2The fifth carbon budget advice
Setting the level of the fifth carbon budget
7.In its advice published on 26 November 2015, the CCC recommended that the fifth carbon budget should be set at 1,765 MtCO2e13 including 40 MtCO2e emissions from international shipping, or 1,725 MtCO2e on the current accounting basis (which excludes international shipping).14 This would limit annual emissions to an average 57% below 1990 levels (Table 1), “[keep] the UK on its cost-effective path to 2050 and [continue] the UK’s historical rate of emissions reduction”.15
8.The majority of contributors to this inquiry (over half of the written evidence received) representing a range of stakeholders supported setting the budget at the level suggested by the CCC16 and agreed with the proposed trajectory towards an 80% reduction in greenhouse gas emissions by 2050 and a low carbon economy.17 Furthermore, two thirds of the evidence called for the budget to be set either at the proposed level or at a tighter, more ambitious one. We heard that it was “imperative that the Government sets the […] budget in line with the CCC’s advice”18 and that this would “give businesses the certainty to plan, innovate and invest”.19
9.Some stakeholders highlighted concerns with aspects of the CCC’s advice in specific sectors.20 The Mineral Products Association judged that:
The Government should not adopt the Fifth Carbon Budget until sufficient safeguards are put in place to ensure that the Budget can be met entirely by UK domestic action and not by exporting UK manufacturing and emissions […]. A re-evaluation of the Fifth Carbon Budget, and a clearer alignment to Government policy, is necessary to give industry confidence that the Budget is achievable.21
One submission disagreed with the process of setting domestic carbon budgets in general, in the absence of such caps internationally.22 Another individual questioned the science behind the CCC’s conclusions and queried the CCC Members’ independence in assessing this science.23 However, overall views of the CCC’s approach and the process by which it reached its conclusions were positive.24 We heard that the CCC was “doing a pretty good job in providing a level of analysis on the budgets”,25 that it “take[s] a fairly thorough and comprehensive approach”26 and “produce[s] very professional, highly robust and scientifically relevant reports”.27 Philip Sellwood, CEO of the Energy Saving Trust, added that he was “extremely impressed with the constructive nature of the CCC under its current leadership”.28 Lord Bourne of Aberystwyth, Parliamentary Under-Secretary of State for Climate Change, said that the Government took “the advice of the Committee on Climate Change […] very seriously”.29 He stressed the importance of carbon budgets and of ensuring that the UK takes domestic action to mitigate against global climate change:
We are committed to the Climate Change Act. We believe it is the right way forward and it is totally inappropriate, I think, to say that our position is minor. If every country adopted that process, it would lead us to hell in a handcart very quickly.30
Table 1: UK carbon budgets to date
|
Budget |
Carbon budget level |
% reduction below base year (1990) |
|
1st Carbon budget (2008–12)* |
3,018 MtCO2e |
23% |
|
2nd Carbon budget (2013–17) |
2,782 MtCO2e |
29% |
|
3rd Carbon budget (2018–22) |
2,544 MtCO2e |
35% by 2020 |
|
4th Carbon budget (2023–27) |
1,950 MtCO2e |
50% by 2025 |
|
5th Carbon budget (2028–32)** |
1,765 MtCO2e |
57% by 2030 |
*The first to fourth budgets have been set in law at these levels.
**CCC’s advice on the fifth carbon budget, to which the Government must respond by 30 June 2016.
10.When it published its advice, the CCC said that it would revisit it following the outcome of the international climate change negotiations at the 21st Conference of Parties (COP21) in Paris in December 2015.31 Global ambition at the meeting was higher than anticipated, with world leaders agreeing to collectively aim to:
Strengthen the global response to the threat of climate change […] by holding the increase in the global average temperature to well below 2°C above pre-industrial levels and to pursue efforts to limit the temperature increase to 1.5°C above pre-industrial levels”.32
On 28 January 2016, the CCC wrote to the Secretary of State explaining that:
This increase in ambition raises the question of whether the fifth carbon budget should be tighter than we have proposed. Our judgement is that our existing recommendation [as published on 26 November 2015] is sufficient at this time, although a tighter budget may be needed in the future.33
11.In light of the outcome of COP21, we heard from stakeholders that the fifth carbon budget level suggested by the CCC should be considered a minimum level of ambition,34 and that subsequent budgets might need to be tighter than the current trajectory modelled by the CCC.35 The Grantham Institute at the London School of Economics warned that:
In light of the Paris Agreement the Government should consider, in due course, recommendations from the Committee on Climate Change about amendments to the Act to account for the global objectives of [COP21]. Such amendments may in turn require a subsequent review of existing carbon budgets.36
However, Oil and Gas UK stated that they did “not believe the agreement alone justifies a revision to either the existing EU energy and climate package for 2030 or to the advice on the Fifth Carbon Budget”.37
12.Some organisations called for the proposed fifth carbon budget itself to be tightened.38 Professor John Barrett from the Centre for Industrial Energy, Materials and Products explained:
We would suggest that the budget needs to be tighter. The main reason for that is that it accepts a low probability of achieving two degrees. It fails to address the recent Paris agreement and potential ambition to reach 1.5 degrees.39
13.The Government told us it was “still in the process of considering what would be an appropriate budget level”, but “remains committed to the Climate Change Act and to meeting our target of an at least 80% reduction in greenhouse gas emissions by 2050”.40 While stressing that he could not provide specific information on the Government’s plans to set the budget, Lord Bourne emphasised that “we have always followed [the CCC’s] budgets previously”.41
Principal recommendation
14.The Committee on Climate Change (CCC) has produced a robust report, and the proposed level of the fifth carbon budget is in line with previous budgets as well as the overall trajectory towards meeting the 2050 statutory emissions reduction target. The Government has not deviated from the CCC’s advice in the past and we would not expect it to do so now.
15.Our principal recommendation in this report is that the Government should set the overall level of the fifth carbon budget, in line with the CCC’s recommendation, at 1,765 MtCO2e for the period from 2028 to 2032, or 1,725 MtCO2e on the current accounting basis. We agree with the CCC’s conclusion that this level remains appropriate following the outcome of COP21 but we urge the CCC and the Government to carry out further analyses as to what levels of emissions reduction may be required to contribute to the increased ambition of the Paris Agreement. The Act requires the Government to publish a statement should it deviate from the CCC’s advice. Should this happen, we will be looking carefully for a robust evidence-base on any alternative level proposed by Government.
International shipping and aviation emissions
16.The current basis of carbon budget accounting excludes international aviation and shipping. In its fifth carbon budget advice, the CCC recommended that the scope of the budget be broadened to include international shipping for the first time.42 It did not specifically recommend including international aviation emissions, given “continuing uncertainties over aviation’s accounting within the EU [Emissions Trading System]”,43 but did recommend that emissions from aviation continue to be allowed for in budgets by setting them consistent with their inclusion in the 2050 target:44
Emissions from international aviation should continue to be allowed for by setting the budget on the path to meeting the 2050 target with international aviation emissions included. However, the accounting for these emissions remain uncertain, so they should not be formally included in the fifth carbon budget.45
17.Jerome Glass, Deputy Director, Strategy at DECC, said that “part of the issue with international aviation and shipping is that there are international accounting systems that relate to them that are not quite settled yet. Part of the difficulty is working out how those international accounting systems fit with the carbon budget”.46 However, the CCC told us that:
There are no significant challenges in the formal accounting for emissions from international shipping. They are already included in the UK emissions inventory that tracks all emissions included in carbon budgets, and they are already reported on this basis to the relevant committee of the United Nations.47
Many witnesses strongly supported the inclusion of international shipping,48 as “the Committee makes a convincing case that measurement and monitoring for international shipping have been resolved, and it is important to bring this emission source into the accounting framework”.49
18.While agreeing that these emissions should be included, the Tyndall Centre for Climate Change Research warned that the methodology for doing so was inappropriate:
While the advice to include shipping within carbon budgets is welcome, an intention to use bunker sales for this is inappropriate (unlike for aviation) as they are not a fair representation of UK shipping activity. […] For shipping, the projection of 40MtCO2 by 2050 should be revisited.50
19.We heard that the continued exclusion of aviation could become problematic, and that it “reduces pressure on […] international bodies to deliver meaningful mitigation policy”.51 Professor John Barrett, Chair in Energy and Climate Policy at the Centre for Industrial Energy, Materials and Products, told us that “it is very difficult to understand how ambitious targets could be achieved when potentially we leave out sectors and do not define a role for individual sectors, and I would include aviation in that”.52 The Aviation Environment Federation, an NGO concerned with the environmental impacts of aviation, explained that:
It is particularly important that the fifth carbon budget reflects the need for aviation to play a part in delivering the 80% emissions cut to which the UK is legally committed in order to provide the appropriate framework for future policy. While we are disappointed that the CCC has not recommended formal inclusion of aviation in the budget, which would provide greater certainty in relation to the sector’s future development, we consider the CCC’s recommended approach of setting the budget with a view to aviation’s formal inclusion in future budgets to provide a ‘next best’ alternative […] It is not critical as long as the current approach of setting aside headroom with a view to the sector’s future inclusion is continued.53
The CCC told us that the International Civil Aviation Organisation (ICAO) would be meeting later this year to agree an international mechanism for controlling international aviation emissions, and that, if agreed, the CCC “will assess the implications for carbon budgets”.54
20.We support the inclusion of emissions from international shipping in the fifth carbon budget and recommend that the Government follow the advice of the CCC to broaden the scope of the budget accordingly.
21.We urge Government to work with international partners to secure progress on the issue of international aviation at the upcoming International Civil Aviation Organisation (ICAO) meeting in 2016. We recommend that the CCC report back to us and DECC on this after the meeting and produce an update on the inclusion of international aviation, and how it could be formally included in future carbon budgets.
Accounting issues
22.The Climate Change Act sets limits on the UK’s ‘net carbon account’ for 2050 and each carbon budget period. The net carbon account is calculated by adjusting UK emissions of greenhouse gases for any carbon credits bought or sold in international markets by UK firms or the government.55 As required in the Climate Change Act,56 the CCC must identify the respective contributions towards meeting the overall carbon budget that should be made by the so-called ‘traded’ and ‘non-traded’ sectors. Traded sectors are those sectors of the economy covered by the EU Emissions Trading System, or EU ETS, primarily electricity generation and energy-intensive industry. The ‘non-traded’ sector refers to sources of emissions outside the EU ETS, including transport, heating in buildings, agriculture, waste and some industry. If international shipping is included in the budget as recommended by the CCC, an additional contribution of 40 MtCO2e would be added to the fifth carbon budget in addition to the cap on emissions from the traded and non-traded sectors of the economy.57
23.The traded sector’s share of the fifth carbon budget is determined by the UK’s share of the EU ETS cap for the period 2021-2030, which is currently uncertain.58 The CCC have carried out analyses as to what this cap could be, and concluded that the best estimate was 590 MtCO2e over the fifth carbon budget period.59 As the total cap for the fifth carbon budget period is the sum of the traded and non-traded caps, the total emissions allowed in the non-traded sector will depend on that of the traded sector as set by the EU ETS. Uncertainties over the traded sector emissions therefore result in uncertainties in the non-traded sector.
24.To address this issue, the CCC has recommended using the Carbon Accounting Regulations to fix the net carbon account for the traded sector at the assumed level (i.e. 590 MtCO2e over 2028–2032), thereby limiting emissions to 1,135 MtCO2e over 2028–2032 for the non-traded sector.60 While some contributors to our inquiry agreed that the CCC’s approach would provide certainty and a credible signal to businesses about the level of emission reductions that needs to be delivered across the UK economy,61 others raised concerns about the difficulties in dealing with the complex accounting issues and did not support the implementation of this recommendation.62 Oil and Gas UK were “concerned that this proposal may have an adverse effect”,63 and RWE warned that “the EU ETS should remain the primary mechanism for achieving cost-effective reductions in the energy and industrial sectors covered by the scheme”.64 RWE npower’s Director of Policy and Public Affairs, Dr John McElroy, explained that:
There is a certain amount of finger in the air on this because the Climate Change Committee has to take a best guesstimate of what it thinks the EU ETS bubble or cap for the UK is. The issue is if it gets that wrong […] what does the Government then do about the difference between the UK carbon budget and the ETS cap?65
While he supported the CCC’s recommendation,66 Dr David Clarke, Director of the Energy Technologies Institute (ETI), explained that “it is quite a challenge and it is one that has been addressed probably as well as possible so far. The challenge is this point around trying to produce a view of what is stable and clear but at the same time they have to retain a degree of flexibility”.67 He added that the ETI’s own analyses were in line with the CCC’s.68
25.The CCC’s report explained that:
There is a specific risk that the accounting rules for the EU ETS, which are not yet finalised for the fifth carbon budget period, could undermine the integrity of the budget. If the UK ends up with a smaller share of the EU ETS cap than assumed in our analysis, then the budget could be met with less effort from the rest of the economy [the non-traded sector], and vice versa. The intention of the proposed budget is that emissions in the non-traded sector should fall an average of 2% (6 MtCO2e) annually to 2030, whatever the UK share of the EU ETS cap. To ensure this is clear, we recommend that the Government uses the Carbon Accounting Regulations to fix the net carbon account for the traded sector at the assumed level (i.e. 590 MtCO2e over 2028–2032).69
Matthew Bell, CEO of the CCC, explained that the CCC’s recommendation was “a way of fixing the accounting framework such that the actions that we envision being taken—the actions in transport, in buildings, on the power section and elsewhere—are actually taken”.70 Lord Bourne said that DECC was looking at this recommendation “very seriously” but he did not comment on the advantages or disadvantages of accepting it. He explained:
More broadly the accounting framework is an issue that has to be looked at, perhaps, but that is beyond the immediate scope of the fifth carbon budget. I suspect it involves wider considerations, but once again, yes, of course, we will look at the advice very carefully, study it very carefully and respond appropriately.71
26.We recognise that given current uncertainties in the UK’s share of the EU ETS cap, there are legitimate concerns about the CCC’s recommendation to fix the net carbon budget for the traded sector at the assumed level (i.e. 590 MtCO2e over 2028-2032), thereby limiting emissions to 1,135 MtCO2e over 2028-2032 for the non-traded sector. The key challenge is providing a clear signal to both the traded and non-traded sectors, whilst retaining the flexibility to respond to changes in the traded sector once the UK’s share of the EU ETS cap is agreed. The Government should set out clearly how it would deal with a discrepancy between the assumed level for the traded sector and the actual level once set. If clarity on this can be provided, we would support fixing the net carbon budget for the traded sector at 590 MtCO2e over the fifth carbon budget period. Over the longer-term the CCC should review the pros and cons of changing accounting methodology to ensure that we have the most robust framework in place to achieve emissions reduction.
27.While carbon budgets account for emissions produced on UK soil, they exclude emissions embodied in materials and products produced elsewhere but imported in the UK (“consumption emissions”). Dr Richard Leese, Director for Energy and Climate Change at the Mineral Products Association, explained that:
The consumption emissions that are imported into the UK in manufactured goods are missing from the current carbon budget. We are at a stage of maturity now with our carbon accounting whereby we should be taking that into consideration.72
Professor John Barrett, from the Centre for Industrial Energy, Materials and Products, explained that the Government have put the accounting in place to measure consumption-based emissions and that these numbers were used by the Department for Environment, Food and Rural Affairs (Defra) but not DECC.73 He questioned whether DECC “were very anti extending or including indicators that might question progress”.74 However, Lord Deben, Chair of the CCC, warned that accounting for these emissions presented challenges:
At the moment we account for those emissions over which we have control. If you do your own emissions, the emissions you create in your own country, you can control those to a very large extent. If you measured emissions on the basis of your consumption, you would be measuring an awful lot of emissions over which you have no control at all except not to import that product or whatever it may be. […] I think it is right to do two things. One is to account for your emissions nationally, the emissions you create, and you do that all over the world. The second thing is from time to time to do an assessment as to what it means as far as our consumption emissions are, and that is what we have done once and we will do again, so that all the time you are seeing your national emissions in that context.75
28.While accounting for emissions from products consumed in the UK but produced elsewhere may be complex, it is important to properly understand the full extent of the UK’s carbon emissions. We recommend that DECC work with the CCC to explore the options for incorporating consumption-based emissions data into their policy-making process and the potential for including these in future carbon budgets.
13 Million metric tons of carbon dioxide equivalent. This measure can aggregate different greenhouse gases into a single measure, using global warming potentials. One unit of carbon is equivalent to 3.664 units of carbon dioxide.
14 Committee on Climate Change, The Fifth Carbon Budget, The next step towards a low-carbon economy (November 2015), p 12
15 Committee on Climate Change, The Fifth Carbon Budget, The next step towards a low-carbon economy (November 2015), p 11
16 Q2 [Dr Skorupska, Philip Sellwood, Lawrence Slade], Q63 [Dr McElroy, Dr Clarke], Marks and Spencer (FCB 003) para 8, Energy Technologies Institute (FCB 009) para 2, Grantham Institute Imperial College London (FCB 010), Scottish Carbon Capture and Storage (FCB 011) para 4.1, Energy Saving Trust (FCB 023) para 2, RenewableUK (FCB 026) para 2, Scottish Renewables (FCB 029), EDF Energy (FCB 030) para 11, Oil and Gas UK (FCB 031), RES (FCB 034), Statkraft (FCB 036) para 6, Renewable Energy Association (FCB 037) para 1, Tees Valley Unlimited (FCB 038) para 1.3, Aldersgate Group (FCB 040) para 8, RSPB (FCB 046), WWF-UK (FCB 047) para 1
20 Renewable Energy Association (FCB 037) para 2, Tyndall Centre for Climate Change Research (FCB0048) para 13
24 Q8 [Lawrence Slade, Philip Sellwood], Qq64-65 [Dr Clarke, Dr McElroy], Grantham Institute Imperial College London (FCB 010), Centre for Industrial Energy, Materials and Products (FCB 019)
25 Q8 [Dr Leese]
26 Q64 [Dr McElroy]
27 Q8 [Professor Barrett]
28 Q8 [Philip Sellwood]
29 Q121 [Lord Bourne]
30 Q128 [Lord Bourne]
31 Committee on Climate Change, ‘Domestic implications of the “Paris Agreement” to combat climate change,’ accessed 18 April 2016
32 United Nations Framework Convention on Climate Change, Adoption of the Paris agreement (December 2015), p 22
33 Committee on Climate Change, Letter to Rt Hon Amber Rudd MP on the Implications of the Paris agreement for the fifth carbon budget (January 2016), p 2
34 Q2 [Dr Skorupska, Philip Sellwood], RES (FCB 034), Aldersgate Group (FCB 040) para 7, Greenpeace (FCB 041), WWF-UK (FCB 047) para 1
35 EDF Energy (FCB 030) para 3, Grantham Research Institute on Climate Change and the Environment at the London School of Economics (FCB 039) para 5
36 Grantham Research Institute on Climate Change and the Environment at the London School of Economics (FCB 039) para 2
38 Fleming Policy Centre (FCB 016) para 1.8, Centre for Industrial Energy, Materials and Products (FCB 019), Energy Saving Trust (FCB 023) para 2, Friends of the Earth (FCB 025), Sandbag Climate Campaign (FCB 045), Tyndall Centre for Climate Change Research (FCB0048) para 1, ClientEarth (FCB 049)
39 Q4 [Professor Barrett]
41 Q121 [Lord Bourne]
42 Committee on Climate Change, The Fifth Carbon Budget, The next step towards a low-carbon economy (November 2015), p 119
43 Committee on Climate Change, The Fifth Carbon Budget, The next step towards a low-carbon economy (November 2015), p 14
44 Committee on Climate Change, The Fifth Carbon Budget, The next step towards a low-carbon economy (November 2015), p 14
45 Committee on Climate Change, The Fifth Carbon Budget, The next step towards a low-carbon economy (November 2015), p 12
46 Q152 [Jerome Glass]
48 Q50 [Professor Barrett], Centre for Industrial Energy, Materials and Products (FCB 019), Grantham Research Institute on Climate Change and the Environment at the London School of Economics (FCB 039) para 2, Tyndall Centre for Climate Change Research (FCB 048) para 14, ClientEarth (FCB 049)
49 Grantham Research Institute on Climate Change and the Environment at the London School of Economics (FCB 039) para 7
52 Q25 [Professor Barrett]
55 Committee on Climate Change, Fourth carbon budget review – part 2 (December 2013), p 21
56 Climate Change Act 2008, section 34
57 Committee on Climate Change, The Fifth Carbon Budget, The next step towards a low-carbon economy (November 2015), p 119
58 Committee on Climate Change, The Fifth Carbon Budget, The next step towards a low-carbon economy (November 2015), p 41-42
59 Committee on Climate Change, The Fifth Carbon Budget, The next step towards a low-carbon economy (November 2015), p 42
60 Committee on Climate Change, The Fifth Carbon Budget, The next step towards a low-carbon economy (November 2015), p 124
61 Energy Technologies Institute (FCB 009) para 7, Renewable Energy Association (FCB 037) para 6, Aldersgate Group (FCB 040) para 10, Sandbag Climate Campaign (FCB 045)
65 Q66 [Dr McElroy]
66 Q66 [Dr Clarke]
67 Q66 [Dr Clarke]
68 Q66 [Dr Clarke]
69 Committee on Climate Change, The Fifth Carbon Budget, The next step towards a low-carbon economy (November 2015), p 13
70 Q104 [Matthew Bell]
71 Q132 [Lord Bourne]
72 Q2 [Dr Leese]
73 Q13 [Professor Barrett]
74 Q19 [Professor Barrett]
75 Q106 [Lord Deben]
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25 April 2016