UK CLIMATE CHANGE ACT 2008

David Nelson, DECCBudapest

Tuesday 13 October 2009

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Background to the Act

• 2006: growing political consensus in UK on need for exceptional action to tackle climate change

• Stern Review – cheaper to act early. Price carbon, support low carbon technologies, remove barriers to behaviour change

• Pressure from the public/ in Parliament/ NGO campaigns – 45,000 letters by end

• Why legislate?

– provide long-term framework for improving carbon management, increase certainty for business

– help drive the transition to a low carbon economy

– give a strong statement internationally – commitments well beyond our current international obligations

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UK greenhouse gas emissions: progress towards targets and goals

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Timeline

March – July 2007 Draft Bill for public consultation and pre-legislative scrutiny – reports by THREE parliamentary committees

October – November 2007

Government response to consultation; Bill introduced to Parliament

November 2007- November 2008

Parliamentary consideration – Climate Change Act became law on 26 November 2008

1st December 2008 Committee on Climate Change formally established, recommends first three carbon budgets 2008-2022

31 May 2009 First three budgets set with Parliamentary approval

July 2009 Low Carbon Transition Plan setting out how we will meet first three budgets

October 2009 First annual progress report from CCC – government must respond by January: annual cycle June/ Oct

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Main provisions of the Act

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Major changes made in Parliament

•2050 target changed from 60% CO2 to 80% - and to cover all six Kyoto Greenhouse Gases

•Limit on use of international credits to meet each budget – to be set by Parliament in secondary legislation

•‘indicative annual ranges’ within budget periods

•Treatment of international aviation and shipping – ‘take into account’ now in setting budgets, aim to fully include from 2012

•Adaptation sub-committee of Committee on Climate Change and framework for adaptation

•Corporate emissions reporting – guidance by 2009, consider by 2012

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Timeline

March – July 2007 Draft Bill for public consultation and pre-legislative scrutiny – reports by THREE parliamentary committees

October – November 2007

Government response to consultation; Bill introduced to Parliament

November 2007- November 2008

Parliamentary consideration – Climate Change Act became law on 26 November 2008

1st December 2008 Committee on Climate Change formally established, recommends first three carbon budgets 2008-2022

31 May 2009 First three budgets set with Parliamentary approval

July 2009 Low Carbon Transition Plan setting out how we will meet first three budgets

October 2009 First annual progress report from CCC – government must respond by January: annual cycle June/ Oct

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Carbon budgets – a novel approach

A concrete reporting cycle set through UK

law

• Setting limits on emissions for each five year period

• Set fifteen years in advance to give long-term clarity – 2022-2026 to be set 2011

• regular reporting to Parliament, and scrutiny by the CCC

Genuine financial consequences if

budgets aren’t met

• Climate Change Act means carbon budgets must be met

• Any shortfall would mean unplanned purchase of international credits

• For a significant shortfall, this could run to £billions

Going beyond international

commitments and ensuring their delivery

• A higher level of ambition than our international commitments require

• A crystal clear framework enshrined in domestic law for delivering economy wide emissions cuts

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The Government will drive the transition to a low carbonUK using our legally binding carbon budgets Chapter 2: Driving

the transition

Carbon budgets are equivalent to a

34% cut in greenhouse gas

emissions in 2020.

....and will be tightened after a

successful Copenhagen deal – around 42%??

The UK will also cut emissions by

80% by 2050.

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...along with our intention to meet them through domestic action

To reinforce this, we have set a zero limit on international credit

purchase in the first budget period

Our aim is to meet the budgets through domestic action alone,

without buying credits

(except under the EU Emissions Trading Scheme)

•Carbon budgets include both traded and non-traded sector emissions – but we assume the EU ETS cap will deliver emissions within the traded sector

•So the challenge is to ensure we make the reductions we need outside the traded sector

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What does it mean for Government?

“And every new policy will therefore be examined for its impact on carbon emissions, not just those which reduce emissions but those which increase them. Where emissions rise in one sector we will have to achieve corresponding falls in another.”

Prime Minister Gordon Brown, 1 May 2008

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We are creating ‘departmental carbon budgets’ to share accountability across Government

Sectoral allocations based on share of influence and emissions

projections

Public sector allocations based on an agreed level of ambition and

emissions projections

The total will make up a departmental carbon budget for each Whitehall Department

•Policies must already be assessed for their carbon impact, as part of the overall impact assessment required for all new policies.

•But a strong internal mechanism is required to ensure that every department takes responsibility for carbon budgets.

•Policies must already be assessed for their carbon impact, as part of the overall impact assessment required for all new policies.

•But a strong internal mechanism is required to ensure that every department takes responsibility for carbon budgets.

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We are now setting in place an approach to managing the system...

The UK Low Carbon Transition Plan set out the policies and proposals to meet our carbon budgets, and departmental budget allocations

We are creating a Carbon Budget Management Unit to oversee delivery, supporting Government Departments to meet their commitments

By Spring 2010, every Government Department will publish a Climate Change Strategy, stating how it will reduce emissions, and manage

adaptation to climate change

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The UK Low Carbon Transition Plan showed how we will meet the budgets

Taken together with measures already included in the baseline, the policies set out in the Transition Plan should meet our first three carbon budgets

The plan will reduce emissions in every sector

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...requiring big changes across our economy

•Decarbonising our energy supply: a seven-fold increase in renewable energy by 2020, alongside new nuclear energy and clean fossil fuels through Carbon

Capture and Storage

•Greener homes and communities, with huge increases in energy efficiency, and community level measures such as district heating

•Transforming our transport system, with ultra-low carbon vehicles entering the market, and decarbonising public transport such as rail and aviation

•Changing our jobs and workplaces as more people are employed in industries delivering the low carbon technologies of the future

•Transforming our agriculture and use of land, using new methods to reduce emissions while still meeting our society’s needs

•UK low carbon economy worth £150bn and employ 1.2 million by 2015.

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Power to 2020: we will get 40% of our electricity from low carbon by 2020 and half by 2025

Implementing a carbon price – EU ETS

30% of electricity through renewables –

delivered through financial incentives.

Growing new industries in the UK

Up to 4 new coal fired power stations with carbon capture &

storage demonstrated

First new nuclear power stations

anticipated around 2018. 

Operators have plans to build over 12 GW in

UK.

Ten year rollout plan for smart meters as part of a new vision for smart grids

Monitoring security of supply, defining a response, ensuring the right conditions for continued investment

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Financial incentives for renewable energy: the Renewables Obligation

Obligation on electricity suppliers to source a proportion of electricity sales from renewables

Generators receive Renewables Obligation Certificates (ROCs) for the renewable electricity they produce

Different renewable technologies receive different numbers of ROCs, to support technologies that are less well-developed or further from the market.

Generators can sell ROCs to suppliers, who submit these to meet their obligations.

If suppliers do not submit enough ROCs, they pay a penalty. Penalty payments are redistributed to suppliers who have complied.

•Under RO renewable energy generation has tripled between 2002 and 2008•RO will be worth around £1bn/year to renewables industry by 2010•RO will be retained and extended to at least 2037

•Under RO renewable energy generation has tripled between 2002 and 2008•RO will be worth around £1bn/year to renewables industry by 2010•RO will be retained and extended to at least 2037

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Information to encourage action: “smart” meters

• Let customers know exactly how much energy they are using and on what.

• Encourage action on energy efficiency.

• Allow suppliers to offer improved services e.g. wider range of tariffs and incentives, and facilitate micro generation.

• The Government has committed to a roll out of smart meters setting an indicative timetable for completion of the roll out by the end of 2020.

• Key step towards future “smart grids”.

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2020 Homes and communities: we will also deliver 40% reduction in carbon by 2020 from 1990 level

Delivery short term

Meeting the 6M homes by Dec 2011. Via:

• Increasing support, providing £3bn to help households improve

energy efficiency

• New large scale community based pilot of ‘whole house/ whole

street‘ approach

Piloting “pay as you save” ways to help people make their

whole house greener – the savings made on energy bills would be

used to repay the upfront costs

Community scale pilots

Information

New incentives/ finance: “Clean energy cash-

back”“Pay as you save”

New delivery models?

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Future delivery

•Ensuring fairness by protecting the fuel poor, including targeting policies at vulnerable communities and seeking to mandate social price support for energy consumers.•Amending legislation to clarify that OFGEM’s remit includes security of supply & reducing emissions.

•Ensuring fairness by protecting the fuel poor, including targeting policies at vulnerable communities and seeking to mandate social price support for energy consumers.•Amending legislation to clarify that OFGEM’s remit includes security of supply & reducing emissions.

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Financial incentives for households: “pay as you save” and “clean energy cashback”

• Upfront costs of improvements to energy efficiency spread into the future.

• Repayments lower than the savings on energy bills.

• Uptake will be tested in a pilot.

• Feed-in tariffs, from April 2010, will provide payment for renewable electricity produced by small-scale generators, including householders.

• New Renewable Heat Incentive (RHI) will provide households, communities and businesses with payment for getting heat from renewable sources, from April 2011.

“Pay as you save”

“Pay as you save”

“Clean energy cash-back”

“Clean energy cash-back”

• In the longer term, substantial changes to homes will be needed, such as solid wall insulation and new low carbon sources of heat & electricity.

• New forms of financial support may be required to achieve this.

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Greener workplaces &

jobs

• Capping emissions from heavy industry, business and the public sector through the EU ETS and Carbon Reduction Commitment.

• Climate Change Levy and Agreements to incentivise energy intensive industries to cut emissions and costs.

• Loans to SMEs and the public sector for low carbon technologies.• £405m to support a world leading low-carbon sector.• Facilitating access to up to £4bn of new capital for renewable

energy projects from the EIB.

• UK low carbon economy could be worth £150bn and employ 1.2 million by 2015.

• All new schools zero carbon by 2016, public buildings by 2018 and all non-domestic buildings by 2019.

• Up to 500,000 new jobs in UK renewable energy by 2020.• Public sector emissions cut by 30% on 1999 levels by 2020.

• UK low carbon economy could be worth £150bn and employ 1.2 million by 2015.

• All new schools zero carbon by 2016, public buildings by 2018 and all non-domestic buildings by 2019.

• Up to 500,000 new jobs in UK renewable energy by 2020.• Public sector emissions cut by 30% on 1999 levels by 2020.

delivering

By 2020, we will cut emissions from workplaces by 13% on 2008 levels

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The Carbon Reduction Commitment and Climate Change Agreements

• New energy saving and emissions reduction scheme to target energy use by large, non energy-intensive, businesses and public sector organisations (around 10% of UK emissions).

• Cap and trade mechanism. Will come into force in 2010 and deliver emission savings of at least 4 MtCO2 per year by 2020.

• Overall, participants will benefit financially. A league table of performance will be published to create a reputation incentive.

• Give energy intensive businesses 80% reduction from the Climate Change Levy (energy tax) in return for meeting energy efficiency or carbon targets. Agreements cover over 50 sectors.

• Estimated that they will save more than 22 MtCO2 by 2010 –

equivalent to taking more than 5 million cars off the road.

• Also save around £1.5 bn a year in energy costs, despite strong output growth in many of the sectors involved.

CRCCRC

CCAsCCAs

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Transforming the way we

travel

• Setting and meeting ambitious EU standards for new car emissions.

• Pressing the EU to require new vans to be more efficient.• Supporting innovation in ultra-low carbon vehicles, through

demonstrations and £2-5000 grants for ‘early adopters’ from 2011.• Investing in cycling and public transport, including up to £30m in

low carbon bus technology.

• Several hundred low carbon buses introduced over 2009-10• 40% improvement in new car fuel efficiency (from 2007) by 2020• 10% transport fuels to come from renewable sources by 2020• A target to limit UK aviation emission to below 2005 levels by 2050

• Several hundred low carbon buses introduced over 2009-10• 40% improvement in new car fuel efficiency (from 2007) by 2020• 10% transport fuels to come from renewable sources by 2020• A target to limit UK aviation emission to below 2005 levels by 2050

delivering

By 2020, we will cut emissions from transport by 14% on 2008 levels

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Transforming farming, and

managing land and waste

sustainably

• Encouraging English farmers to reduce emissions, e.g. through more efficient use of fertiliser, better management of livestock and manure, by:

• Providing advice and demonstrating cost-effective action• Support for efficient, low-carbon farming through Carbon Trust• Research to improve measurement of on-farm emissions• Support for anaerobic digestion of farm waste

• Encouraging private funding for woodland creation

• Continuing to reduce emissions from landfilled waste

• By spring 2010, an action plan for reducing emissions, agreed by the farming sector on a voluntary basis.

• Review voluntary action in 2012. Shortlist of options for intervention if progress is insufficient.

• Cut emissions from farming and waste by 6% on 2008 levels by 2020

• By spring 2010, an action plan for reducing emissions, agreed by the farming sector on a voluntary basis.

• Review voluntary action in 2012. Shortlist of options for intervention if progress is insufficient.

• Cut emissions from farming and waste by 6% on 2008 levels by 2020

delivering

...and, for the first time, we will limit emissions from farming

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The UK Low Carbon Transition Plan received positive feedback from stakeholders and the media

“We welcome this mature and open debate that has been initiated by the Government on the future of Britain's energy requirements.”

“The commitment to a joined-up approach across Government is very welcome, as is the commitment to delivering 15% of renewable energy by 2020 from domestic sources. There appears to be a genuine commitment to a radical transformation of UK energy generation.”

“This is a promising start, and includes many measures the CBI has been calling for to reduce emissions across the economy.”

“It is easy to criticise governments when they publish such programmes… (and) it would be easy to greet this one with a cynical rictus. I don't think that would be right ... It is thoughtful, ambitious, and - for just about the first time I can remember - gives the impression that the various government departments know what meeting their headline targets will entail in practice.”

"This is a very welcome document that maps out not just a proper response to the threat of climate chaos but also starts to map out the shape of the UK economy after the recession.”

“No other government in the world has published anything quite like this, both a collective statement of intention and a fairly detailed description of how carbon reduction might be achieved.”