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Energy Policy 34 (2006) 2071–2086

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The environmental and economic impacts of theUK climate change agreements$

Paul Ekinsa,�, Ben Etheridgeb

aPolicy Studies Institute, Environment Group, 100 Park Village East, London NW1 3SR, UKbCambridge Econometrics, Covent Garden, Cambridge CB1 2HS, UK

Available online 24 March 2005

Abstract

The climate change agreements (CCAs) in the UK were negotiated with a number of energy-intensive industrial sectors, and

offered a reduction in the rate of the climate change levy (CCL), provided that negotiated energy efficiency targets were met.

Through modelling and by analysis of the results of the first target period, this paper analyses the stringency of the targets, and the

economic and environmental implications of the CCAs. It concludes that, while the targets in themselves were not stringent, and

were in the main met well before the due date, the CCAs appear to have had an ‘awareness effect’ in stimulating energy savings. This

has resulted in overall environmental benefits above those which would have derived from the imposition of a flat-rate tax with no

rebate and no CCAs, and economic benefits for the sectors and companies with which CCAs were negotiated.

r 2005 Elsevier Ltd. All rights reserved.

Keywords: Voluntary/negotiated agreements; Energy taxation; Carbon dioxide emissions

1. Introduction

Voluntary, or negotiated, agreements (VNAs) havenow become a generally accepted instrument of envir-onmental policy, and there have been a number ofstudies both to classify different types of agreement andto investigate their economic and environmental perfor-mance (for example, OECD, 1999, 2003, ELNI, 1998,ten Brink, 2002; Central and Eastern European experi-ence in this area is reviewed in Sauer et al., 2001).

OECD, 1999 (pp.16ff.) classifies VNAs into four maingroups:

(1)

unilateral commitments made by polluters, (2) private agreements between polluters and those who

are polluted,

e front matter r 2005 Elsevier Ltd. All rights reserved.

pol.2005.01.008

is based on research funded by the Tyndall Centre for

e Research, support from which is gratefully acknowl-

ing author. Tel.: +4420 7468 2276;

8 0914.

ess: p.ekins@psi.org.uk (P. Ekins).

(3)

negotiated agreements between polluters and publicauthorities,

(4)

programmes initiated and/or administered by publicauthorities in which polluters are invited to partici-pate.

The UK climate change agreements (CCAs) fall intothe third of these groups. The CCAs were negotiatedprior to the introduction in the UK of the climatechange levy (CCL, a tax on the business and commercialuse of energy) in 2001, and entitled eligible economicsectors to an 80% discount on the CCL. The CCAs aredescribed in more detail in Section 2. The key questionsthat typically arise in connection with such agreements(see, for example, OECD, 2003, p.42) are whether theyachieve an appropriate level of environmental perfor-mance (i.e. whether targets associated with the agree-ments are set at an appropriate level, and aresubsequently achieved) and whether their environmentalperformance is achieved with the least cost comparedwith other possible policy instruments (related to theachievement of static economic efficiency, through the

ARTICLE IN PRESSP. Ekins, B. Etheridge / Energy Policy 34 (2006) 2071–20862072

equalisation of the marginal costs of abatement acrosspolluters, and dynamic economic efficiency, through thestimulation of technical change). These issues form thesubject of this paper.

After describing the CCAs, Section 2 assesses to whatextent they were designed and implemented in accor-dance with current perceptions of best practice. Section3 sets out the methodology that was adopted toinvestigate them, and the specific questions it soughtto answer. Section 4 describes how the targets agreed forthe CCA sectors were aggregated into the larger fuel-user sectors in the Cambridge Econometrics (CE)MDM-E3 model that was used for the research, andsets out the MDM-E3 fuel-user targets that were derivedfrom the CCAs. Section 5 reports the results forprojected energy use from the MDM model runs, andcompares these with the targets derived from the CCAs.Section 6 then compares the projections for 2002 withthe actual results for 2002, which were published byAEA Technology in 2003 (AEAT 2003). Section 7discusses the economic implications of the CCAs, andSection 8 concludes.

2. Implementation and operation of the climate change

agreements (CCAs)

2.1. Implementation and initial results of the CCAs

When the CCL was announced in 1999, it was madeclear that energy-intensive sectors would have thechance to negotiate a reduced rate of tax in return fortargets of reduced energy use. In the event, 44agreements (CCAs) were concluded with differentsectors, with different sites (target units, or TUs)individually signed up within the sectors. The agree-ments set out targets related to energy use or carbonemissions over this decade, comprising a final target in2010 and ‘milestone’ interim targets for 2002, 2004, 2006and 2008. The CCL on the TUs in all the sectors withCCAs was set for the first target period (to April 2003)at 20% of the rate charged on other industrial andcommercial energy use. If a sector, or the individual TUswithin it, met their ‘milestone’ targets, the sector (or thecomplying TUs) would be ‘re-certified’ (i.e. entitled tothe reduced CCL rate for the next target period, thefollowing 2 years). If the target was not met, the non-complying TUs would have to pay the full rate of theCCL on their energy use in the next target period. Thisprovided a powerful incentive for the sectors and TUs tomeet their targets.

The targets were negotiated separately with eachsector by the UK Government’s Department for theEnvironment, Food and Rural Affairs (DEFRA). Thetargets for each sector were different in terms ofthe reduction in energy they envisaged and in terms of

the units in which they were denominated. Most targetswere for specific energy use, meaning that they relate tosome measure of primary energy use (kWhp or PJ) perunit of some (mainly physical) measure of output (oftentonnes). A few sectors opted for absolute targets. Theinput to the negotiations was analysis by the Govern-ment’s advisers (then called ETSU, now called FutureEnergy Solutions [FES], part of AEA Technology[AEAT]), which estimated the improvements in energyefficiency which the sector would be likely to achieve by2010 in the absence of any CCL and CCAs (thebusiness-as-usual (BAU) estimate), and the improve-ments which would arise if the sector implemented allcost-effective energy efficiency measures (the ACEestimate). The outcome of the negotiations was a targetsomewhere between the BAU and ACE estimates. Thetargets were specified relative to a Base Year, which wasnormally 1999 or 2000 and were denominated in one offour possible units:

�

relative energy (eg GJ primary energy per unit tonneof production), � relative carbon (eg tonnes of carbon per unit tonne of

production)—i.e. energy is converted into carbonemissions,

� absolute energy (eg GJ), � absolute carbon (tonnes of carbon).

The targets were also derived from various baselines,depending on what data were available. AEAT, 2001lists the sectors that concluded CCAs and brieflydescribes the agreements that were reached, with theassociated targets. Appendix 1 sets out the emissionstargets that were originally agreed under the CCAs intabular form, and the results for both sectoral produc-tion, and energy use against the targets, that wereannounced in 2003 (it also gives, in bold, some of themodelling results, which are explained below). Subse-quently, it was agreed that sectors would be allowed touse the UK Emissions Trading Scheme (ETS, started inApril 2002) to enable them to meet their targets (bypurchasing emission permits), if they would not other-wise do so. As part of the evaluation of the first targetperiod, the targets were adjusted for a number ofreasons (including to take account of entrants and exits,baseline corrections, and changes in product mix and/orthroughput). The targets for actual sectoral perfor-mance were also adjusted to take account of emissionstrading activity.

Appendix 2, taken from the results published byDEFRA (2003) shows that the great majority of thetarget units (TUs) met their targets. Even those that didnot do so through their own use of energy were usuallyre-certified for the next target period because of their useof the ETS. In fact the results of the first target periodshowed a very considerable over-achievement by most

ARTICLE IN PRESSP. Ekins, B. Etheridge / Energy Policy 34 (2006) 2071–2086 2073

sectors compared to their 2002 milestone targets. Inaggregate, the results showed that overall 221 PJ lessenergy had been consumed in the CCA sectorscompared to the Base Years, which amounts to anabsolute saving of 4.3mtC (in the UK Climate ChangeProgramme, it was envisaged that the CCAs would onlysave 2.5mtC by 2010 [DETR, 2000, p.72]). In relativeterms, the calculation showed that the sectors consumed171 PJ less energy (and emitted 2.8mtC less) than theywould have done had their specific energy use remainedat the level of their Base Year. The fact that the relativereductions in energy and carbon are less than theabsolute reductions reflects the fact that a number ofsectors experienced steep declines in output over thetarget period. In particular, a saving of 2.6mtC camefrom the steel sector alone, arising largely from a 27.5%decrease in output over the target period (AEAT, 2003b,p. 78). This means that by 2002 the CCA sectors, otherthan steel, reduced their carbon emissions by 1.7mtC(4.3–2.6) below their Base Year levels. The effects of theCCAs could have been more or less than this, dependingon what the emissions would have been without them,but given that, in the main, these were growing sectors,even 2002 emissions that were constant against the BaseYears would represent a reduction in carbon intensity.In the absence of other information, it is thereforenot unreasonable to attribute this 1.7mtC savingsby 2002 to the CCAs. The outcomes for 2002 forboth the reduction in specific energy use against thetargets, and for carbon emissions and sectoral produc-tion in 2002 compared to the Base Year, are discussed inmore detail in relation to the modelled outcomes inSection 6.

2.2. Design and implementation of the CCAs in relation

to best practice

OECD, 2003 (pp. 19–20) sets out a number ofrecommendations for the design of VNAs to countertheir main perceived potential weaknesses. These buildon similar recommendations in OECD, 1999 (pp.134–135), which were used by Hansen et al. (2002) toassess VNAs in Denmark, the Netherlands and France.The recommendations are given below, together with abrief assessment as to whether the design and imple-mentation of the CCAs were consistent with them:

�

Clearly defined targets: Appendix 1 shows that thetargets were clearly defined. � Characterisation of a BAU scenario: each target was

defined in relation to such a scenario.

� Credible regulatory threats: there is little doubt that

any sector failing to meet its target would have itsCCL rebate removed.

� Credible and reliable monitoring: results against the

targets are measured and reported every two years.

�

Third-party participation: this is provided by theongoing involvement of Future Energy Solutions. � Penalties for non-compliance: the removal of the 80%

CCL rebate would be a substantial penalty.

� Information-oriented provisions: there are government

programmes of information and technical assistanceto help firms increase their energy efficiency.

� Provisions to reduce distortions in market competition:

targets can be adjusted to take account of exits andnew entrants.

This brief assessment suggests that the CCAs weredesigned and implemented in a way that is very muchconsistent with the OECD recommendations.

3. Modelling the impacts of the CCAs

It was seen in the previous section that the CCAtargets were set in relation to two scenarios, described inAEAT, 2001 as BAU and all-cost-effective (ACE), withthe latter delivering higher energy savings. While thisdescription would suggest that firms were in fact onlyundertaking to implement measures that would yieldthem net money savings (and which, on this basis, theyshould have been planning to undertaking anyway), infact ETSU admitted that its ACE estimates wereoptimistic, in that they assumed unlimited managementtime and capital availability (AEAT, 2001, p. v).Certainly, the industrial sectors undertook the negotia-tions on the basis that this was so, and ETSU wasconvinced enough of the robustness of the industrialcase to conclude that in each case ‘‘a step change inbehaviour will be needed to deliver the proposedtargets’’ (AEAT, 2001, p. vi).

It may be noted that this was not a universally sharedconclusion. On the basis of its own analysis, theAssociation for the Conservation of Energy concludedthat, in fact, the CCAs delivered very little if anyincreases in energy efficiency beyond BAU (11% asagainst BAU estimates of 9–13%, ACE, 2001, p. 1). Itwas a major purpose of this research to generate somefresh insights on this point.

The methodology used by ETSU to assess the BAUand ACE scenarios is normally described as ‘bottomup’, in that it involves the detailed analysis oftechnological opportunities (in this case for energysaving), sector by sector, and the associated costs ofinstalling them. For the BAU scenario, assumptions aremade as to which technologies will be installed in theabsence of policy intervention, often on the basis of pastexperience of the sector. For the ACE scenario,technologies are included in the scenario if theirestimated return on investment (or payback) is the sameor greater than that which is believed to be operative inthe sector concerned.

ARTICLE IN PRESSP. Ekins, B. Etheridge / Energy Policy 34 (2006) 2071–20862074

This research sought to compare the results from this‘bottom up’ methodology with results generated by a‘top down’ econometric model of the UK economy andenergy system, the MDM-E3 model, maintained byCambridge Econometrics (CE). The model is describedin more detail in Box 1, but, briefly, it projects industrialenergy use in the future, on the basis of assumptionsabout economic growth rates and energy prices (whichare also required for the bottom up assessment toestimate cost effectiveness and rates of investment) andtrends in industrial structure and energy efficiency asestimated econometrically from past data. This ‘top

Box 1The Cambridge multisectoral dynamic model of

detailed energy–environment–economy (E3) model,economic structure, energy demand and resulting enused for the work reported in this paper is based on thwith 1995 as the price-base year, and uses input–outan earlier version of the economic model is given in Bbecome a regionalized energy–environment–economrespecified, but the basic structure of the model has

Flows in the economic model are generally inmodelling is done in physical units. Energy-environmwithin MDM-E3, and at present the coverage inenvironmental emissions, the electricity supply indusindustries are included within the basic input-output smodel, allowing extensive economy-energy-environm

The economic model is designed to analyse and forit disaggregates industries (into 49 sectors), commoexpenditure, as well as foreign trade and investmentaccounting framework based on the system of UK Nacorrect accounting balances in the model’s projectionorthodox time-series econometric relationships and c

The energy submodel determines total secondary euse, and also provides the feedback to the main eequation sets in MDM-E3, including the energycointegrating technique. This econometric ‘top-down‘bottom-up’ approach in a number of submodels, inclThe emissions classification in MDM-E3 includes 14gases and local pollutants from energy use. The classiare obtained from the National Atmospheric Emissio

The reliability of the projections made using MDMdata. There is great potential for inconsistencies begovernment departments, by different methods,improved through periodic revisions. Aside from tuncertainty surrounding the projections. While ituncertainty, it is possible to comment on the validitymethods, MDM-E3 provides both a very detailed andprospects for the economy and energy-environmenfeedback occurring between the economy, fuel pricinteractions and feedback effects between different sethe overall macroeconomy is essential for assessing tand environmental emissions.

down’ approach is therefore very different from thatused to derive the CCA targets, and the resultsgenerated by it should provide an interesting compar-ison with the ETSU estimates.

Using this approach, the research investigatedthe energy, environmental and economic effectsto 2010 (in relation to a Base Case without thepolicies) of:

�

thd

vie

puayrecoenc

trtre

ecdit. Ttisro

necoe

’udemficns-Etwanheisof

atescthe

Only the CCA element of the CCL package.

� The CCL package as implemented. � The CCL package without the CCA element.

e UK economy (MDM-E3) is the UK’s mostesigned to analyse and forecast changes inronmental emissions. The version of MDM-E31992 Standard Industrial Classification (SIC92),t tables for 1995. A comprehensive account ofrker and Peterson (1987). The model has sincemodel and most of the equations have beenmained unchanged.nstant prices, while the energy-environmentt characteristics are represented by submodelsludes energy demand (primary and final),y and domestic energy appliances. The energyucture, and MDM-E3 is a fully integrated singlent interaction.ast changes in economic structure. To do this,ies, consumers’ expenditure and governmenthe detailed variables are linked together in an

onal Accounts, which ensures consistency andand forecasts. The model is a combination ofss-section, input-output relationships.rgy demand, fuel use by user and prices of fuelnomic framework of MDM-E3. All the mainquations, are estimated using a standard

treatment is supplemented by an engineeringing that of the electricity supply industry (ESI).issions to air, including the main greenhouseation is based on the availability of data, whichInventory (NAEI).

3 partly reflects the reliability of the availableeen datasets which are collected by differentd with different disaggregations. Data aredata, there are many other contributors tonot possible to quantify the extent of the

the methodology adopted. Compared to othercomprehensive framework for exploring the

linkages. The model is fully integrated, withand energy demand. The ability to look at

ors—industries, consumers, government—andimpact of government policy on energy inputs

ARTICLE IN PRESSP. Ekins, B. Etheridge / Energy Policy 34 (2006) 2071–2086 2075

This paper focuses mainly on the first and the third ofthese project components, in order to assess the impacts

of the CCAs.

The modelling carried out by the project undertookthe following model runs:

�

Scenario B (the ‘base case’) projected through to 2010as if the CCL had never been announced orintroduced. � Scenario C0 (the ‘CCL case’) imposed the CCL at the

rates that were actually implemented from April2001— the full rate on all business and commerce,and 20% of that rate on CCA sectors, with revenuesused to reduce employers’ National Insurance con-tributions (NICs).

� Scenario C1 (the ‘reduced-rate CCL case’) simply

imposed the 20% CCL rate on the CCA sectors (i.e.did not impose the CCL on the rest of business andcommercial energy use), in order to see what the‘pure’ price effect of the reduced-rate CCL is on thesesectors, with revenues used to reduce the rate ofemployers’ NICs.

� Scenario C2 (the ‘full-rate, no-rebate CCL case’)

imposed the full CCL on the CCA sectors (i.e. on allbusiness and commercial energy use) from April 2001.

� Scenario C3 (the ‘no-rebate, same carbon reduction,

CCL case’) imposed a single rate of CCL on allbusiness and commercial energy use (including CCAsectors), with revenue recycling through reducedNICs, at the rate necessary to achieve the samecarbon reduction by 2010 as in Scenario C0.

The Base Case Scenario B thus provided for anestimate of the evolution of energy use in the economywithout any announcement or imposition of the CCL.The Scenario C0 provided for an estimate of the fulleffect of the CCL as implemented. The scenario C1provided for an estimate for the pure price effect of theCCAs as implemented. The scenarios C2 and C3, bycomparison with the scenario C0, were intended to showthe economic and environmental implications of theCCL package that are associated specifically with theCCAs and their associated tax rebates.

The purpose of these scenarios was to explore anumber of questions, namely:

�

Table 1

Proportion of energy use in MDM fuel user sectors covered by CCAs

MDM fuel user sector Proportion of energy use

covered by CCA

Basic metals 92.2%

To what extent do the CCA targets representadditional emission cuts from the baseline emissionsthat the sectors would anyway have achieved? That is,what are the emission projections under the BaseCase, B, and how do these compare with the CCAtargets?

Mineral products 87.8%

� Chemicals 96.7%

Other industry 49.2%

Other final use 12.4%

When the 20% rate of CCL is applied (in the C1scenario), how much further reduction in emissionsdo the energy-intensive sectors need to make in orderto achieve their targets?

�

What is the difference in carbon emissions, and ineconomic outcomes, between the CCL package asimplemented (with the CCAs, as in Scenario C0) andone without the CCAs (as in Scenario C2)? � What overall (reduced) rate of CCL (with no CCAs,

as in Scenario C3) would have achieved the samereduction in carbon emissions as Scenario C0? Whatare the economic implications of achieving this samecarbon reduction without any tax rebates?

4. The CCA targets and their aggregation into MDM

fuel-using sectors

As seen in Appendix 1, the CCAs were appliedindividually and separately to 44 industrial sectors. Inorder to model the specific energy use that would beexpected from these sectors on the basis of past trends, anumber of steps were required.

The sectors had first to be allocated to a sector in theStandard Industrial Classification (SIC), and thence toone of the 49 sectors in the MDM-E3 model.

These 49 sectors were then aggregated into 13 fueluser sectors in the model: power generation, otherenergy transformation, energy industries’ own use ofenergy, basic metals, mineral products, chemicals, other

industry, transport (road, rail, air, water), domestic finaluse, other final use. The CCL and CCAs only applied tothose sectors in italics, and these are therefore the onlysectors discussed further here.

Next the proportion of energy use in each of therelevant fuel user sectors that was covered by the CCAs,and was therefore entitled to a reduced rate of CCL, wascalculated. These proportions are shown in Table 1.

It can be seen that the proportion of energy coveredby the CCAs for the Other Final Use sector, at 12%, isrelatively small. It is therefore not further considered inthis paper. For Other Industry the proportion is justunder half, for the other sectors it is well over half.

To compare the MDM model’s Base Case projectionswith the CCA targets, targets for the MDM fuel usersectors as a whole had to be derived. This was notpossible for the Basic Metals sector, because in thatsector iron and steel had an absolute target while other

ARTICLE IN PRESSP. Ekins, B. Etheridge / Energy Policy 34 (2006) 2071–20862076

metals generally had relative targets. It was notattempted for Other Final Users, because the proportionof fuel use covered by CCAs was too small. For theChemicals sector, the MDM fuel user sector corre-sponded almost exactly with the CCA sectors, so thatthe same targets could be used.

For Other Industry and Mineral Products, using thepublished energy use of each of the CCA sectors in itstarget Base Year, their target energy use (usually relativeto output) for 2002, 2004, 2006, 2008, 2010 wascalculated as follows. The projected sectoral output forthe whole fuel user sector, and for each CCA sector, wastaken from the then current MDM-E3 industrialforecast (which was closest to the C0 Scenario, withthe CCL as implemented). Using the CCA targets forspecific energy use, this enabled a target energy use foreach of the CCA sectors to be calculated for each of thetarget years and, using the relevant assumption for thespecific energy use for the non-CCA sub-sectors (asoutlined in the next paragraph), for the MDM-E3 fueluser sector as a whole. This yielded a target reduction inspecific energy use for the MDM fuel user sector as awhole, derived from the CCA targets, which could becompared with the modelled specific energy use fromdifferent scenarios.

For Other Industry, where the proportion of sub-sectors not covered by the CCAs is relatively large, itwas assumed in deriving a target for the sector as awhole that for these sectors the energy intensity wouldremain constant at its 1998 value. This was intended toreflect the fact that, unlike the relatively energy-intensiveCCA sub-sectors, and in the absence of the CCL (in theBase Case Scenario B), the sub-sectors outside the CCAshad no special incentive to reduce fuel use. For MineralProducts it was assumed that the relatively few sub-sectors not covered by the CCAs would reduce theirenergy intensity in line with the average reduction of the

Table 2

Target overall reduction for mineral products

Mineral Products 1998

Projected output £m

Target fuel use mtoe

Target energy intensity mtoe/£m 0.42295 (actual)

Overall target % change from 1998

Table 3

Target overall reduction for other industry

Other Industry 1998

Projected output £m

Target fuel use mtoe

Target energy intensity mtoe/£m 0.0806 (actual)

Overall target % change from 1998

CCA sectors, thereby making the target relatively morechallenging.

Tables 2 and 3 show the target reduction in specificenergy use for Mineral Products and Other Industry,calculated in this way.

Table 2 shows that the energy intensity for theMineral Products sector in 1998 was 0.423mtoe/£m.As described above, on the basis of the CCA targets ofthe sub-sectors in Mineral Products, and assumptionsabout their output growth, their target fuel use, andfrom that a target energy intensity, in each of the CCAtarget years could be derived. The Overall Target energyintensity assumed that the sectors not covered by CCAsin Mineral Products (accounting for about 12% of fueluse) improved their energy intensity at the same averagerate as the CCA sectors. Table 2 shows that on thisbasis, the CCAs imply that Mineral Products has atarget energy intensity reduction of 1.44% in 2002,rising to 10.93% in 2010.

Table 3 shows that the energy intensity for OtherIndustry in 1998 was 0.0806mtoe/£m. On the basis ofthe CCA targets for sub-sectors included in OtherIndustry, and assuming constant energy intensity for therest of the sector over the period to 2010, the targetenergy intensity for 2002 was a 6.84% reduction on the1998 level, and for 2010 an 11.35% reduction.

5. Projected energy use from MDM model and

comparison with targets

Table 4 shows the projected energy intensities usingMDM-E3 to model the scenarios outlined in Section 3above.

The figures for 1990 and 1998 are actuals, from whichit can be seen that Basic Metals increased its energyintensity (by 15.1%) over these years, but the other

2002 2004 2006 2008 2010

5656.65 5885.18 6122.95 6370.31 6627.67

2358.12 2388.54 2374.36 2428.45 2496.81

0.416875 0.405857 0.387780 0.381214 0.376724

�1.44 �4.04 �8.32 �9.87 �10.93

2002 2004 2006 2008 2010

299848 310668 322021 333933 346433

22508 22919 23435 24080 24745

0.0751 0.0738 0.0728 0.0721 0.0714

�6.84 �8.44 �9.68 �10.50 �11.35

ARTICLE IN PRESS

Table 4

Projected energy intensities for different sectors under different scenarios

1990 1998 2002 2004 2006 2008 2010

Base Case, B

Basic metals 86.9 100 109.5 97.5 88.9 82 76.7

No derived target possible (15.1)a

Mineral products 123.6 100 92 84.9 78.4 71.8 65.5

Derived CCA target (�19.1) �1.44 �4.04 �8.32 �9.87 �10.93

Chemicals 102.8 100 88.4 84.2 77.4 71.9 67.5

CCA target (�2.7) �12.3 �15 �16.6 �17.8 �18.3

Other industry 111.2 100 115.3 111.6 100.2 90.4 82

Derived CCA target (�10.1) �6.84 �8.44 �9.68 �10.5 �11.35

Other final users 107.8 100 90.7 90.1 87.2 83.1 79.3

No derived target attempted (�7.2)

CCL Scenario, C0 (% difference from B)

Basic metals 86.9 100 108.2 95.8 87.8 81.1 76

(�1.2) (�1.7) (�1.2) (�1.1) (�1.0)

Mineral products 123.6 100 90 83.2 77.7 81.1 65.5

(�2.1) (�2.0) (�0.9) (�0.6) (�0.0)

Chemicals 102.8 100 86.5 82 78.9 70.6 66.5

(�2.2) (�2.6) (�1.9) (�1.8) (�1.6)

Other industry 111.2 100 112.6 108.1 97.6 88.1 80.2

(�2.3) (�3.1) (�2.6) (�2.5) (�2.2)

Other final users 107.8 100 82.6 79.2 76.3 72.6 69.4

(�8.9) (�12.1) (�12.4) (�12.6) (�12.5)

Reduced Rate Scenario, C1 (% difference from B)

Basic metals 86.9 100 108.3 96.4 88.1 81.3 76.1

(�1.1) (�1.1) (�0.9) (�0.9) (�0.8)

Mineral products 123.6 100 90.9 84.1 78 71.5 65.4

(�1.2) (�0.9) (�0.5) (�0.4) (�0.1)

Chemicals 102.8 100 86.7 82.7 76.2 70.8 66.6

(�2.0) (�1.8) (�1.5) (�1.5) (�1.4)

Other industry 111.2 100 114.6 110.9 99.8 90 81.7

(�0.5) (�0.7) (�0.5) (�0.5) (�0.4)

Other final users 107.8 100 90.6 89.9 87.2 83 79.3

(�0.2) (�0.2) (�0.0) (�0.1) (�0.0)

Full rate, no rebate scenario, C2 (% difference from B)

Basic metals 86.9 100 104.3 92.6 84.8 78.4 73.6

(�4.7) (�5.0) (�4.6) (�4.3) (�4.1)

Mineral products 123.6 100 86.6 80.9 76 70.4 65.1

(�5.8) (�4.7) (�3.1) (�1.9) (�0.5)

Chemicals 102.8 100 80.8 77.4 71.5 66.6 63.8

(�8.7) (�8.0) (�7.6) (�7.4) (�7.1)

Other industry 111.2 100 110.8 106.3 95.6 86.4 78.7

(�3.9) (�4.8) (�4.6) (�4.4) (�4.0)

Other final users 107.8 100 82.5 79.2 76.2 72.5 69.2

(�9.1) (�12.0) (�12.6) (�12.8) (�12.7)

aFigures in brackets are % changes from 1990.

P. Ekins, B. Etheridge / Energy Policy 34 (2006) 2071–2086 2077

sectors reduced their energy intensity, Mineral Productsby 19.1%. In the Base Case, B (which was projectedfrom 1998 in order to remove any effects of the CCL),both Basic Metals and Other Industry were projected toincrease their energy intensity to 2002, but from then onenergy intensity in all sectors declines through to 2010.Energy intensity in any particular sector is affected byboth energy prices and the relative size of the sub-sectors(some of which might be much more energy-intensivethan others). The energy intensity increase for BasicMetals in 1998 is likely to have been due to structural

change within the sector, and that for Basic Metals andOther Industry over 1998–2002 due to both structuralchange and a fall in energy prices, which slowed energyefficiency improvements.

Looking at the differences between the scenariooutcomes and the Base Case (B), it can be seen that,as expected, the CCL brings about a reduction in energyintensity, and the higher the CCL the greater thereduction. The sector whose energy intensity is the mostsensitive to the CCL is Other Final Users, which by 2010experiences a more than 12% reduction from B under

ARTICLE IN PRESSP. Ekins, B. Etheridge / Energy Policy 34 (2006) 2071–20862078

both the CCL (C0) and Full Rate, No Rebate (C2)Scenarios. It can also be seen that, for all sectors exceptOther Final Users, the reduction from B tends todecrease over the years to 2010. For Mineral Productsthis tendency is especially marked.

Regarding the Base Case (B) Scenario and the CCAtargets, these are discussed in turn for each of therelevant MDM-E3 fuel user sectors.

�

Basic Metals: It can be seen that the energy intensityof the Basic Metals sector fell by 15.1% over 1990–98.It was then projected in the Base Case (B) to rise by9.5% to 2002, before falling again by 23.3% by 2010.As explained above, it was not possible to derive aCCA target for this sector. � Mineral Products: In this sector, the energy intensity

fell by 19.1% between 1990 and 1998 and wasprojected to fall further throughout the projectionperiod. The derived CCA target for this sector wasonly a 1.44% reduction in energy intensity by 2002,which was far exceeded by the B Scenario projectionfor this year, an 8% reduction from 1998. The gapbetween the B Scenario projection and the derivedCCA target for this sector widens to about 25% by2010. On this projection, the CCA targets for thissector were well within what might have beenexpected under BAU.

� Chemicals: The energy intensity of the chemicals

sector only fell by 2.7% over 1990–1998, but in theBase Case (B) was projected to fall 32.5% by 2010. Itcan be seen that in the Base Case the CCA target wasnearly achieved in 2002 (and was achieved when the20% CCL rate was applied in the Reduced Rate (C1)Scenario), was just achieved in 2004, and then waseasily met thereafter. These results suggest that in thissector the CCA target was not particularly challen-ging.

�

Table 5

Comparison of 2002 results against CCA targets

Other Industry: In this sector, the energy intensity fellby 10.1% over 1990–1998, but was then projected inthe B Scenario to rise by 15.3% by 2002, before fallingoff to reach an 18% reduction from the 1998 level by2010. The derived CCA target for this sector requiredthe energy intensity to fall by 6.84% by 2002, so thatthis target is far from being met in this year. In factthe derived target is only achieved in the B Scenario in2010, having been narrowly missed in 2008. The C1Scenario makes little difference to this situation. ForOther Industry, therefore, it seems that the CCAtargets were more demanding, especially in the firstthree target periods.

Target year in which 2002 results achieved target for that

� year

Not 2002 2002 2004 2006 2008 2010

Number

of sectors

5 4 7 6 3 15

Other Final Use: Between 1990 and 1998 the energyintensity of this sector fell by 7.2%, and was projectedto fall in the B Scenario throughout the projectionperiod, reaching 20.7% below 1998s level by 2010. NoCCA target was derived for this sector, because solittle of its fuel use was covered by CCAs. However,

the 9.3% reduction for the sector as a whole that wasachieved in the B Scenario by 2002 was greater thanthe most challenging 2002 target for a CCA sub-sector in Other Final Use (a 6.4% reduction for redmeat producers, see Appendix 1). Moreover, this istrue for each target year through to 2010, with thehighest target for that year being a 14.7% reductionfor poultry meat rearing, as compared to the BScenario’s 20.7% projected reduction in 2010 for thesector as a whole. This suggests that, if the CCAsectors in Other Final Use are representative of thesector overall, the CCA targets through to 2010 arewell within what the CCA sectors would haveachieved anyway.

6. Comparison of projections with 2002 outcomes

Appendix 1 shows the 2002 results from the CCAsectors (ordered by MDM fuel user) compared with theoriginal CCA targets over 2002–2010. Table 5 sum-marises these results in terms of the number of sectorswhich in 2002 achieved the target that had been set for aparticular year.

Table 5 shows that five sectors failed to meet thetarget for 2002 (although with emissions trading mostdid so, so that very few failed to re-qualify for their CCLrebate, see Appendix 2). On the other hand, 15 sectorsmet in 2002 the target that had been set for 2010, a verysignificant over-achievement. Another 16 sectors met in2002 their targets for 2004, 2006 or 2008 (i.e. they alsoover-achieved, but by a lesser amount). It was this over-achievement that resulted in the substantially greatercarbon savings from the CCAs (reported in Section 2)than had been expected in the Climate ChangeProgramme.

The over-achievement against the CCA targets couldbe explained in terms of the greater attention to energyuse which the CCAs might have brought about (andwhich AEAT, 2001, p.12, claimed certainly was broughtabout) in the participating sectors. If it was true thatthere was substantial scope for cost-effective energysavings in these sectors, and if these were brought tomanagers’ attention during the negotiating process, andmanagers were subsequently determined to realise them

ARTICLE IN PRESSP. Ekins, B. Etheridge / Energy Policy 34 (2006) 2071–2086 2079

in order to be sure of re-qualifying for the CCL rebate,then it is not surprising that many sectors achieved theirfull 2010 target (which was only supposed to includecost-effective savings) in 2002.

In Appendix 1 the 2002 results from the CCA sectorsmay be compared both with the CCA targets and withthe 2002 projections of the B Scenario. For Basic Metalsit can be seen that the CCA results compare quite wellwith the CCA targets (except that metal-forming andnon-ferrous metals have considerably over-achieved),and that the 9.5% energy intensity increase in this sectorprojected by the B Scenario did not materialise. Thiswould be consistent with the hypothesis that managersfocused more attention on this area than they had in thepast and therefore changed the trend related to pricesand output that had been established in earlier years.

Much the same story could be told about the results inOther Industry, where again the B Scenario projected anenergy intensity increase (of 15.3%), which did notmaterialise. All the CCA sectors reduced their energyintensity, and most substantially over-achieved againsttheir 2002 targets.

In Chemicals, the 2002 projection from the B Scenariowas close to the CCA target of a 12.3% reduction, andthe CCA sector actually achieved 14.5%. Again this isconsistent with the hypothesis that the CCA negotiationprocess allowed managers to find cost-effective measuresbeyond the target, which they then implemented.

A similar result of over-achievement against targetswas found by the Benchmarking Commission (2002) intheir Interim Report on the Dutch energy efficiencycovenants. The energy saving anticipated to derive fromthese covenants was found to be substantially in excessof the difference between the companies’ initial energyperformance and the ‘Top Global Performers’ againstwhich they were being benchmarked. This suggests notonly that the companies themselves, in the process ofbenchmarking, became aware of cost-effective opportu-nities for energy saving of which they were previouslyunaware, but also that such opportunities exist for the‘Top Global Performers’. OECD, 2003 (p. 56) statesthat this over-achievement suggests that the covenantshave not saved energy beyond what would have beensaved anyway, but this is not necessarily the case, if thecompanies only became aware of the energy-savingopportunities through the covenant-negotiating process,as is suggested here. OECD, 2003 (p. 63) also makes thepoint that the covenants apply to relative, rather thanabsolute, energy use, and that they are thereforeconsistent with rising absolute emissions if output growsstrongly. This is also true in principle of the UK CCAsthat have energy efficiency targets.

In Mineral Products, the story seems somewhatdifferent. The 2002 projection in the B Scenario wasmuch closer to the kinds of results achieved by the CCAsectors. With the exception of two ceramic sub-sectors,

these were greater than the reductions implied by the2002 CCA targets, and for some sectors (e.g. glass, slaggrinders, two other ceramics sub-sectors) substantiallyso. In these sectors it seems that the CCA targets wereprobably the least challenging and considerably belowBAU expectations.

From the modelled outcomes of carbon emissions it ispossible to assess whether the carbon emission reduc-tions from the CCAs by 2002, which in Section 2.1 weresuggested to be around 1.7mtC for the non-steel CCAsectors, were more or less than they would have beenwith a no-rebate CCL levied on all business use ofenergy. Appendix 3 shows that the carbon reductionfrom the Base scenario (B) achieved by the CCL asimplemented with the CCAs and rebates (scenario C0)was 2.1mtC. Removing the rebate and applying theCCL across all business energy use (scenario C2)increased this carbon reduction by 0.9mtC, to3.0mtC. However, this is still less than the 1.7mtCreduction which seems to have come from the CCAs. Ittherefore seems likely that, as at 2002, the CCL packageas implemented (with the CCAs and rebates), anddespite the weak targets, achieved a greater carbonreduction than a no-rebate CCL would have done byitself. It will be interesting to see whether these extracarbon reductions continue to be achieved by the CCAsectors over the rest of this decade.

7. Economic implications of the CCAs

Economic theory would suggest that cutting the rateof CCL on the energy-intensive sectors, as implementedthrough the CCAs, would make it more costly to reach agiven level of carbon abatement in the economy as awhole, unless the CCAs brought about extra carbonreduction efforts beyond that achieved by the pricemechanism. The argument was expressed thus byBohringer & Rutherford (1997, p. 201): ‘‘Welfare lossesassociated with exemptions can be substantial evenwhen the share of exempted sectors in overall economicactivity and carbon emissions is small. Holding emis-sions constant, exemptions for some sectors implyincreased tax rates for others and higher costs for theeconomy as a whole’’. The scenario C3 was intended totest this hypothesis by implementing the (lower) rate ofCCL that would have achieved the same carbonreduction as in the CCL (C0) Scenario, but withoutany reductions for energy-intensive sectors, and thencomparing various outcomes with those in the C0Scenario.

Appendix 3 sets out some of the economic resultsfrom the different scenarios. The first point to be madeis that, compared to the B Scenario (the one without theCCL and CCAs), all the economic impacts are small.The second point to be made is that the imposition of

ARTICLE IN PRESSP. Ekins, B. Etheridge / Energy Policy 34 (2006) 2071–20862080

the CCL is generally economically beneficial. GDP isslightly higher in all the scenarios, as is employment.Industrial unit costs are slightly lower (because the NICsreduction over-compensated for the revenues from theCCL). Only the balance of payments is slightly negativecompared to the B Scenario.

For the individual sectors the output of only BasicMetals and Mineral Products is reduced by 2010, whenthe CCL is imposed. Chemicals, Other Industry andOther Final Use all have increased output.

These results put a rather different complexion on theeconomic story, compared to Bohringer & Rutherford’s(1997) results. With the CCL basically favourable forthe economy, the most positive economic results occurwhen it is imposed at the full-rate across all sectors (theC2 Scenario). When, in the C3 Scenario, it is reduced toyield the same carbon reduction as in the CCL (C0)Scenario, both GDP and employment are lower.However, compared to the C0 Scenario, the C3 Scenariois economically positive, and this is the same effect notedby Bohringer & Rutherford (1997): it is economicallypreferable to abate carbon by having a tax that isconstant across sectors, even the energy-intensivesectors, than to give the energy-intensive sectors rebates.

However, then there is the question of the extracarbon reductions yielded by the CCAs to be consid-ered. By 2010 the CO2 emissions in the C2 (Full Rate,No Rebate) Scenario are 151.7mtC, compared with152.4mtC in the C0 (CCL) Scenario. In other words,taxing the energy-intensive sectors at the full CCL ratehas saved an extra 0.7mtC, as well as having positiveeconomic effects. However, on the basis of the analysisabove, it seems likely that the CCAs stimulated extracarbon savings beyond those arising from the priceeffect, at least in sectors other than Mineral Products.As noted in Section 2, AEAT (2003) calculated that theCCAs by 2003 had saved 4.3mtC (compared to anestimated 2.5mtC by 2010). Ignoring the 2.6mtCcarbon savings that came from the 27.5% reduction insteel output, which can hardly be put down to theCCAs, this means that by 2003 the CCAs had saved1.7mtC. Not all of this will have been beyond BAU, butin Basic Metals and Other Industry at least (for both ofwhich, as shown in Table 4, the MDM model wasprojecting energy intensity increases in 2002, while theCCA sectors in those fuel user groups actually achieveda reduction in their energy intensity, as shown inAppendix 1), it is likely to have been so. It is at presentimpossible to know whether by 2010 the additionalcarbon savings from the CCAs will exceed the extra0.7mtC savings that would have resulted from taxingthe CCA sectors at the full CCL rate. However, onthe basis of the 2002 results, such an outcome seemslikely.

Indeed, this was the result found by Bjørner & Jensen(2002) in their econometric analysis of the effects of the

Danish energy efficiency agreements (and accompanyingtax reductions) which were concluded with somecompanies. The baseline against which the effectivenessof the agreements was assessed was derived on the basisof two dimensions: comparing energy intensity in thesame company before and after an agreement wasimplemented; and comparing it between companies thatdid and did not have agreement. Bjørner & Jensen(2002, p.243) found that the tax reduction given toenergy-intensive sectors increased their energy use by1–5% (depending on the year being considered), but theenergy efficiency agreements reduced their energy useby 9%.

8. Conclusions

In Section 1 the key general questions in relation toVNAs were identified as relating to environmentalperformance and cost-effectiveness. In Section 3 thequestions which the modelling sought to answer were:the extent to which the CCA targets went beyondbaseline emissions that the sectors would anyway haveachieved, both without the CCL and with the CCL atonly 20% of its full rate; the difference in carbonemissions, and in economic outcomes, with the CCAsand without them; and the economic effect of the taxrebates. The conclusions of this paper are presented inrelation to these questions.

The first conclusion of the study is that there is strongevidence that substantial opportunities exist for cost-effective improvements in industrial energy efficiency,and that industrial managers were not generally awareof the extent of these opportunities before the process ofnegotiating the CCAs, but became aware of them duringthis process (this might be called the ‘awareness effect’ ofthe CCAs). There is no other way of explaining thesubstantial over-achievement against their 2002 CCAtargets by many of the CCA sectors. This conclusiongoes a long way towards justifying the whole policyprocess of introducing the CCAs.

The second conclusion is that, on the basis of theeconometric projections, and with some exceptions, theCCA targets were within what companies would havebeen likely to achieve anyway. This was especially trueof the sectors in the broad Mineral Products andChemicals sectors. The exceptions were in the broadOther Industry sector. This conclusion is hardly asurprise. The superior knowledge of industrial managersabout their business compared to even the most diligentexternal consultant means that they are always likely tobe able to present compelling arguments (which theymay or may not themselves believe) about why proposedmeasures will cost more than is actually the case. Whatis interesting about this conclusion combined with theprevious one is that industrial managers persuaded

ARTICLE IN PRESSP. Ekins, B. Etheridge / Energy Policy 34 (2006) 2071–2086 2081

Future Energy Solutions (on behalf of the UK Govern-ment) that cost-effective measures were limited, andthen went on to prove themselves wrong.

The third conclusion concerns the cost-effectivenessof the CCAs, compared to imposing a CCL withoutrebates. This conclusion is coloured by the fact that,because of the tax shift whereby revenues from the CCLwere recycled through the business sector by reducingemployers’ NICs, imposing the CCL is actually bene-ficial for the economy in terms of GDP and employment(though the effects are small). It may be noted that sucha result derives from the econometric nature of theCambridge model; a computable general equilibrium(CGE) model would not give such a result because astarting assumption in such models would be that theeconomy is at an optimum position before the CCL isintroduced, so that any introduction of a tax wouldentail a reduction in GDP.

However, the results in this paper confirm what CGEmodels also find, namely that a certain reduction inemissions is cheaper to achieve with a uniform tax thanwith rebates for some sectors (which then require highertax rates on others). However, because of the ‘awarenesseffect’ of the CCAs, on the basis of the results for 2002 itseems likely that the CCA package (rebates plusnegotiated targets) will produce a higher reduction incarbon emissions by 2010 than a simple imposition ofthe full CCL across all sectors would have done. It istherefore possible to argue credibly that the CCLpackage as implemented outperformed environmentallywhat a no-rebate CCL would have achieved. Because ofthe extra cost-effective energy savings achieved by theCCAs, it can also be argued that the CCAs weregenerally economically beneficial for the sectors towhich they applied.

The implications of this result for the futureintroduction of VNAs are quite striking. To achievesuch a result seems to require that several conditions aremet. Firstly, a tax must be proposed which is highenough to cause serious concern among industrialmanagers. Secondly, a rebate on the tax must beoffered, in return for energy-efficiency improvements,which gives a sufficient incentive for the managers toenter into serious negotiations. Thirdly, targets need tobe set as a result of these negotiations. Experience withthe CCA targets suggests that, despite best governmentefforts, the targets will amount to little, if any,improvement on BAU energy use, but this may notmatter if, as a result of the negotiations and theincentives to ensure that the targets are not missed,managers find measures which go beyond the (slack)targets but which are worth implementing on financialgrounds alone, as seems to have been the case with theCCAs. Although this was not a result of the modellingper se, presumably the over-achievement of sectorsagainst the CCA targets actually improved the competi-

tiveness (because it cost effectively reduced the energycosts) of the sectors concerned.

It might be worth exploring whether this approachwould be worth extending to more sectors, and at whatpoint one might expect that the lower energy-intensity ofthe new sectors would mean that the lower expectedenergy savings would cease to justify the considerablepolicy effort involved in CCA-type negotiations.

Finally, it is worth comparing these results withanalysis of other European VNAs aimed at increasingindustrial energy efficiency. The European ‘VoluntaryAgreements—Implementation and Efficiency’ (VAIE)research project analysed the effectiveness of five suchVNAs, in Denmark, France, Germany, the Netherlandsand Sweden. The project is reported in Krarup andRamesohl, 2000. One of their principal conclusions isthat one of the most important success factors for theseVNAs is the ambitiousness of the targets that are set(pp.59ff.). This is in striking contrast to the UK CCAs,in which, as has been seen, the targets were in the mainvery little different to what would have been achievedwithout the CCAs. That the CCAs were effectivewithout stringent targets was due to the fact that therewere widespread but unrecognised opportunities forcost-effective energy efficiency improvements that theCCAs caused managers to realise. It is possible that suchconditions did not exist in the five countries studied bythe VAIE project, and this serves as a reminder that theexistence of such opportunities should not be taken forgranted.

Helby (2002)’s analysis of the evidence from VAIE israther more consonant with that from the CCAs. Hehardly mentions targets, focusing instead on the needfor strong governmental commitment—to the negotia-tions, to monitoring and to sanctions. The Dutch andDanish VNAs are judged the most effective because they‘‘are based on impressive administrative capacity build-ing’’ (p. 187). Incentives and sanctions are key. It is onlyworth the government embarking on negotiations froma position of strength and if it ‘‘is able to offer a tangibleaward or table a highly credible threat’’ (p. 185). Theprior announcement of the CCL, the offer of an 80%rebate, and the intensive negotiations leading to theCCAs were all likely to have been important factors ingetting the CCAs taken seriously by business.

Helby also draws attention to the Dutch agreements‘‘in terms of the learning process they trigger. Amomentum for change results from the process ofdrawing up improvement plans y. Companies arestimulated to investigate energy-saving options morethoroughly than before. As a consequence, manycompanies approach energy issues more activelyand in a more structured way, and say so themselves.’’(p. 190). Precisely, the same reasons have been givenabove for the over-achievement of the 2002 targets ofthe CCAs.

ARTICLE IN PRESSP. Ekins, B. Etheridge / Energy Policy 34 (2006) 2071–20862082

Appendix 1. Original climate change agreement targets and 2002 results

Results

Original targets

2002

2002 2002 2004 2006 2008 2010

MDM fuel user:2002 Base Caseprojection (B),2002–2010derived CCAtarget whereavailable CCA

sector (letters inbrackets: outputmeasure forspecific targets)Ordered by MDM

fuel user

Base yearof target

(%)Prod’nchangefrom base

(%) Specificenergy changefrom base

(%)Specificenergychangefrom base

(%)Specificenergychangefrom base

(%)Specificenergychangefrom base

(%)Specificenergychangefrom base

(%)Specificenergychangefrom base

MDM: Basicmetals (no derivedtarget)

1998

9.5 (B)

Aluminium(carbon perf.ratio)

1990

�31.9 �27.4 �29.5 �30.5 �31 �32.2

Foundries (t)

2000 �7.5 �1 �1.64 �3.82 �6.24 �8.62 �11 Metal packaginga 1999 �6 �4 �5.5 �7 �8 �9 Metal forming (t) 2000 5.1 �10 �1.4 �2.8 �4.2 �5.6 �7 Non-ferrousb 1998 �10.1 �5.6 �8.3 �10.1 �11.4 �14.7 Steel (abs. targetPJ)

1997

�27.5 �31.1 �4.7 �7.6 �9.5 �10.5 �11.5

MDM: Mineralproducts

1998

�8.0 (B) �1.44 �4.04 �8.32 �9.87 �10.93

Cement (kg)

1990 �16 �16.6 �13.1 �16.1 �22.6 �23.6 �25.6 Ceramicsc 2000 �3.8 �2.41 �4.79 �6.3 �8.84 �10.22

11

�0.86 �2.4 �4.29 �6.17 �8.06 2.8 �3.06 �4.82 �5.83 �8.37 �10.33

�12

�2.83 �8.9 �10.16 �11.4 �12.4 �11 �2.39 �4.84 �7.13 �8.69 �10.1

Glass (t)

1999 10.5 �11.3 �2.8 �5.4 �8 �10.1 �9.3 Gypsumproductsb,d

2000

�1.1 �2.3 �3.8 �5.7 �7.1

Lime (t)

1999 �14 �7 �6.1 �6.5 �6.8 �7.7 �7.9 Mineral wool(Eurisol) (t)

1999

�9 �7.5 �11 �12.5 �14.4 �14.9

Slag grinders (t)

1999 �8 �0.4 �2.8 �6.4 �8.5 �10.2 MDM: Chemicals 1998 �11.6 (B) �12.3 �15 �16.6 �17.8 �18.3 Chemicalse 1998 �14.5 �12.3 �15 �16.6 �17.8 �18.3 MDM: Otherindustry

1998

15.3 (B) �6.84 �8.44 �9.68 �10.5 �11.35

Aerospace (abs.target kWhp)

2000

�8.4 �2.4 �4.16 �5.67 �7.48 �8.53

Brewing (hl)

1999 �6.4 �2.2 �4.4 �6.5 �8.7 �10.9 Cathode ray tubes(kg)

2000

�42 �6 �13 �16 �19 �21

Craft bakeries(£kVA)

2000

17.6 �11 �1.3 �3 �4.4 �6.2 �7.9

ARTICLE IN PRESSP. Ekins, B. Etheridge / Energy Policy 34 (2006) 2071–2086 2083

Dairy industryf (t)

1999/2000 13 �17 �15.1 �17 �17.9 �18.7 �19.6 Egg products(Egg Processing)f

(kg)

1999/2000

37

�35.4 �7 �8.7 �10 �11.5 �13.3

Food and drinkf

(t)

1999/2000 12 �14.2 �7.8 �9.7 �11.6 �12.7 �13.8

Leather (m2)

1999 �7.5 �7.4 �2 �4 �6 �8 �10 Maltings (t) 1999 4 �5.8 �1.7 �3.2 �4.7 �6.3 �7.8 Motormanufacturers(vehicle)

1995

16 �17 �7.94 �10.19 �12.64 �13.92 �15.34

Paper (t)

1990 62 �32.1 �29.4 �33 �36.3 �38 �40 Poultry meatprocessingf (t)

1999/2000

19 �10 �7.2 �8.5 �9.8 �11.1 �12.3

Printing (m2)

2000 3.3 �3.7 �1 �3 �6 �9 �12 Rendering (t) 1999 �4.4 �4.4 �1.7 �3.9 �5.6 �7.3 �9 Reprotechg

Rubber (t)

1999 �22 �13 �3.4 �5.2 �6.9 �8.5 �10.3 Semiconductors(ratio target/base)

2000

32 �11 �21 �49 �52 �56 �59

Spirits (lpa)

1999 �4 �2.61 �0.18 �1.16 �2.76 �3.63 �4.5 Surfaceengineeringf

1999

�12 �3.67 �5.65 �7.57 �8.89 �11.08

Textilesf

1999 3.1 �8.1 �1.2 �3 �4.8 �6.9 �9 Vehicle buildersand repairers(unit)

2000

�2 �6 �7.32 �8.64 �10

Wallcoverings(abs. target kWhp)

1999

�5 �19.9 �1.6 �6 �7.4 �8.2 �9

MDM: Other finaluse (no derivedtarget)

1998

�9.3 (B)

Agriculturalsupply (t)

1999

�7.3 �2.1 �4.1 �5.6 �6.3 �7.1

Egg producers(doz)

1999

�41 �18.3 �4.9 �7.4 �9.8 �11.8 �13.7

Pig rearing (PigInd.) (kg)

1999

�44 �10 �6.3 �10.2 �12.2 �15.1 �18

Poultry meatrearingf (t)

1999/2000

3 �22.6 �4.9 �7.1 �9.8 �12.5 �14.3

Poultry meatrearing (kg)

1999

�46 24.9 �4.3 �6.8 �9.7 �12.7 �14.7

Red meatf (t)

1999/2000 �5 0.3 �6.4 �9.4 �11.9 �13.2 �14.4 Supermarkets(abs. target kWhp)

2001

�10.3 �11.1 �0.9 �3.2 �4.6 �6.4 �8.3

Wood panel (m3)

1999 2.9 1 �1.26 �3.47 �5.57 �6.51 �7.35

Source: AEAT 2003a, b.aThe specific target for metal packaging is ‘kgC for a given level of throughput’.bThe specific target for non-ferrous metals and gypsum is ‘at an assumed level of throughput’.cTargets for ceramics are different for five sub-sectors, each of which is given here.dAlthough specific energy consumption actually increased, this was due to a more energy intensive product mix, and the target was adjusted

accordingly. No percentage is therefore given.eImprovement here is in energy efficiency ratio.fParticipants could choose base year between 1995–2000; most chose 1999/2000.gNo data for this sector (actually a single company) were given in the source.

ARTICLE IN PRESSP. Ekins, B. Etheridge / Energy Policy 34 (2006) 2071–20862084

Appendix 2. Results from the first target period (base to 2002)

Sector

Number offacilities re-certified

Target units (TU)

No of TUmeetingtarget

% of TU re-certified

No. of TUexiting (as at17 Feb.)

No. of reportednon-respondent TU

No. of TUnot meetingtarget

Aerospace

21 11 100% 1 Aluminium 57 56 100% 4 3 Craft baking 2967 376 100% 237 Brewing 62 60 100% 6 Cement 17 5 100% Ceramics 223 117 97% 1 2 4 Chemicals 285 246 100% 33 Cathode ray tubes 3 4 100% Dairy industry 133 126 99% 19 6 1 Egg processing 9 9 100% 1 NFU—eggs 277 212 68% 98 Eurisol (Mineral wool) 6 6 100% Food and drink 1081 923 100% 27 Foundries 217 205 95% 17 6 10 Glass 45 47 100% Gypsum Products 6 3 100% Leather 11 11 100% 1 Lime 8 7 100% Malting 33 25 100% Poultry meatProcessing/feed

81

78 98% 2

British meat fedtn

185 140 97% 15 4 Metal forming 107 103 100% 16 1 Metal packaging 23 19 95% 1 Motor manufacturers 19 12 100% 1 NFU—Pigs 608 612 100% non-Ferrous 111 76 100% 2 Paper 84 84 100% NFU—poultry Meat 520 456 83% 93 Poultry meat Rearing 1179 251 99% 5 2 Printing 105 98 96% 6 1 4 Rendering 20 16 100% Reprotech 1 1 100% Rubber 8 5 100% Semiconductors 18 16 100% 2 Slag grinders 6 6 100% Spirits 68 24 100% Steel 60 19 100% 1 Supermarkets 1342 9 100% Surface engineering 187 162 100% 16 3 Textiles 153 157 100% 36 6 Agricultural supply 178 165 100% 3 Vehicle builders andrepairers

60

60 100%

Wall coverings

15 15 100% 1 Wood panel 9 9 100% 2 Total 10,698 5,042 164 317 219

Source: Results from the First Target-Period, April 2003: http://www.defra.gov.uk/environment/ccl/results.htm.

ARTICLE IN PRESSP. Ekins, B. Etheridge / Energy Policy 34 (2006) 2071–2086 2085

Appendix 3. Economic impacts of the CCAs

Difference from Base Case (B)

1998 2000 2005 2010

CCL Scenario (C0)

GDP (£1995m), %

0 0 0.109 0.069 Employment, ’000s 0 0 23.3 23.6 Exports, % 0 0 �0.032 �0.036 Imports, % 0 0 0.109 0.043 Industrial unit costs, % 0 0 �0.122 �0.135 Output, %: Basic Metals 0 0 �0.133 �0.234 Mineral Products 0 0 0.006 �0.032 Chemicals 0 0 0.034 0.093 Other Industry 0 0 0.037 0.022 Other Final Use 0 0 0.108 0.056 Carbon emissions in 2002 (mtC) �2.1

Full rate, no rebate (C2)

GDP (£1995m) (%)

0 0 0.153 0.094 Employment, ’000s 0 0 31.2 30 Exports (%) 0 0 �0.051 �0.054 Imports (%) 0 0 0.143 0.048 Industrial unit costs, % 0 0 �0.177 �0.224 Output, %: Basic Metals 0 0 �0.174 �0.325 Mineral Products 0 0 0.008 �0.066 Chemicals 0 0 0.057 0.145 Other Industry 0 0 0.059 0.039 Other Final Use 0 0 0.153 0.079 Carbon emissions in 2002, mtC �3.0

Same Carbon Reduction (C3)

GDP (£1995m) (%)

0 0 0.121 0.084 Employment, ’000s 0 0 24.4 25.8 Exports (%) 0 0 �0.041 �0.045 Imports (%) 0 0 0.117 0.05 Industrial unit costs (%) 0 0 �0.165 �0.203 Output, %: Basic metals 0 0 �0.128 �0.26 Mineral products 0 0 0.005 �0.046 Chemicals 0 0 0.043 0.117 Other industry 0 0 0.046 0.033 Other final use 0 0 0.122 0.071

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