1 meeting carbon budgets – ensuring a low-carbon recovery 2 nd progress report to parliament...

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Meeting Carbon Budgets –ensuring a low-carbon recovery

2nd progress report to ParliamentCommittee on Climate Change, June 2010

www.theccc.org.uk

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Main messages

• Second progress report• Only 9 months since our first report• Annually in June from now on


• Emissions reductions in 2009 largely due to recession• Should aim to outperform first budget and not bank

to second budget

• Emissions reductions in 2009 largely due to recession• Should aim to outperform first budget and not bank

to second budget

• Step change still needed• Limited progress on measures• Some progress on policies but further action required


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Key areas for policy strengthening

Encouraging a move to more carbon-efficient cars, including electric carsEncouraging a move to more carbon-efficient cars, including electric cars

Delivery mechanisms and incentives to improve energy efficiency of buildingsDelivery mechanisms and incentives to improve energy efficiency of buildings

New policies for the agriculture sectorNew policies for the agriculture sector

Incentives for investment in low carbon powerIncentives for investment in low carbon powerElectricity market reformCarbon price floorEmissions Performance Standard

Electricity market reformCarbon price floorEmissions Performance Standard

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i. Emissions trends and traded/non-traded split

ii. The non-traded sector

iii. The traded sector

iv. Need for a step change and move to Intended budget

v. Progress against indicators and future challenges• Power, buildings, industry and transport

vi. Opportunities for reducing emissions in agriculture

vii. Future work of the Committee

Structure of the presentation

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(i) Emissions fell by 8.6% in 2009 with reductions in CO2 (9.7%) and non-CO2 (1.9%)

CO2 Non-CO2GHG

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(i) CO2 emissions fell in all sectors, particularly power and industry

(% change in 2009)

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(i) Non-traded sector emissions fell by 5.7% in 2009, more than the 1.3% annual average reductions required to meet budget

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(i) Traded sector emissions fell by 12.5% in 2009, more than the 2.5% annual average reductions required to meet budget

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(ii) Outperformance of the first budget due to the recession and other external factors is likely to be within the range we projected in our 2009 progress report

Outperformance of first budget in the non-traded sector

Outperformance of 3-6% of non-traded sector CO2 emissions across first budget

Outperformance of 3-6% of non-traded sector CO2 emissions across first budget

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(ii) Little of the outperformance is due to policy impacts in the non-traded sector in 2009

Emissions reductions from measures (MtCO

2)

Expected* Outturn Out-performance

Domestic sector

Loft insulation (professional) 0.1 0.2 0.1

Loft insulation (DIY) - 0.1 0.1

Cavity wall insulation 0.4 0.3 ~0

Solid wall insulation < 0.1 < 0.1 ~0

Efficient boilers 0.5 0.6 ~0

Road transport

New car gCO2/km < 0.1 0.2 0.2

Biofuels (by volume) 0.6 0.6 ~0

Total

1.7 2.0 0.4

*i.e. Included in budget projections

Emissions reduction from measures / total NTS CO2 emissions reduction in 2009: around 10%

Emissions reduction from measures / total NTS CO2 emissions reduction in 2009: around 10%

Outperformance on measures / total outperformance in 2009:less than 5%

Outperformance on measures / total outperformance in 2009:less than 5%

Given recession impact, aim to outperform first budget and not bank to second budget

Given recession impact, aim to outperform first budget and not bank to second budget

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(iii) Reduced need for credit purchase at UK and EU levels due to recession

UK levelUK level

UK becomes net seller in EU ETS / banks permits for future periodsUK becomes net seller in EU ETS / banks permits for future periods

EU levelEU level

Less CDM required at EU level to meet EU ETS capLess CDM required at EU level to meet EU ETS cap

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(iii) Carbon prices have remained low; projections revised downwards

Traded sector emissionsUK: down 12% in 2009EU: down 12% in 2009

Traded sector emissionsUK: down 12% in 2009EU: down 12% in 2009

No binding global deal in CopenhagenNo binding global deal in Copenhagen

Carbon price has remained low(c. €15/tCO2)

Carbon price has remained low(c. €15/tCO2)

Latest projections confirm risk of carbon price remaining low (e.g. €20-30/tCO2 )

Latest projections confirm risk of carbon price remaining low (e.g. €20-30/tCO2 )

Undermines incentives for investment in low- carbon power generation

Undermines incentives for investment in low- carbon power generation

Strong case for introduction of a UK carbon price floor in the absence of EU-wide action

Strong case for introduction of a UK carbon price floor in the absence of EU-wide action

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(iv) Despite emissions reduction in 2009, step change in underlying progress still required

Implementing measures in the non-traded sector at 2009 rate would leave a shortfall to the Interim budget

Implementing measures in the non-traded sector at 2009 rate would leave a shortfall to the Interim budget

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(iv) Given step change, it could be possible to meet the Intended budget through domestic effort alone

If impact of recession persists and measures in Committee’s Extended Ambition scenario are implemented, emissions will be below Intended budget

If impact of recession persists and measures in Committee’s Extended Ambition scenario are implemented, emissions will be below Intended budget

We will consider possible move to Intended budget in context of advice on 4th carbon budget (2023-2027)

We will consider possible move to Intended budget in context of advice on 4th carbon budget (2023-2027)

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(v) Power sector emissions fell 13% in 2009 due to reduced demand and less generation from coal /more from nuclear

Between 2008-2009:•Carbon intensity: 545 g/kWh to 496 g/kWh.•Nuclear generation: 13% to 19% (outages ended)•Coal: 32% to 28% (low gas price) •Renewables: 6.1% to 7.3%.

Between 2008-2009:•Carbon intensity: 545 g/kWh to 496 g/kWh.•Nuclear generation: 13% to 19% (outages ended)•Coal: 32% to 28% (low gas price) •Renewables: 6.1% to 7.3%.

Lower demand (7%) especially in commercial and industrial sectorsLower demand (7%) especially in commercial and industrial sectors

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(v) Progress investing in wind generation

Underperformance due to slippage of

0.2 GW to early 2010

Underperformance due to slippage of

0.2 GW to early 2010

Need to move from less than 1 GW new wind capacity added in 2009 to over 3 GW on average annually in third budget

Need to move from less than 1 GW new wind capacity added in 2009 to over 3 GW on average annually in third budget

Additional operational wind capacity installed per year

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(v) Progress and challenges in power: transmission and planning

TransmissionTransmission

Planning Planning

• Enduring access regime now in place

• Offshore enduring regime on track

• Some slippage on agreement of onshore grid investments

• Enduring access regime now in place

• Offshore enduring regime on track

• Some slippage on agreement of onshore grid investments

• Decision times improving but still slower than indicator

• Fall in approval rates

• Decision times improving but still slower than indicator

• Fall in approval rates

• Important that there is no further slippage in the agreement for onshore grid investments

• Important that there is no further slippage in the agreement for onshore grid investments

• Important that replacement of IPC does not adversely affect planning efficiency

• Important that replacement of IPC does not adversely affect planning efficiency

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(v) Progress and challenges in power: nuclear, CCS and market arrangements

NuclearNuclear

CCSCCS

MarketMarket

• Progress on enabling actions now depends on decisions of Ministers and Parliament

• Progress on enabling actions now depends on decisions of Ministers and Parliament

• More clarity needed on financing for retrofit and operation of unabated plant into 2020s.

• Demos on gas should be considered together with Emissions Performance Standard

• More clarity needed on financing for retrofit and operation of unabated plant into 2020s.

• Demos on gas should be considered together with Emissions Performance Standard

• Short window for reform if key investments are to go ahead in time

• Full range of options should now be considered in detail

• Short window for reform if key investments are to go ahead in time

• Full range of options should now be considered in detail

• Draft National Policy Statement published in 2009

• Other enabling actions on track (e.g. Regulatory Justification)

• Draft National Policy Statement published in 2009

• Other enabling actions on track (e.g. Regulatory Justification)

• Demonstrations increased to four, commitment to rolling review from 2018

• Demonstrations increased to four, commitment to rolling review from 2018

• Initial findings of Energy Market Assessment published in March 2010, accepts need for intervention and sets out options

• Initial findings of Energy Market Assessment published in March 2010, accepts need for intervention and sets out options

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(v) Residential emissions fell 7% in 2009

• Direct emissions fell 5%• Indirect emissions fell ~10% reflecting

• 3% fall in electricity consumption• 9% fall in carbon intensity

• Direct emissions fell 5%• Indirect emissions fell ~10% reflecting

• 3% fall in electricity consumption• 9% fall in carbon intensity

Key drivers• GDP down 5%• Energy prices up 12%

(gas), 3% (electricity)• Colder winter on

average but fewer cold days

• Some insulation measures

Key drivers• GDP down 5%• Energy prices up 12%

(gas), 3% (electricity)• Colder winter on

average but fewer cold days

• Some insulation measures

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(v) Progress and challenges in the residential sector: need for step change in insulation

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(v) Progress and challenges in the residential sector: policy development

• Further details needed around specific policy delivery elements of National Energy Efficiency Programme (e.g. other levers in addition to Pay As You Save to address non-financial barriers)

• Further details needed around specific policy delivery elements of National Energy Efficiency Programme (e.g. other levers in addition to Pay As You Save to address non-financial barriers)

• Home Energy Management Strategy published March 2010

• Political commitment to National Energy Efficiency Programme and ‘Green Deal’

• Home Energy Management Strategy published March 2010

• Political commitment to National Energy Efficiency Programme and ‘Green Deal’

• In our 2009 progress report, Committee recommended a 3 pillar approach to National Energy Efficiency Programme

1. Whole house

2. Neighbourhood / area based

3. New financing mechanism (some subsidy, some Pay As You Save)

• In our 2009 progress report, Committee recommended a 3 pillar approach to National Energy Efficiency Programme

1. Whole house

2. Neighbourhood / area based

3. New financing mechanism (some subsidy, some Pay As You Save)

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(v) Non-residential building emissions fell 9% in 2009

Key drivers• Service sector output

(GVA) down 3%• Electricity price up 12%

Key drivers• Service sector output

(GVA) down 3%• Electricity price up 12%

• Direct emissions fell 5%• Indirect emissions fell

13% reflecting• 3% fall in electricity

consumption• 9% fall in carbon intensity

• Direct emissions fell 5%• Indirect emissions fell

13% reflecting• 3% fall in electricity

consumption• 9% fall in carbon intensity

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(v) Progress and challenges in the non-residential buildings sector

• Consultation on Display Energy Certificate roll-out

• Impact Assessment underway on Energy Performance Certificate roll-out & minimum rating

• Analysis of policy options for SMEs underway, proposals due end 2010

• Carbon Reduction Commitment Scheme launched

• Consultation on achieving zero-carbon new builds by 2018

• Consultation on Display Energy Certificate roll-out

• Impact Assessment underway on Energy Performance Certificate roll-out & minimum rating

• Analysis of policy options for SMEs underway, proposals due end 2010

• Carbon Reduction Commitment Scheme launched

• Consultation on achieving zero-carbon new builds by 2018

• Time required to change primary legislation

• More effective compliance mechanism required

• New policy required to unlock SME abatement potential

• Need to set appropriate cap to deliver abatement (Committee’s advice to follow)

• Building stock turnover is slow – refurbishment of existing stock crucial

• Time required to change primary legislation

• More effective compliance mechanism required

• New policy required to unlock SME abatement potential

• Need to set appropriate cap to deliver abatement (Committee’s advice to follow)

• Building stock turnover is slow – refurbishment of existing stock crucial

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(v) Industry emissions fell 18% in 2009 but largely due to falling output during recession

Key drivers• Manufacturing output (GVA) down

10%

Key drivers• Manufacturing output (GVA) down

10%

• Direct emissions fell 18%• Indirect emissions fell 19% reflecting

• 11% fall in grid electricity consumption• 9% fall in carbon intensity

• Direct emissions fell 18%• Indirect emissions fell 19% reflecting

• 11% fall in grid electricity consumption• 9% fall in carbon intensity

• Highly concentrated• Nearly 50% of industry direct

emissions in 3 sectors (Iron & steel, Chemicals, Cement)

• Significant reductions in key sectors• Iron & steel down around 14%• Cement down around 30%

• Highly concentrated• Nearly 50% of industry direct

emissions in 3 sectors (Iron & steel, Chemicals, Cement)

• Significant reductions in key sectors• Iron & steel down around 14%• Cement down around 30%

• Need to improve evidence base on scope for longer term emissions reductions in industry

• Committee to provide assessment of abatement options in 4th budget report

• Need to improve evidence base on scope for longer term emissions reductions in industry

• Committee to provide assessment of abatement options in 4th budget report

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(v) Progress and challenges in renewable heat

• Draft Renewable Heat Incentive published. RHI to commence in April 2011.

• Draft Renewable Heat Incentive published. RHI to commence in April 2011.

• Significant increase in uptake required

• Questions over support for specific technologies

• Need to ensure non-financial barriers to deployment are addressed

• Need to ensure integration with energy efficiency policy

• Significant increase in uptake required

• Questions over support for specific technologies

• Need to ensure non-financial barriers to deployment are addressed

• Need to ensure integration with energy efficiency policy

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(v) Road transport emissions fell 3.9%

-2.7% +0.3%

-8.5%-9.1%

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(v) Car emissions fell 2.7% in 2009 driven by falls in mileage and carbon intensity

-1.2%

-1.6%

-2.7%

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(v) Progress and challenges reducing road transport emissions: carbon efficiency of new cars

Average new car gCO2/km fell 4% in 2008 and a further 5% in 2009 to 149 gCO2/km, outperforming our indicator of 158 gCO2/km Average new car gCO2/km fell 4% in 2008 and a further 5% in 2009 to 149 gCO2/km, outperforming our indicator of 158 gCO2/km

New car sales

2007: 2.39m

2008: 2.11m

2009: 1.97m

New car sales

2007: 2.39m

2008: 2.11m

2009: 1.97m

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(v) Improvement in new car gCO2/km driven by more efficient cars in each category plus greater share of more efficient cars

Policy (e.g. differentiated VED) needed to lock in changes in purchase behaviourPolicy (e.g. differentiated VED) needed to lock in changes in purchase behaviour

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(v) Progress and challenges reducing road transport emissions: need ambitious targets for electric vehicles and vans

• EU draft framework for new van emissions (October 2009)• ambitious but feasible targets to 2020 (200 gCO2/km → 135 gCO2/km)

• DfT consulting on draft regulation to inform negotiations with EU

• EU draft framework for new van emissions (October 2009)• ambitious but feasible targets to 2020 (200 gCO2/km → 135 gCO2/km)

• DfT consulting on draft regulation to inform negotiations with EU

• Blend increased to 2.9% by volume• 8% (energy) required by 2020

(Gallagher)

• Blend increased to 2.9% by volume• 8% (energy) required by 2020

(Gallagher)

• Price support for new electric and plug in hybrid cars announced

• Commitment from new Government to mandate national charging network

• Plugged In Places pilot projects announced and first 3 pilots selected

• Price support for new electric and plug in hybrid cars announced

• Commitment from new Government to mandate national charging network

• Plugged In Places pilot projects announced and first 3 pilots selected

Electric cars

Electric cars

BiofuelsBiofuels

• Significant increase in uptake • Annual sales 140 → 86,000• 1.7 million required in fleet in 2020

• Need deployment targets for 2020

• Greater price support may be required to support early market

• Significant increase in uptake • Annual sales 140 → 86,000• 1.7 million required in fleet in 2020

• Need deployment targets for 2020

• Greater price support may be required to support early market

• Need to understand likely availability of sustainable biofuels post 2020

• Need to understand likely availability of sustainable biofuels post 2020

VansVans

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(v) Progress and challenges reducing road transport emissions: limited progress on demand side

• Policy has moved backwards: planned Sustainable Travel City project withdrawn March 2010.

• Policy has moved backwards: planned Sustainable Travel City project withdrawn March 2010.

• Limited car driver training delivered in 2009 but Government exploring options for wider delivery.

• Limited car driver training delivered in 2009 but Government exploring options for wider delivery.

Eco-drivingEco-driving

Smarter ChoicesSmarter Choices

• Need to consider potential delivery mechanisms for wider roll out.

• Need to consider potential delivery mechanisms for wider roll out.

• No policy for roll out across UK towns and cities.

• No policy for roll out across UK towns and cities.

• No significant progress in developing integrated transport and land use strategy so far.

• No significant progress in developing integrated transport and land use strategy so far.

Land use planningLand use planning

• Proposed review of planning policy by new Government provides opportunity to consider new approach.

• Proposed review of planning policy by new Government provides opportunity to consider new approach.

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(vi) Estimated agriculture emissions fell by 1% in 2008

Emissions reductions driven mainly by:•Greater efficiency in fertiliser use•Falling livestock numbers

Emissions reductions driven mainly by:•Greater efficiency in fertiliser use•Falling livestock numbers

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(vi) Treatment of agriculture in this report

Ambition in Low Carbon Transition Plan appears low relative to underlying maximum potential Ambition in Low Carbon Transition Plan appears low relative to underlying maximum potential

Devolved Administrations should set targets at least in line with the LCTP ambitionDevolved Administrations should set targets at least in line with the LCTP ambition

Range of policies beyond provision of information/ encouragement should be seriously considered to address barriers to actionRange of policies beyond provision of information/ encouragement should be seriously considered to address barriers to action

More robust evidence base needed on current farming practice and emissions impact of changed practice.More robust evidence base needed on current farming practice and emissions impact of changed practice.

For agriculture we set out:•New analysis of abatement potential and incentives•A draft indicator framework

Our main conclusions are:

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(vi) Our indicator framework for agriculture

Draft indicator framework sets out:•Emissions projections range•Trajectories for:

• emissions drivers (e.g. livestock numbers, fertiliser use)

• key emissions-reducing measures (e.g. farmer uptake of practice)

•Policy milestones

Draft indicator framework sets out:•Emissions projections range•Trajectories for:

• emissions drivers (e.g. livestock numbers, fertiliser use)

• key emissions-reducing measures (e.g. farmer uptake of practice)

•Policy milestones

Agricultural emissions trajectories Given uncertainties over emissions, focus should be on drivers and implementation of measures

Given uncertainties over emissions, focus should be on drivers and implementation of measures

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Headline conclusions



• Emissions reductions in 2009 largely due to recession• Should aim to outperform first budget and not bank to

second budget

• Emissions reductions in 2009 largely due to recession• Should aim to outperform first budget and not bank to

second budget



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(vii) Future work of the Committee

• Low carbon R&D review

• Review of the second phase cap for the Carbon Reduction Commitment

• Advice on the level of the fourth budget

• Low carbon R&D review

• Review of the second phase cap for the Carbon Reduction Commitment

• Advice on the level of the fourth budget

• Review of renewable energy ambition

• Advice on the Scottish cumulative emissions Budget

• Third annual report to Parliament

• Advice on use of offset credits to meet the second carbon budget

• Review of international shipping emissions

• Review of sustainable bioenergy

• Review of renewable energy ambition

• Advice on the Scottish cumulative emissions Budget

• Third annual report to Parliament

• Advice on use of offset credits to meet the second carbon budget

• Review of international shipping emissions

• Review of sustainable bioenergy

• Advice on inclusion of international aviation & shipping in carbon budgets

• Fourth annual report to Parliament

• Advice on inclusion of international aviation & shipping in carbon budgets

• Fourth annual report to Parliament

20102010

20112011

20122012

1 meeting carbon budgets – ensuring a low-carbon recovery 2 nd progress report to parliament...

Documents

nontraded sector emissions

traded sector emissions

budget slide

budget emissions reductions

emissions trends

budget step change

presentation slide

budget v