Energy bill

Written evidence submitted by Sandbag Climate Campaign (EB 22)

Please find below a response to the Energy Bill Committee’s ‘call for evidence’ following the Energy Bill’s Second Reading in the House of Commons on Monday 18th January from Sandbag Climate Campaign.

Sandbag is a UK-based not-for-profit think tank conducting research and campaigning for environmentally effective climate policies. Our research focuses on the phase-out of old coal in Europe; industrial decarbonisation through technologies including carbon capture utilisation and storage; reform of the EU Emissions Trading Scheme; and increasing ambition in the EU 2020 and 2030 climate & energy packages.

Executive Summary

· Sandbag urges the Committee to let clause 80 remain in the Bill.

· Clause 80 would make the government accountable for ensuring all of the UK’s greenhouse gas emissions stay within any new carbon budget.

· Currently, the government is only responsible for meeting half of the UK’s carbon budget, placing no obligation on the government to decarbonise the power or manufacturing sector.

· Clause 80 would provide much-needed investor confidence beyond the expiration of the UK’s obligations under the EU 2020 Renewables targets.

· Sandbag believes that clause 80 is a necessary, timely, and sensible change to our carbon budgets that will signal the UK’s commitments to decarbonise our economy in the long-term.

Sandbag strongly supports the inclusion of clause 80 in the Energy Bill, which proposes to change the accounting rules under the Climate Change Act 2008.

More transparent accounting

Under the current carbon accounting regime, the government is only responsible for meeting half of the UK carbon budget, in sectors such as buildings, transport and agriculture. Meeting the other half of the carbon budget is completely outsourced to companies in the EU Emissions Trading Scheme (ETS), and is treated as being met automatically, irrespective of whether actual emissions from these sectors are higher or lower than the UK’s ETS budget.

This leaves the government with no obligation to reduce emissions from the electricity or manufacturing sectors. Even if emissions were to grow in these sectors, the government would still legally meet its carbon budget. The current accounting allows the government to indefinitely ignore the Climate Change Committee’s advice regarding the level of power sector decarbonisation required to meet our long-term goals.

Lower costs

Clause 80 would turn the 5th carbon budget into a much more useful guide for investors in the power and manufacturing sectors. Sandbag believes that this would help encourage investment in alternatives to coal power, which the government has pledged to phase-out, and low-carbon industrial technologies, as well as carbon capture and storage technologies (CCS) in both sectors. With lower policy risks for these low-carbon technologies, costs could be lowered.

Fitting in with the traded sector

During second reading, some MPs raised concerns about what this would mean for the UK’s commitment to the EU ETS. Clause 80 would not opt the UK out of the ETS. The clause simply places an obligation on the government to ensure that all UK emissions – in both the ETS and non-ETS sectors – stay within the carbon budgets, and that appropriate policies are put in place to deliver this.

The 5th Carbon Budget

Now is the best time to make this change. Sandbag is clear that reforms to the accounting regulations should take place before the 5th carbon budget is set in June 2016. The Climate Change Committee’s advice on the level of the 5th carbon budget is affected by the accounting method used. The Climate Change Committee indicates that the budget would need to be set roughly 61% below 1990 levels if the accounting was changed, in contrast to 57% below 1990 as advised under current accounting rules. If the accounting rules are changed after the 5th carbon budget is set by government, the budget is unlikely to remain in line with the cost-effective pathway to cut emissions by 80% in 2050.

Sandbag believes that this reform is a simple, necessary and timely change that will provide a much needed signal to investors in low-carbon technologies in our manufacturing and power sectors, and urges the committee to support its continued inclusion in the Bill.

January 2016


Prepared 2nd February 2016