of carbon budgets, which we believe should remain as set out in the Climate Change Act 2008.

The CCC published the results of their analysis on 24 April 2013 in Reducing the UK’s carbon footprint and managing competitive risks.13 In this report, the CCC recommended that we retain a territorial basis for emission reductions, stating that “it remains appropriate to account for carbon budgets on the basis of production emissions given accounting conventions and available policy levers. However, consumption emissions should be monitored to check whether these are falling in line with global action required to achieve the climate objective, or whether further action is required”. The CCC further noted the importance of securing a global deal as the most effective way of reducing imported emissions: “there is a need for a global deal to substantially cut global emissions over the next decades and achieve the climate objective, as a consequence of which the UK’s carbon footprint would fall”. The Government agrees with this position.

Recommendation 16. 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.

The Government does not agree that local authorities should be required to set mandatory emission reduction targets, for example local carbon budgets. This would be against the Coalition policy of removing burdens and top-down targets on local authorities. There are also significant data and burden issues which would make them difficult to calculate and impose at present.

Many local authorities are enthusiastic about playing their part in meeting our carbon mitigation targets and have already set in place stretching ambitions and policies for emissions reductions in their areas. Local authorities that wish to self-impose their own targets (or “budgets”) are free to do so. Under the Memorandum of Understanding (MoU) signed between DECC and the Local Government Association (LGA) in March 2011, local authorities are encouraged to set themselves targets for emissions reductions under a new Climate Local initiative launched in June 2012. This initiative succeeds the Nottingham Declaration. The MoU is currently being reviewed by DECC and the LGA, and an updated version will be published shortly.

In response to a request from Government the Committee on Climate Change published guidance in May 2012 on what local authorities can do to reduce carbon emissions in their areas. In this report the Committee said it would not be appropriate for local authorities to set (or be set) binding carbon budgets given the multiple drivers of emissions, many of which are beyond their control.

There are a number of other initiatives to encourage local authorities to take action to tackle carbon emission in their areas. These include:

Local Carbon Frameworks pilot—a £2.5 million programme in 2010–11 involving 30 local authorities with the aim of growing capacity. An evaluation and toolkit for the benefit of all local authorities was published on the Energy Saving Trust website in 2011;

Home Energy Conservation Act 199—see paragraph 17 below. Publishing data on local authority area emissions as National Statistics.

Recommendation 17. 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.

The Government has no plans to impose mandatory reporting of performance on local authorities, for the reasons given above. However, the Government has revitalised the Home Energy Conservation Act (HECA) 1995 in England by way of new guidance published in July 2012 requiring LAs to report to the Secretary of State by 31 March 2013 and recommending that their reports explain:

(i)their local energy efficiency ambitions and priorities;

(ii)the measures proposed to result in significant energy efficiency improvements in all residential accommodation in their area;

(iii)the measures proposed to deliver energy efficiency improvements on an area based/street by street roll out; and

(iv)the timeframe for delivery and the national and local partners they are working with.

To provide transparency and accountability LAs are required to publish their HECA reports on their websites.

In addition, as stated above, the Secretary of State for Energy and Climate Change signed a MoU with the Local Government Association in March 2011, which sets out how DECC and local government can work together to reduce emissions and help with renewable energy deployment. Under the MoU, councils are invited to declare their energy and climate change ambitions. The new Climate Local initiative (which succeeds the Nottingham Declaration), where local authorities can declare their support for action on climate change and set self-imposed carbon reduction targets, will support councils to make even further inroads into reducing carbon emissions.

Recommendation 18. 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 [of emissions] by businesses at the earliest opportunity.

Section 85 of the Climate Change Act required the UK Government to introduce regulations requiring the mandatory reporting of GHG emissions information under the Companies Act 2006 by 6 April 2012, or lay a report explaining why this has not happened. Defra laid a report to Parliament in March 2012 explaining that no decision to make regulations had been reached because Ministers were still considering extensive evidence and required some additional time to consider this evidence before coming to a decision. Currently, it is the intention to introduce regulations for all UK quoted companies to report their GHG emissions information in their annual reports, as announced by the Deputy Prime Minister at the Rio+20 Summit in June 2012. It is planned that the regulations will come into force on 1 October 2013 and that the regulations will be laid before Parliament, and guidance for quoted companies to assist with complying will be published, in May.

Recommendation 19. When setting carbon budgets the Government needs to be mindful that strong action on climate change may result in some production and jobs moving abroad to countries with less stringent policies or carbon-related taxes. Without care, this could harm UK industry and could increase global emissions. A lack of transparency and hard information on the risks to energy intensive industries, and how these should be tackled, need to be resolved to allay fears of lobbying dictating policy. We recognise the importance of policy measures to help energy intensive industries, but before any are introduced a comprehensive and robust assessment of the actual risk to each sector affected, on a case by case basis, should be made.

Recommendation 20. Any measures the Government introduce to help energy intensive industries should be fair and tailored to each sector affected, on a case by case basis, reflecting hard evidence on the scale and likelihood of the risk of carbon leakage. Measures should focus on providing incentives to invest in lower carbon infrastructure and should keep a strong incentive to reduce emissions.

We appreciate the importance of ensuring any compensation is targeted precisely on those most at risk of carbon leakage; our response to the Committee’s report on the Energy Intensive Industries Compensation Scheme14 sets out what we are doing to do this.

In the recently published report Reducing the UK’s carbon footprint and managing competitive risks,15 the CCC note that, “our analysis suggests that policies already announced by the Government should be sufficient to address competitiveness risks for energy-intensive industries to 2020. These would continue to be manageable beyond 2020 in a carbon-constrained world where other countries commit to and deliver the emissions cuts required to achieve the climate objective”.

What the Government’s response should be to the Committee on Climate Change’s June 2013 assessment of emissions reduction performance, and whether the Carbon Budgets should be tightened or relaxed

18. The CCC is independent of Government and is not obliged to share its report before the date of publication. We are unable to comment on the Government’s likely response to the CCC’s assessment until this time.

16 May 2013

1 The Departments of Energy and Climate Change; Communities and Local Government; Business, Innovation and Skills; Environment, Food and Rural Affairs, Transport and HM Treasury

2 2010 figures from EDGAR database, http://edgar.jrc.ec.europa.eu/overview.php

3 https://www.gov.uk/government/publications/annual-statement-of-emissions-for-2011

4 The latest projections suggest the UK is on track to meet its first three budgets with current planned policies. The Government expects to reduce emissions to below the first three budgets by 90, 132, and 71 MtCO2e respectively on central forecasts. Based on current planned policies there is an expected shortfall of 205 MtCO2e over the fourth budget reflecting the fact that detailed policy mechanisms have yet to be developed so far into the future.

5 GHG national statistics release 2011

6 These are: the Cabinet Office, HM Treasury, the Department of Energy and Climate Change, the Department for Communities and Local Government, the Department for Transport and the Department for Business, Innovation and Skills.

7 See: http://www.publications.parliament.uk/pa/cm201012/cmselect/cmenvaud/1720/1720.pdf

8 GHG national statistics release 2011

9 International Federation of Red Cross and Red Crescent: World Disasters Report www.ifrc.org/publicat/wdr2004/chapter2.asp

10 Stott, P A et al. Nature 432, 610–614 (2004)

11 Association of British Insurers, Flooding: A Partnership Approach to Protecting People, Page 2
http://www.abi.org.uk/Publications/Flooding_A_Partnership_Approach_to_Protecting_People1.aspx

12 P, Aina, T, Stone, D A, Stott P A, Nozawa, T, Hilbert, A G J, Lohmann, D, Allen, M R. Anthropogenic greenhouse gas contribution to flood risk in England and Wales in autumn 2000. Nature, doi:10.1038/nature09762, 2011.

13 http://www.theccc.org.uk/wp-content/uploads/2013/04/CF-C-Summary-Rep-web1.pdf

14 http://www.publications.parliament.uk/pa/cm201213/cmselect/cmenvaud/669/66902.htm

15 http://www.theccc.org.uk/wp-content/uploads/2013/04/CF-C-Summary-Rep-web1.pdf

Prepared 3rd October 2013