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Published on 8 October 2013 by authority of the House of Commons London: The Stationery Office Limited

House of Commons

Environmental Audit Committee

Progress on Carbon Budgets

Fifth Report of Session 2013–14

Volume II

Additional written evidence

Ordered by the House of Commons to be printed 11 September 2013

Environmental Audit Committee The Environmental Audit Committee is appointed by the House of Commons to consider to what extent the policies and programmes of government departments and non-departmental public bodies contribute to environmental protection and sustainable development; to audit their performance against such targets as may be set for them by Her Majesty’s Ministers; and to report thereon to the House.

Current membership Joan Walley MP (Labour, Stoke-on-Trent North) (Chair) Peter Aldous MP (Conservative, Waveney) Richard Benyon MP (Conservative, Newbury) [ex-officio] Neil Carmichael MP (Conservative, Stroud) Martin Caton MP (Labour, Gower) Katy Clark MP (Labour, North Ayrshire and Arran) Chris Evans MP (Labour/Co-operative, Islwyn) Zac Goldsmith MP (Conservative, Richmond Park) Mark Lazarowicz MP (Labour/Co-operative, Edinburgh North and Leith) Caroline Lucas MP (Green, Brighton Pavilion) Caroline Nokes MP (Conservative, Romsey and Southampton North) Dr Matthew Offord MP (Conservative, Hendon) Mr Mark Spencer MP (Conservative, Sherwood) Paul Uppal MP (Conservative, Wolverhampton South West) Dr Alan Whitehead MP (Labour, Southampton, Test) Simon Wright MP (Liberal Democrat, Norwich South)

The following members were also members of the committee during the parliament: Ian Murray MP (Labour, Edinburgh South) Sheryll Murray MP (Conservative, South East Cornwall)

Powers The constitution and powers are set out in House of Commons Standing Orders, principally in SO No 152A. These are available on the internet via www.parliament.uk.

Publications The Reports and evidence of the Committee are published by The Stationery Office by Order of the House. All publications of the Committee (including press notices) are on the internet at www.parliament.uk/eacom. A list of Reports of the Committee in the present Parliament is at the back of this volume. The Reports of the Committee, the formal minutes relating to that report, oral evidence taken and some or all written evidence are available in a printed volume.

Committee staff The current staff of the Committee are Simon Fiander (Clerk), Nicholas Beech (Second Clerk), Lee Nicholson (Committee Specialist), Andrew Wallace (Senior Committee Assistant), Anna Browning (Committee Assistant), Sayeda Begum (Committee Support Assistant) and Nicholas Davies (Media Officer).

Contacts All correspondence should be addressed to the Clerk of the Environmental Audit Committee, House of Commons, 7 Millbank, London SW1P 3JA. The telephone number for general enquiries is 020 7219 6150; the Committee’s email address is [email protected]

List of additional written evidence

(published in Volume II on the Committee’s website www.parliament.uk/eacom)

1 Daniel Scharf Ev w1

2 Biotechnology and Biological Sciences Research Council (BBSRC) Ev w3

3 WWF-UK Ev w4

4 RWDE npower Ev w13

5 EDF energy Ev w14

6 Mineral Products Association Ev w18

7 Prof Kevin Anderson, Dr John Broderick, Dr Paul Gilbert, Mr Jaise Kuriakose, Dr Miriam Röder and Alice Bows, Sustainable Consumption Institute, University of Manchester, and Pro Corinne Le Quéré and Annela Anger-Kraavi, University of East Anglia Ev w19

8 Aldersgate Group Ev w29

9 Friends of the Earth Ev w36

10 Terry O’Connell Ev w39

11 Environmental Investigation Agency Ev w41

12 Andrew Montford Ev w44

13 Sandbag Ev w45

14 Dr Ulrich Loening, former Director of the Centre for Human Ecology, University of Edinburgh Ev w53

15 Dr Mayer Hillman, Senior Fellow Emeritus at Policy Studies Institute, University of Westminster Ev w54

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Environmental Audit Committee: Evidence Ev w1

Written evidence

Written evidence submitted by Daniel Scharf

I have worked as a town and country planner for over 30 years in public, private and voluntary sectors. Ialso work as a trainer and tutor in planning. I have run a transport NGO for the last 15 years concentrating onthe environmental impacts of vehicle speeds on both road transport, and the transport system as a whole.

Summary— Any suggestion that the UK should limit its ambition to reduce carbon emissions in accordance with

the Climate Change Act 2008 due to the scale of the global problem should be rejected. It is theresponsibility of all sovereign states to do everything in their own power to minimise domesticemissions. This is both a moral and practical imperative if the UK is to engage in internationalnegotiations on this matter.

— The profile of the Committee on Climate Change (CCC) should be increased and given properrespect and attention by all Government Departments. The treatment of CCC recommendations byboth the DfT and DCLG is deplorable and brings the Climate Change Act itself into disrepute. Thisis particularly noticeable in respect of recommendations addressing carbon emissions from cars andthe construction of new dwellings.

— The Government should defer to the expertise of the CCC in respect of the specific matter on whichthey have been set up to give independent advice. One of the most important factors which haspersuaded British citizens that climate change is not a matter of much importance is the apparentindifference of its Government. One of the most important factors in delaying and inhibiting businessinvestment in low carbon technologies is the equivocation of the Government. The roles of both theCCC and the EAC are critical to changing Government attitudes in this matter.

Evidence

1. Low Carbon Building

1.01 The lack of rigour and urgency in the way in which Government is managing the reduction in carbonemissions can be seen from the regulation of emissions from new housing. Its adopted standards can be foundin the Code for Sustainable Homes which contains measures available to be applied voluntarily by localplanning authorities and/or developers. Whilst the Government has accepted the target of requiring all newdwellings to be zero carbon by 2016, there have been unexplained delays in the introduction of buildingregulations that would continue the trajectory of carbon reduction. In the 2013 Budget Speech the Chancellorannounced the delayed introduction of Part L will be in May 2013. Although no advances in technology orbuilding methods are expected by 2016 there is no intention of requiring the necessary carbon reductionsdependent on a further increase in energy efficiency reflected in a further upgrade to Part L before that date.The housing built to a lower standard will continue unnecessarily to add carbon to the atmosphere until 2050.

1.02 In May 2012 the Committee on Climate Change drew attention to the lack of progress in reducingcarbon in its Report How local authorities can reduce emissions and manage climate risk. Since then CentralGovernment has indicated that it is inclined to rely on building regulations rather than the planning system andthe adoption of the Code for Sustainable Homes to manage carbon reduction from dwellings. In fact, thisReport from the CCC explained why the building regulations were not “fit for purpose” in that respect. Thecurrent position is that developers, planning authorities (including those engaged in neighbourhood planning)and other interested parties (including businesses engaged in low carbon technologies) are in a state ofconfusion. Whilst there is no difficulty in respect of either the cost or technologies in the provision of zerocarbon homes (equivalent to CHS6), it is the equivocation of the Government which is primarily responsiblefor the continuation of the building of sub standard dwellings.

1.03 One of the reasons why CCC wish to see planning authorities engaged in the process of reducing carbonfrom buildings is that conditions can be applied to planning permissions addressing the problem identified asthe “performance gap” between the design and the end result. Planning conditions can be applied to requirethe use of low carbon materials and inspections during the building process to ensure the proper installation ofinsulation and of achieving necessary levels of airtightness. Conditions can also require post-occupationevaluation to assist residents in achieving the design standards and to identify any faults in carrying out thebuilding works. The introduction of Part L of the building regulations will not achieve these necessaryimprovements to the construction process.

1.04 Another reason for the CCC wanting to see greater efforts in reducing carbon emissions from buildingsis because of the comparative ease with which this could be achieved. Transport is seen as a very difficultsector—partly due to air travel and partly the addiction to personalized motor vehicles (see next section).Manufacturing and associated carbon emissions have largely been exported (this should be accounted for inthe UK budgets). Agriculture is extremely difficult without a revolution to low input organic systems.Electricity generation is being put on a fossil fuel path by the current Government. In these circumstances thefailure to deal rigorously with the relatively straightforward matter of new buildings is inexcusable. The Code

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Ev w2 Environmental Audit Committee: Evidence

for Sustainable Homes explains that the upgrading of new buildings would be difficult if not impossible and itis indicative of the Government’s approach to carbon reduction to be complicit in the erection of new buildingsthat are adding to the problem rather than being part of the solution.

1.05 Ironically, the DCLG introduced the “presumption in favour of sustainable development” in the NationalPlanning Policy Framework in March 2012. However, it has left the development industry in a state ofuncertainty as to whether new buildings must be sustainable, that is emitting the lowest possible level ofcarbon. Given that zero carbon building is within the capability of the development industry, it is difficult tounderstand how anything less than zero carbon could satisfy the “presumption”. It should be a simple matterof a Government Minister (Mr Pickles and/or Mr Boles) making it clear that any development that continuesto emit carbon would not be considered to be sustainable. This would be entirely consistent with therecommendations being made by the CCC. The industry (including responsible developers such as Barratts)would be pleased to see a level playing field where all the developers are brought up to the same andnecessary standard.

1.06 Whilst not directly a matter of carbon reductions, energy efficient buildings are an essential part ofreducing fuel poverty which is a growing blight on our housing system.

2. Low Carbon Transport

2.01 The EAC should be aware that in 2005–06 (Reducing carbon emissions from transport) it recommendeda reduction in the national speed limit. Whilst accepting that the Government at that time might be reluctant,to the extent of being, “…running scared of critical tabloid headlines”, the committee supported such areduction on the basis that it would, “…help to raise awareness of the reality of climate change, and of theneed for everyone to take action on it.” The corollary of the failure to take this action (repeatedly recommendedby the CCC) is that the general public is being made very aware that climate change is not a sufficientlyserious problem for their Government to take effective action.

2.02 Extraordinarily, the Government has a proposal to increase the national speed limit on some if not allmotorways, reinforcing the view that it is unnecessary or even undesirable to attempt to reduce carbonemissions from transport. In fact, the Department for Transport understand very well the benefits that wouldaccrue to the transport system as a whole, were speeds limited to 60 mph or preferably 50 mph. This wouldbenefit coaches and trains (without the need for increased speeds), planned journey times would be reduced,less fuel would be used, less carbon and other greenhouse gases emitted, wear and tear on vehicles, tyres andpassengers would be reduced and the NHS would benefit hugely from the reduction in the number and severityof accidents. The only explanation for maintaining (or increasing) the national speed limit is the very substantialincome to the Treasury from fuel duty. However, the Department of Transport has become aware that this willbe reduced in any event in the power shift to electric vehicles. It is reasonably clear that a reduction in thenational speed limit would facilitate the change from the internal combustion engine to electrical power drives.

2.03 The Government should not place the CCC (or the EAC) in a position where it has to repeat its messagein respect of the damaging effect of speed in respect of carbon emissions. A systemic view of transport wouldshow that not only would reducing car speeds encourage low carbon modes of travel but that speed is also amajor component in causing congestion and stop-start driving which is disproportionately responsible forgreenhouse gas emissions. The variable speed limiting of parts of the motorway system prone to congestionshows that the Government is fully aware that lower speeds increase capacity and efficiency. The case for areduction in the national speed limit, as recognised by the EAC in 2005–06, is overwhelming, and the failureof its implementation gives the strongest possible signal to the public that this Government, like its predecessor,is oblivious to the problems of climate change or simply afraid of adverse publicity.

2.04 The Government has delegated the issue of lower urban speed limits (normally 30 mph to 20 mph) tolocal authorities. However, the necessary traffic orders and signing makes this very expensive and theubiquitous use of overpowered cars results in flagrant abuse and difficulties in enforcement and discreditingthese initiatives. A benefit of reducing and enforcing a lower national speed limit would be a power shift tolighter, more efficient and generally smaller vehicles that would also be both easier to drive and less pollutingat the lower speeds which are becoming commonplace in urban areas. With this change in technology CentralGovernment could and should make 20 mph the default speed in urban areas.

3. Recommendations

3.01 That the Government accept the recommendations of the CCC in respect of increasing the energyefficiency of new buildings. This should be done by endorsing the Code for Sustainable Homes (and rigorouslyenforce BREEAM “excellent” for commercial building) and requiring all new dwellings to meet Code 6(encouraging local planning authorities to identify “allowable solutions” to achieve the highest standard). Thiscould be done immediately by making it clear that lower building standards would not benefit from thepresumption in favour of sustainable development in the Framework.

3.02 That the Government accept the CCC recommendation that the national speed limit be reduced to 60mph (or lower, based on evidence in the US and the Netherlands) and that the police receive instructions thatthis is the level to be strictly enforced. This would be completely equitable (possibly disadvantageous ownersof unnecessarily fast and powerful cars) and could be done immediately and at virtually no expense.

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3.03 The Prime Minister should take responsibility for preventing the interference of the Chancellor/Treasuryin forestalling the delivery of both zero carbon buildings and an integrated, reliable, efficient and low carbontransport system. This interference has done nothing but cause confusion, additional costs and delay inachieving necessary carbon reductions.

29 March 2013

Written evidence submitted by the Biotechnology and Biological Sciences Research Council (BBSRC)

Introduction

1. The Biotechnology and Biological Sciences Research Council (BBSRC) is the leading funder of non-medical biological research in the UK. Its budget for 2012–13 is around £500 million, supporting approximately1,600 scientists and 2,000 research students in universities and institutes across the UK. Further details areavailable at www.bbsrc.ac.uk.

2. This evidence is submitted by BBSRC and represents the Council’s independent views. It does not includeor necessarily reflect the views of the Science and Research Group in the Department for Business, Innovationand Skills (BIS), BBSRC’s sponsoring government department.

3. As a public funder of research, it is not appropriate for BBSRC to make policy recommendations regardingthe level, operation or governance of UK Carbon Budgets. This response therefore highlights the importanceof bioenergy and industrial biotechnology to carbon budgeting, and outlines relevant BBSRC investments.

Response

4. Bioenergy and Industrial Biotechnology offer novel low carbon alternatives to the production of energy,materials and chemicals from fossil fuels through the sustainable exploitation of plants, bacterial, algae andfungi. They have an important role in helping the UK to meet the targets for Green House Gas emissions setout in the Climate Change Act and to maintain its energy security in the context of increasing oil prices.

5. The Energy System Modelling Environment (ESME) model1 and Department of Energy and ClimateChange Carbon Calculator2 demonstrate that it would be challenging for the UK to meet its carbon reductioncommitments without bioenergy. Bioenergy offers a significant and cost-effective contribution to reducingcarbon emissions, and its exclusion would significantly increase the cost of decarbonising the UK’s energysystem.3 In combination with carbon capture and storage (CCS), bioenergy could contribute to achievingnegative carbon emissions.

BBSRC Investment in Bioenergy and Industrial Biotechnology

6. In 2009 BBSRC invested £20 million in the BBSRC Sustainable Bioenergy Centre (BSBEC).4 Researchundertaken by BSBEC spans the bioenergy pipeline from biomass crops to fermentation for the production ofbiofuels and high value chemicals. The Centre brings together world-class research groups and industrialpartners to create a network which ensures the translation of its research to practical application.

7. Building on BSBEC, BBSRC is supporting the transition of the UK to a low carbon economy throughstrategic investment in world class Industrial Biotechnology and Bioenergy (IBBE) research, underpinning thedevelopment of sustainable low carbon technologies. As one of BBSRC’s three strategic priorities, IBBEreceived investment of £28 million in 2012–13.

8. BBSRC’s key interests in Industrial Biotechnology and Bioenergy are:5

— The improvement of lignocellulosic feedstocks (non-food crops and waste straw) anddevelopment of biological conversion technologies to generate biofuels and bioenergy.

— The exploitation of systems and synthetic biology approaches to generate bacteria capable ofproducing biofuel, biogas and industrial chemicals.

— Multidisciplinary research underpinning the development of biological, chemical andengineering processes for the sustainable, clean, production of chemicals materials andpolymers (biorefining).

— The cultivation and engineering of microalgae and cyanobacteria for the production of biofuelsand high value chemicals.

1 http://www.eti.co.uk/technology_strategy/energy_systems_modelling_environment/2 https://www.gov.uk/2050-pathways-analysis3 UK Bioenergy Strategy4 http://www.bbsrc.ac.uk/research/biotechnology-bioenergy/bsbec/bsbec-index.aspx5 http://www.bbsrc.ac.uk/funding/priorities/ibb-bioenergy.aspx



Bioenergy for the Future

9. As indicated in paragraph 5 above, bioenergy has a major role to play in the UK energy mix—contributingto long term greenhouse gas emissions reductions, 2020 renewables targets and the UK’s future energy security.

10. Fully realising bioenergy’s potential will require continued investment in basic and translational research.To this end, BBSRC have recently announced a further £35 million of funding for Industrial Biotechnology andBioenergy, to create networks and collaborative research between academia and industry leading to translationaldevelopment to commercialisation, offering a channel for sustainable economic growth for the UK and new“green” jobs.

11. BBSRC funded research is contributing to the development a solid body of evidence to inform decision-making in the development of a low carbon economy.

9 May 2013

Written evidence submitted by WWF-UK

Summary

— The latest science indicates that it is still feasible for the world to prevent global average temperaturesincreasing by more than 2ºC compared to pre-industrial average, the stated objective of theinternational negotiation process to avoid dangerous levels of climate change. However, the windowof opportunity for doing so is rapidly closing and substantial shifts in investment towards energyefficiency and low-carbon technologies have to happen over the next five years.

— This is also a critical time for climate and energy policy in both the European and internationalarena. Despite the poor signal sent to the rest of the world following the European Parliament’srecent vote against a proposal to marginally strengthen the carbon price under the EU EmissionsTrading Scheme, discussions have started at EU level on a possible package of climate and energylegislation for 2030 (and a Green Paper has been published). Internationally, the objective remainsto reach a global deal at the United Nations Framework Convention on Climate Change (UNFCCC)summit in 2015 on reducing greenhouse gas emissions for the post 2020 period. With two of thenext three summits taking place in the EU, pro-active UK and EU leadership is likely to be crucialto the success of these negotiations, as it has been since the inception of the UNFCCC in 1992.

— The UK’s Climate Change Act 2008 is seen by many countries across the world as landmarklegislation and it has become a model for similar legislation in countries such as Mexico and SouthKorea. It is therefore imperative that the UK be seen to take robust action domestically to deliveron its emission reduction commitments, which will give it the credibility and reputation to positivelyinfluence critical international developments. On the other hand, being perceived as backtracking oncommitments, watering down legislation or ignoring the best available scientific evidence would dountold damage to the UK’s reputation and undermine the much needed momentum required to deliveran ambitious global deal on emissions by 2015.

— This is therefore not the time for the Government to dilute the greenhouse gas emission reductionambitions set out in the Climate Change Act and the first four legislated carbon budgets set followingthe advice of the Committee on Climate Change (CCC). It must be recalled that these represent theminimum ambition that the UK needs to aim for as part of a global effort to keep the increase inaverage temperatures below 2 degrees, which in the case of the European Union has been estimatedto require emission reductions of 80% to 95% by 2050 compared to 1990 levels. If anything, theUK’s emission reduction commitments should be strengthened and this should certainly be the casefor the UK’s second and third interim carbon budgets, as recommended by the CCC.

— The UK economy could greatly benefit from being an early-mover in the transition towards a low-carbon economy. However, Government divisions in recent years over the future direction of climateand energy policy have resulted in a decision to review the Fourth Carbon Budget in 2014. Sincethe Committee’s previous inquiry, this has also been followed by an agreement to postpone a decisionon both a power sector decarbonisation target and the inclusion of aviation and shipping emissionsin the UK’s carbon budgets until 2016 at the earliest. This has created significant investmentuncertainty in the low-carbon sector, which risks not only undermining one of the very few areas ofgrowth of the UK economy but will also severely undermine the UK’s ability to meet itscommitments under the Climate Change Act.

— WWF-UK urges the UK Government to accept the CCC’s initial recommendations for the FourthCarbon Budget in its 2014 review, make a decision now to set a decarbonisation target for the powersector for 2030, accept to include international aviation and shipping emissions into the carbonbudgets and increase ambition for non-traded sector emissions from the “interim” to the “intended”level of the second and third carbon budgets, that is, to—42% by 2020 as in Scotland and comparableto Germany’s target of 40% emission reductions by 2020.



— We agree that any detrimental impacts of climate and energy policy on energy intensive industriesshould be taken seriously. WWF-UK believes that the risks faced by this small group of companiescan be managed through appropriate policy tools and the CCC’s latest report on competitivenessindicates that the UK Government is taking satisfactory steps to address current impacts. However,the UK should learn the lessons from international experience and avoid the mistakes that haveoccurred in Germany and under the EU Emissions Trading Scheme by ensuring that only thosesectors genuinely at risk of carbon leakage are proportionally compensated for any detrimentalcompetitiveness impacts on the basis of firm, publicly available evidence.

— The framing of the policy discourse should also recognise that UK-based energy intensive companiescould stand to benefit from the substantial economic growth opportunities created by ambitious UKclimate and energy policies. These policies should therefore not just be portrayed as a negative coston those industries.

Introduction

1. WWF is the largest environmental network in the world, with projects in over 100 countries. One of ourkey aims is tackling climate change, and we have been active in UK and global energy policy discussions forover a decade. We are strongly committed as an organisation to helping prevent the worst impacts of climatechange and in particular preventing temperatures from rising above 2ºC compared to pre-industrial levels.

2. The Climate Change Act 2008 is a fundamental tool to guide the UK’s transition to a low, and eventuallyzero, carbon economy. It establishes a legally binding target that the UK must reduce greenhouse gas (GHG)emissions by at least 80% below 1990 levels by 2050, underpinned by a framework of five-year carbon budgets,set out on a minimum 15-year time horizon.

3. The closely related Scottish Climate Change Act is another landmark piece of legislation. In some respects,it is superior to the UK Act as it commits Scotland to reduce emissions by at least 42% below 1990 levels by2020, and unlike the UK budgets, includes Scotland’s share of international aviation and shipping emissionswithin this ambition. The Scottish Act also includes a requirement for annual, as opposed to five-year, targets.

4. A fair, ambitious and binding international agreement remains essential to adequately address the globalnature of climate change. However, given the slow progress towards a legally binding agreement, strongnational frameworks are urgently needed not just in their own right, but also to rebuild political momentumand trust in international negotiations. This is particularly important today given the international community’sobjective to reach an agreement in 2015 on a global deal to reduce GHG emissions for the post-2020 period.

5. Our response focuses on the following key questions raised by the Committee:

(I) Are the emissions reduction targets in the Climate Change Act still valid as an appropriate UKcontribution to avoiding dangerous climate change?

Operation and management of the carbon budgets: have the Environmental Audit Committee’sprevious concerns and recommendations been addressed?

What should the Government response be to the CCC’s 2013 progress report and should thecarbon budgets be relaxed?

I. Are the emissions reduction targets in the Climate Change Act still valid as an appropriate UKcontribution to avoiding dangerous climate change?

The latest climate change science calls for urgency of action, not further delay

6. A range of reports published at the end of 2012 from the World Bank,6 the International EnergyAgency7 (IEA), the United Nations Environment Programme (UNEP)8 and Pricewaterhouse Coopers(PWC)9 show that the challenge of tackling GHG emissions is as urgent as ever. Key points from thesereports show that:

— If current trends continue, the world is currently on track for a warming far in excess of

2ºC, with the World Bank warning that “even with the current mitigation commitments andpledges fully implemented, there is roughly a 20% likelihood of exceeding 4ºC by 2100” and“if they are not met, a warming of 4ºC could occur as early as the 2060s”.10 UNEP notes inparticular that current global emissions of GHGs are considerably higher than the maximumlevel of emissions that could be allowable in 2020 (44Gt CO2e) to stay within a “likely” chance(greater than 66%) of preventing temperature increases of more than 2ºC.

6 ‘Turn Down the Heat: Why a Warmer 4ºC World Must Be Avoided’, the World Bank, November 2012:http://climatechange.worldbank.org/sites/default/files/Turn_Down_the_heat_Why_a_4_degree_centrigrade_warmer_world_must_be_avoided.pdf

7 “World Energy Outlook 2012”, the International Energy Agency, November 2012:http://iea.org/publications/freepublications/publication/English.pdf

8 “The Emissions Gap Report 2012”, United Nations Environment Programme,November 2012: http://www.unep.org/publications/ebooks/emissionsgap2012/

9 “Too late for two degrees?”, PricewaterhouseCoopers, November 2012:http://www.pwc.co.uk/sustainability-climate-change/publications/low-carbon-economy-index.jhtml

10 See World Bank report, page xiii.



WWF-UK is aware that a recent article published in The Economist11 suggested that the recentapparent slowing down of average global temperatures may indicate that the climate is lesssensitive to accumulations of GHGs in the atmosphere than previously thought and thattherefore the high upper end of temperature increases contemplated by the IntergovernmentalPanel on Climate Change’s (IPCC) models (ie with warming in excess of +4.5ºC) are less likelyto occur than previously thought. Whilst this is a possibility and further research is required,this article under-estimates that recent warming may have been masked by other factors suchas heat being redirected into deep oceans instead of the atmosphere, the temporary coolingimpact that aerosols might be having by reflecting sunlight back into space and the fact thatonly looking back at temperature variations in the last 15 years could mask longer trends inwarming which tend to evolve in a step-like rather than linear fashion. In addition, the latestevidence still confirms the validity of the IPCC’s central estimation that a doubling of carbondioxide in the atmosphere compared to pre-industrial levels will result in average globaltemperatures increasing by a range of 2ºC to 4.5ºC.12

— The current concentration of carbon dioxide in the atmosphere is already unprecedented

with the World Bank noting that “the present CO2 concentration is higher than paleoclimaticand geologic evidence indicates has occurred at any time in the last 15 million years”13 andUNEP observing that GHG emissions in 2010 were some 20% higher than in 2000.

— The impact of projected levels of global warming would disproportionately impact “many

of the world’s poorest regions, which have the least economic, institutional, scientific and

technical capacity to cope and adapt”.14 These impacts would also severely undermine theprovision of ecosystem services on which human society and the world economy are highlydependent. The World Bank notes in particular that “in a 4ºC world climate change seems likelyto become the dominant driver of ecosystem shifts, surpassing habitat destruction as the greatestthreat to biodiversity. (…) Ecosystem damage would be expected to dramatically reduce theprovision of ecosystem services on which society depends (for example, fisheries and protectioncoast-line afforded by coral reefs and mangroves)”.15

— The reports all confirm that it is still possible to prevent temperature increases in excess

of 2ºC but the window of opportunity for doing so is rapidly closing, with the InternationalEnergy Agency warning in its latest World Energy Outlook report that “if action to reduce CO2

emissions is not taken before 2017, all the allowable CO2 emissions would be locked-in byenergy infrastructure existing at that time.”16 UNEP notes that even if fulfilled, current pledgesmade by countries to reduce their emissions of greenhouse gases by 2020 are some 8 GtCO2e17 to 13 Gt CO2e above the level of annual emissions allowable in 2020 to stay on trackfor having a likely chance to meet the 2ºC objective. To put this “emissions gap” into context,the emissions of China in 2010 were in the region of 10 Gt CO2e.18

— As made clear by the Stern Review in 2006,19 taking early action to prevent temperature

increase in excess of 2ºC makes economic sense, with UNEP noting in particular that “theincreased lock-in of carbon-intensive technologies will lead to significantly higher mitigationcosts over the medium- and long-term”.20 This point was echoed by the IEA in its WorldEnergy Outlook 2011 report, which warned that “delaying action is a false economy: for every$1 of investment avoided in the power sector before 2020 an additional $4.3 would need to bespent after 2020 to compensate for the increased emissions.”21

7. It is therefore clear from a climate change science perspective that despite uncertainties in some areas,now is not the time to dilute the UK’s commitments to reduce its GHG emissions and that the remainingwindow of opportunity to prevent dangerous levels of climate change should be seized with urgency.

8. It should be pointed out that the carbon budgets proposed by the Committee on Climate Change (CCC)fall short of what is needed to be in line with the UK and EU’s longstanding policy objective to keep levelsof warming to less than 2ºC above the pre-industrial average with any degree of confidence. The CCC’srecommendations are based on limiting the central expectation of temperature rise “as close as possible” to11 “A sensitive matter”, The Economist, 30 March 2013:

http://www.economist.com/news/science-and-technology/21574461-climate-may-be-heating-up-less-response-greenhouse-gas-emissions

12 A good summary of the latest evidence is provided in this review by Carbon Brief:http://www.carbonbrief.org/blog/2013/04/climate-sensitivity-in-the-media-a-case-of-mistranslation-%281%29

13 See World Bank report, page xiv.14 See World Bank Report, page xiii.15 See World Bank report, page xvi.16 See World Energy Outlook 2012 Report, page 3.17 Gigatonnes of carbon dioxide equivalent.18 See the Climate Action Tracker for country by country tracker: http://climateactiontracker.org/countries/china.html19 The Stern Review: The Economics of Climate Change, 2006.20 See UNEP report, page 4.21 “World Energy Outlook 2011”, International Energy Agency, November 2011: http://www.iea.org/weo/docs/weo2011/executive_

summary.pdf, page 2.



2ºC. In practice, its main criterion has been to select a pathway for global emissions which limits the risk thatwarming will exceed 4ºC to less than 1%.

Too slow and not enough, but the rest of the world is acting

9. Whilst international action to tackle greenhouse gas emissions falls far short of the action required tomeet the 2ºC goal, several countries around the world have started taking positive action to reduce theiremissions. Within the EU, countries like Germany (through the “EnergieWende”)22 and Denmark23 have setthemselves ambitious emission reduction goals out to 2050 and embarked on a radical transition towards anenergy system based on renewable energy and high levels of energy efficiency.

10. Outside of the EU and whilst recognising that more ambitious action is required, major emitting countriessuch as South Africa (with the introduction of a new carbon tax in 2015) and China are doing far more thanthey are regularly given credit for. In its 12th five-year plan, the Chinese Government has set itself the followingobjectives for 2015: reducing its energy consumption per unit of GDP by 15% by 2015 compared to 2010levels, reducing its emissions of CO2 per unit of GDP by 17% compared to 2010 levels (and by 40% to 45%by 2020 compared to 2005 levels) and increasing the share of non-fossil fuel energy to 11.4% of its overallprimary energy mix by 2015 and 15% by 2020.24

11. In many cases, the UK’s Climate Change Act has already had a role in influencing positive developmentsin other parts of the world, such as the adoption of a new Climate Change Act in Mexico,25 the developmentof the Clean Energy Act in Australia (which legislated an emissions trading scheme, an 80% emissionsreduction target by 2050 and a Climate Change Authority closely resembling the Committee on ClimateChange),26 a White Paper from the Norwegian Parliament27 committing to investigating the need for aclimate change act similar to the UK’s and recent consideration given by the Danish Government to develop aUK-style climate change act.

12. WWF’s own work in China shows that the UK’s Climate Change Act coupled with engagement onclimate change through the Department for International Development (DFID), the Foreign and CommonwealthOffice (FCO) and the British Council in China have played an important role in helping build momentum inChina towards prioritising climate change mitigation and low-carbon developments on the political agenda, aswell as supporting current discussions around running an emissions trading pilot scheme in China andintroducing a possible carbon tax.

13. If the UK were to water down the emission reduction and low-carbon development commitmentsembedded in its Climate Change Act and its first four carbon budgets, this would send a very negative signalto other major economies and would be detrimental to the building of a positive momentum towards a globaldeal on climate change in 2015.

The rationale behind the Climate Change Act: the need for long-term stability and early domestic action, notconstant chopping and changing

14. When considering whether the emission reduction objectives in the Climate Change Act are still valid,it is important to recall the context behind the Act.

15. A major objective of the Climate Change Act, which was enacted through cross-party consensus justover four years ago, “was to set a target which would not vary with the ups and downs of global negotiations,but would provide certainty within which policies and technologies could develop”.28

16. In line with the economic analysis of the Stern Review, which concluded that “the earlier effectiveaction is taken, the less costly it will be”,29 the Act was also developed on the understanding that earlydomestic action to reduce GHG emissions was more likely to be cost-effective than delaying action towards22 See in particular German Government’s Energy Concept, September 2010:

http://www.bmwi.de/English/Redaktion/Pdf/energy-concept,property=pdf,bereich=bmwi,sprache=en,rwb=true.pdf.See in particular pages 4 and 5 and detailed sections on energy efficiency and renewable energy deployment.

23 See latest Energy Agreement from March 2012. See the summary of Denmark’s climate and energy policy on the Danish EnergyAgency website:http://www.ens.dk/en-US/policy/danish-climate-and-energy-policy/Sider/danish-climate-and-energy-policy.aspx

24 See “China’s Policies and Actions for Addressing Climate Change”, The National Development and Reform Commission, ThePeople’s Republic of China, 2012:http://qhs.ndrc.gov.cn/zcfg/W020121122588539459161.pdf

25 See Globe International’s 3rd Climate Legislation Study:http://www.globeinternational.org/index.php/legislation-policy/studies/climate

26 See Clean Energy Act 2011, the Clean Energy Regulator Act 2011,the Climate Change Authority Act 2011, the Clean Energy(Consequential Amendments) Act 2011 at:http://www.cleanenergyregulator.gov.au/Carbon-Pricing-Mechanism/Legislation-and-regulations/Pages/default.aspx

27 See the Norwegian Parliament’s White Paper(http://www.regjeringen.no/pages/37858627/PDFS/STM201120120021000DD) and the cross-party agreement to take forwardthe development of a new climate change law in Norway (http://www.stortinget.no/Global/pdf/Innstillinger/Stortinget/2011–2012/inns-201112–390.pdf).

28 “The Fourth Carbon Budget—reducing emissions through the 2020s”, Committee on Climate Change, December 2010, page17: http://downloads.theccc.org.uk.s3.amazonaws.com/4th%20Budget/CCC-4th-Budget-Book_with-hypers.pdf

29 The Stern Review, page ii.



the end of the period leading to 2050. This is recognised in the Government’s own analysis in its proposal toset the Fourth Carbon Budget, which states that “pathways with early [domestic] action…are more cost-effective over time than pathways which delay action towards meeting the 2050 emissions reduction target.”30

17. The need for early domestic action is all the more important as the CCC’s own analysis shows that aswe approach 2050, there will be very little opportunity to purchase international carbon credits to help deliverthe UK’s emissions reduction goals if the world is genuinely taking action to prevent a level of warming inexcess of 2ºC: “We need to face the reality that in the long term, reductions in emissions will need to beachieved almost entirely through domestic action”.31

18. Recommendations: A dilution of the UK’s emission reduction commitments under the Climate ChangeAct would clearly run counter to the political, scientific and economic rationale which led to the cross-partysupport for the Act just four years ago. WWF-UK therefore expects the Government to uphold the objectivesof the Climate Change Act and, as explained below, follow the CCC’s recommendations in relation to thesecond, third and fourth carbon budgets.

II. Operation and management of the carbon budgets: have the Environmental Audit Committee’s previousconcerns and recommendations been addressed?

Overview of key issues identified by the Committee in its previous report

19. In its previous report on carbon budgets, the Environmental Audit Committee expressed concerns inrelation to the following key issues:

— the climate of investment uncertainty in the low-carbon sector caused by the Government’sdecision to review its adoption of the Fourth Carbon Budget in 2014;

— the lack of clarity around the Government’s intentions following the CCC’s recommendationsto increase emission reduction ambitions in the non-traded sectors from the “interim” budgetlevel to the “intended” budget level;

— the need to develop a clearer evidence base on the possible detrimental impacts of climate andenergy policies on the UK’s energy intensive companies; and

— the current lack of understanding surrounding the treatment and impacts of the UK’sconsumption emissions.

20. Each of these issues is addressed in turn below.

The damage caused by the Fourth Carbon Budget review and the delayed decisions on power sectordecarbonisation and the treatment of international aviation and shipping emissions

21. In its report on the previous Carbon Budgets inquiry, the Environmental Audit Committee noted that“the prospect of the review changing the budgets in itself undermines the benefit of having a degree of longer-term certainty about Government policy that investors in low-carbon need.”32 This is particularly detrimentalgiven that the CCC has stressed repeatedly that “the level of ambition in this budget should be regarded as anabsolute minimum, and more may be both feasible and required as current uncertainties over emissionsprojections and abatement opportunities are resolved.”33 It should be stressed here that the Fourth CarbonBudget recommended by the CCC, which requires emissions reduction cuts of 46% from 2009 to 2030(equivalent to emissions in 2030 being 60% below 1990 levels), already pushes back a significant amount ofemission reduction actions to the 2030–50 period (a 62% cut in emissions from 2030 to 2050). Therefore, “anyless ambitious target for 2030 would endanger the feasibility of the path to 2050”34 due to the improbablelevels of emission reduction actions it would require to be taken in the 2030–50 period.

22. Whilst the review of the Fourth Carbon Budget is still expected for 2014, the political dynamics behindthe Government’s decision to review the budget has led to further detrimental impacts in two key areas sincethe Committee’s previous inquiry was held. First, following months of political divisions on the developmentof the Energy Bill, the Government failed to put forward a binding target to reduce the power sector’s carbonintensity down to around 50g CO2/kWh by 2030 as recommended by the CCC and a wide range of businesses,faith groups, trade unions and non-governmental organisations.35 Subject to amendments put forward in the30 “Implementing the Climate Change Act 2008: The Government’s proposal for setting the fourth carbon budget”, May 2011,

paragraph 26.31 See CCC’s Fourth Carbon Budget Report, page 18.32 ‘Carbon Budgets Inquiry’, Environmental Audit Committee, October 2011:

http://www.parliament.uk/business/committees/committees-a-z/commons-select/environmental-audit-committee/inquiries/parliament-2010/carbon-budgets/

33 Fourth Carbon Budget report, page 12.34 Fourth Carbon Budget report, page 12.35 See in particular the joint statement from 40 organisations covered in the Financial Times’ article “Companies call for carbon-

free power” of 20 February 2013http://www.ft.com/cms/s/0/29d87c3e-7aad-11e2–915b-00144feabdc0.html#axzz2LKjLgdUO and a recent letter from leadinginternational manufacturing companies covered in the Times on 11 March: http://www.vestas.com/Files/Filer/EN/FINAL_Industry_letter_-_2030_target_-_7_March_2013.pdf



context of the Energy Bill, a decision on whether or not to introduce a decarbonisation target for the UK powersector will not be taken until 2016 at the earliest. This is damaging for two key reasons:

— First, by failing to provide a clear sense of direction out to the next investment cycle, the lack ofa target risks slowing down the significant investments required to make the transition towards alow-carbon power sector. This is concerning given that the CCC estimates that “decarbonising”the UK’s power sector down to a carbon intensity level of 50g CO2/kWh by 2030 would requireinvesting approximately £10 billion annually in the sector throughout the 2020s.36 The risk ofinvestment hiatus was made clear in a recent letter by leading international manufacturers tothe UK Government, which stated in particular that “postponing the 2030 target decision until2016 creates entirely avoidable political risk. This will slow growth in the low carbon sector,handicap the UK supply chain, reduce UK R&D and produce fewer new jobs.”37

— Second, this lack of long-term investment certainty also risks resulting in the UK losing out onimportant economic growth benefits associated with the development of low-carboninfrastructure. A recent report from the Confederation of British Industry (CBI) noted that “intrying economic times, the UK’s green business has continued to grow in real terms, carvingout a £122 billion share of a global market worth £3.3 trillion and employing close to a millionpeople. And in 2014–15, it is expected to roughly halve the UK’s trade deficit” but lack ofpolicy certainty in the green sector could result in “a risk of losing almost £0.4 billion in netexports in 2014–15”.38

A recent report by Cambridge Econometrics also found that if the UK was to invest steadily inoffshore wind out to 2030 instead of relying on gas-fired generation, this would increase itsannual GDP by £20 billion by 2030, create 70,000 more net jobs, reduce UK gas imports by£8 billion/year and produce power sector emissions that would be three times lower by 2030.These potential economic benefits, which require a long-term and supportive policy frameworkto materialise, should also be seen in the light of recent research by the Institute for PublicPolicy Research (IPPR), which suggests that a 2030 decarbonisation target would not result inhigher domestic electricity bills in 2030 and would play a key role in reducing their volatility.39

23. The negative political dynamic triggered by the scheduled review of the Fourth Carbon Budget has alsoresulted in the Government deciding in December 2012 to postpone a decision on whether to includeinternational aviation and shipping emissions in the carbon budgets until 2016.40 This not only underminesthe importance that the UK government gives to its commitments under the Climate Change Act but also sendsa damaging signal at a critical time where international efforts are trying to influence the adoption of anassembly resolution within the International Civil Aviation Organisation (ICAO) to develop a market-basedmechanism to tackle fast growing global aviation emissions.

24. Recommendations: WWF-UK therefore urges the Government to avoid unnecessary and damaging delay,and take the following actions in the very near future:

— fully adopt the emission reduction recommendations of the CCC with respect to the FourthCarbon Budget;

— set a decarbonisation target in the Energy Bill in line with the CCC’s recommendations; and

— accept the inclusion of the UK’s share of international aviation and shipping emissions in thecarbon budgets.

The Government’s lack of progress on tightening up the second and third interim carbon budgets willundermine the UK’s ability to meet the Fourth Carbon Budget recommendations

25. The Environmental Audit Committee noted in its previous report that the Government had rejected otherimportant recommendations from the CCC in 2011, most notably “on making the second and third carbonbudgets consistent with the pace of emissions reductions required by the fourth budget”. There has been nomovement on the Government’s position on this issue and the emission reduction ambitions for the UK’s non-traded sector (ie emissions from sectors of the UK economy that are not covered by the EU ETS) are still setat the levels of the “interim” second and third carbon budgets as opposed to the higher levels set out in the“intended” budgets recommended by the CCC.

26. The continued failure to endorse the CCC’s recommendations on the second and third carbon budgetswill make it harder than necessary for the UK to meet the emission cuts recommended in the Fourth Carbon36 Fourth Carbon Budget report, pages 40–41.37 Letter to UK Government from Mitsubishi, Gamesa, Vestas, Alstom, Areva and Doosan dated 7 March 2013: http://bit.ly/

ZCQcd738 “Colour of Growth”, CBI, July 2012:

http://www.cbi.org.uk/media/1552876/energy_climatechangerpt_web.pdf. The report also showed how “without green businessthe trade deficit in 2014–15 would be around double current government projections” and that a supportive policy environment“could boost the UK’s economy by almost £20 billion by 2014–15”.

39 “Energy Pathways to 2030: An Overview of choices for the Government”, IPPR, March 2013: http://www.slideshare.net/ippr/target-2030-presentation-22-feb13

40 https://www.gov.uk/government/publications/uk-carbon-budgets-and-the-2050-target-international-aviation-and-shipping-emissions



Budget: “the [Fourth] Domestic Action budget recommended for 2023–27, and the indicative 2030 target, willbe difficult to achieve unless the UK enters the 2020s at a level of emissions consistent with the Intendedbudgets for the non-traded sector, rather than with the less ambitious Interim budgets.”41 As the CCC furtherpoints out, “from the third Intended budget to the fourth Domestic Action budget would entail a feasiblereduction of 13% over a five-year period: from the third Interim budget to the fourth Domestic Action budgetwould require a much more challenging 23% reduction.”42

27. As explained above, the insufficient emission reduction ambitions set in the “interim” second and thirdcarbon budgets sit in a context where the CCC’s Fourth Carbon budget recommendations themselves amountto the “absolute minimum” domestic action required of the UK to stay on track for delivering the 2050 emissionreduction goal set in the Climate Change Act. In turn, the ambitions of the Climate Change Act amount to theminimum action required of the UK to play its part in a global effort to prevent global average temperaturerises in excess of 2ºC.

28. Recommendations: WWF-UK therefore urges the Government to adopt as soon as possible the CCC’srecommendations with respect to tightening the emission reduction ambitions for the UK’s non-traded sectorup to the “intended” levels of the second and third carbon budgets.

Energy intensive industries: the need for transparent and proportionate compensation criteria

29. The Environmental Audit Committee recommended in its previous report that “a comprehensive androbust assessment of the actual risk to each sector affected, on a case by case basis, should be made bydepartments working in concert” and that “measures to help energy intensive industries must be fair andtailored to each sector affected and should keep a strong incentive to reduce emissions.”43

30. In its recent analysis on the impact of climate and energy policies on energy bills,44 the Department ofEnergy and Climate Change (DECC) estimated that current policies would add between 1% to 14% to theenergy bills of energy intensive companies (EIUs) in 2013, with the projected impact of these policiesincreasing to between +6% to +30% by 2020 and to between +13% to + 60% by 2030.45 The extent to whichEIUs are exposed to bill increases arising out of climate and energy policies varies on a case by case basisdepending on the share of a site’s gas and electricity use, whether it has onsite combined heat and powergeneration capabilities (which are often exempt from the cost of climate and energy policies) and the extent towhich production processes can be made more efficient. Importantly, the figures above also do not considerthe impact of measures that are being considered by DECC to reduce the transitional impact of the EU ETS,the UK’s carbon floor price (CFP) and the introduction of contracts for differences (CfDs) to support thedeployment of low-carbon generation.

31. Before looking at the case for compensating EIUs, it is important to put the impacts highlighted abovein context. First, EIUs are defined by the Department for Business, Innovation and Skills (BIS) as companieswhere energy costs account for at least 10% of their gross value added. Whilst they play an important role inthe UK economy, these companies are deemed to represent around 4% of the UK’s total gross value added andaround 2% of the UK’s workforce. Second, for the majority of UK businesses, the impact of climate andenergy policies on their overall costs is expected to be minimal as energy represents only a small fraction oftheir costs. DECC estimates for instance that energy represents on average less than 3% of the total businesscosts of the UK’s manufacturing sector and that therefore climate and energy policies are currently adding lessthan 1% to the total business costs in that sector.46 In its recent report on Household Bill Impacts, the CCCalso found that low-carbon policies would add, by 2020, one penny in every £10 spent in the UK commercialsector and six pence in every £10 spent in the UK’s manufacturing sector.47

32. We agree that the risks to UK-based EIUs’ competitiveness should be taken seriously. However, it isimportant to note that the £250 million compensation fund that was announced by Government for thisSpending Review period to protect EIUs against the costs of the EU ETS and the CFP were found by the CCCin its recent Competitiveness Risks report48 to provide adequate protection to EIUs for the period running upto 2020. As explained in the CCC’s report, impacts on EIUs for the 2020 to 2030 period is less certain butDECC announced in November 2012 that it was considering exempting some EIUs from additional costsarising from the introduction of CfDs “where these have a significant impact on their competitiveness” (Para124).41 Fourth Carbon Budget report, page 12.42 Fourth Carbon Budget report, page 31.43 “Carbon Budgets Inquiry”, Environmental Audit Committee, October 2011:

http://www.parliament.uk/business/committees/committees-a-z/commons-select/environmental-audit-committee/inquiries/parliament-2010/carbon-budgets/

44 “Estimated Impacts of Climate and Energy Policies on Energy Prices and Bills”, Department of Energy and Climate Change,March 2013: https://www.gov.uk/policy-impacts-on-prices-and-bills

45 DECC Bill Impact Document—paragraphs 25 to 27.46 DECC Bill Impact Document—paragraphs 23 and 24.47 Energy Prices and Bills—impacts of meeting carbon budgets, the Committee on Climate Change (December 2012):

http://www.theccc.org.uk/wp-content/uploads/2012/12/1672_CCC_Energy-Bills_bookmarked.pdf48 “Reducing the UK’s carbon footprint and managing competitiveness risks”, Committee on Climate Change, April 2013, see

page 10:http://www.theccc.org.uk/publication/carbon-footprint-and-competitiveness/



33. It is important that when developing these policies, the UK Government develops transparent andmeaningful criteria that will ensure that only those firms genuinely at risk of “carbon leakage” (thephenomenon whereby industrial relocation shifts greenhouse gas emissions to a different jurisdiction) willreceive a level of financial support proportionate to the identified detrimental impact caused by climate and/or energy policies.

34. The risk of over-compensating some industries is a very real one as the latest developments in Germanyillustrate. According to a recent report from Arepo Consult,49 the lack of clear criteria in German legislationto determine whether a firm is genuinely at risk of a loss of competitiveness has resulted in 75% of electricityuse from the industrial and agricultural sector receiving varying degrees of compensation. The total amount ofcompensation provided to these sectors amounted to some €9.1 billion in 2012 alone, which the report suggestsis significantly out of proportion with the actual impact of climate and energy policies on German industry andis unnecessarily increasing costs for domestic consumers in Germany.

35. A recent report from CE Delft also suggests that the criteria developed by the European Union in 2009to assess the risk of carbon leakage caused by the EU ETS are far too lax and are resulting in far more firmsand sectors receiving compensation (in the form of free carbon allowances) under the scheme than should bethe case. The criteria developed in 2009 were based in particular on the assumption that the carbon price inthe EU would reach €30 by 2020 (it is now unlikely to exceed €12 by that date) and that carbon emissionsfrom the sectors identified as at risk of carbon leakage would exceed their free allocation of carbon allowancesby some 60% (a figure of 20% now seems more likely). As a result, CE Delft argues that “if the 2009 allocationhad been based on more realistic assumptions, the sectors deemed at risk of carbon leakage would have fallenfrom the current 60% of sectors representing 95% of industrial emissions, to a mere 33% of sectors accountingfor only 10% of emissions.”50,51

36. Concerns over the robustness of EU criteria to assess carbon leakage are important in the context of thisinquiry given that they are influencing the proposals that are being developed in the UK to compensate EIUsfor the indirect costs of the EU ETS, the CFP and (potentially) the introduction of CfDs. A recent consultationresponse from the Centre for Climate Change Economics and Policy and the Grantham Research Institute onClimate Change and the Environment52 expressed concern that the UK proposals to focus on a sector’s“carbon intensity” and “trade intensity” as a means of identifying risks of carbon leakage were likely to giverise to over-compensation.

37. Based on a report from the Centre for Economic Performance,53 which interviewed the managers of761 manufacturing firms in six European countries to analyse the effectiveness of the EU’s carbon leakagecriteria under the EU ETS, the response recommended that the following issues should be taken into accountwhen developing carbon leakage criteria in the UK:

— “The large heterogeneity among firms in terms of relocation risk suggests that further efficiencygains could be reaped by providing compensation at the firm level, rather than at sectorlevel”;54

— With the exception of those firms carrying out high levels of trade with emerging economiessuch as China, trade intensity (the share of exports with third countries in a company’s grossvalue added) was a poor indicator of vulnerability on its own. The report from the Centre forEconomic Performance (which made the following observation from an EU rather than UKperspective) found in particular that “by not exempting trade intensive sectors but the ones thatare at least moderately carbon intensive as well, European governments could raise additionalauction revenue in the order of €6.7 billion every year”. The report also argued that a changein the definition of the trade intensity criterion in the EU that focused more on a sector’sintensity of trade with emerging economies such as China “would raise an additional €2.8billion in auction revenues per year.”55

49 “Befreiungen der energieentensiven Industrie in Deutschland von Energieabgaben”, Arepo Consult, March 2012:http://www.arepoconsult.com/index.php?id=46

50 “Carbon leakage and the future of the EU ETS”, CE Delft, April 2013:http://www.cedelft.eu/news/273/Carbon_leakage_discussion_may_hold_key_to_reform_of_the_EU_ETS/?PHPSESSID=5b6fec871557481897365d90c3d152f6

51 See also Sandbag’s “Losing the Lead?” report (July 2012), which showed that as at the end of 2012, the EU ETS cap was“carrying over a year’s more allowances than was originally bargained for” and that out of 392 million tonnes of excess carbonpermits carried in the scheme as at the end of 2011, “78% of this is made up of surplus free allocations awarded to just tensteel and cement companies”:www.sandbag.org.uk/reports, page 11.

52 “Response to the Consultation on Energy Intensive Industries Compensation Scheme”, Centre for Climate Change Economicsand Policy and Grantham Research Institute on Climate Change and the Environment, December 2012

53 “CFP Discussion Paper No 1150, Industry Compensation Under Relocation Risk: A Firm-Level Analysis of the EU EmissionsTrading Scheme”, Centre for Economic Performance, June 2012:http://cep.lse.ac.uk/_new/publications/abstract.asp?index=4071

54 See Consultation Response, page 4.55 See page 4 from the report from the Centre for Economic Performance. The report suggests in particular that a restricted

compensation package awarded only to the following categories of firms would be cost-effective and have minimal impacts onthe risk of carbon leakage: (i) sectors with a high carbon intensity (above 30% of its gross value added), (ii) sectors with hightrade intensity (above 30% of its gross value added) and moderate carbon intensity (above 5% of gross value added) and (iii)sectors with high trade intensity (above 30% of gross value added) with emerging economies such as China.



— In order to minimise job losses and prevent an unequal distribution of compensation awardedto different industries, compensation criteria should take into account the size of a firm’sworkforce.

38. Whilst the UK’s proposed criteria to compensate UK EIUs for the introduction of the CFP (which resultsin UK EIUs paying a higher carbon price than their European competitors especially pending a structuralreform of the EU ETS) includes both a trade intensity criteria and a carbon intensity criteria, the consultationresponse from the Grantham Research Institute considers that the proposed threshold for trade exposure forUK EIUs (10%) may be too low and may need to be reviewed upwards.

39. Finally, it is important that UK policy recognises that ambitious climate and energy policy represents animportant opportunity for the UK’s energy intensive sector, not just a cost. The most recent figures publishedby BIS show that the UK low-carbon and environmental goods and services sector had sales of £122.2 billionin 2010–11, growing 4.7% from the previous year and placing the UK sixth in the global league table. Ashighlighted above, a recent report from the CBI also found that the UK’s “green business” could have thecountry’s trade deficit by 2014–15.56 Ambitious domestic climate and energy policies can therefore create asignificant market for UK-based energy intensive companies to support the necessary deployment of low-carbon energy supply and energy efficiency infrastructure. This issue, which was recognised in a recent jointreport from the TUC and the Energy Intensive Users Group57 and a report from the manufacturers’ associationEEF,58 should play an important role in the way the UK develops its overall policy towards EIUs.

40. Recommendations: Risks to the competitiveness of UK-based energy intensive companies arising fromclimate and energy policies should be taken seriously. However, WWF-UK urges the UK Government to avoidthe risk of over-compensating some industries by developing meaningful and transparent eligibility criteria asdescribed above. In addition, UK policy on EIUs should recognise that climate and energy policies provide aunique economic opportunity for these companies.

What should be the role of consumption emissions?

41. Following the Environmental Audit Committee’s previous report on carbon budgets, an inquiry by theEnergy and Climate Change Select Committee concluded in April 2012 that the UK’s consumption relatedcarbon emissions, which rose by 20% from 1990 to 2009 according to the Department for the EnvironmentFood and Rural Affairs (DEFRA), should be incorporated alongside the UK’s territorial emissions in the policymaking process.59 As made clear in our submission to that inquiry, WWF-UK agrees with these conclusionsbut would stress that the conventional production-based approach to emissions accounting and regulation is awell-established and powerful tool to guide the transition to a low-carbon economy in the UK—notably inensuring that we make a well-managed transition always from fossil fuel dependency.

42. This point was reinforced in the CCC’s latest study on Competitiveness Risks, which stressed inparticular that “moving to a consumption-based accounting methodology would be disruptive and impracticalgiven international accounting conventions (which are based on territorial emissions and aim to avoid doublecounting) and uncertainties over measuring and projecting consumption emissions”.60 The CCC also notedthat there were fewer UK policy levers that could be used to reduce imported emissions. Therefore,consumption-based emissions should be taken into account alongside (but not replace) production emissionsas part of a comprehensive strategy to reduce the UK’s overall contribution to climate change.

III. What should the Government response be to the CCC’s 2013 progress report and should the carbonbudgets should be relaxed?

43. As explained in response to question I above, the latest climate change science and economic evidencestrongly suggests that the UK Government should follow the CCC’s latest recommendations and should notrelax the existing and proposed carbon budgets.

44. In the context of the Fourth Carbon Budget (2023–27), the CCC made clear that the budget could bedelivered at a manageable economic cost representing less than 1% of UK GDP by 2025 (with additional costsin the region of 0.1% of UK GDP if the CCC’s more ambitious global emissions reduction offering wasadopted). However, the CCC also rightly warned that “planning for a lower level of ambition would carrythree risks. It could result in investment in carbon-intensive assets in the period to 2020 which, while compatiblewith meeting the first three budgets, would impede further progress in the 2020s. It could fail to developadequately technologies that will be required in the 2020s. It could also fail to put appropriate policies in56 Colour of Growth, CBI, July 2012:

http://www.cbi.org.uk/media/1552876/energy_climatechangerpt_web.pdf57 “Building our Low-Carbon Industries”, TUC in association with the Energy Intensive Users’ Group, June 2012:

http://www.eef.org.uk/publications/reports/Tech-for-Growth-Delivering-green-growth-through-technology.htm58 “Tech for Growth: Delivering Green Growth Through Technology”, EEF, January 2013:

http://www.eef.org.uk/publications/reports/Tech-for-Growth-Delivering-green-growth-through-technology.htm59 “Consumptions-Based Emissions Reporting, Twelfth Report of Session 2010–2012”, Energy and Climate Change Select

Committee, March 2012:http://www.publications.parliament.uk/pa/cm201012/cmselect/cmenergy/1646/164604.htm

60 “Reducing the UK’s carbon footprint and managing competitiveness risks”, Committee on Climate Change, April 2013, page13:http://www.theccc.org.uk/publication/carbon-footprint-and-competitiveness/



place far enough in advance of the fourth budget, resulting in limited investments with long lead times andlimited supply chain expansion. It could therefore necessitate scrapping of high-carbon assets and/or thepurchase of high-cost carbon credits in the 2020s.”61

45. The review of the Fourth Carbon Budget in 2014 provides the Government with an important opportunityto redress the climate of investment uncertainty which has resulted from two years of Government divisions(often displayed in the media) on the future of the UK’s climate and energy policy and to ensure that theimportance of the Climate Change Act on policy making is fully understood in departments across Whitehall.

46. To date, there has been one major legal challenge involving the Climate Change Act—the landmarkHeathrow Judicial Review of March 2010. This case made clear that some Government departments—in thiscase the Department for Transport—had yet to take on board the full implications of the Act in their decisionsand approach to policy making. It is an open question whether the lessons from this case have been fullyabsorbed across Whitehall.

47. In the Heathrow case, the judge ruled that the former Government’s entire aviation policy needed to bechanged to ensure that it was consistent with the Climate Change Act. Making aviation policy decisions (suchas the decision to expand Heathrow) without making reference to climate change developments—and the Actin particular—was deemed “untenable in law and common sense”. It is very likely it would be even moreuntenable for the UK Government to make future decisions on other policy areas on the same basis.

13 May 2013

Written evidence submitted by RWE npower

Summary

1. We believe that the Carbon Budgets are important but Government needs to be clear what is necessary toachieve the level of ambition set by the targets. It is important to separate out issues around decarbonisation ofthe electricity sector and what will be needed to meet the emissions reductions set by the fourth carbon budget.

2. The key steps for achieving UK carbon budgets are to:

— Agree EU wide carbon reduction targets and strengthen the EU ETS for the traded sector,

— Focus on emissions reductions in the non-EU ETS sectors to deliver UK carbon budgets,

— Recognise the benefits from moving energy use from the non-EU ETS sectors to the cappedETS sector (eg electrification of heating and transport).

Are the Emissions Reduction Targets in the Climate Change Act still Valid?

3. The reduction targets in the Climate Change Act of an 80% reduction in emissions of greenhouse gasesby 2050 compared with 1990 levels is consistent with the EU policy goals set out in the Energy Road Map2050. We believe that it is important that Europe should now agree a long-term binding carbon target withintermediate targets for 2030 and 2040. The UK target should take into account interactions with Europeantargets and we would expect the reduction targets as set out in the Climate Change Act to be broadly consistentwith future European targets.

Operation and Management of the Carbon Budgets

4. We are concerned that in discussing carbon budgets there seems to be a lack of understanding around theprinciples used for carbon accounting in relation to reporting against targets. In reporting emissions reductionsagainst all of its targets, the UK takes account of emissions trading through the flexible mechanisms definedby the UNFCCC and the Kyoto protocol. In particular this reporting takes account of trading under the EUETS. Taking emissions trading into account within the context of the UK’s reported emissions, affects theresults by increasing (or decreasing) the level of emissions by the amount of EU ETS allowances sold (orbought) in a year such that the amount reported against the “traded sector” part of the UK Carbon Budgetsalways equates to the UK share of the overall EUETS cap and not the total emissions from these sectors.

5. The interaction between Carbon Budgets and the EU ETS needs to be made clearer. While the EU ETSis in place, any emissions reductions from the sectors in the EU ETS will be constrained by the overall levelof the EU ETS cap. Hence the UK’s carbon budgets are linked to the ambition of EU ETS carbon targets andthe UK’s pro rata share of the overall cap. The only ways to break this link (assuming the UK continues to bepart of Europe and/or the EU ETS) would be for the UK Government to choose not to auction a part of itsallocation of EU ETS allowances or to buy and cancel allowances from the scheme.

6. The announcement of this current inquiry talked about the possibility of whether the fourth carbon budgetshould be relaxed in light of a weak EU ETS carbon price. However, it is not the carbon price but the level ofthe EU ETS cap that will impact on meeting the UK carbon budgets—if the EU cap remains as it is the onlyway for the UK to achieve its carbon budgets is through greater reductions in the non-EUETS sectors61 Fourth Carbon Budget Report, page 23.



(particularly heat and transport). Clearly there is a link between the cap and carbon prices but this justunderlines the need for Europe to agree on long term carbon targets and revisions to the EU ETS caps.

7. As an example to illustrate this point, it is worth considering a situation where the UK has completelydecarbonised electricity generation by 2025. In this case although the actual emissions from the sector wouldbe 0 the emissions reported against carbon budgets, according to the Carbon Accounting Regulations (2009),62

are estimated at around 120 MtCO2 (based on 2010 emissions from power stations and following the currentEU ETS trajectory for the reduction in the overall cap).

8. If the link between carbon budgets and the EU ETS is not recognised the debate on carbon budgets willcontinue to be confused by discussion around decarbonisation of the electricity sector. While decarbonisationof electricity is clearly central to meeting carbon reductions in the long term, unless this decarbonisation alsohappens at a European level, it will have no impact on achieving UK Carbon Budgets given the over archingnature of EU ETS targets.

9. It is important to separate out the issues around decarbonisation of the electricity sector and what isneeded to meet the fourth Carbon Budget.

10. The cap for the traded sector that is needed for consistency with the fourth Carbon Budget is calculatedby the Committee on Climate Change to be 690 Mt (over the five year period). If there is no revision to thecurrent EU ETS trajectory the actual cap for the sector is estimated to be around 890 Mt CO2 over the sameperiod. The key issue is therefore how to achieve this additional 200 Mt CO2 reduction over the period2023–27.

11. The important steps for achieving UK budgets are to:

— Agree EU wide carbon reduction targets and strengthening the EU ETS for the traded sector.

— Focus on emissions reductions in the non-ETS sectors to deliver UK carbon budgets.

— Recognise the benefits from moving energy use from the non-ETS sectors to the capped ETSsector (eg electrification of heating and transport). As an example DEFRA’s63 greenhouse gasreporting guidelines (which may be used by listed companies reporting under the ClimateChange Act requirements to report greenhouse gas emissions) do not currently give anyrecognition to these carbon benefits from electrification.

Government’s Response to the Committee on Climate Change June 2013 Assessment ofEmissions Reduction Performance

12. The focus for the June 2013 assessment of emissions reduction performance should be on the non-tradedsector and progress towards meeting reductions in emissions from heat and transport.

13. For the traded sector the focus must be on progress towards agreement of future targets at EU level. Inparticular Government should set out progress and timescales for agreement on the 2030 energy and climatechange package and structural reform to the EU ETS and what actions it is taking across Europe to deliver this.

16 May 2013

Written evidence submitted by EDF Energy

Key Points— EDF Energy continues to support the use of Carbon Budgets as important milestones on the path to

meeting the UK’s statutory requirement to reduce its emissions by at least 80% from 1990 levelsby 2050.

— Delivering the Government’s Electricity Market Reform (EMR) package will be a key componentin achieving the challenging targets set out in the carbon budgets. We welcome the progress that isbeing made in the Parliamentary scrutiny of the Energy Bill but we urge that Royal Assent isachieved as soon as possible in 2013 to help provide certainty for investors.

— Gas-fired generation will play an important role in the transition towards a decarbonised power sectorin the 2030s by providing the reliable and flexible backup generation required for balancing theelectricity system.

— However, further investment in any unabated gas generation plant, beyond the minimum that isrequired to bridge the gap to the transition to low carbon technologies, would introduce significantchallenges in meeting the UK’s climate change objectives. Such investment substantially increasesthe risk that the UK’s long term emissions reduction targets will not be met, or at least not be metin a cost-effective manner.

62 Guidance on carbon accounting and the net UK carbon account DECC December 2009http://webarchive.nationalarchives.gov.uk/20121205174605/http://www.decc.gov.uk/assets/decc/Consultations/Carbon%20Accounting/1_20091211101501_e_@@_guidancecarbonaccounting.pdf

63 DEFRA Guidance on how to measure and report your greenhouse gas emissionshttps://www.gov.uk/government/publications/guidance-on-how-to-measure-and-report-your-greenhouse-gas-emissions



— We believe that the Government should continue to focus its attention on its EMR proposals and thatit should aim to provide a clear and unilateral commitment of its low carbon intentions to investors.

— We note that the Government’s intended review of the Fourth Carbon Budget, where it will considerdevelopments in the EU emissions reduction trajectory, will occur in 2014. Although there appearsto be a lack of apparent progress in international discussions on climate change, we would highlightthat there have been recent advances at the EU level, including the publication of the EuropeanCommission’s Green Paper on a 2030 framework for climate and energy policies. It will be importantfor the UK Government to take into consideration any positive developments at the EU level duringthe review process. A potential lack of formal resolutions at the EU level at this stage should not initself be used as a reason to revise the Fourth Carbon Budget. This is because the need for urgentaction on climate change has not changed.

— Should the Government find reason to make any changes to the Fourth Carbon Budget, it is importantto note that even a slower path to decarbonise the economy will still require the UK to largelydecarbonise the electricity sector by the early 2030s. As such, any review must not undermine thedevelopment of a policy framework to decarbonise the electricity sector.

— EDF Energy supports Government proposals to assist those Energy Intensive Industries (EIIs)exposed to international competition, and therefore the risk of carbon leakage, as a result of theindirect costs of UK and EU climate policies. However, it is important that any financial support isproportionate and time-limited to drive the behavioural change required to permanently reduceemissions. In addition, care will need to be taken to ensure that the integrity of the EMR proposalsis not undermined by creating the scope for ad-hoc exemptions.

About EDF Energy

1. EDF Energy is one of the UK’s largest energy companies with activities throughout the energy chain. Weprovide 50% of the UK’s low carbon generation. Our interests include nuclear, coal and gas-fired electricitygeneration, renewables, and energy supply to end users. We have over five million electricity and gas customeraccounts in the UK, including both residential and business users.

Introduction

2. EDF Energy has previously expressed its support for the Government’s decision to adopt therecommendations of the Committee on Climate Change (CCC) on the Fourth Carbon Budget. We maintain theposition that a clear and stable long-term policy framework, as provided by the carbon budgets to date, willhelp inform the priorities for policy development and will assist in providing investors with the certainty theyrequire to accelerate the delivery of low carbon investment.

3. The mainstream consensus of the need for urgent action on climate change has not changed, despite thelack of apparent progress in international discussions on the topic. It is crucial that the UK continues to makethe transition to a low carbon economy in an affordable manner that will also ensure that the competitivenessof UK energy supplies is maintained.

4. There is general agreement within both industry and the Government that power sector decarbonisationby 2030, or soon thereafter, is necessary to meet the UK’s statutory requirement of an 80% reduction in carbonemissions by 2050. This is because low carbon electricity generation can be a key driver in the decarbonisationof the residential heat and surface transport sectors.

5. We note that the CCC continues to emphasise that “achieving this reduction [by 2050] will require a stepchange in the pace of UK production emissions reduction—now needed urgently.”64 It is therefore imperativethat the UK Government maintains momentum on delivering Electricity Market Reform (EMR), which webelieve will help achieve decarbonisation at least cost. Reform of the existing electricity market arrangementsis necessary to ensure the market is capable of delivering the reliable diverse energy mix required to achievethe UK’s energy policy objectives. We believe that the Government’s proposals will provide the investmentframework that is crucial for the low carbon investment that the country needs, and will keep costs downfor consumers.

6. The planned Contracts for Difference (CfDs) will be a key component of ensuring value for money forconsumers by shielding them from the damaging impacts of high and volatile fossil fuel prices. By reducingrisk to investors, they will lead to a lower cost of capital and a reduction in bills compared with alternativemechanisms such as the Renewables Obligation.

7. EDF Energy believes that CfDs, in conjunction with the carbon price floor, are capable of working for alllow carbon technologies (including renewables, nuclear and fossil fuels with carbon capture and storage) and,indeed, are designed to do so. These instruments will give all such projects the stable and reliable revenue theyneed to support the large upfront investment required. It is important that investors are allowed to make areasonable return with an acceptable sharing of risk so that the final outcome represents a fair deal for bothconsumers and investors. We believe that the Government’s plans will help us, and other investors, to deliversecure, affordable and low carbon energy supplies.64 CCC, Reducing the UK’s carbon footprint and managing competitiveness risks, April 2013, p10



Energy Bill

8. EDF Energy welcomes the progress that is being made in the Parliamentary scrutiny of the Energy Billbut we urge that Royal Assent is achieved as soon as possible in 2013 to help provide certainty for investors.

9. As part of the current Energy Bill debate, EDF Energy supports the introduction of a 2030 carbon intensitytarget in secondary legislation, as recommended by the CCC and the Energy and Climate Change SelectCommittee. This will help ensure that the required pathway to 2050 is both realistic and deliverable and willprovide investors with greater confidence in the Government’s commitment to the transition to a low carboneconomy. We believe that the target should exist within a range and be consistent with the trajectory of thecarbon budgets. It should also be flexible enough to reflect periodic changes in assumptions and costs. However,the requirement for secondary legislation on this, and other points of EMR detail, should not be a reason fordelaying the Bill’s progress.

Role of Gas

10. Gas plays a significant role in heating, with 81% of home heating65 fuelled by this source. We supportDECC’s ambitions to move away from fossil fuel heating as over a third of the UK’s carbon emissions comesfrom the energy used to produce heat (more than from power generation).66 EDF Energy has long supportedearly action on renewable heat, as we believe that this is a sector which can make a significant and costeffective contribution to the UK meeting its 2020 renewable energy target, especially through the use ofheat pumps.

11. EDF Energy is committed to delivering affordable, secure, and low carbon supplies based on a diverseenergy mix, including nuclear and renewables. As part of this, we believe that unabated gas fired generationwill play an important role in the transition towards a decarbonised power sector in the 2030s by providing thereliable and flexible backup generation required for balancing the electricity system.

12. Further investment in any unabated gas generation plant (whether fuelled by conventional or shale gas),beyond the minimum that is required to bridge the gap to the transition to low carbon technologies, wouldintroduce significant challenges in meeting the UK’s climate change objectives. This is because while gas firedgeneration has lower carbon dioxide emissions than old coal fired generation, it is still a significant source ofcarbon emissions in its own right (unless it can be equipped with carbon capture and storage). In addition, asthe UK increasingly starts to move to a greater reliance on imported gas, this is likely to lead to greater pricevolatility and long-term price uncertainty as global demand recovers from the effects of the recession. Thiswill potentially lead to security of supply concerns that will need to be addressed.

13. We are therefore concerned by the Government’s introduction of a new 200gCO2/kWh (in 2030) powersector carbon-intensity scenario in its Gas Generation Strategy67 (equating to 37GW of new CCGT capacityby 2030). Although we note that 200gCO2/kWh is only a sensitivity analysis, we fear that it sends a mixedsignal to industry. Investment in unabated gas generation plant substantially increases the risk that the UK’slong term emissions reduction targets will not be met, or at least will not be met in a cost effective manner.This is either because the carbon emissions from these new assets will be “locked in” or, alternatively, becauseit increases the risk of stranded assets.

14. EDF Energy believes that a 200gCO2/kWh scenario in 2030 (in contrast to a 50g-100g scenario) weakensthe signal for low carbon investment beyond 2020. We note that the CCC states that “in this scenario, the shareof unabated gas generation expands to approximately 45% of the mix, at the expense of nuclear and renewablegeneration”.68 A 200gCO2/kWh power sector carbon intensity target in 2030 would potentially mean that nolow carbon investment would be needed in the 2020s, and the stop/start trajectory of investment would affectthe UK’s ability to deliver decarbonisation at the lowest cost. We believe that the Government should continueto focus its attention on its EMR proposals and that it should aim to provide a clear and unilateral commitmentof its low carbon intentions to investors.

Review of the Fourth Carbon Budget

15. EDF Energy is aware that the Government intends to carry out a review of the Fourth Carbon Budgetin 2014 to ensure that the UK’s carbon targets are in line with Emissions Trading System (ETS) emissionsreduction trajectory agreed by the EU. We believe that it will be essential for the Government to take note ofthe direction of policy development at that time.

16. Although the European Parliament’s voted recently to reject the proposal to “backload” 900m carbonallowances, we were pleased to note that MEPs defeated a procedural vote to move immediately to a LegislativeResolution. Since then, we understand that a decision has been made for the Environment (ENVI) committeeto hold another vote on the issue in June (and in the plenary session in July). This suggests that the proposalis still a live concern at the European level. We also welcome the fact that that there is a now a strongrecognition within Europe of the need for concrete legislative proposals to carry out structural reform of the65 DECC, The Future of Heating: A strategic framework for low carbon heat in the UK, March 201266 DECC, Government sets out plans to cut emissions from heat, Press Release, 26 March 201267 DECC, Gas Generation Strategy, December 201268 Letter from Lord Deben to the Rt. Hon. Edward Davey MP, 25 February 2013



EU ETS. For example, we note that there has been a recent letter signed by a number of Energy andEnvironmental Ministers calling for the European Commission to bring forward proposals by the end of theyear at the latest.69

17. The European Commission, through its recent Green Paper, has also started to consult stakeholders tosupport the development of a new integrated climate and energy policy framework for the period up to 2030.It is recognised that the framework should ensure that the EU is on track to meet longer term climate objectives(ie reduce greenhouse gas emissions between 80–95% by 2050) and build upon the Energy Roadmap 2050laid out in 2011. We support the efforts being made by the UK Government to move to a tighter 2020 emissionstarget and to secure a robust agreement for domestic carbon dioxide reductions across the EU that could leadto a binding international agreement on tackling climate change.

18. We note that the Government’s intended review of the Fourth Carbon Budget, where it will considerdevelopments in the EU emissions reduction trajectory, will occur in early 2014. However, since this comesbefore the date that the European Commission has stated it is seeking to adopt legally any 2030 package (ieby the end of 2014), the Government needs to ensure it has enough information to undertake a completeevaluation of developments. It will be essential for the Government to take into consideration any positivedevelopments at the EU level during the time of the Government’s review. A potential lack of formal resolutionsat the EU level at this stage should not in itself be used as a reason to revise the Fourth Carbon Budget. Thisis because, as stated above, the need for urgent action on climate change has not changed.

19. Should the Government find reason to make any changes, it is important to note that even a slower pathto decarbonise the economy will still require the UK to largely decarbonise the electricity sector by the early2030s. As such, any review must not undermine the development of a policy framework to decarbonise theelectricity sector.

Competitiveness Risks of Carbon Budgets

20. EDF Energy recognises that it is possible that some low carbon policies may have an indirect impact onenergy intensive users through their effect on electricity prices. We therefore support Government proposals toassist those Energy Intensive Industries (EIIs) exposed to international competition, and therefore the risk ofcarbon leakage, as a result of the indirect costs of UK and EU climate policies. However, we would highlightthat are many reasons why firms may wish to relocate production and agree with the EAC’s conclusion that“it is the overall cost burden, rather than energy costs in isolation, that help determine the risk of carbonleakage”.70 In addition, we note that recent analysis by the CCC suggests that “policies already announced bythe Government should be sufficient to address competitiveness risks for energy-intensive industries to2020”.71

21. We believe that UK Government relief for the indirect costs of the EU ETS and carbon price supportmechanism should be targeted at those industrial sectors and installations where the evidence base suggeststhere is significant risk of carbon leakage and that the levels awarded are proportionate to need. In addition, itis important that any financial support is time-limited in order to drive the behavioural change required topermanently reduce emissions.

22. It is our understanding that the Government is currently examining the different options to determineeligibility for the exemption from the costs of CfDs for EIIs. While EDF Energy would continue to supporttargeted relief, we believe it will be critical to ensure that the integrity of the EMR proposals is maintained.We are concerned that if, for example, the primary legislation within the Energy Bill is diluted by creating thescope for ad-hoc exemptions.

23. EDF Energy believes it is also important to consider the time horizon over which the costs of the CfDregime will evolve. With the Renewables Obligation remaining the key driver for renewables investment inthe near future, we believe it will be a long time before consumers will see any CfD related costs feeding intoelectricity prices. The first projects supported by CfDs are unlikely to have any discernable impact on consumerbills for at least another six or seven years. In such circumstances, we believe there are significant inherentrisks associated with prescribing statutory solutions today for uncertain impacts that will arise so far intothe future.

24. The Government is right to proceed with measures now to provide targeted relief against the indirectimpact of the carbon price support mechanism (which came into effect in April 2013). However, we believethat it should reserve its position on how other EMR related costs should be dealt with until 2016, by which datethe outcome of the post-2020 Durban Platform global climate change agreement should be known. Deferring adecision on EMR-related costs will allow Government to make a much better assessment of the impacts69 https://www.gov.uk/government/news/european-ministers-set-out-timetable-for-eu-ets-reform70 House of Commons, Environmental Audit Committee, Energy Intensive Industries Compensation Scheme, Sixth Report Session

2012–2013, p1171 CCC, Reducing the UK’s carbon footprint and managing competitiveness risks, April 2013, p10



that it believes it should protect against, and also give it a better understanding of the potential for trans-boundary distortions.

16 May 2013

Written evidence submitted by the Mineral Products Association

1. Executive Summary

1.1 The evidence is compelling that the UK Carbon Budgets are outdated and no longer entirely fit forpurpose.

1.2 Emissions associated with imported goods are increasing and now make up around half of the UK’scarbon footprint.

1.3 The Climate Change Act needs revision to ensure that the Carbon Budgets are not met by importinggoods and exporting emissions to countries that may be less well equipped to abate.

1.4 The UK Government has a social responsibility to avoid carbon and jobs leakage.

1.5 Consumption based national GHG accounting must be introduced in law to avoid the slow demise ofUK manufacturing.

1.6 Responsible Sourcing Initiatives should be promoted, where locally produced goods are consumed locallyfor local economic benefit.

1.7 The Committee on Climate Change has underestimated the environmental and economic costs of meetingthe 4th Carbon Budget. Industry will suffer from unilateral UK energy and Carbon policy costs as otherevidence has shown.

1.8 The Committee on Climate Change incorrectly assumes that the EII compensation package is sufficientto protect UK manufacturers. The £250 million EII package is a welcome first step but insufficient to preventcarbon leakage resulting from cumulative carbon costs. Government should be prepared to provide additionalfunds and/or reallocate funds from EU ETS to CPF if there is a need.

2. Introduction

2.1 The Mineral Products Association (MPA) is the trade association for the aggregates, asphalt, cement,concrete, dimension stone, lime, mortar and silica sand industries. With the recent addition of The BritishPrecast Concrete Federation (BPCF) and the British Association of Reinforcement (BAR), it has a growingmembership of 450 companies and is the sectoral voice for mineral products. MPA membership is made up ofthe vast majority of independent SME companies throughout the UK, as well as the nine major internationaland global companies. It covers 100% of GB cement production, 90% of aggregates production and 95% ofasphalt and ready-mixed concrete production and 70% of precast concrete production. Each year the industrysupplies £9 billion of materials and services to the £120 billion construction and other sectors. Industryproduction represents the largest materials flow in the UK economy and is also one of the largestmanufacturing sectors.72

2.2 This response relates largely to the MPA Cement and British Lime Association activities which are partof the Mineral Products Association.

3. Are the Carbon Budgets still valid?

3.1 In May 2013 the Committee on Climate Change (CCC) released its “Reducing the UK’s carbon footprintand managing competitiveness risks” report. The report states that the UK’s Carbon Footprint has increasedover the past two decades and whilst production emissions have fallen (21% between 1990–2010) emissionsembedded in UK imports are estimated to have increased by 40% between 1993 and 2010. So the growth ofconsumption emissions has more than offset reductions in production emissions. This trend undermines thehard work and investment made by UK operators and even the CCC acknowledges that the UK carbon footprintwould have increased more had production emissions not been reduced by fuel switching and energy efficiencyby UK operators.

3.2 The evidence is compelling that the UK Carbon Budgets are now too narrowly focused, outdated andno longer entirely fit for purpose. However, by suggesting that the Carbon Budgets remain unchanged, theCCC has failed to properly address the recommendations of the Energy and Climate Change (ECC)Committee’s report.73 The ECC select committee recommended that policy makers explore the options for“incorporating consumption-based emissions data into the policy making process”. Furthermore, the ECCCommittee concluded that “We are not convinced that consumption based emissions data are too complex ortime consuming to gather, as Defra’s work in this area shows”.72 “Make the Link: The Mineral Products Industry’s Contribution to the UK”, 2012,

http://www.mineralproducts.org/documents/MPA_MTL_Document.pdf73 House of Commons Energy and Climate Change Committee: Consumption Based Reporting. HC1646



3.3 So, if the evidence that consumption emissions are becoming an increasing problem and that collectingthe information is not too complex, there is good reason to amend, or supplement, the Climate Change ActCarbon Budgets to account for “embedded” or “imported” emissions related to consumption. By enshrining inlaw greenhouse gas (GHG) accounting methods that take account of the whole UK footprint, the UK wouldshow leadership in this internationally important policy area and set the benchmark for similar internationaldevelopments.

3.4 The CCC’s justification for retaining production based emissions is flawed. Firstly, they cite thatconsumption based reporting would be disruptive to international accounting conventions. Secondly, they claimthat production emissions should be the focus because half of the UK footprint is imported emissions and thereis less leverage to reduce the imported emissions.

3.5 The future of manufacturing in the UK is at stake so it is vitally important that the UK can properlymeasure what impact climate change, energy policies and other factors are having on the location ofmanufacturing. International reporting conventions do not have to be disrupted to properly account foremissions under the UK Climate Change Act and less leverage is not a good reason to ignore around half ofthe UK carbon footprint.

3.6 Surprisingly, the Committee on Climate Change claims that the cost of energy and climate changepolicies will not damage the competitiveness of British industry. MPA disagrees. The CCC has underestimatedthe environmental and economic costs of meeting the Carbon Budgets. UK industry will suffer from both EUand unilateral UK energy and carbon policy costs as other evidence has shown. Research carried out by ICF74

on behalf of BIS shows that climate and energy policy costs will be the highest for UK manufacturers comparedto competing nations. ICF sector specific analysis shows that the UK cement industry will pay higher policycosts compared to the manufacturers of the same product in the principle competing economies. The ICF andMPA work is supported by other research carried out by KPMG75 which has shown that the UK ranks thirdin the Global Green Tax Index and first in the carbon and climate change list of 21 countries that areincreasingly using green taxes in place of regulation or incentive schemes.

3.7 The energy and climate change policy costs that MPA presented to the Environmental AuditCommittee76 shows that for the cement and lime sectors the policy costs increase rapidly over the next fewyears and that only a fraction of these costs are eligible for compensation under the Government’s EnergyIntensive Industries package, thereby dispelling the CCC assumption that the compensation schemes aresufficient to offset the policy costs.

3.8 The Committee on Climate Change incorrectly assumes that the EII compensation package is sufficientto protect UK manufacturers. The £250 million EII package is a welcome first step but insufficient to preventcarbon leakage resulting from cumulative carbon costs. Government should be prepared to provide additionalfunds and/or reallocate funds from EU ETS to CPF if there is a need.

3.9 Exporting the UK emissions problem has wider consequences than simply environmental. There is littledoubt that as the UK increases its imported emissions embedded in the goods that it consumes there is anequivalent amount of jobs and economic benefit that is also lost to other nations. The UK Government has asocial responsibility to avoid carbon and jobs leakage. This is important in the often rural communities thatdepend on mineral products industries such as cement and lime production. In this regard “ResponsibleSourcing” initiatives77 should be promoted, where locally produced goods are consumed locally for localeconomic benefit.

3.10 In conclusion, there are compelling environmental, social and economic reasons to adopt consumptionbased Carbon Budgets in the Climate Change Act.

18 May 2013

Written evidence submitted by Prof Kevin Anderson, Dr John Broderick, Dr Paul Gilbert, Mr Jaise

Kuriakose, Dr Mirjam Röder and Dr Alice Bows, Sustainable Consumption Institute, University of

Manchester, and Prof Corinne Le Quéré and Dr Annela Anger-Kraavi, University of East Anglia

Summary

UK carbon budgets in the context of international commitments on 2°C:

— The UK’s commitments under the Climate Change Act (short-term carbon budgets and the80% reduction pathway) are incompatible and much less challenging than the UK’s explicitinternational commitment on 2°C. The UK has, in effect, two radically different and conflictingcarbon budgets.

74 International Comparison of Energy and Climate Change Policies Impacting Energy Intensive Industries in Selected Countries.ICF International for BIS. 2012

75 KPMG Global Green Tax Index:http://www.kpmg.com/global/en/issuesandinsights/articlespublications/green-tax/pages/default.aspx

76 Environmental Audit Committee: Energy Intensive Industries Compensation Scheme Sixth Report of Session 2012–13. Ev3677 BES 6001 Framework Standard is for the Responsible Sourcing of Construction Products



— The UK’s national carbon budget is a highly inequitable proportion of the global budget for2°C, and contradicts the UK’s assurances of an equitable distribution of emissions under theCopenhagen Accord and similar international agreements.

— The recent global emissions trajectory is at the high end of IPCC emissions scenarios, andcorrelates with a central global warming projection of 4.9°C. Such a rise would exceed anywarming level thought to have occurred in the past five million years.

UK emissions in the context of the Climate change Act (2008):— The UK’s current emission reductions targets for 2050 remain valid as a minimum requirement

for the legal commitments under the 2008 Climate Change Act.

— UK emissions have remained approximately constant when UK consumption of goods andservices produced elsewhere is considered; this is despite a decline in UK territorial fossil fuelemissions of 20% since 1990. In contrast, Germany’s territorial and consumption emissionshave both decreased by about 25% at the same time as their economy has continued to grow.

— Agricultural emissions are an example where consumption-based accounting is an importantand useful complement to production-based (territorial) accounting. Direct climate impacts andglobal trade are especially significant in this sector and lead to this accounting vulnerability.

— Emissions from the UK’s proportion of international shipping and aviation are poorly accountedfor. Given that the UK has the ability to influence these sources nationally, it is prudent toincorporate aviation and shipping emissions into short-term carbon budgets as a matter ofsome urgency.

— Given the technical difficulty of securing large reductions in emissions from the agriculturalsector, their non-CO2 GHG emissions are set to become an increasing proportion of the UK’sbudgets. Greater rates and levels of decarbonisation may therefore be necessary from the UK’senergy system.

— The development of further gas generation capacity cannot be reconciled with the UK’s 2°Ccommitments and has only a very limited role in the UK’s current carbon budgets. Anyadditional gas capacity will rapidly become a stranded asset unless retro-fitted with carboncapture and storage.

— If carbon and capture storage technologies are proven to work at scale and with high levels ofcapture (90% or higher), gas fired powerstations would be compatible with the UK’s carbonbudgets, but remain incompatible with the UK’s 2°C commitments.

This submission gathers input from a number of Tyndall Centre researchers based at the University ofManchester and the University of East Anglia. All views contained within are attributable to the specific sectionauthors and do not necessarily reflect those of the other contributors, researchers from the wider Tyndall Centreor either university. With each section we have indicated the relevant lead author for clarity.

Question 1

In light of the current climate change assessments, whether the emissions reduction targets in the ClimateChange Act (which underpin the UK Carbon Budgets) are still valid as an appropriate UK contribution toavoiding dangerous global climate change; and if not, whether the Act and/or the Carbon Budgets should berevised

Prof C. Le Quéré: Paragraphs 1–6

1. In spite of concerns for climate change, the global emissions of CO2 have increased by 3.1%per year since 2000 on average, three times faster than the 1.0% per year increase observed inthe 1990s (Peters et al, 2013). CO2 emissions were 58% above 1990 levels in 2012 (Le Quéréet al, 2013). We have computed near-term projections in global CO2 emissions using theprojected World GDP from the International Monetary Fund (IMF; April 2013), and applyingthe mean improvements in the fossil intensity of the economy of the past decade as in Raupachand Canadell (2010) (Fig. 1, below).

2. The observed global CO2 emissions are following the upper end of the emissions scenarios thatwill be used in the upcoming assessment of the Intergovernmental Panel on Climate Change(IPCC; Fig. 1). Observed emissions are increasingly diverging from the emissions required tolimit global warming to the 2oC characterisation of “dangerous global climate change”(Peterset al, 2013). The emissions projections we calculated for 2012–2018 suggests that the recenttrend will persist well into this decade unless improvements in energy efficiency strongly departfrom the tendencies observed since 2000, or unless reductions in energy consumption occur.

3. The upper emission scenario leads to a central global warming projection of 4.9°C above pre-industrial temperatures at the end of the century (Rogelj et al, 2012), above any warming levelsthat is thought to have occurred on Earth in the past five million years. The uncertainty aroundthis projection is large and depends on the climate sensitivity of the planet. Climate sensitivityis a measure of how much the global temperature would rise for a doubling concentration ofCO2. There is a range of climate sensitivity values based on different lines of evidence (both



observations and models). However, even if the low-end of the range is chosen (ie 1.5°C for adoubling CO2 concentration), this would still cause a rise in temperature of 3.5°C by 2100under the high emissions scenario (Fig. 1). Conversely, if the climate sensitivity was at the highend of the range (ie of 4.5°C for a doubling of CO2), for instance due to a strong feedback withcarbon stored in the natural reservoirs (Previdi et al, 2013), warming could reach as high as7.9°C by the end of the century. The uncertainties above the central projection are larger thanthose below due to the many processes that are poorly understood, but could add considerablewarming to the planet if the carbon stores were destabilised (eg frozen soils, wetlands and gashydrates). A range of studies suggest that the most likely value of climate sensitivity is around3°C (Hegerl et al. 2007), even considering global temperature trends of the past 15 years, whichcan be accounted for by natural variability in the climate (Foster and Rahmstorf, 2011; Guemaset al, 2013).

Figure 1: Global emissions of CO2 (GtCO2/y). The emissions computed from reported energy statistics by theCarbon Dioxide Information Analysis Centre (CDIAC) are shown in black with their uncertainty in gray (Peterset al, 2013). The red dots are projections for these emissions based on World GDP which we computed hereusing established methods (Raupach and Canadell, 2010). Recent and projected emissions are compared to thescenarios used to project climate change by the upcoming assessment of the Intergovernmental Panel onClimate Change (IPCC). Temperature projections in 2100 above pre-industrial levels are shown on the graphand are from Rogelj et al (2012), including in parenthesis the range for a climate sensitivity of 1.5–4.5°C.



4. The CO2 emissions from fossil fuel combustion in the UK have decreased by 20% since 1990when considering territorial emissions only (Fig. 2). However they have remainedapproximately constant when considering emissions from the consumption of goods andservices produced elsewhere but consumed in the UK ((Le Quéré et al, 2013) updating theanalysis of (Peters et al, 2011)). In contrast, the emissions in Germany have decreased by about25% since 1990, for both territorial and consumption emissions, while the German economyhas continued to grow. Peters et al (2013) provide further examples of precedents in emissionsreductions (consumption based) sustained over 10 years of about 4–5% per year in Belgium,France and Sweden. These examples highlight the practical and economic feasibilities oftransitions towards lower emissions.

Figure 2: Change in emissions compared to year 1990 in the United Kingdom and in Germany. Full lines showterritorial emissions as reported to the UNFCCC; dashed lines show consumption emissions, which take intoaccount the emissions from good and services produced elsewhere but consumed in the UK. The consumptionCO2 emissions are from (Le Quéré et al, 2013) updating the analysis of (Peters et al, 2011).

5. CO2 emissions from the EU accounted for 11% of global emissions in 2012 and 24% over theperiod 1751–2010 (Le Quéré et al, 2013). The UK and EU need to maintain and enhance theircommitments to emissions reduction in support of the successor to the Kyoto Protocol (to bedecided by 2015). Any loosening of the UK commitments could be seen as a weakening ofleadership and risk derailing the UNFCCC process and the credibility of the Prime Minister asChair of the UN committee tasked with establishing the new UN Millennium DevelopmentGoals for 2015.

6. Having established the context and necessity of emissions reductions it then remains to considerthe scale of UK action. There are two issues that are pivotal to an evidence-based quantificationof the UK’s carbon budget: 1) the “appropriate” probability for 2°C; and 2) the “appropriate”apportionment of the global carbon budget to the UK.

Prof K. Anderson: paragraphs 7–19

Considering the appropriate probability for 2°C

7. From the Copenhagen Accord (2009) and subsequent COPs through to the G8 Camp DavidDeclaration (May 2012) the UK has repeatedly committed to making its fair contribution to“hold the increase in global temperature below 2°C, and take action to meet this objectiveconsistent with science and on the basis of equity”. Moreover, much of the UK Government’sdomestic language has, since its 2009 Low Carbon Transition Plan (DECC 2009), been around“must rise no more than 2°C” (p. 5, emphasis added). Whilst this qualitative language ofconsensus around 2°C has been clear and consistent for many years (“hold below”, “must notexceed”, etc) there has been no open clarification as to what quantitative probabilities suchlanguage represents. Yet, without quantified probabilities it is not possible to determine theaccompanying range of twenty-first century cumulative emissions budgets from which emissionpathways can be derived (Anderson & Bows, 2008).

8. In the absence of any explicit quantification, probabilities may be inferred by adopting theapproach developed for the IPCC’s reports, whereby a correlation is made between the language



of likelihood and quantified probabilities (IPCC, 2010). Following this approach, the Accord’s,EU’s and UK Government’s statements all clearly imply very low (0%–10%) probabilities ofexceeding 2°C. Even a highly conservative judgement would suggest the statements representno more than a 33% chance of exceeding 2°C. However in 2013, and with the UK’s preferredprobability density (PDF) of temperature increase for a given trajectory (taken from Murphy etal, 2004), a 0%-10% chance of exceeding 2°C would leave almost no available carbon budget.Stretching the probabilities much further really starts to detract from any reasonableinterpretation of the “must not exceed” language; though given the emissions released since2000, it is now difficult to envisage anything much lower than 30%-40% chance of 2°C beingeither physically viable or deliverable in practice.

9. Set against such a quantitative backdrop, DECC’s choice of a 63% chance of exceeding 2°C isclearly incompatible with the UK’s repeated commitments made at various international forums(Anderson et al., 2009). Consequently, the UK has (at least—see below) two climate changetargets. One with budgets related to “must not exceed” (say 0%–10%—and potentially30%–40% chance of 2°C) and the other, with budgets accompanying a 63% of exceeding 2°C.These two budgets are associated with radically different emission pathways and hence providefundamentally different criteria for judging the appropriateness or otherwise of alternativemitigation options—both individually and collectively.

Considering apportionment of the global carbon budget to the UK

10. Exacerbating the UK’s profoundly inconsistent domestic and international positions on climatechange are issues related to how the UK chooses to apportion global emissions to the nationallevel. In this regard two particular issues arise; a) who is responsible for deforestation emissions;and b) how should global emissions be divided between Annex 1 and non-Annex 1 regions.Both the issues relate to the equity dimension of mitigation and against which the UK’s currentdomestic position again conflicts with its international rhetoric.

11. Issue a) deforestation: The UK’s budgets imply all responsibility for emissions from globaldeforestation accrue solely to those nations deforesting. Whilst, such a position may have meritin terms of increasing the available “energy” budget to the Annex 1 nations such as the UK, itdoes so at the expense of major reductions in available “energy” emissions space for the poorer,non-Annex 1, nations (where the deforestation is occurring). Climate change has arisen as anissue principally from the emissions of wealthier, and already deforested, Annex 1 nations(Anderson & Bows, 2011). It is therefore difficult, if not impossible, to reconcile the UK viewthat responsibility for current deforestation emissions belongs solely to those nations’deforesting with the explicit equity dimension of various international agreements. In responseto this inequity, deforestation could be considered as a global overhead, thereby allocatingemissions from deforestation amongst all nations—not only those deforesting. Such a globaloverhead approach would not absolve non-Annex 1 nations of responsibility for deforestationemissions, as their available budget for energy-related emissions, along with the budget forAnnex 1 nations, would still be reduced as a consequence of the emissions from deforestation.Anderson and Bows further defended this position by noting how historical emissions (pre-2000) are essentially considered a global overhead that favours Annex 1 nations. Ultimatelythey concluded that “getting an appropriate balance of responsibilities is a matter of judgmentthat inevitably will not satisfy all stakeholders and certainly will be open to challenge. As itstands, the approach… in which historical and deforestation emissions are taken to be globaloverheads, is a pragmatic decision that, if anything, errs in favour of the Annex 1 nations.”78

12. Translating this principle into a quantitative constraint for the UK, Anderson and Bows (2008)estimated a twenty-first century budget of 266GtCO2 from deforestation, which, disaggregatedto the national level equates to about a 20% reduction in the available energy-emission spacein the UK’s budget. However, since Anderson and Bows first proposed the 266GtCO2 budget,deforestation emissions have fallen sharply, with a similar method likely to almost halve theglobal overhead to around ~150GtCO2.79 In light of this, it is appropriate that the UK budgetbe reduced by approximately 7% to account for the nation’s “fair” share of global deforestation.

13. Issue b) apportionment between nations: A much more significant issue relates to assumptionsabout emissions from non-Annex 1 nations, and therefore what is a reasonable budget forAnnex 1 nations, including the UK? As it stands the UK approach implies a highly inequitabledivision of emissions—with very little distinction drawn between the two regions. In brief, theUK choice of budgets and pathways is based on a global peak in emissions of around 2016,with non-Annex 1 nations, on average, peaking around 2 years later. As with the attribution ofdeforestation emissions, such a division of the global budget between Annex 1 and non-Annex

78 It is worth noting that Jiankun, H, Wenying, C, Fei, T, Bin, L, 2009. Long-term climate change mitigation target and carbonpermit allocation. Tsinghua University. Access date: based on analysis undertaken at Tsinghua University in Beijing, makes thecase that “reasonable rights and interests should be strived for, based on the equity principle, reflected through cumulativeemissions per capita”. Building on this cumulative emissions per capita approach, the authors demonstrate how China’s historicalcumulative emissions are only one-tenth of the average in industrial countries and one-twentieth that of the U.S.

79 This is the subject of a paper currently being developed, and is again based on FAO and other similar data.



1 nations is far removed from both the wording and spirit of the equity dimensions of thevarious international climate change agreements.

14. Anderson and Bows (2011) took a different framing of equity than that assumed by the UK,starting with the question “what reduction profiles could non-Annex 1 nations reasonably beexpected to achieve if pushed extremely hard in terms of a rapid transition away from theirgrowing emissions, and towards absolute mitigation”. They adopted a range of scenarios, butsuffice to say the budget remaining for the Annex 1 nations in all of these was dramaticallymore challenging than the proportional budget adopted by the UK government.

15. In brief, and to put some perspective on the change in the scale of the challenge, if non-Annex1 nations can peak by 2025, and reduce emissions thereafter at around 7% p.a. (approximatelytwice the level Stern et al suggest is possible with economic growth), then there is no discernibleemission space remaining for Annex 1 nations. Only if the growth to a 2025 peak in non-Annex1 emissions is radically curtailed to just 1% p.a. and subsequently reduced at over 7% from2025, is there any space for Annex 1 emissions—but still only if the latter’s emissions beginreducing at over 10% p.a. immediately.

16. As Anderson and Bows (2011) demonstrates, the UK’s proportion of the global carbon budgetfor a 63% chance of exceeding 2°C is premised on an apportionment regime that is highlypartisan and certainly far removed from the UK’s explicit and international commitments onequity.

Combining probabilities and equity

17. Far from being a technical and nuanced issue, the disjuncture between the UK’s high profileand repeated commitments on 2°C and the Government’s legally binding carbon budgets isprofound and with fundamental repercussions for the framing of carbon-reduction polices.

18. The legally binding budgets essentially reject 2°C in favour of maintaining some emissionspace out to 2050 and hence a relatively slow transition to a lower-carbon society. By contrast,taking Government international statements on 2°C as an honest reflection of commitmentsdemands immediate behavioural adjustments alongside rapid penetration of low-carbontechnologies; with complete decarbonisation of the energy system by 2030.

19. Ultimately, if the UK wants to develop a consistent and evidence-based framing of its climatechange commitments, it needs to match its legally binding domestic budgets with itsinternational rhetoric on 2°C.

Question 2

The operation and management of the Carbon Budgets, including: the accountability and governancearrangements, and the extent to which the EAC’s previous concerns and recommendations have beenaddresses; the effectiveness of the over all management system, including for meeting carbon budgets bysector; and the current status, operation and impact of the National Emissions Target Board

Dr A. Bows: Paragraphs 20–25

As time goes on non-CO2 emissions will become more significant to UK budgets

20. The cumulative nature of long-lived greenhouse gases means that slow progress towardsachieving a reduction in one gas must be compensated by greater cuts in another. Cutting thenon-CO2 emissions associated with the agricultural sector is considered to be more challengingthan mitigating CO2. Specifically, there is more uncertainty over how to significantly curb andquantify N2O emissions, particularly those associated with soil processes, than there is for theCO2 associated with energy consumption. This is exacerbated when taking into account a risingdemand for food and future climatic change (Flynn et al, 2005, Popp et al, 2010, Reay et al,2012, Smith et al, 2008, Smith and Olesen, 2010). Having separate sectoral targets, as well asan aggregated “carbon budget” is therefore essential to ensure that limited progress in onesector can be compensated for by greater progress in another, when budgets are reviewedperiodically. Therefore, consideration of sectoral progress should be used to maintain, weakenor strength targets in other sectors, in order to remain within the overall carbon budgetassociated with the 2C target. One likely outcome of taking this approach, is that mitigationeffort aimed at CO2 will need to be strengthened in the short-term, given technical limits toN2O emissions associated with food production over the longer term (Bows et al, 2012a).

Present producer based accounting overlooks emissions associated with imports of food

21. Given that global emissions are in line with the highest projected emission scenarios, climatechange will increasingly impact on food production. However, some mid-latitude regions, suchas the UK, may be able to reap greater yields for crops such as wheat, in the short- to medium-term, as temperatures rise (assuming extreme weather events do not counter this effect). If thisis the case, it may be less emissions-intensive on aggregate to grow some crops in the UK than



it will be to grow them elsewhere. But, under the current territorial emission accountingframework, the UK would incur greater emissions as a result of high levels of agriculturalproduction coupled with a greater use of fertiliser to benefit from the more favourable climaticconditions (Bows et al, 2012a). Considering the consumption-based as well as the territorialemissions associated with agriculture in particular, would enable policymakers to make a moreconsidered judgment on setting the emissions budgets for the agriculture sector.

Shipping & aviation have limited mitigation drivers and continue to be poorly accounted for

22. Difficulties remain in ascribing emissions from international aviation and shipping to nations.This, combined with the failure of the international bodies charged with mitigating internationalaviation and shipping emissions (International Civil Aviation Organisation (ICAO) and theInternational Maritime Organisation (IMO)) to put into place measures to tackle thoseemissions, have led the UK Government to consider international aviation and shipping withinlong-term targets, but omitting them from the short-term carbon budgets. Such an approach totwo of the most rapidly growing sectors in terms of greenhouse gas emissions is unacceptablegiven the UK’s broader commitment to 2°C. However, the arguments surrounding aviation andshipping are somewhat different from each other (Bows et al, 2012).

23. Aviation: For aviation, emissions can be apportioned to nations on the basis of departures orbunker fuels, providing a close approximation to a “fair share” of the emissions released withininternational airspace. Furthermore, given the recent collapse of the carbon price governingmitigation effort within the EU ETS, the aviation sector continues to have highly limited driverstowards mitigating emissions, and urgently requires a new approach to incorporating aviation-related emissions into existing mitigation frameworks, such as the UK’s carbon budgets. Thusat present, and given the known barriers to low-carbon technology unique to this sector, (Bows,2010), aviation activity associated with UK residents or UK airlines continues with itsprivileged position with regard to carbon budgets, potentially jeopardising all of the UK’s effortstowards a decarbonised energy system (as aviation also forms part of that system) (Woods etal, 2012)

24. Shipping: The problem of how to apportion the emissions associated with the shipping sectoris a much greater challenge than for aviation, in the main due to shipping generally involvingmultiple journey legs. However, despite the methodological and data uncertainties inapportioning shipping emissions to the UK (or any nation) (Bows et al, 2012; Gilbert andBows, 2012), the order of magnitude of emissions is known and is sufficient to at least providea guide to the scope and scale of necessary mitigation in shipping, as well as other sectors.Nevertheless, to include shipping emissions within the existing budgets, it would be advisablenot to use the sales of bunker fuels (as is used when reporting international shipping emissionsto the UNFCCC), as they are a poor guide of the emissions associated with trade to and fromthe UK, but rather indicate that most ships choose to refuel in Rotterdam where fuel is cheap.CO2 estimates based on bunker sales are between 20–60% lower than the estimate that “relatesto the transport of passengers or goods to or from the United Kingdom”, the definition givento international aviation and shipping emissions by the Committee on Climate Change. Thusconsideration of one of the existing estimates based on imports would be a reasonable startingto point towards including shipping within short-term budgets (Anderson and Bows, 2012).

25. On the basis of our analysis of shipping and aviation emission apportionment, as well as howto influence these emissions (Gilbert and Bows, 2012), and given the now effectively defunctEU ETS, we would urge government to start to incorporate aviation and shipping emissionsinto short-term carbon budgets as a matter of some urgency.

Dr P. Gilbert: Paragraphs 26–31

Chemical Industry

26. Tyndall Manchester have recently completed a report on the chemical industry in the UKconsidering market and climate change challenges (Gilbert et al, 2013). At the time of writingthis submission, the report is not yet in the public domain. The authors will send a copy to thisinquiry as soon as it is available. Key findings related to this question are as follows:

Insufficient evidence that climate policy is responsible for the loss of competitiveness in the chemicalindustry at present

27. Parts of the industry are shutting down in the UK and relocating to other regions due tocompetition and production costs. This is resulting in “weak carbon leakage” and globalgreenhouse gas emissions are increasing accordingly. Although these regions typically have lessstringent rules, or an absence of regulation and policies to address greenhouse gas emissions,evidence suggests that the industry is not relocating due to climate policy. However, the UK’sclimate change targets are challenging for the industry and the wider economy. Such targetscould impose further pressure on competitiveness in the UK in future and lead to “strong carbon



leakage”. Alternatively, introduced carefully, they could drive innovative efficiencyimprovements that also increase resilience to fossil fuel and feedstock price volatility.

The UK’s carbon footprint associated with chemicals is increasing (consumption basis)

28. Despite UK chemical industry emissions reducing by 70% from direct energy use and processessince 1990, it has not been solely the result of energy efficiency improvements. The reductionin the UK’s chemical industry emissions has largely been a result of the closure of productionsites and/or relocation to other nations with lower production costs and energy and feedstockcosts. When examining the UK’s carbon footprint from a consumption-based approach, wherethe UK would take account of emissions produced in other nations during the manufacturingof the goods it consumes, overall emissions associated with the consumption of chemical-derived goods and commodities are likely to be increasing (accenture, 2011; Oxford Economics,2010; KPMG, 2011).

The chemical industry requires substantial reductions in emission intensities to satisfy UK climate targets

29. The UK chemical industry anticipates growth in the period up to 2020. Growth rates of 1–3%may lead, with no change to emission intensity or UK chemical production mix, to the chemicalindustry accounting for 11–25% of the total UK carbon budget in 2050. To ensure that theindustry reduces its emissions by 80%, the absolute growth rates would require the emissionintensity to reduce by ~2–4% p.a. Historically, technically mature industries reduce emissionintensity levels by 1–1.2% p.a. This point is relevant to the majority of UK industry wheregrowth is anticipated and the sector is required to deliver absolute savings.

Industry requires an urgent, radical rethink in how it produces chemicals

30. If the chemical industry is to step up to the challenge of meeting the UK’s climate targets andmaintain competitiveness, it will need to move beyond incremental energy efficiencyimprovements towards more radical, step changes. Although the industry could decarboniseemissions associated with direct energy, this would return us to the argument raised aboveconcerning non-CO2 emissions. Process emissions from the industry should not be overlookedas they account for approximately one third of the chemical industries emissions (4.3MtCO2e,excluding electricity use, 2010 data). Of this CO2e, 11% is from N2O emissions associated withnitric acid production.

31. As well as managing processes, there is a requirement to ultimately move away from fossilbased hydrocarbons as feedstocks to renewable forms of fixed carbon. Nonetheless, undercurrent emission accounting protocols, where emissions are reported on a producer basis withinterritorial boundaries, and coupled with issues of feedstock price and competitiveness, there isinsufficient economic incentive to justify substantial investment in the new assets required toimplement bio-derived product substitution. Furthermore, as fossil hydrocarbons are the primaryfeedstock for the chemical industry, it could be argued that their value as a fixed source ofcarbon is much greater than their energetic value, particularly when renewable wind, wave andsolar energy could help decarbonise the energy supply. Options for decarbonised chemicalfeedstocks are much more limited and costly. Decisions about whether our limited use of fossilfuel emissions associated with a carbon budget should be used for the chemical industry, thetransport sector (particularly aviation) or other applications are determined by the complexinterplay of legislative, policy and market conditions. To date there have been few policyinitiatives which have recognised the unique challenges and potential contributions from thissector; some prioritisation seems likely to be required if the UK is to achieve its carbonreduction targets and retain its valuable and strategic chemical industry.

Question 3

What the Government’s response should be to the Committee on Climate Change’s June 2013 assessment ofemissions reduction performance, and whether the Carbon Budgets should be tightened or relaxed

Dr A. Anger-Kraavi: Paragraphs 32–37

32. In addition to tightening the targets enshrined within the Act and Carbon Budgets, discussedabove, we believe it is worth considering a policy response to the developments in the EU ETSin light of economic and industrial research. We also suggest that the committee note ourprevious submission to the Energy and Climate Change Committee regarding shale gas andother unconventional fossil fuels.

Stimulating innovation in the “Traded Sector”

33. The UK’s share of the EU ETS cap is represented as the “traded sector” component of thecarbon budgets (EAC, 2011). There is a concern that as the EU ETS cap is set at 20% below



1990 levels,80 and given the UK carbon budget for 2020 is tighter (34%), then the UK “non-traded sector” will have to take on a greater burden of reductions.

34. As the “non-traded sector” is less carbon intensive this is likely to result in emission reductionsthat are not economically efficient in the strict sense. Furthermore, the current low carbon priceat the EU market (about €3 per tonne of CO2e in April 2013) would allow the “traded sector”simply to buy allowances and leave the physical domestic reductions to the “non-traded sector”.

35. The question here is whether the UK carbon budget at least for “non-traded sector” should berelaxed. However, as argued previously, in order to achieve climate stabilisation at or around2°C the budgets need to be even tighter (EAC, 2011). Therefore, we propose that thegovernment should consider subsidising green investments in carbon intensive sectors (“tradedsector”), for instance with finance from the UK Green Investment Bank.81 Caps could then betightened in these sectors further with a domestic commitment without detriment tocompetitiveness.

36. The impacts of public and private green investment would be significant (see, Barker et al,2012). It would help industrial sectors to adopt less-carbon intensive technologies bycompensating the weak price signal from the EU ETS and reduce the risk of leakage by makinginvestments more attractive and compensating for increases in product prices. As every £1invested is likely to result in an average of £0.60 additional investment (see, Barker et al, 2012)this policy would help to reduce unemployment and help to lift the UK economy out recession.In the longer term such support could also have a positive effect on other countries through thediffusion of low carbon technologies, and for UK industry through the growth of export marketsfor supported technologies.

37. However, it is worth noting that the induced investment may also generate some degree ofrebound in terms of increased aggregated CO2 emissions. At the very least, if UK “tradedsector” is “helped” to reduce emission then it should have a negative impact on the carbonprice in the EU ETS. Therefore the UK cap in the EU ETS should be tightened commensurately.

Dr J. Broderick. Paragraphs 38–41

The impact of unconventional fossil fuels on UK climate and energy policy

38. We have previously submitted evidence to the Energy and Climate Change Committee that thedevelopment of unconventional fossil fuels, indeed the expansion of fossil fuel production perse, is detrimental to climate change mitigation (Broderick et al, 2012).

39. Whilst gas has a lower carbon intensity per unit of energy than coal, and can be combusted inmore efficient power stations, it is still a high carbon energy source (75% carbon by mass). Theprice effects of increased supply and hence aggregate quantity of emissions suggest that theprospect of new unconventional gas production in the USA, Canada, Australia and China willnot in and of itself increase the likelihood of achieving a two degrees climate objective.

40. UK policy, and Carbon Budgets, need to be robust to these new conditions, especially withregards to the common assumption of affordable, timely, high performance, commercial scaleCCS. Short term indications of a lack of commitment to decarbonisation, on the prospect ofsubstantial indigenous shale gas production or lower global prices, may jeopardize long terminvestment. The DECC Gas Generation Strategy is potentially problematic in this regard; anumber of the gas rich scenarios presented are incompatible with existing carbon budgets andimplied climate targets.

41. Despite several clear recommendations by the Committee on Climate Change of an advisablecarbon intensity of electricity sector for achieving the UK’s 80% by 2050 GHG reduction target,the Energy Bill (2012) is not clear on the intended aim on decarbonisation level. A grid carbonintensity target of 50 g CO2/kWh by 2030 is a prudent policy to assist the delivery of the carbonbudgets (though it would need to be considerably tighter for UK’s international commitmentsaround 2°C). Were power sector emissions to exceed their allocation this would place greaterpressure on other sectors for reductions, which, as we have outlined in a number of sectionsabove, may be problematic.

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Wood R, F Bows, A, Anderson, K (2012). A one-way ticket to high carbon lock-in: the UK debate on aviationpolicy. Carbon Management 3(6), 537–540

23 May 2013

Written evidence submitted by the Aldersgate Group

Summary

1. The Aldersgate Group strongly believes that the Climate Change Act and greenhouse gas (GHG) emissionsreduction targets are essential if the UK is to tackle the challenges of dangerous climate change, energy securityand commodity price volatility and to secure growth, jobs and competitive advantage.

2. Levels of carbon in the atmosphere have recently reached record levels of over 400 parts per million forthe first time on record. Now is not the time for any country to relax its GHG emission reduction targets.

3. Domestic action legitimises the UK’s role in international negotiations and our domestic policies havebeen replicated around the world. As international competitors continue to innovate and commit to their ownGHG emission targets, it would be regrettable if the UK were to weaken its own emission reductioncommitments.

4. There are growth advantages for the UK to be an early mover in the transition to a low carbon economy.The clear direction of travel provided by the Climate Change Act is already bearing fruit. The UK’senvironmental goods and services sector out-performed all other sectors in 2010–11 and is on course to halvethe UK’s trade deficit by 2014–15. To continue this growth, the Government must ensure that UK businesseshave the stable policy framework they need. The Climate Change Act acts as a roadmap for businesses andinvestors, providing a long-term, stable environment to allow them to make investment decisions withconfidence.

5. The UK cannot afford to lose momentum in this low carbon race. While the industrialised world has ledthe way in the development of a low carbon economy, international competitors are catching up. Businessesargue that the Climate Change Act has set the direction of travel, so hesitation or delay is nowcounterproductive and will allow international competitors to seize market share.

6. In 2010 the Coalition Government committed itself to being “the greenest government ever”, but therehas been no overarching strategy to accelerate the shift to a low carbon economy. The Government has madea series of retrospective or short-notice changes to existing policies that have undermined investor confidence.Contradictory messages from Government are coming at a pivotal time.

7. Business requires a long, loud and legal policy framework, supported by Government messaging, thatbuilds policy coherence. Left to its own devices, the market will fail to respond swiftly enough to the threatposed by global climate change, as it has to previous threats.

8. The systems for operation and management of the carbon budgets are sound. The Aldersgate Group fullysupports the Committee on Climate Change (CCC), which is a well-respected body. Management of the carbonbudgets cannot, however, be undertaken by the CCC alone; the Government must respond. To ensure thecarbon budgets are met, new policies or programmes are required.

9. The Aldersgate Group welcomes a number of developments that have been undertaken since the EAC’slast inquiry into carbon budgets. We support the Committee on Climate Change’s decision to continue tomonitor carbon budgets on the basis of production emissions, reflecting the UK’s sphere of direct control, butwelcome ongoing measurement of the UK’s consumption-based emissions.

10. The Aldersgate Group supports the CCC’s recommendation that the second and third carbon budgets betightened to ensure the UK can meet subsequent targets. The Government’s failure to implement the CCC’srecommendations will make it harder than necessary to meet the Fourth Carbon Budget, which in itself is ameasure to ensure that the UK is on course to meet the 2050 legislated emissions reductions.

11. The Energy Bill represents a once-in-a-generation opportunity to decarbonise the UK’s power sector.Recent Government statements have seriously challenged the Bill’s clarity of purpose and undermined theinvestment community’s confidence in the UK as a safe place to build low carbon energy.

12. The Aldersgate Group is calling for the Government to underwrite the carbon budgets by including acarbon intensity target in the Energy Bill for 2030. This would provide a clear, strategic direction withobjectives against which policies could deliver. This would build business and investor confidence, which iscurrently being eroded by mixed messages from Government.



13. The lack of a legislated decarbonisation target risks increasing the costs for renewables to 2020. It wouldbe possible to meet Britain’s legally binding EU 2020 renewables target by largely importing the equipmentand materials needed. This would mean spending the money without securing the economic benefit in termsof jobs and growth.

14. The Government should not bet that gas will be cheaper for consumers than renewable sources of power.This is dependent on unknowable future factors. Analysis suggests that although a high gas power system haslower baseline costs under particular assumptions, its sensitivity to these assumptions is far higher than undera high renewables system. Relying too heavily on gas would mean taking the risk that, if CCS is costlier thanpredicted, or we under deliver on energy efficiency, the Government will be forced either to increase the carbonprice sharply, or to abandon its legislative decarbonisation commitments.

15. A target to reduce GHG emissions by 2030 must also be applied at EU level, where businesses areurging for a progressive regulatory framework. The UK will benefit from an EU GHG emissions target,ensuring that its European partners share the same level of ambition as the UK and providing a market for itslow carbon goods and services. Conversely, if the EU delays or weakens its action, it will undermine theconfidence of its member states to take action themselves. It will also harm the EU’s reputation as a leader ininternational climate change negotiations.

Background

16. The Aldersgate Group is an alliance of leaders from business, politics and society that drives action for asustainable economy. Its mission is to trigger the change in policy required to address environmental challengeseffectively and secure the maximum economic benefit in terms of sustainable growth, jobs and competitiveness.

17. The views expressed in this document can only be attributed to the Aldersgate Group and not toindividual members.

18. The Aldersgate Group is a strong advocate and supporter of the UK’s Climate Change Act and carbonbudgets. In May 2011 we wrote to the Prime Minister and Deputy Prime Minister, supporting adoption of thefourth carbon budget in a letter that was signed by nearly 70 businesses, investors and other organisations. Wewelcomed the Government’s subsequent decision to accept the budget.

19. We responded to the Environmental Audit Committee’s first consultation on carbon budgets, in June2011 and the fourth carbon budget was the topic of our members’ reception in May 2011, where the ChiefExecutive of the Committee on Climate Change (CCC), David Kennedy, addressed our membership.

20. In October 2012, we wrote to the Chancellor in a letter that was signed by over 50 business, industrybodies and NGOs,82 calling for a carbon intensity target to be included in the Energy Bill.

21. Our members believe that decisive action on climate change, based on the best available science and theprecautionary principle, is essential for long-term economic growth, jobs and competitiveness. Failure to act atsufficient scale and pace will undermine our prosperity, make the costs of tackling climate change in the futuremuch higher and lead the UK to miss out on commercial opportunities associated with the low carbon economy.

22. In consideration of the climate science, the evolving international framework, feasible and cost-effectivereductions in the UK through the 2020s, plausible paths to the 2050 target of 80% decarbonisation on 1990levels and the impact on fiscal revenue and competitiveness, we strongly believe that the UK should followthe Committee on Climate Change’s recommendations for decarbonisation and its advice for the adoption ofcarbon budgets.

Detailed Evidence

The call for evidence asks respondents to consider:

In light of the current climate change assessments, whether the emissions reduction targets in the ClimateChange Act are still valid as an appropriate UK contribution to avoiding dangerous climate change; and ifnot, whether the Act and/or the carbon budgets should be revised

23. The Climate Change Act provides the framework for the UK’s transition to a low carbon economy. Itestablishes a legally binding target of an 80% reduction in greenhouse gas emissions, below 1990 levels, by2050, which is supported by a series of five-year carbon budgets. These act as stepping-stones to the 2050 goaland are set on a 15-year time horizon.

24. The Aldersgate Group strongly believes that the Climate Change Act and greenhouse gas (GHG)emissions reduction targets are essential if the UK is to tackle the challenges of dangerous climate change,energy security and commodity price volatility and to secure growth, jobs and competitive advantage.

25. Now more than ever, it is essential for the UK to stick to the targets that the Act has set. Since theClimate Change Act became law levels of carbon in the atmosphere have continued to rise, recently reaching82 Aldersgate Group (October 2012) Letter to the Chancellor: http://www.aldersgategroup.org.uk/asset/download/832/

Letter%20to%20Chancellor.pdf



record levels of over 400 parts per million (ppm) for the first time on record.83 Estimates suggest that the lasttime atmospheric CO2 reached these levels of concentration—three to five million years ago—global averagetemperatures were three to four degrees higher and as much as 10 degrees higher at the poles. Sea levels wereprobably between five and forty meters higher than they are today. Of course, 400ppm is not our enddestination: global emissions are set to continue rising.

26. With emissions rising at this rate, now is not the time for any country to be relaxing GHG emissionreduction targets. Quite the opposite—a major step-change in most countries’ pre-2020 effort is essential if weare to have any chance of keeping average temperature rise below two degrees.

27. The UK accounts for 2% of global emissions84 (on a production basis), so a reduction in domesticemissions will have a minor direct impact on global climate change. But the UK’s true impact is far broaderthan this percentage suggests. The Committee on Climate Change has shown that the UK’s indirect carbonemissions (on a consumption basis), give it a carbon footprint that is 80% larger than if it were measured byproduction emissions alone.85

28. A binding international agreement, scheduled for 2015 to cover the post-2020 period, remains essentialto tackle global climate change, but progress towards it is slow. National frameworks are thus increasinglyimportant to bridge the gap and revitalise momentum towards a global deal. As the first country in the worldto industrialise, the UK has a responsibility to lead the way in tackling climate change and has played a keyrole in international climate change negotiations thus far.

29. Domestic action legitimises the UK’s role in international negotiations. This was recognised by theGovernment, which committed to work towards “a comprehensive, legally binding international climate changeagreement”, and noted that, “The right way to do this is through well planned and measurable action rightacross the UK.”86 The Foreign Secretary, William Hague warned the Prime Minister, “We will not secure abinding climate agreement in 2015 unless the idea of low carbon growth becomes dominant across the majoreconomies before then. We can leverage this. But our diplomacy will only succeed if it is rooted in our owndomestic narrative.”87 To have credibility on the world stage, the UK must take robust action domestically todeliver on its emission reduction commitments. Backtracking or ignoring the best available scientific evidencewould harm the UK’s reputation and undermine much needed momentum to deliver a global deal.

30. The UK’s domestic policies have been replicated around the world. The UK led the way in 2008 withits cross-party agreement, which produced the world’s first legally binding 2050 target. Mexico has sinceintroduced a Climate Change Act,88 Australia is bringing forward a Clean Energy Act89 which closelyresembles the UK’s Act, including an emissions trading scheme, 80% emissions reduction by 2050 and aClimate Change Authority that mirrors the Committee on Climate Change. A White Paper from the NorwegianParliament90 is investigating the need for a climate change act similar to the UK’s and there is a similarinvestigation by the Danish Government.

31. But international competitors continue to innovate and commit to their own GHG emissions targets.South Africa will adopt a new carbon tax from 2015 and China’s 12th Five Year Plan has challenging targetson energy efficiency and carbon intensity.91 It would be regrettable if the UK were to weaken its own emissionreduction commitments as global competitors commit to their own and would undermine the possibility of aglobal agreement in 2015.

32. There are growth opportunities for the UK to be an early mover in the transition to a low carboneconomy. Early mover advantage can lead to opportunities for growth and job creation in the lucrative globalmarket for environmental goods and services. The clear direction of travel provided by the Climate ChangeAct is already bearing fruit. The UK’s environmental goods and services sector out-performed all other sectorsin 2010–1192 despite the challenging economic times, winning a £122 billion slice of the global market worth£3.3 trillion and it is on course to halve the UK’s trade deficit by 2014–15. The opportunities for further growthare strong. The UK has approximately 3.7% market share of the £3.3 trillion global environmental goods andservices sector, having outstripped the global green business growth rate in 2010–11.93 Already the UK is the83 Guardian (29 April 2013) “Global carbon dioxide levels set to pass 400ppm milestone”84 HM Government (December 2011) The Carbon Plan85 Committee on Climate Change (April 2013) Reducing the UK’s carbon footprint and managing competitiveness risks86 HM Government (December 2011) The Carbon Plan87 Letter from William Hague, Secretary of State for Foreign & Commonwealth Office to Prime Minister David Cameron (19

March 2012). http://www.guardian.co.uk/environment/interactive/2012/may/18/william-hague-green-economy-letter88 See Globe International’s 3rd Climate Legislation Study: http://www.globeinternational.org/index.php/legislation-policy/studies/

climate89 See Clean Energy Act 2011, the Clean Energy Regulator Act 2011,the Climate Change Authority Act 2011, the Clean Energy

(Consequential Amendments) Act 2011 at http://www.cleanenergyregulator.gov.au/Carbon-Pricing-Mechanism/Legislation-and-regulations/Pages/default.aspx

90 See the Norwegian Parliament’s White Paper (http://www.regjeringen.no/pages/37858627/PDFS/STM201120120021000DD) andthe cross-party agreement to take forward the development of a new climate change law in Norway (http://www.stortinget.no/Global/pdf/Innstillinger/Stortinget/2011–2012/inns-201112–390.pdf).

91 See ‘China’s Policies and Actions for Addressing Climate Change’, The National Development and Reform Commission, ThePeople’s Republic of China, 2012: http://qhs.ndrc.gov.cn/zcfg/W020121122588539459161.pdf

92 CBI (July 2012) The Colour of Growth93 CBI (July 2012) The Colour of Growth



green financing capital of the world, with one third of all global asset deals between 2007 and 2012 receivingboth legal and financial advice from the UK.94 By 2015, the UK market could be worth as much as £150billion and employ over 1.2 million people.95 This is already making a significant contribution to the UKeconomy, with the green sector likely to have accounted for one third of the UK’s economic grown in2011–12.96 There is therefore a core source of expertise for transforming the whole economy.

33. To continue this growth, the Government must provide the stability that UK businesses need, to competeon the global stage. Leading businesses have warned the Chancellor that their continued investment in the UKis “critically dependent on a long-term stable policy framework.”97

34. The Climate Change Act acts as a roadmap for businesses and investors, providing a long-term, stableenvironment to allow them to make investment decisions with confidence. Even with this in place, the businesscommunity has repeatedly cited policy risk as a significant impediment to investment in the UK. John Cridland,Director General of the CBI, noted that, “building confidence in new technologies and markets is essential toget ahead of the game. If we can’t be sure that the policies of today will be the policies of tomorrow, investorswill simply spend their money elsewhere.”98 The Climate Change Act underwrites the Government’scommitment to tackling climate change, encouraging investment in innovation for the low carbon economy,reducing policy risk and leading to a reduction in the cost of capital.

35. The UK cannot afford to lose momentum in this low carbon race. While the industrialised world has ledthe way in the development of a low carbon economy, international competitors are catching up. Manydeveloping countries are winning market share and increasing their carbon productivity. Ernst & Young’sanalysis of the relative attractiveness of countries for renewable energy investments demonstrates that “a newworld order is emerging in the clean-tech sector with China now the clear leader in the global renewablesmarket”.99 HSBC100 predicts that the share of the three largest industrialised low carbon markets (EU, USAand Japan) will fall from 60% in 2009 to 53% in 2020, while the share of the three leading major emergingmarkets (China, India and Brazil) will grow from 25% to 34%. In the words of Barack Obama, “nobody inthis race is standing still”.101

36. Businesses argue that the Climate Change Act has set the direction of travel, so hesitation or delay isnow counterproductive and will allow international competitors to seize market share. The UK must ensure ithas the right policy framework in place to deliver confidence, growth, innovation and jobs in the future lowcarbon economy.

37. In 2010 the Coalition Government committed itself to being “the greenest government ever”. Policieslaunched since that time, such as the Green Investment Bank, Green Deal and mandatory carbon reporting forcompanies listed on the London Stock Exchange, have been welcomed as evidence of the Government’s desireto drive the transition to a new economy.

38. However there has been no overarching strategy to accelerate the shift to a low carbon economy and theGovernment has made a series of retrospective or short-notice changes to existing policies which haveundermined investor confidence. It decided to review the Fourth Carbon Budget in 2014, there have beenmixed messages from government ministers on a number of vital issues and Budget 2013 offered tax breaksfor shale gas, but largely ignored the UK-based green businesses that are already creating a trade surplus of£5 billion.102 The CCC has noted the “high degree of uncertainty about development of the power systembeyond 2020 [which] threatens fundamentally to undermine the EMR [Electricity Market Reform]. Unless thisis addressed, projects coming on to the system before 2020 are likely to be at high cost and there could wellbe an investment hiatus for projects coming on after 2020. Therefore, Government action is necessary toresolve these uncertainties in order that the UK can gain maximum economic and employment benefit fromthe move to a low-carbon economy.”103

39. The Aldersgate Group is deeply concerned by the uncertainty created by the Government’s GasGeneration Strategy104. This contemplates three “pathways” for gas generation and the carbon intensity of thegrid by 2030. One of these proposes a grid average of 200g of CO2 per kilowatt hour, which is four times thelevel recommended by the Committee on Climate Change, to put the UK on the most cost-effective path todecarbonise. By the Government’s own admission, this pathway would be incompatible with current legislatedtargets and would require the Fourth Carbon budget to be revised upwards. “Only if the world were to abandon94 Green Alliance (August 2012) Green economy: a UK success story.95 Department of Business Innovation & Skills (BIS) (December 2010) Growth Review Framework for Advanced Manufacturing.96 CBI (July 2012) The Colour of Growth97 Letter reported in The Telegraph (8th October 2012) “Businesses threaten to withdraw investment if Government does not go

green enough.” http://www.telegraph.co.uk/news/politics/9593184/Businesses-threaten-to-withdraw-investment-if-Government-does-not-go-green-enough.html

98 John Cridland writing in the Foreword of CBI’s publication (July 2012) The Colour of Growth99 Ernst & Young (November 2010) Renewable Energy Country Attractiveness Indices.100 HSBC (September 2010) Sizing the Climate Economy.101 The White House (26 May 2010) Remarks by the President on the Economy.102 CBI (July 2012) The Colour of Growth103 Committee on Climate Change (May 2013) Next steps on Electricity Market Reform—securing the benefits of low-carbon

investment104 Department of Energy & Climate Change (DECC) (December 2012) Gas Generation Strategy. https://www.gov.uk/government/

uploads/system/uploads/attachment_data/file/65654/7165-gas-generation-strategy.pdf



attempts to limit the risk of dangerous climate change would there be significant cost savings from a strategyfocused on investment in gas-fired generation.”105

40. Contradictory messages from Government are coming at a pivotal time. Projections from the Departmentof Energy and Climate Change (DECC) show that investment in renewables will hit a cliff in 2020, if accessto the Renewables Obligation is closed in 2017, as currently planned.106 SSE warns that “Sufficient certaintythat renewables will be a long-term part of the energy system, well beyond the current 2020 cliff edge, isneeded in order to allow the industry to mature and put renewables on a path of cost reduction that will steadilyreduce and eliminate the need for support.”107 The CBI warned Government prior to publication of its gasstrategy, that an “over-reliance on new gas would leave us exposed to global price and supply fluctuationsand jeopardise our carbon targets, so we need to build more of everything, including renewables, nuclearand CCS.”108

41. Business requires a long, loud and legal policy framework, supported by Government messaging, thatbuilds policy coherence.

42. It is not feasible to “let the market decide”, to tackle market failure. The Executive Director of UNEP,Achim Steiner argued, “There’s a perception that climate change legislation is about government running theeconomy, but the fact of the matter is that much of what we talk about in terms of climate change legislationis to set targets, within which the economy then makes choices.”109 Left to its own devices, the market willfail to respond swiftly enough to the threat posed by global climate change, as it has to previous threats:“Markets also malfunction if there are information problems, if firms have monopolistic power or if innovationis not properly rewarded.”110 The Climate Change Act and its carbon budgets provide the framework, whichmust be supported by Government statements, in response to which businesses make choices.

The operation and management of the carbon budgets, including: the accountability and governancearrangements, and the extent to which the EAC’s previous concerns and recommendations have beenaddressed; the effectiveness of the overall management system, including for meeting carbon budgets bysector; and the current status, operation and impact of the National Emissions Target Board

43. The systems for operation and management of the carbon budgets are sound. The Committee on ClimateChange (CCC) was established under the Climate Change Act 2008, as an independent body to adviseGovernment on the UK’s progress in reducing carbon emissions and preparation for climate change. TheAldersgate Group fully supports the CCC’s recommendations and management of the carbon budgets. It is awell-respected body that provides expertise in climate change targets and is a credit to the UK’s policylandscape.

44. The CCC’s carbon budgets are based on the best possible evidence and assessment, which helpAldersgate Group members to plan for a decarbonised future. Data is made publicly available, which providesa common point of reference for discussions between government, business and civil society. The CCC providesconsistency and independence, helping to smooth out the sudden policy shifts from Government, which aredestabilising for business and investors.

45. Management of the carbon budgets cannot, however, be undertaken by the CCC alone; the Governmentmust respond. The CCC has called repeatedly for a step change to address the gap between the UK’s long-term environmental ambitions and the policies in place to address them. To ensure the carbon budgets are metand the UK maximises the economic opportunities, new policies or programmes are required. For example werecommend that the Government:

— incorporates a major overarching, low carbon element into its industrial strategy;

— takes the opportunity to explore how long-term trends (such as resource insecurity and climatechange) will affect competitiveness across the priority sectors; and

— adopts an overlaying strategy that seeks to maximise economic opportunities. The strategyshould be accompanied by a set of economic and environmental indicators against whichprogress towards a low carbon and resource efficient economy may be measured.

46. The Aldersgate Group welcomes a number of developments that have been undertaken since the EAC’slast inquiry into carbon budgets. In our 2011 response, we recommended that the Government address issuesof competitiveness for energy intensive industries, that the CCC should review the Fourth Carbon Budget and105 Committee on Climate Change (May 2013) Next steps on Electricity Market Reform—securing the benefits of low-carbon

investment106 See analysis presented by SSE here: http://news.sse.com/listing/2013/02/blog-why-the-uk-needs-a-2030-decarbonisation-target/107 SSE’s Keith Maclean quoted in the Guardian, 25 October 2011, http://www.guardian.co.uk/environment/2011/oct/25/uk-

renewables-2030-wwf108 The Guardian (14 October 2012) “Business bosses attack George Osborne’s policy of ‘dash for gas’”. http://www.guardian.co.uk/

business/2012/oct/14/george-osborne-dash-for-gas109 Achim Steiner interviewed by RTE Radio 1 on 22 April 2013: http://www.rte.ie/radio/utils/radioplayer/rteradioweb.html#!rii=

9%3A20192627%3A83%3A22%2D04%2D2013%3A110 Bowen and Fankhauser (26 August 2012) Blog: “Green Growth” is an attractive concept for analysts and policy makers alike,

but to be effective it must be backed up by effective collection action, not spin.



make a recommendation to Government, prior to the Government’s own review in 2014, and that consumption-based emissions should be considered for inclusion in the UK’s carbon footprint. All these recommendationswere included in the EAC’s report to Government, and have subsequently been actioned.

47. We welcome the CCC’s review of consumption-based emissions, which found that the UK is now oneof the world’s largest net importers of emissions, “with a carbon footprint that is around 80% larger than itsproduction emissions.”111 We support the Committee’s decision to continue to monitor carbon budgets on thebasis of production emissions, reflecting the UK’s sphere of direct control, but welcome the ongoingmeasurement of the UK’s consumption-based emissions and recommend that these be regularly reported. If aglobal deal is not forthcoming, other means of pricing in carbon should be considered.

What the Government’s response should be to the Committee on Climate Change’s June 2013 assessment ofemissions reduction performance, and whether the carbon budgets should be tightened or relaxed

48. The carbon budgets represent the minimum ambition if the UK is to meet its legislated target of 80%reduction of emissions on 1990 levels by 2050. As described above, in the context of the climate science, theevolving international framework, the impact of the UK’s domestic policies and the benefits of clear policy tobusiness, the carbon budgets should not be relaxed.

49. The Aldersgate Group supports the CCC’s recommendation that the second and third carbon budgets betightened to ensure that the UK can meet subsequent targets. “The [Fourth] Domestic Action budgetrecommended for 2023–27, and the indicative 2030 target, will be difficult to achieve unless the UK enters the2020s at a level of emissions consistent with the Intended budgets for the non-traded sector, rather than withthe less ambitious Interim budgets.”112 The CCC further notes, “from the third Intended budget to the fourthDomestic Action budget would entail a feasible reduction of 13% over a five-year period: from the third Interimbudget to the fourth Domestic Action budget would require a much more challenging 23% reduction.”113

50. The Government’s failure to implement the CCC’s recommendations will make it harder than necessaryto meet the Fourth Carbon Budget, which in itself is a measure to ensure that the UK is on course to meet the2050 legislated emissions reductions. In turn, the ambitions of the Climate Change Act amount to the minimumaction required of the UK to play its part in a global effort to prevent global average temperature rises inexcess of 2ºC.

51. The Energy Bill represents a once-in-a-generation opportunity to decarbonise the UK’s power sector,attracting £110 billion into an economy that badly needs investment; providing a hedge against fossil fuel pricevolatility (which hits businesses and households), and lowering the cost of capital for the UK to meet is carbonbudgets. Recent Government statements have seriously challenged the Bill’s clarity of purpose and underminedthe investment community’s confidence in the UK as a safe place to build low carbon energy.

52. The Committee on Climate Change (CCC) made this clear in an open letter to Ed Davey on 13 September2012: “The apparently ambivalent position of the Government about whether it is trying to build a low-carbonor a gas-based power system weakens the signal provided by carbon budgets to investors. It makes morepronounced the perceived risk that the Electricity Market Reform (EMR) will perpetuate the current stop-startapproach to investment in low-carbon technologies. As a result, the cases for low-carbon business development,capital allocation, innovation and supply chain investment are undermined, damaging prospects for requiredlow-carbon investments.”114

53. In response to this uncertainty, the Aldersgate Group is calling for the Government to underwrite thecarbon budgets by including a carbon intensity, or decarbonisation target in the Energy Bill for 2030. Thedecarbonisation target must be set by 2014 in time to be embedded into the architecture of the ElectricityMarket Reform, and met by 2030. Advice must be sought from the CCC in setting the target and planning forhow it would be achieved.

54. A decarbonisation target would provide a clear, strategic direction, with objectives against which policiescould deliver. This would build business and investor confidence, which is currently being eroded by mixedmessages from Government.

55. The Government has postponed the decision on a decarbonisation target until 2016, while the target thatmay be decided would not have to be met by 2030. This decision is not required to take account of the CCC’sadvice and there is no guidance on how any target that is set, would be met, or would interact with the otherelectricity market reform proposals. This creates a high degree of uncertainty, which “will adversely impact onsupply chain investment decisions and project development, therefore undermining implementation of the Billand raising costs for consumers.”115

56. Neil Bentley, Deputy-Director General of the CBI, said just before the Bill’s introduction that, “TheEnergy Bill must deliver the pace of decarbonisation required to achieve [the carbon budgets]. The link to the111 Committee on Climate Change (April 2013) Reducing the UK’s carbon footprint and managing competitiveness risks112 Committee on Climate Change (December 2010) Fourth Carbon Budget report, page 12.113 Committee on Climate Change (December 2010) Fourth Carbon Budget report, page 31.114 http://hmccc.s3.amazonaws.com/EMR%20letter%20-%20September%2012.pdf115 Letter from Lord Deben, Chair of the Committee on Climate Change (25 February 2013) to DECC Secretary of State, Ed Davey:

http://www.theccc.org.uk/wp-content/uploads/2013/02/Ed-Davey-February13.pdf



existing Climate Change Act targets should be enshrined in the Energy Bill”.116 The Government’s own impactassessment of the Energy Bill found that early decarbonisation of the power sector would result in significantnet benefits to the economy: £5.5 billion under a 50g/kWh pathway and £4.5–7.8 billion under a 100g/kWhpathway—in contrast to only £2.2 billion under a 200g/kWh pathway.117 A group of leading businesses arguedthat to secure further investment in low carbon power generation, a decarbonisation target by 2030 should beincluded in the legislation and “postponing the 2030 decision until 2016 creates entirely avoidable politicalrisk. This will slow growth in the low carbon sector, handicap the UK supply chain, reduce UK R&D andproduce fewer new jobs.”118

57. The lack of a legislated decarbonisation target risks increasing the costs for renewables (as well asnuclear and CCS) to 2020 that have already been largely agreed; contracts for difference for renewable power,nuclear power, and CCS will come from the Levy Control Framework, capped at £7.6 billion in 2020. It wouldbe possible to meet Britain’s legally binding EU 2020 renewables target and issue contracts for differenceusing the Levy Control Framework by largely importing the equipment and materials needed. In other words,we would be spending this money without securing the economic benefit from the investment in terms of jobsand growth. A 2030 decarbonisation target in 2014 would provide greater long-term certainty that would helpto ensure that the money spent this decade would build a competitive domestic supply chain. This would bothlower the cost of electricity generation and give a much-needed boost to British manufacturing.

58. Government has argued that gas would be cheaper for consumers than renewable sources of power. Thisis impossible to know with any certainty, because it is dependent upon unknowable future factors, such as thefuture price of gas, the cost of CCS and learning rates for renewable technologies. Intuitively, as Lord Debennotes, “to invest in low-carbon technologies to 2020, then to focus on investment in gas in the 2020s, and tomove back to investment in low-carbon generation in the 2030s simply doesn’t stand up. Such an approach islikely to drive up costs.”119

59. The Government’s policy challenge is to manage these uncertainties by hedging against the risk of beingwrong. Analysis120 suggests that although a high gas power system has lower baseline costs under particularassumptions, its sensitivity to these assumptions is far higher than under a high renewables system. Undercertain circumstances, the costs of a gas intensive power sector could be up to 98% higher than the forecastcentral scenario, which, in practice, would almost certainly result in the Government being forced to abandonits low carbon policy initiatives. Relying too heavily on gas would mean taking the risk that, if CCS is costlierthan predicted, or we under deliver on energy efficiency, the Government will be forced either to increase thecarbon price sharply, or to abandon its legislative decarbonisation commitments. Relying too heavily on gasmeans backing the UK into a position where we stand a chance of having to choose between affordable or lowcarbon energy further down the line. This would not be responsible governance.

60. The robust case and overwhelming support for a binding 2030 power sector target has been madeabsolutely clear. It is now time for the Government to step up to the task. Failure to do so would deliveranother severely damaging blow to investor confidence.

61. A target to reduce GHG emissions by 2030 must also be applied at EU level, to provide certainty to pan-European businesses and drive investment. With low carbon goods and services being traded across borders,environmental policies across the Common Market must align to create a level playing field. The EuropeanCommission is now consulting on the framework for climate and energy policies to 2030121 and businessesare urging for “an ambitious policy on climate and energy targets [that] will drive investment.”122

62. The UK will benefit from the EU’s GHG emissions reductions targets reflecting its own. The EU blocis the UK’s largest trading partner and “eurozone economies do more business with the UK than any othercountry, including the US.”123 Aligned environmental policies will ensure a market for the UK’s low carbonbusinesses that, as discussed above, have already carved out 3.7% share of the global market.124

63. The EU must equal the ambition shown by its member states. The UK Chancellor, George Osborne,announced that, “We’re not going to save the planet by putting our country out of business”, and committed116 Speech by Neil Bentley, CBI Deputy Director General (18 October 2012) “The future of UK energy policy”.

http://www.cbi.org.uk/media/1797512/the_future_of_uk_energy_policy_-_neil_bentley_speech_oct_2012.pdf117 DECC Impact Assessment (8 May 2013) Electricity Market Reform—ensuring electricity security of supply and promoting

investmetn in low carbon generation. https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/197904/cfd_ia_may_update.pdf

118 Letter to the Chancellor from Alstom, Areva, Doosan, Gamesa, Mitsubishi and Vestas (7 March 2013) “2030 Carbon IntensityTarget for the Electricity Sector.” http://www.vestas.com/Files/Filer/EN/FINAL_Industry_letter_-_2030_target_-_7_March_2013.pdf

119 Lord Deben’s Foreword in Committee on Climate Change (May 2013) Next steps on Electricity Market Reform—securing thebenefits of low-carbon investment

120 E3G (October 2012) Risk managing power sector decarbonisation in the UK. Avoiding the risks of a new “Dash for Gas”.121 European Commission (March 2013) Green Paper: A 2030 framework for climate and energy policies. http://eur-lex.europa.eu/

LexUriServ/LexUriServ.do?uri=COM:2013:0169:FIN:EN:PDF122 Vestas press release (21 May 2013) “Engel encourages EU leaders to adopt 2030 climate and energy targets that will change

the balance of incentives to favour green energy investments. http://www.vestas.com/en/media/news/news-display.aspx?action=3&NewsID=3277

123 Stephanie Flanders (21 January 2013), “Trading places: The UK, Germany and France”. http://www.bbc.co.uk/news/business-21127037

124 CBI (July 2012) The Colour of Growth



to “cut our carbon emissions no slower but also no faster than our fellow countries in Europe.”125 If the EUdelays or weakens its action on GHG emissions reduction commitments, it will undermine the confidence ofits member states to take action themselves.

64. If the EU backpedals or stalls in its action on climate change, it will undermine its reputation as a leaderin international climate change negotiations. With two out of the next three UN climate change conventions tobe held in Europe, it has never been more important for the EU to show leadership and provide an ambitious,transparent, stable and predictable pathway to decarbonisation.

23 May 2013

Written evidence submitted by Friends of the Earth

Summary

Our response covers four points. All four should be seen in the context of extreme urgency on climatechange—global concentrations of greenhouse gases are now 400ppmv and rising,i and nations’ current pledges,even if met, would likely only limit temperature rises to around 3.5 degreesii—which would be likely to havedevastating consequences for humanity. Action from almost all nations needs to be ramped up; global emissionsneed to peak as soon as possible, and then fall rapidly.

— The UK’s carbon budgets and Climate Change Act are seen internationally as a sign ofcollective cross-party political leadership, transcending day-to-day party politics, which hasbeen a huge boost to British climate diplomacy, and a stimulus for climate legislation aroundthe world. Attempts to weaken the carbon budgets or Act would have negative consequencesinternationally as well as nationally.iii We urge that the Review must strengthen, not weaken,the UK’s climate response.

— The UK needs to tighten its territorial carbon budgets so that they are commensurate with thethreat of climate change, and the UK’s fair share of responsibility for tackling it. Currentbudgets fall short of this on both counts.

— UK 2030 target should be an 80% cut on 1990 levels at the least.

— The UK’s policies are not adequate to tackle even current carbon budgets, and needsubstantial strengthening:

— Power sector progress is hampered by Treasury refusal to allow a 2030 decarbonisationtarget, and its hostility to carbon budgets; this is damaging investor confidence.

— The Government is overly focussed on energy supply and does not look adequately attackling demand.

— The UK needs a broader strategy for doing its part in tackling climate change, which goesbeyond territorial emissions, and delivers a much greater leadership role internationally to tackleclimate change.

— We suggest that the Committee should launch a wide-ranging inquiry into the role of theUK financial sector in tackling climate change, particularly fossil-fuel finance, given themajor role played by UK financial institutions in financing investments globally.

— Support for fracking and tax breaks for new North Sea Oil and Gas exploration are atodds with climate change policy.iv It is adding to an already huge “unburnable carbon”v

problem, and sending confusing signals to investors on the UK Government’s attitudetowards tackling climate change.

— The UK’s proposals for an EU 2030 target should be based on a fair share for the EU inkeeping emissions below 2 degrees: this would be an 80% cut in greenhouse gas emissionson 1990 levels.

Main Response

1. The Review should seek to strengthen, not weaken, the Climate Change Act

It is damaging for the Treasury to be forcing a review of the 4th carbon budget, with a view to weakeningit. The signals this sends to the investor community are poor, and will drive up the cost of capital and delayinvestment in the UK: the opposite of what Treasury should want. The National Audit Office’s 2013 report forTreasury on infrastructure said that: “Electricity generating companies and investors we spoke to wereconcerned by what they perceived as a lack of clarity over the types of electricity generation projectsgovernment wishes to promote, and the price support mechanisms and levels for different generation methods.As a result, the electricity generating companies were holding back on some potential investments”.vi It alsosends a poor signal globally, when the UK’s Climate Change Act and carbon budget process has been describedas “one of the main stimuli for climate legislation around the world”.vii

125 George Osborne’s conference speech, October 2011. Read the full speech here: http://www.telegraph.co.uk/news/politics/georgeosborne/8804027/Conservative-Party-Conference-2011-George-Osborne-speech-in-full.html



The only advantage of this review is that it offers the opportunity to tighten carbon budgets to the levelrequired to tackle climate change adequately, rather than the Treasury’s seeming intention to weaken the carbonbudgets. We hope that the EAC would invite the Chancellor to give evidence to the Committee on theTreasury’s views on carbon budgets.

2. Tightening UK carbon budgets:

— The UK’s carbon budgets are based on a global carbon budget which has a greater than 50% chanceof exceeding two degrees, and also a 10% chance of exceeding three degrees:

— 50% is very high risk for a temperature rise we “must…not exceed”.viii Reducing the risk to33% (the IPCC definition of “unlikely”) would reduce the carbon budget considerably.

— 2 degrees is in any case already very risky—James Hansen in May 2013 evidence to the EACdescribes it as “an upper bound” of what is acceptable; Tyndall Centre describe 2 degrees as“the boundary between dangerous and extremely dangerous”.ix Many countries advocate a 1.5degree target.

— Above 2 degrees increases risks of irreversible tipping points, as well as worse droughts, floodsand other impacts. A 10% chance of exceeding three degrees seems an extremely risky courseto accept.

— They are based on an unreasonably large appropriation of that global carbon budget for the UK:

— The CCC’s first report in 2008 discusses different countries’ responsibilities, and advocate thatonly by 2050, there should be equal per capita emissions.

— This is an extremely pro-developed country position to take, appropriating far more than anequal share of the remaining global carbon budget to developed countries.

— Developed countries no longer have the excuse that they need time to adjust—discussions onequitable approaches to climate change have been ongoing for two decades.

— Other countries would give lower shares to developed countries, allowing developing countriesgreater “emissions space” to develop and make the transition to low-carbon economies.

— The CCC also state that “it is not part of the Committee’s remit to propose a specificmethodology for the purposes of international negotiations” and “nor do we make a judgementabout which methodology is ethically preferable to another”.x

— However, they have had to make such a choice, in setting the UK budget, and have explicitlychosen one which benefits the UK greatly at other countries’ expense. We hope that theCommittee would look into the position the CCC and Government have taken regarding theUK’s responsibility on climate change as reflected in carbon budgets.

— These two assumptions mean the UK’s carbon budgets are in our view far too lax at present. Anequal per capita share of the remaining carbon budget for a likely chance of avoiding two degreeswould mean UK cuts of 80% in greenhouse gas emissions by 2030, on 1990 levels. This focus solelyon remaining carbon budgets also ignores all historical responsibility for climate change, so is stillvery generous to the UK.

— The CCC’s budget analysis is also based on assumptions around dates for global peaking ofemissions which now look unlikely to occur. If this is the case, this means greater global emissionscuts will be required in future. This, coupled with increased understanding of the science of climatechange and the likely impacts of 2 degree warming, suggest that these are further reasons fortightening the UK’s carbon budget.

3. Stronger policies

Within the UK, we have major concerns over progress towards meeting even existing carbon budgets.

— The Carbon Planxi notes that existing policies, even if implemented, are not sufficient to keepwithin the 4th Carbon Budget.

— The CCC have repeatedly stated in their annual reviews that a policy “step change” is required.

— There are weak institutional arrangements in the power sector. The National Policy Statementson energy infrastructure contain guidance that climate change mitigation cannot be consideredin the final planning decision; and the Emissions Performance Standard is too weak to preventnew high carbon infrastructure. In this context, there is a strong risk that high carbon investmentwill crowd out low-carbon. A 2030 decarbonisation target in the Energy Billxii currently beforeParliament would send a necessary signal to potential investors that the UK is genuinelycommitted to low-carbon investment in the power sector beyond 2020.

— The attitude of the National Policy Statements to climate change is symptomatic of a broaderconcern that the overarching carbon budgets may be seen in some quarters of Government asa type of “carbon-magic”—whereby the impact of a particular decision on climate can bedisregarded because policies elsewhere will ensure that carbon budgets will be adhered to.



— We are very concerned that the Government’s attitude is to (grudgingly) support low-carboninfrastructure, but AT THE SAME TIME still support large amounts of high-carboninfrastructure—such as more roads, gas-fired power stations, oil and gas exploration andairports. This is not credible or consistent—it is akin to a healthy eating strategy promotingfruit and veg while also opening a chain of deep-fried-pie shops.

— There is a heavy overemphasis on supply, and underemphasis on demand, right across theeconomy, most evident in the fossil fuel sector:

— The Government’s fossil fuel strategy is “to continue maximising the recovery ofindigenous hydrocarbon resources—on land and at sea”xiii

— By contrast, the Government expects almost no progress at all in cutting oil or gasconsumption between now and 2030. Its energy projections see oil consumption fallingby 3%, and gas consumption falling by 0.3%.xiv

— If the UK wants to reduce reliance on fossil fuel imports, a strategy to minimise use offossil fuels, rather than maximising domestic extraction, would be far more suited totackling climate change.

— Carbon Tracker estimate that only 20% of current global fossil fuel reserves can be safelyburned.xv The UK policy to add it to its own reserves—for example through fracking orthrough tax breaks to exploit North Sea heavy oils is simply adding to a vast quantity ofalready unburnable carbon.

— New analysisxvi from Friends of the Earth argues that the UK has already extracted its fairshare of safely burnable carbon.

— Local carbon plans are needed to drive emissions reductions—there needs to be a strongrelationship between national carbon budgeting and local action. The CCC have summarisedthe situation in their May 2012 report.xvii

— Aviation and shipping should be included in carbon budgets, with much stronger policies totackle their emissions. It is poor policy to make decisions about airport expansion withoutproperly measuring and having a plan to reduce this sector’s emissions.

— We repeat our concern expressed to the EAC’s previous carbon budget inquiry that theGovernment should adopt the CCC’s recommendation that the 4th carbon budget should be metwithin the UK, without credit purchase. The potential to use credit purchases has long been agaping loophole in the Climate Change Act—the EUETS is not a capped system as it allowsvast quantities of credits to be purchased from countries without emissions caps.

4. The UK’s global role

The purpose of the UK Climate Change Act is to ensure the UK plays its part in preventing dangerousclimate change. The Act focuses on the UK’s territorial emissions. However, there are other major effects theUK can have on preventing climate change, beyond its territorial emissions. In keeping with the spirit andintention of the act, these other effects should be addressed as well. For example:

— UK has a major role through its globally dominant financial sector: the FTSE 100 has a high-fossil fuel intensity; the UK has a $2 trillion pension sector; UK based banks have a major rolein financing energy investments. We suggest that the Committee should conduct a wide-ranginginquiry looking at the UK financial sector’s role in preventing dangerous climate change, witha focus on fossil fuel investment.

— The UK’s inputs to the forthcoming EU 2030 Greenhouse Gas targets—the UK is likely topropose around 40–50%, when again an EU wide target of 80% is more appropriate. The UKshould be clear about what its proposal is assuming for emissions reductions for other countries,and what chance of exceeding 2 degrees.

— UK’s consumption of products, for example from net imports such as agricultural produce andmanufactured goods, makes us effective net imports of GHGs. These fall outside the scope ofthe Climate Change Act, but have real climate implications. The UK needs to implement astrategy to tackle these emissions.

— Leadership role on core technologies—offshore wind is one example of an area where the UKis leading, and where there could be major, faster deployment in other countries, if the UKleads the way. The same applies for other marine technologies.

— Leadership role on carbon budgeting. The UK’s Climate Change Act and its carbon budgetingprocess is a world first—this can be replicated elsewhere, so attempts to weaken it should bestrongly resisted.

— Leadership in international negotiations. We are heading for 3.5 degrees plus. As James Hansenargued in his May 2013 oral evidence to the EAC, the UK has the highest per capita historicalresponsibility for climate change—the UK must lead, and do this by advocating andimplementing clear, fair positions and policies which would keep temperatures below 2 degrees.

24 May 2013



Referencesi See Keeling curve data at Scripps Institution of Oceanography

ii See http://www.climateactiontracker.org/

iii See John Ashton former special representative for climate change to the UK Government. Speech “Comeththe hour”, May 2013.

iv See Friends of the Earth, 2013. UK fossil fuel tax breaks. May.

v Carbon Tracker, 2013. .

vi NAO, 2013.

vii John Ashton speech “cometh the hour”, op.cit.

viii Eg, EU Council, 2007. . “The EU must adopt the necessary domestic measures and take the leadinternationally to ensure that global average temperature increases do not exceed pre-industrial levels by morethan 2°C.”ix Tyndall Centre, 2011. Written evidence to Environmental Audit Committee on Carbon Budgets. 27 June

x CCC, 2008. . Page 30.

xi HM Govt, 2011. . Annex B.

xii See Friends of the Earth and Greenpeace, 2013. April

xiii Ed Davey, 2013. . 18 March.

xiv DECC, 2012. . Annex C.

xv Carbon Tracker, 2013. .

xvi Friends of the Earth, 2013 (forthcoming). Unburnable carbon—how much fossil fuel can the UK fairlyextract?

xvii CCC, 2012. How local authorities can reduce emissions and manage climate risks.

Written evidence submitted by Terry O’Connell

The Climate Change Act and its budgets need revision. They are inadequate because:

1. The Committee on Climate Change gives only 44% odds for success in avoiding more than a 2°Ctemperature rise. Once “feedback effects” are included, emissions contraction should be complete by 2050 ifwe are to give better than 50:50 odds for keeping within the 2°C rise.

2. The CCC prescribes 2016 as the peak emissions year and 2050 as the International “Convergence” year,foregoing the need for international negotiation of these dates.

3. The CCC and UKMO omit major feedback effects from calculation of their “Contraction &Concentrations” scenario.

1. Committee on Climate Change Review of Carbon Budgets

1.1 Avoiding Dangerous Climate Change—2006

4. The need for proper accounting for climate-carbon cycle feedbacks was recognised by UK governmentwell before the Climate Change Act was adopted. Following the 2005 Exeter scientific conference, thegovernment published “Avoiding Dangerous Climate Change”. Amongst its conclusions is clear recognition ofthe importance of feedbacks:

“We conclude, therefore, that any mitigation or stabilisation policy which aims to prevent‘dangerous’ climate change through stabilisation of atmospheric CO2 levels must take into accountclimate-carbon cycle feedbacks and their associated uncertainty. Failure to do so may lead to asignificant underestimate of the action required to achieve stabilisation”. (Chapter 34.4 Conclusions).

1.2 Building a Low Carbon Economy—2008

5. The Committee on Climate Change was established later under the 2008 Climate Change Act. With theHadley Centre, the Committee produced the global and UK carbon budgets published in “Building a LowCarbon Economy” at the end of 2008.

6. Feedbacks were recognised as a major consideration in the approach to setting climate policy objectives(Part 1, Chapter 1 Setting a 2050 Target). In summary, feedback loops were divided into two categories:



— Those that determine the overall temperature response to a given increase in GHGconcentrations. The overall strength of this temperature feedback is often measured as“climate sensitivity”.

— Those that further alter GHG concentrations in response to climate change. In particular, carboncycle feedbacks are likely to add to CO2 concentrations and are incorporated into the latestmodel projections as mentioned in Section 1.

7. Other feedback processes were suggested such as release of natural methane from northern wetlands orfrom oceans, not currently incorporated in models. It was thought possible that as temperatures rise the climatesystem could show new and altered feedback processes, not included in current model projections and that thiscould make it more difficult to stabilise concentrations and temperatures.

8. In Chapter 1.6, “Responding to developments in science and future emissions growth: possible futureadjustments to objectives”, the door was opened to future adjustment of budgets in response to a list ofpossible influences:

“Actual achieved emissions could diverge from our modelled trajectories. If, for instance, emissionsdo not peak in 2016 but continue to rise, or if emissions increase at a faster rate than anticipatedbefore the peak, then the probability of keeping below a given temperature will be reduced. Tomaintain these probabilities cumulative emissions from now to 2050 will need to be in line withthose implied by the recommended targets, and overshoots in the early years will need to be matchedby more rapid reduction later. In this case Kyoto gas emissions in 2050 would need to be lower than20–24 GtCO2e”.

9. This would include making provision for known and potential feedbacks. Already, it is also necessary toaccount for the change in peak emissions year from 2016 to 2020 agreed in Durban.

10. Later, in Chapter 2, the following ambiguous statement is made:

“Our approach to judging the desirability of the emissions reduction strategy which we recommendedin Chapter 1 does not therefore rest on IAM results. Rather we believe that the dangers of significantclimate change set out in Chapter 1, and in particular the danger of self-reinforcing feedback loopsand irreversible effects, can reasonably be judged to be so great that if they can be avoided by asmall sacrifice of GDP they should be. We believe that the case for action is clear”. (Part 1, Chapter2, Page 75)

11. Here, there is a stated preparedness to change the emissions reduction strategy in response to dangerousfeedback loops, but quantified only in terms of “a small amount of GDP”. No further elaboration on the case foraction is given. This conclusion is also given in the Technical Appendix to Building a Low Carbon Economy:

“The Committee believes that in particular the danger of self-reinforcing feedback loops andirreversible effects can reasonably be judged to be so great that if they can be avoided by a smallsacrifice to GDP they should be”. (Technical Appendix Chapter 2)

12. No further statement on the quantification of feedbacks was made in this first report of the Committee onClimate Change.

1.3 Fourth Carbon Budget Report—2010

13. The above references seem to represent the published position within the CCC from 2008 until theFourth Carbon Budget Report came out in December 2010.

14. This report repeatedly refers to continuing uncertainty in the science, the climate models and the globalcarbon budgets that are derived from them. In particular, concern is expressed about potentially importantprocesses cited in 2008 that are known still to be missing from leading model projections. These includedadditional CO2 and CH4 release from large natural reserves in wetlands, permafrost and oceans. It states thatearly results suggest that these sources may add additional warming of the order of several%, but that largeuncertainties remain.

15. However, in the Executive Summary the following reaffirmation of the 2008 budgets is given:

“Global emissions pathways. We have assessed the latest climate science and the internationalcontext. Our conclusion is that the climate objective and the global emissions pathway underpinningour first report recommendations remain appropriate”.

16. In its Policy Statement of May 2011, again the government stated that the proposed level of the fourthcarbon budget is consistent with what the UK needs to do to play its part in international efforts to limit theexpected increase in global temperature above pre-industrial levels to two degrees Celsius, consistent withscientific advice on avoiding the dangerous effects of climate change.

17. This fourth budget report states that from December 2010, CCC budget advice reports will be deliveredevery five years (ie advice on the fifth carbon budget, covering the period 2028–32, will be provided in 2015).Proper provision for feedbacks and other uncertainties must be made as soon as possible before then.



1.4 UKMO website current view on feedbacks (last updated 29 November 2010)

Feedbacks that aren’t included in the models

18. There are some feedbacks they have recognised but there remain big uncertainties. Not enough is knownabout them to include their effects in climate models. However, they are potentially very serious so there isstill a lot of work going on to try to understand them and get them into our projections.

19. Methane hydrates (positive feedback) are potentially a very big deal which could change our wholeunderstanding of climate change, but it’s very uncertain.

20. Permafrost methane (positive feedback) is a big question mark but also potentially a very big deal. Whenthe soil thaws due to rising temperatures, these gases could become unlocked and be released as CO2 ormethane. At the moment they don’t know how much of the CO2 is stored away or to what extent it would bereleased when the soil thaws.

21. They need to figure out how to resolve them on a global scale in a climate model before this effect canbe included in their projections. Within the next five years they hope to know enough about this process tostart including its effects.

Other feedbacks they don’t yet know about

22. They assume there are hidden feedbacks in the system, but as long as we keep climate change relativelysmall we can be confident these unknown issues won’t come into play.

23. However, as we move further away from the present climate, we are exposing ourselves to more riskabout these unknowns. Even only taking into account the climate feedbacks we are aware of now, they pose agreat incentive for us to quickly reduce our greenhouse gas emissions to keep global temperature rises toa minimum.

1.5 Conclusion

24. Despite the reassurances in the Fourth Carbon Budget Report and the government’s 2011 policystatement, it is clear from the above sources that the current carbon budgets are inadequate. This is in part dueto the lack of recognition and accounting for a number of known feedbacks. The question remaining is by howmuch? Until this is addressed, we cannot have a UNFCCC-compliant mitigation strategy.

25. COP 17 in Durban agreed to increase ambition immediately and to negotiate a new legally bindinginternational climate agreement by 2015 for implementation from 2020. This gives a later peak emissions yearthan the government’s 2016 date upon which UK carbon budgets are based.

26. In apparent contradiction of the current peak of 2016, the CCC posted the following on its website inMarch 2013: “Modelling work with the Met Office Hadley Centre in 2008 showed that global emissionstherefore ought to peak by 2020 and halve by 2050”.

27. The later the peak, the faster global emissions reduction must be to stay within a given global temperaturelimit and carbon budget . 2016 4% Low now requires change in light of this.

28. The CCC has said that the next IPCC report covering warming projections is expected to be publishedthis Autumn (WG1 September 2013) and that they will consider any implications in their review of the FourthCarbon Budget at the end of this year. There is already much to be done.

23 May 2013

Written evidence submitted by the Environmental Investigation Agency

1. Introduction to the EIA

Founded in 1984, the Environmental Investigation Agency (EIA) is an NGO and has been actively involvedin the greenhouse gas (GHG) emission policy debate for over 20 years.

2. F-gas Background

F-gases (fluorinated gases) are a suite of GHGs containing fluorine. Used in various industrial andcommercial processes (predominantly refrigeration, air conditioning, foams and fire extinguishers), the mostcommon F-gases are hydrofluorocarbons (HFCs), although perfluorocarbons (PFCs) and sulphur hexafluoride(SF6) are also included. F-gases currently account for 3% of total GHG emissions in the UK (CCC, 2013, p.1),yet unlike other GHGs, most F-gases are 1,000–20,000 times more powerful than CO2 (Defra, 2012, p.1) interms of Global Warming Potential (GWP). Furthermore, UK F-gas emissions have grown significantly in thepast two decades, rising from 2 MtCO2e in 1995 to 12 MtCO2e in 2008 (CCC, 2010, p.131). HFCs in particularare growing the fasted, with associated CO2e emissions swelling by 8% per year from 2004–2008 (UNEP,2011, p.9). Spiralling HFC production, consumption and emissions must be addressed as a matter of urgency.Estimates project that global HFC emissions will increase to 3.6–8.8 GtCO2e yr-1 by 2050 (Velders et al., 2009;



Gschrey & Schwarz, 2009). The higher end of these projections means that HFC emissions will equal 19% ofall predicted CO2 emissions in 2050 in the absence of a CO2 stabilisation target.

3. EU Policy

Recognising the rising influence that F-gases such as HFCs were having on the global climate, the EUintroduced EC Regulation 842/2006 on certain fluorinated greenhouse gases (the F-Gas Regulation) whichcame into force in 2007 and focused on containment and recovery of F-gases. In 2011, the EU Commissioncontracted the Öko-Recherche research institute in Germany to produce a preparatory study, in part to assessthe effectiveness of the existing F-Gas Regulation and also to advise on future amendments to the Regulation.This study found that even with full implementation of the existing F-Gas Regulation, annual F-gas emissionsin the EU would actually increase by over 7% between 2008 and 2050, from 103,104 to 110,824 kt CO2e yr-1

respectively (Schwarz et al., 2011, p.158). This runs in stark contrast with the UK’s obligation under theClimate Change Act 2008 (which underpins the UK Carbon Budgets) to reduce GHG emissions by 80% by2050, compared with a 1990 baseline.

4. Future EU Policy

Following the Öko-Recherche study, in November 2012 the EU Commission released a proposal for arevised F-Gas Regulation (EC, 2012a). Amendments to this Regulation will go to a vote in the plenary sessionof the European Parliament in late 2013 and the associated ENVI Committee voted in June 2013 to supportbans on new HFC-based equipment in a wide range of sectors, in recognition of the fact that safe, cost-effectiveand energy efficient alternatives are already available. The Lithuanian presidency and Member States intend tohave several ‘Working Party on International Environment’ (WPE) meetings throughout 2013 on the existingproposals, in order to determine the EU Council’s position. During this stage, it is essential that the UK’sposition (coordinated via Defra) fully takes into account the scientific and technological evidence available.

5. Introducing Bans on New Equipment in the F-Gas Regulation

The EU Commission’s own preparatory study showed that new HFC equipment bans126 can be implementedin all the key sectors by 2020 (Schwarz et al., 2011, p.264), being replaced instead with technologies that relyon greener cooling chemicals including CO2, hydrocarbons or ammonia, all of which possess much lower (orzero) GWPs than HFCs. Such bans form part of the key amendments proposed by the European Parliament(and agreed by the ENVI Committee) as changes to the existing Regulation and it is important to note thatSchwarz et al.’s analysis restricted possible alternatives to HFC equipment to technologies that exhibit equal(or better) life-cycle energy efficiency ratings and are proven to be safe. Bans on new equipment using HFCsprovide chemical producers, manufacturers and end-users with genuine regulatory certainty. They send clearmarket signals with concrete timeframes for companies and investors in each subsector, spurring the necessaryplanning and capital investments. Furthermore their use is historically proven, with bans having been integralpolicy tools to enable the phase-out of ozone depleting substances under the Montreal Protocol.

6. SMEs and the Green Economy

The EU Commission’s impact assessment on the review of the existing Regulation found that a “strengthenedpolicy approach… …would provide opportunities for small innovative companies,” particularly if “bans ofproduction, use or placing on the market of F-gases in certain applications” were included (EC, 2012b, p.44).In the UK alone, there are over 40 SMEs providing HFC-free solutions to the country’s refrigeration and airconditioning needs, including manufacturers, component suppliers, contractors, installers, and research &training institutes (Shecco, 2012, pp.156–165). Encouraging this shift towards HFC-free technologies—throughintroducing bans on new equipment where safe, energy efficient and cost-effective alternatives exist—wouldbenefit these SMEs by providing them with policy certainty and support the green economy, avoiding lockingthe UK into unnecessarily high future F-gas emissions. In the current economic climate, clear market directionis needed to enable our green economy to flourish. Some companies have warned that without bans there willnot be enough certainty to invest in low-GWP technology production. Additionally, the associated reduction inHFC emissions would provide the UK with added flexibility in the way that it chooses to implement its CarbonBudget objectives. In short, introducing bans on certain HFC equipment represents an easy win for UK SMEsand well as the UK’s climate objectives more broadly.

7. UK Government Position on Bans

The UK’s current position on the review of the F-Gas Regulation, headed by Defra, includes a misconceptionthat additional bans will place an unfair burden on UK industry and entail disproportionate costs. In reality,failing to introduce bans for sectors in which alternatives are readily available—such as for commercialrefrigeration equipment—would actually guarantee the continued market dominance of American and Japanesemultinationals at the expense of UK SMEs. In the commercial refrigeration sector, Waitrose has committed to126 EIA’s call for bans only affects new equipment and does not extend to existing equipment



phase out HFCs in new and existing equipment by 2020, with Sainsbury’s, Marks & Spencer and The Co-operative set to follow suit by 2030 (EIA, 2012). Supporting this, Richard Benyon MP, Parliamentary Under-Secretary of State for Defra, recently claimed that “Restrictions on HFCs in commercial refrigeration equipmentwould provide market opportunities for manufacturers of natural refrigeration equipment” (Hansard, 2012). Asthe real-world experience of UK retailers and the Öko-Recherche study carried out on behalf of the EUCommission show, switching away from HFCs can lead to significant cost savings over the lifetime ofrefrigeration and cooling equipment. As the market develops and widespread applications of alternativetechnologies generate economies of scale, costs will fall even further whilst energy efficiency gains are likelyto increase.

8. Recommendations for Action

As one of the more influential Member States, the UK’s willingness to push for an effective policy at EUlevel will be crucial to ensuring that the EU’s domestic ambition complements its progressive position atinternational level. It is important to note that failure to address F-gases meaningfully at EU level will have ahugely detrimental impact on talks currently taking place within the Montreal Protocol and UNFCCC. The UKshould follow the example of progressive Member States such as Germany, France and Denmark, who havemade clear their preference for sector bans on HFCs and have flourishing domestic alternatives industries.Implementing feasible bans on new equipment containing HFCs would strengthen the UK’s overall CarbonBudgets as such bans represent an easy win for emissions reductions, whilst supporting SMEs and the greeneconomy.

9. Assisted Questions/Topics to Raise with the CCC and DECC

(a) In the context of the UK government reviewing the Carbon Budgets in 2014, do you recognise that HFCreductions offer a least-cost opportunity if they are banned in sectors where climate-friendly, cost-effective,safe and proven technologies already exist?

(b) Given the need to stimulate the green economy and find cost-effective emissions reductions, would yousupport the introduction of placing on the market restrictions (bans) on HFCs in sectors where numerousindependent studies have shown low GWP alternatives to be cost-effective, safe and energy efficient?

(c) Do you recognise that placing on the market restrictions (bans) on HFCs provides UK-based greentechnology equipment manufacturers with opportunities for growth?

References

CCC (Committee on Climate Change), 2013, Other non CO2 factsheet, UK, available:http://www.theccc.org.uk/publication/other-non-co2/.

CCC (Committee on Climate Change), 2010, The Fourth Carbon Budget: Reducing emissions through the2020s, UK, available: http://www.theccc.org.uk/publication/the-fourth-carbon-budget-reducing-emissions-through-the-2020s-2/.

Defra (Department for Environment, Food and Rural Affairs), 2012, Guidance: F Gas and Ozone Regulations—Information Sheet GEN 2: Fluid Uses, UK, available: https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/182571/fgas-gen2-fluid-uses.pdf.

EC (European Commission), 2012a, Proposal for a regulation of the European Parliament and of the Councilon fluorinated greenhouse gases: COM(2012) 643, available: http://ec.europa.eu/clima/policies/f-gas/legislation/documentation_en.htm.

EC (European Commission), 2012b, Impact Assessment: Review of Regulation (EC) No 842/2006 on certainfluorinated greenhouse gases, available: http://ec.europa.eu/clima/policies/f-gas/legislation/docs/swd_2012_364_en.pdf.

EIA (Environmental Investigation Agency), 2012, Chilling Facts IV: HFC-Free Cooling Goes Mainstream,available: http://www.eia-international.org/wp-content/uploads/EIA_ChillFactsIV_FINAL_lo-res.pdf.

Gschrey, B. and Schwarz, W., 2009, Global Projection of F-gas Emissions Shows High Increase Until 2050,available: http://www.umweltbundesamt.de/produkte/dokumente/Flyer_F_gase_global.pdf.

Hansard, 2012, UK Commons Debates—Written Answers: Refrigeration—Job Creation, available:http://www.publications.parliament.uk/pa/cm201314/cmhansrd/cm130603/text/130603w0004.htm#13060415001768.

IPCC (Intergovernmental Panel on Climate Change), 2000, IPCC Special Reporton Emissions Scenarios:Summary for Policymakers, available: http://www.ipcc.ch/pdf/special-reports/spm/sres-en.pdf.

Schwarz, W., Leisewitz, A., Gschrey, B., Herold, A., Gores, S., Papst, I., Usinger, J., Colbourne, D., Kauffeld,M., Pedersen, H. and Croiset, I., 2011, Preparatory study for a review of Regulation (EC)



No 842/2006 on certain fluorinated greenhouse gases: Prepared for the European Commission in the contextof Service Contract No 070307/2009/548866/SER/C4, available: http://ec.europa.eu/clima/policies/f-gas/docs/2011_study_en.pdf.

Shecco, 2012, Natural Refrigerants Market Growth for Europe, available: http://guide.shecco.com/GUIDE-Natural-Refrigerants-Europe-2012.php.

UNEP (United Nations Environment Programme), 2011, HFCs: A Critical Link in Protecting Climate and theOzone Layer—UNEP Synthesis Report, available: http://www.unep.org/dewa/Portals/67/pdf/HFC_report.pdf.

Velders, G., Fahey, D., Daniel, J., McFarland, M. and Anderson, S., 2009, The Large Contribution of ProjectedHFC Emissions to Future Climate Forcing, Proceedings of the National Academy of Sciences, 10:1073,available: http://www.pnas.org/content/early/2009/06/19/0902817106.abstract.

20 June 2013

Written evidence submitted by Andrew Montford

In her evidence to the committee on 12 June 2013, Professor Julia Slingo answered a question from DrOfford about climate sensitivity as follows:

It’s also really important that we do use observations in some ways to check if our climate models are withinsensible bounds. It is still the case that even with the latest updates to what we think what the transient climateresponse is or the equilibrium climate sensitivity using the last decade of observations, the models—certainlythe models we use—and many of the leading models around the world are still within the range of thoseestimates.

This is misleading. The graph below shows probability density functions for recently published instrumental-observation constrained estimates of equilibrium climate sensitivity (ECS), and the only purely observationalstudy for which an estimated PDF for ECS was included in the last IPCC assessment report, all peer reviewed.Studies including the last decade of observations are in green. Those relying on slightly earlier data, but whichuse objectively valid methods, are in blue.127 The grey band represents the range of model estimates. It isobvious that there is little overlap between the observationally constrained estimates and the models, the formersuggesting a value of climate sensitivity that is considerably less alarming.

Recent observationally constrained estimates of climate sensitivity—Lindzen and Choi 2011, Forster andGregory 2006, Aldrin et al 2012, Lewis 2013, Masters 2013, and two estimates from Otto et al 2013 (usingdata from 2000–09 and from 1970–2009). The Lindzen and Choi PDF was not shown in that paper but wascalculated from its results by Lewis.127 The Ring et al 2012 study, which gave best estimates for ECS varying between 1.45 and 2.0°C depending on the surface

temperature dataset used, has not been included since it did not give estimated PDFs.



The only way Professor Slingo could conceivably make the statement she did in relation to equilibriumclimate sensitivity would be to include studies which used a Bayesian prior that biased their results to highECS values. That includes studies based on using a uniform Bayesian prior distribution for ECS, an approachthat is known to give a warm bias and has been shown in the scientific literature to be invalid.128,129It alsoincludes studies using a non-uniform Bayesian prior distribution that substantially downweights low ECSvalues before any observational evidence is introduced. Neither approach would be supported by anyreputable statistician.

In relation to the models used by the Met Office, its website states that the HadGEM2-ES model in particularis used for policy advice.130 The HadGEM2-ES model has an ECS of 4.6°C and a transient climate response(TCR) of 2.5°C, the highest TCR and second highest ECS among the 23 CMIP5 models analysed in Forsteret al., 2013.131 By comparison, the best observationally constrained estimate of TCR from the recent Otto etal paper was 0.9–2.0°C.

I would urge the committee:

— to write to Professor Slingo, asking her to rebut the points made above, stating what publishedstudies she relied on for her assertion regarding the models used by the Met Office and confirmingwhat models she referred to; and

— to take evidence from a reputable statistician with expertise in objective Bayesian statisticalinference.

18 June 2013

Written evidence submitted by Sandbag

Sandbag is a UK-based NGO campaigning for environmentally effective carbon budgets and carbon markets.In the document which follows we:

— critically examine the way the UK’s long term emissions pathway was set under the UK ClimateChange Act and the carbon budgets currently set by the CCC;

— propose and suggest the UK adopt an alternate effort sharing model as a more equitablealternative to the model on which the UK Carbon Budgets are currently based;

— evaluate the ambition of the UK against Europe using this new effort-sharing model;

— critically examine the basis for the reviewing the 4th carbon budget in 2014, based ondevelopments in Europe; and

— propose that the UK unshackle its carbon budgets from the allocations set for it under the EUETS by cancelling excess ETS allowances.

1. Introduction: The Importance of the 2008 Climate Change Act

1.1 We wish to start by acknowledging the ground-breaking importance of the 2008 Climate Change Act,the first legislation of its kind anywhere in the world to legally bind a state to 2050 emissions reductions andto set periodic budgets to ensure those targets are met.

1.2 The UK’s ambition here has, undoubtedly, been an important factor encouraging other G8 countries andother EU Member States to make similarly ambitious pledges for 2050 emissions reductions and to start topassing legislation to meet those pledges.

1.3 Ground-breaking and progressive as the 2008 Climate Change Act was, we will argue in this submissionthat both the headline target in the Act and, more specifically, the budgets set beneath it by the Climate ChangeCommittee describe an environmentally inadequate and inequitable emissions pathway for the United Kingdom.

1.4 We propose that the global emissions pathway chosen allows for an unacceptable level of climate riskand, more importantly, the effort sharing model used to determine the UK’s pathway under this global trajectoryis highly inequitable. That model is extremely preferential to rich countries with large emissions and smallpopulations like the UK, and highly prejudicial against poor countries with low emissions and large populationslike Bangladesh.

1.5 We will advance here an alternative effort-sharing framework, based on work by the German AdvisoryCouncil on Global Change and our own published research, which implies a much more ambitious emissionspathway for the United Kingdom than that envisaged by the Climate Change Committee.128 Annan JD and Hargreaves JC. On the generation and interpretation of probabilistic estimates of climate sensitivity, Climatic

Change 2009; DOI 10.1007/s10584–009–9715-y.129 Lewis N. An objective Bayesian improved approach for applying optimal fingerprint techniques to estimate climate sensitivity,

J. Climate 2013. http://dx.doi.org/10.1175/JCLI-D-12–00473.130 http://www.metoffice.gov.uk/climate-change/policy-relevant/advance.131 Forster, P. M. et al. Evaluating adjusted forcing and model spread for historical and future scenarios in the CMIP5 generation

of climate models. J. Geophys. Res., 2013; doi:10.1002/jgrd.50174).



1.6 Moreover, we will argue that current plans to review the 4th Carbon Budget against the levels of climateambition in Europe and specifically in the EU ETS are firstly premature, insofar as they are scheduled to takeplace before the European decisions relating to that 2023–27 budget period are agreed, but are also misplacedinsofar as climate ambition in the EU, though environmentally inadequate, is outpacing that in the UK.

1.7 Finally, we discuss how the UK’s carbon budgets should be unshackled from the allocations set underthe EU Emissions Trading Scheme to provide the government with more freedom in determining the emissionspath it would like to pursue, without being beholden to EU legislation and legislative timetables. This can bereadily performed through the cancellation of ETS allowances from UK auctions.

2. A Critical Assessment of the Methodology behind the Current UK Emissions Pathway

2.1 The logic by which the 80% target was determined and by which the carbon budgets towards it havebeen set it is eloquently laid out in a letter from the former Chair of the Committee, Adair Turner, to thenEnergy and Climate Secretary, Ed Miliband on 7 October 2008.132

2.2 Firstly, it is clear from that letter that the global emissions pathway envisaged by the Committee, andwithin which the UK pathway is set, has less than a 50% chance of avoiding 2̊C.

“We therefore believe that global policy should seek to limit the central expectation [ie 50%probability] of global temperature rise to, or close to, 2°C and that it should ensure that theprobability of crossing the extreme danger threshold of 4°C is reduced to an extremely low level (egless than 1%).” (Emphasis added).

2.3 The Climate Change Committee hesitates between setting a global emissions pathway with an evenchance of hitting 2 degrees (requiring global emissions to drop by 60% in 2050) and a pathway with an evenchance of hitting 2.2 degrees (requiring global emissions to halve by 2050) seeming to hover somewhere inbetween. For the astute observer, this acceptance of a less than 50% chance of avoiding 2 degrees is apparentfrom the Climate Change Committee’s own charts which visibly show the central estimate line landing slightlyabove the 2 degrees threshold.133

Figure 1

GLOBAL TEMPERATURE STABILISATION UNDER THE ENVISAGED GLOBAL PATHWAY

2.4 We propose that committing to a global pathway which has a less than fifty-fifty chance of avoiding twodegrees Celsius poses unacceptable climate risks, and is also a disingenuous application of the UK’scommitment under the 2009 Copenhagen Accord, which states:

“We agree that deep cuts in global emissions are required according to science, and as documentedby the IPCC Fourth Assessment Report with a view to reduce global emissions so as to hold the

132 http://www.theccc.org.uk/wp-content/uploads/2013/03/Interim-report-letter-to-DECC-SofS-071008.pdf133 P.65 http://archive.theccc.org.uk/aws2/4th%20Budget/CCC-4th-Budget-Book_plain_singles.pdf



increase in global temperature below 2 degrees Celsius, and take action to meet this objectiveconsistent with science and on the basis of equity.”134

2.5 A global pathway that is “very likely” (>75% chance) or, at the least, “likely” (>66% chance) to avoidtwo degrees seems to us far more consistent with this international pledge and seems a more appropriatereaction to the economic and environmental dangers posed by climate change. We also note that the scienceon emissions budgets has advanced since this global emissions pathway was modelled for the Climate ChangeCommittee by the Hadley Centre.

2.6 But the most critical parts of that letter are the following two sections. Firstly Lord Turner wisely pointsout that it is not the Committees role to make ethical judgements about the UK’s share of global emissions onbehalf of the international community.

“The appropriate UK share of a global emissions target involves ethical judgements and will be thesubject of international negotiations….It is not part of the Committee’s remit to propose a specificmethodology for the purposes on international negotiations.”

2.7 But in the absence of a national or international political decision about the effort sharing approach thatshould be used in the international negotiations, the Climate Change Committee effectively defaulted to theeffort sharing model used to decide the original -60% 2050 target in the Climate Change Bill, but updated toreflect more recent science in the 4th IPCC assessment report. The Committee has always been careful not tocondone this particular effort sharing methodology, but presents this as the minimum conceivable effort thatthe UK might adopt. Continuing on from the paragraph quoted above, Lord Turner says:

“[W]e believe that it is difficult to imagine a global deal which allows the developed countries tohave emissions per capita in 2050 which are significantly above a sustainable global average. In2050 the global average, based on an estimated population of 9.2 billion, would be between 2.1 to2.6 tonnes per capita, implying an 80% cut in UK Kyoto GHG emissions from 1990 levels.”

2.8 It is indeed difficult to imagine a global deal that is worse for developing countries and better fordeveloped ones. The UK trajectory described in the 4th carbon budget report finds the UK consuming 1.1% ofglobal emissions under the modest pathway used by the Climate Change Committee for 1990–2050,135 andthis before accounting for its international aviation and shipping emissions. While this number looks small, theUK currently accounts for around 0.9% of the world’s population, and is expected by the Committee torepresent 0.8% of the global population in 2050. This suggests that the UK intends to exceed its fair share ofthe emissions space by more than a quarter.

2.9 By comparison, Bangladesh, which accounts for 2.2% of currently global population rising to 2.9% in2050 receives only 0.5% of the 1990–2050 emissions space. In effect, Bangladesh risks having three quartersof its emissions space expropriated by richer countries under this approach.

Figure 2

UK VS. BANGLADESH UNDER THE CCC’S POST 2020 CONVERGENCE MODEL

134 http://unfccc.int/resource/docs/2009/cop15/eng/11a01.pdf135 The CCC uses two scenarios from the Hadley Centre’s MAGIC 4.11 model: a 2,423 Gt scenario and a 2,536 Gt scenario. See

page 14 of http://downloads.theccc.org.uk/docs/Ch1%20technical%20appendix%20v1.1%20-%20projecting%20global%20emissions,%20concentrations%20and%20temperatures.pdf



2.10 The current UK emissions pathway is doubly compromised then. It allows for an unacceptably highrisk of passing 2 degrees, and it applies an effort-sharing framework that is unacceptably prejudicial againstpoor countries.

2.11 It is clear from Lord Turner’s remarks that this was not a realistic effort-sharing model to form thetemplate for a global climate deal. From the outset this was captured in the Committee’s recommendation that“the emissions reduction target for those sectors covered by the Climate Change Bill should be at least 80%”.The emphasis, here, is the Committee’s own.136

2.12 Instead it is clear that the Committee expected its placeholder expectations about both the acceptablevolume of global emissions, and the share of emissions to which each country was entitled to be adjusted inthe light of a more ambitious offer from the UK government as part of the international negotiations. Instead,the tail is wagging the dog. These highly conservative Climate Change Committee budgets have defined thegovernment’s starting position on ambition, with the threat, if anything, of being further weakened bygovernment intervention to review the 4th carbon budget if the government decides there have been insufficientadvances in the EU’s climate ambition.

2.13 We note, however, that the UK Government currently lacks an agreed yardstick by which to measureits own and Europe’s efforts. In the following sections we scrutinize the placeholder effort sharing modelapplied by the Commission in more detail and present our own effort-sharing model which we suggest shouldbe used as a fairer template for the government to apply as part of such an exercise.

3. Political Compromise in the Effort-sharing Methodology Selected by the Royal Commissionfor Environmental Pollution

3.1 The placeholder methodology used by the Climate Change Committee to determine the UK’s effortsharing methodology was, as noted above, inherited from the Royal Commission on Environmental Pollution,who are very explicit in the approach that they endorsed: “the UK should be prepared to accept the contractionand convergence principle as the basis for international agreement on reducing greenhouse gas emissions”.137

This endorsement, however, seems to have been reached because of the Commission’s excessive fears aboutthe potential cost of mitigation if a fairer system were embraced.

3.2 The Royal Commission were acutely aware that there were important moral issues at stake. They rejectoutright the methodology by which emissions rights were awarded under the Kyoto Protocol because:

“…the Kyoto Protocol was based on negotiated reductions from each developed nation’s level ofemissions in 1990. This approach gives those nations which have produced the most greenhousegases to date an unfair advantage, in the shape of ‘grandfather rights’ to continue making the largestemissions. That does not seem a fair basis on which to proceed in the long term, nor one likely towin widespread support in the developing world.” 138 (Emphasis added)

3.3 With equal moral insight, the Royal Commission expressed the view that “an effective, enduring andequitable climate protocol will eventually require emission quotas to be allocated to nations on a simple andequal per capita basis.” (Emphasis added). The Commission seems to be on the brink of endorsing a genuinelyequitable effort-sharing model, but their hesitation in doing so is clearly telegraphed from the use of the word“eventually”. Instead of proposing a global emissions budget based on a pure per capita approach, they endorsedContraction and Convergence® instead. As the Commission explains:

“Over the coming decades each nation’s allocation would gradually shift from its current level ofemissions towards a level set on a uniform per capita basis. By this means ‘grandfather rights’ wouldgradually be removed” (emphasis added).

3.4 At what point did the Royal Commission argue that developing countries should finally gain parity ofaccess to the global emissions space? Not until 2050 when the vast majority of the global emissions space willhave been exhausted by rich countries like the UK.

3.5 In other words, the Contraction and Convergence® model continues to favour the largest historicalemitters in rich developed countries by awarding them a disproportionate share of the emissions space at theexpense of poor populous ones. Just like the Kyoto framework rejected by the Royal Commission, it is anapproach which “grandfathers” emissions rights to the biggest polluters, deferring the point at which lowemitting developing countries gain equivalent access to the global carbon space. It is by inheriting this modelthat the Climate Change Committee prescribes a UK pathway under which the UK uses a share of the globalemissions space 120% times larger than its population seems to merit.

3.6 The disenfranchisement of developing and emerging economies under this model makes it as unlikely acandidate for a global climate deal as the methodology dismissed under the Kyoto Protocol. There is littlechance that such a framework will be embraced by populous, emerging economies such as the BASICcountries,139 or by developing countries in the G77 group.140

136 Page 1. http://www.theccc.org.uk/wp-content/uploads/2013/03/Interim-report-letter-to-DECC-SofS-071008.pdf137 http://web.archive.org/web/20070104105415/http://www.rcep.org.uk/pdf/chp4.pdf138 Page 56 http://web.archive.org/web/20070104105415/http://www.rcep.org.uk/pdf/chp4.pdf139 Brazil, South Africa, India, China140 Now incorporating 132 developing countries, including some “emerging economies” like China



3.7 But how did the Royal Commission reach this position? On this they were surprisingly frank: a fairerapproach just looked too hard for states like the UK. Political expediency won out over fairness:

“A system of per capita quotas could not be expected to enter into force immediately. At the sametime as entitling developing nations to use substantially more fossil fuels than at present (which theymight not be able to afford), it would require developed nations to make drastic and immediate cutsin their use of fossil fuels, causing serious damage to their economies.”

3.8 This analysis also seems to underestimate the extent to which trading of emissions rights could reducethe need for high emitters to cut their domestic emissions, lowering their mitigation costs and softening theeconomic impact by buying spare emissions rights from developing countries or paying for cheap abatementopportunities elsewhere in the world. It also neglects that developing countries should be entitled to grow theireconomies through the sale of emissions space that is rightfully theirs.

3.9 While we share the understanding expressed in Contraction and Convergence® that a just transition willinevitably involve a gradual convergence of emissions between developed and developing countries, we arguethat this should not be taken to imply a deferred convergence of emissions rights. Poor countries should notbe disenfranchised from their fair share of a new global resource by virtue of being low emitters. Equivalentaccess to emissions rights under a 2°C emissions budget should be conferred to developed and developingcountries from the outset.

4. A Fairer Effort Sharing Model for the UK Carbon Budgets and Targets: The SovereignEmissions Rights Framework

4.1 At Sandbag, we have published our own effort sharing model as part of the European CommissionConsultation on a 2015 International Climate Agreement: The Sovereign Emissions Rights Framework.141 Ourapproach seeks to provide a fair model of how emissions rights might be awarded to ensure that all countriesinternalise their fair share of the costs involved in mitigating global emissions within a global carbon budgetcompatible with a “likely” chance (>66%) of cost-effectively avoiding 2 degrees. We propose that:

— The total global greenhouse emissions budget to 2050 should be back-calculated from 1990,when the dangers of climate change were first globally acknowledged following from theIPCC’s first assessment report.

— This 1990–2050 budget should be divided between nations based on their share of globalpopulation in 1990 at that particular moral and epistemological milestone.

— This new agreement should supersede previous agreements and all historic territorial emissionsproduced since 1990 should be counted against these national budgets, as well any as awardedemissions rights or offset credits issued under the Kyoto Protocol.

— All fossil and industrial CO2 emissions under those national budgets should be tradablebetween countries, either at state level or through devolved cap and trade schemes, to allowcost-effective emissions reductions to be realised while ensuring ultimate financial responsibilityfor these reductions is appropriately apportioned.

4.2 We emphasise that Sandbag is not unique in advocating this kind of budgets approach. The GermanAdvisory Council on Global Change published a very similar approach in a landmark paper in 2009,142 andas early as early as 1989 Professor Michael Grubb, founding member of the Climate Change Committeeargued that:

“There is only one really solid basis for allocation. That is to recognize equal per capita entitlementsto carbon emissions: and, consequently, initially to allocate carbon emission permits in proportion tonational population. The moral principle is simple, namely that every human has an equal right touse the atmospheric resource.”143

4.3 By following the approach outlined above, we find that the UK is 66% of the way (16 billion tonnes)through its 25 billion tonne budget for 1990–2050. That leaves it just over 8 billion tonnes to use out to 2050.The UK will exhaust its remaining equitable budget under this framework by 2017 without a step-change inits domestic and internationally traded effort.

141 Damien Morris, The Sovereign Emissions Rights Framework (Sandbag, June 2013) http://www.sandbag.org.uk/site_media/pdfs/reports/The_Sovereign_Emissions_Rights_Framework.pdf

142 WBGU, Solving the Climate Dilemma (2009) http://www.wbgu.de/fileadmin/templates/dateien/veroeffentlichungen/sondergutachten/sn2009/wbgu_sn2009_en.pdf

143 Michael Grubb, The Greenhouse Effect: Negotiating Targets (Royal Institute of International Affairs, 1989)



5. Comparing UK and European Effort under the 4th Carbon Budget using the SERFramework

5.1 In the table below we explore how far the UK has progressed through this budget compared with theEU27 and the world as a whole, noting that the UK is further through its budget, owing to its high rate ofemissions since 1990 relative to its 1990 population.

Table 1

EMISSIONS BUDGETS UNDER THE SOVEREIGN EMISSIONS RIGHTS FRAMEWORK

1990–2050 budget Emissions Share ofShare of under 66% chance produced budget

1990 global of avoiding 2̊C 1990–2012E alreadyCountry/region popn (Gt CO2e) (Gt CO2e) used

Global budget 100% 2,274 1,024 45%EU27 budget 9% 204 116 57%United Kingdom 1% 24.6 16.3 66%

Sources: UNEP 2012 Emissions Gap report gives a 1,890Gt global budget for 2000–2050 of which 640 isestimated to have been used by 2012. To both figures we have added in 384Mt of estimated 1990–1999emissions from Stockholm Environment Institute1990 population figures taken from the CIA World FactbooksUK and EU27 emissions for 1990–2012 taken from the European Environment Agency as reported to theUNFCCC (net emissions including LULUCF and bunker fuels and early 2012 estimates from Eurostat.Figures are approximate and have been rounded

5.2 Europe, then, is also dangerously close to exhausting its equitable emissions budget, and will exhaust itsemissions space by 2033 under the budgets implied by the 2020 framework and the milestones in the 2050Low Carbon Roadmap without a step change in its domestic and international effort. While this suggests thatEurope needs to go much further, the UK has considerable catching up to do if it even to match Europe’sinadequate levels of climate ambition. Using an equitable per capita approach, the UK, then, will compareunfavourably in any test of its climate efforts against Europe for the period governing the 4th carbon budget.

5.3 With Europe as a whole committed to much higher levels of abatement relative to its historic emissions,and therefore streaks ahead of Britain in terms of its climate ambition, we can easily predict the outcome ofsuch an effort comparison, but we note that, strictly speaking, a precise comparison cannot take place until theEuropean Emissions pathway for 2023–27 is completed. This is especially true in relation to the budgets setunder the EU Emissions Trading Scheme as we explore below.

6. Generous Carbon Budgets in the EU Emissions Trading Scheme are Holding back UK Effort

6.1 As we seek to demonstrate above, it is not a problem with EU ambition that is blocking ambition in theUK as is sometimes proposed. Instead this is an artefact of differences in the way that ambition in the UKcarbon budgets and the EU emissions trading scheme are currently determined.

6.2 When setting the carbon budgets for the UK, the Climate Change Committee initially decided to separateout the component of that budget to be reached by the sectors covered by the EU Emissions Trading Scheme(eg power stations, factories, airlines) against those that weren’t (eg transport, heating, agriculture). Emissionsin traded sectors were deemed to be equivalent to the levels of allocations in the ETS with any physicalemissions over or under these allocations deemed to have been “offset” with tradable permits.

6.3 The decision to account for traded emissions in this way was based on the support for flexible policiessuch as the ETS which enabled least-cost compliance. But having embarked on this accounting methodologyit has become very difficult for the Climate Change Committee to recommend budgets which depart from thoseset under the ETS.

6.4 Unfortunately, the EU methodology for awarding emission rights under the EU ETS is far more generousto the UK than Britain’s own effort sharing methodology. While the EU has not displayed less ambition thanthe UK, its harmonised methodology for awarding emissions rights under the Emissions Trading Scheme ismore advantageous to the UK than to other countries. This is because, while the UK’s budgets are set under amodel based on Contraction and Convergence, Emissions rights under the EU ETS have largely been awardedby “grandfathering” which, as the Royal Commission noted, is even more favourable to the largest emitters.As the UK is the second largest emitter in the EU ETS after Germany it is has been one of the biggestbeneficiaries of this allocation methodology. The UK has received 12% of the ETS allowances awarded to all30 participating countries over 2008–12,144 it will receive 11% of all ETS allowances available for auction144 Phase 2 of the EU ETS, corresponding to first Carbon Budget and the first Kyoto Commitment Period



from 2013,145 and it will also be awarded free allocations on the same basis as countries like Sweden andNorway who have a much lower responsibility for historic emissions and have also been more successful inlimiting their greenhouse gas pollution.

6.5 Ironically, because the current accounting methodology for the UK carbon budgets is fixed to theincompatible allocation methodology in the EU, Europe’s generosity to Britain under the ETS threatens toderail the ambition of the UK carbon budgets.

6.6 This has already been observed with the first three carbon budgets. Recognising that UK ambition wasin many ways tied to that of the EU as a whole, the CCC recommended two proposed levels for these budgets—the “Intended Budgets” and the “Interim Budgets”. The CCC hoped that the Intended budgets would be adoptedin the event of an increase in ambition at an EU level as part of a new global deal being reached in Copenhagen.This deal never materialised which lead to the Interim Budgets remaining in place. This “interim” pathwaynow threatens to take the UK dangerously off track from its desired trajectory, demanding a steeper and costlierabatement path later on if it is to get back on track.

Figure 3

FUTURE EMISSIONS REDUCTIONS REQUIRED AGAINST THE INTERIM AND INTENDEDBUDGETS146

6.7 Observing this danger, as part of its advice to the government, the Climate Change Committee hasrecommended that the first three budgets now be reduced to the level of the Intended Budgets in recognitionof the fact that the Interim Budgets are no longer very challenging after the recession, and therefore representan unnecessary deviation from the desired trajectory. This has not, however, been accepted by Governmentthus far.

145 88% of future auctioning rights are awarded on the basis of national shares in EU27 emissions in 2005. The UK accounts for237Mt (12%) of ETS emissions in that baseline year. See article 10 of the ETS Directivehttp://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CONSLEG:2003L0087:20090625:EN:HTML

146 Figure 10 CCC 4th budget report



6.8 Even here, the Committee has been hamstrung in the level of ambition it can suggest for these threebudgets by the way emissions from the traded sector are currently fixed against the allowances awarded to theUK under the EU ETS. It has therefore only been able to propose that the non-traded sections of the first threebudgets be tightened:

Figure 4

THE CCC’S PROPOSE TIGHTENING OF THE NON-TRADED SECTIONS OF THE FIRST THREEBUDGETS

6.9 To prevent UK ambition from continuing to be hamstrung in the future, the Climate Change Committeehas now proposed that the 4th carbon budget should be a “Domestic Action” budget of 1,950 million tonnes,accounted separately from any emissions traded in under the EU ETS:

“This budget should be legislated in the first instance, with the aim to achieve it through domesticemissions reductions only (ie without recourse to purchase of credits in international carbon markets,including through the EU ETS).”

6.10 We fully concur with the Climate Change Committee that the 4th and future carbon budgets need to bedisaggregated from the EU ETS to ensure a minimum level of ambitions is reached, and also to allow the UKto set its budgets without being beholden to the timescales of EU legislation. However, we note it is not withinthe power of the Climate Change Act to deprive UK installations in the ETS from meeting their complianceobligations under that policy through traded effort. Consequently, new accounting techniques will be necessaryto protect UK budgets from excess UK allowances awarded under the EU ETS and to protect any environmentalgains made through increased UK ambition.

7. Unshackling the UK Carbon Budgets from the EU ETS

7.1 As it is Europe’s excessive generosity to the UK under the ETS that is holding back ambition in theUK’s carbon budgets, rather than any shortfall in EU ambition, this offers Britain a fairly straightforwardsolution: cancel any ETS allowances awarded it by Europe which exceed those it feels is appropriate for itsown traded sector for the relevant budget period.

7.2 Retiring allowances scheduled for auction in the years corresponding to future UK carbon budgets wouldreadily allow the UK to maintain its desired levels of national ambition without being held back by theallowances distributed under the EU Emissions Trading Scheme. At the same time it would still afford the UKall of the flexibilities afforded by Emissions Trading to meet these national budgets.

7.3 An alternative to this ex ante methodology would be an ex post adjustment where the UK would seekto purchase and cancel any ETS emissions rights above and beyond its desired internal budget at the end ofeach UK carbon budget period using receipts from ETS auctions and from the Carbon Price Support.

7.4 Both of the options described above would serve to unshackle UK ambition from the EU ETS, withoutlosing the flexibilities afforded by that policy. Furthermore, they ensure that the additional climate ambition ofthe UK results in real emissions reductions. A Domestic Action budget, as proposed by the Climate ChangeCommittee, will not change the total volume of emissions allowances issued under the ETS, unless unused UKallowances are cancelled in a manner similar to those we have described above. Some form of ETS



cancellation is paramount to ensure that any additional efforts from the UK do not simply serve to take thepressure of other states participating in the EU ETS.

7.5 Cancellation of allowances under both of these proposals would imply a loss of revenue to the Treasury,but in both instances this loss stems from the UK rejecting allowances it feels are incompatible with its desiredlevel of ambition, and to which the government feels it is not entitled. We also note that these revenue lossescould be considerably diminished if other large emitters in the EU ETS, most notably Germany, wereencouraged to adopt similar measures. If sufficient allowances were cancelled by large emitting member states,the market price of ETS allowances would rise, making this cancellation revenue neutral to the treasuriesinvolved. A similar proposal has been persuasively argued in the past by Professor Michael Grubb, foundingmember of the Climate Change Committee.147

8. Conclusion

8.1 While in these last sections we have argued that the UK carbon budgets should be liberated from theEU ETS, to allow them to reduce national emissions faster, this should not be taken to suggest that that theUK’s current pathway is adequate, or that its ambition is outpacing Europe’s.

8.2 The ETS has waylaid the UK ambition because it has diluted the UK’s weak effort sharing methodology(Contraction and Convergence) with a weaker one (grandfathering) that is even more preferential to Britain. Itis not, we emphasize again, a result of UK ambition outstripping Europe’s.

8.3 As we prepare to agree a new climate deal in 2015 which might be the world’s last realistic chance ofavoiding dangerous climate change, the UK should look to support a global emissions pathway that is likelyto avoid two degrees, and should promote and adopt an effort sharing system which has a realistic chance ofgaining the support of developing and especially emerging economies like China. An environmentally adequateglobal deal is unlikely to be reached while rich industrialised countries seek to expropriate emissions spacefrom poor developing ones.

8.4 In this paper we have presented an effort sharing model which we feel represents an equitable frameworkthat might serve as a reference point for the political negotiations towards a new pledges in a new climate deal.

8.5 Our recommendations in summary are that the Government should:

— Embrace a global pathway which involves at least a 66% chance of avoiding two degrees ofwarming against pre-industrial levels. According to the UN the UN Environment Programmethis leaves 1,250 billion tonnes over 2013–50148 and implies a 1990–2050 budget of 2,274billion tonnes.149 By contrast the global pathway currently assumed by the UK assumes2,423–2,536 billion tonnes of emissions.150

— Support an effort sharing model which equitably divides up the 2 degree emissions space onan equitable per capita basis. We argue that the fairest approach would retroactively apply thisper capita division to 1990 when the dangers of climate change were widely globallyrecognised.

— Unshackle the UK carbon budgets from the EU ETS, which is waylaying UK ambition byawarding the UK too many allowances. This can be achieved through an ex ante cancellationof UK allowances scheduled for auction, or an ex post purchase of ETS allowances by thegovernment.

11 July 2013

Written evidence submitted by Dr Ulrich Loening, former Director of the Centre for Human Ecology,

University of Edinburgh

I write at the suggestion of Aubrey Meyer, Global Commons Institute to give my reaction to key climate-feedbacks in the UKMO’s UK-Climate-Act.

My justification for being nvolved in this is that I was for many years close to several research groups onresource modelling, (these include the Balaton Group who make a feature of not publicising their deliberationsbut helping participants in their understanding, and the Edinburgh EU funded resource accounting programme)including climate scientists who were authors or co-authors of IPC reports. I am not in any way a climatescientist; I did consult some Edinburgh climate modellers.

I have examined the submission that Aubrey Meyer has made to your Committee, and understood the issuesbut not the detail.

As I understand it, the Climate Act is based on modelling information of projected global temperature risesthat omit some possibly key feedbacks from the models; and that the Met Office has more recently explained147 http://news.bbc.co.uk/1/hi/sci/tech/8000156.stm#comments148 UNEP, The Emissions Gap Report 2012 (UNEP, December 2012)149 Sandbag calculations using UNEP and historical emissions data from the Stockholm Environment Institute150 MAGICC 4.1 as appearing in the Technical Appendix to the Climate Change Committee’s first Carbon Budgets report



that this is indeed the case. There is therefore a discrepancy between the terms in the Act and the realities ofscientific understanding.

The terms negative feedback and positive feedback tend to be used with equal abandon. It is important firstto stress that these are not just opposites but effectively very different phenomena. Negative feedback exertsself-control and is therefore limiting and becomes predictable; positive feedback is self-propagating and istherefore likely to grow out of control without limit and become unpredictable.

The MO’s omission of positive feedbacks from the modelling that is used to estimate emission budgets istherefore very serious.

My first reactions were that this omission was poor science, with the consequence that the conclusion wouldbe misleading.

However, there are real problems: firstly because of the uncertainties about the scale of positive feedbacks,like the melting of permafrost, they are too difficult to model properly. Indeed one might justifiably argue thatlarge positive feedbacks cannot be modelled because of their very nature; more research would improve thesituation but not solve it sufficiently to allow coupling into the climate models.

Secondly, the resulting errors in the modelling could have serious political and implementation consequences.It is for this reason that IPCC has repeatedly under-estimated the likely effects of rising greenhouse gasconcentrations, (as can be seen from the lengthy discussions about detailed wording).

These two problems and others like them are, as the MO explained, why the more long term and difficultpositive feedbacks were omitted.

However, this situation cannot be left to stand. Budget emission scenarios must be realistic; otherwise theconsequences can become worse. At the very least positive feedbacks must be coupled into the modelssufficiently to give a budget which avoids the onset of the largest potential positive feedbacks; once they startin earnest, it is too late to stop them.

My understanding is that the Climate Act would require updating to accommodate the coupling. The questionthen becomes how to deal politically with this frightening “inconvenient truth”. To continue as at presentknowing that full coupling would entail a stricter carbon budget, would expand the position into a widercontext. The solution is of course up to your Committee, but I can suggest that a reasonable guess about whatto budget can be made, such that warming remains limited to below what would set positive feedbacks intrain. In other words, the position can be avoided by being honest about it, and presenting the best plausiblecarbon budget.

The scenarios proposed by Aubrey and the Global Commons Institute to remain within these limits, seemrealistic and achievable. The essential fairness in the C&C process would one would think and hope, enableall nations to join in. I have over many years supported the GCI initiatives, and still hope that this would allowthe UK to set the tone and agenda.

10 July 2013

Written evidence submitted by Dr Mayer Hillman, Senior Fellow Emeritus at Policy Studies Institute,

University of Westminster

COMMENTS ON THE QUESTION OF POSITIVE FEEDBACK IN CLIMATE MODELLING

The concentration of carbon dioxide in the global atmosphere is clearly linked to climate change. It is notonly rising alarmingly but, it would appear, doing so exponentially. It has now reached a level not experiencedon the planet for millions of years. One does not have to be a climate scientist to understand that there arecontributory factors to this other than the direct one of fossil fuel burning.

It is recognised, not least by the UKMO, that a major one is the process of feedback from this burningwhich is resulting in higher temperatures and thus leading to the level rising still further. The melting of thepolar ice caps and loss of snow cover in the tundra regions of Russia and Canada, for example, is seriouslydiminishing the albedo effect of that cover and releasing growing volumes of methane, a far more potentgreenhouse gas than carbon dioxide. Higher temperatures, as well as deliberate felling of significant areas oftropical rainforests, are a source for extreme concern about the consequences of the loss of their “sink” functionin limiting the rising level of carbon dioxide in the atmosphere.

It stands to reason that policy formation employed in determining reliable targets to counter the worst effectsof climate change are wholly unreliable unless all the feedback effects are incorporated into the modellingprocess, as far as is at all possible. And insofar as they cannot be incorporated owing to the unavailability ofresearch evidence, that should be made explicit so that this omission is fully reflected in the advice given topolicy makers.

To date, the UKMO has not done this. The outcome of the omission is seriously misleading. Given thatthere are growing grounds for realising that emissions from the feedbacks may well be exceeding those from



the direct burning of fossil fuels, this grave aspect of policy needs to be satisfactorily and transparently rectifiedas a matter of extreme urgency.

Otherwise, politicians, within and outside the Coalition, civil servants within the various governmentdepartments, local authorities, the business community and those active in the various fields of relevant policywill continue to take as the received scientific wisdom that the target agreed by the main political parties of an80% reduction by 2050 on carbon dioxide emissions on the 1990 level (as contained in the Climate Act)—whilst hugely challenging—nevertheless represents a target that reliably reflects the level of concentrations ofthe emissions in the decades ahead, thus enabling determination of adequate policy changes needed to preventirreversible climate change.

15 July 2013

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