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Building a Low-Carbon Economy – The UK's Contribution to Tackling Climate Change

Building a Low-Carbon Economy – The UK's Contribution to Tackling Climate Change. www.theccc.org.uk. UK Climate Change Bill (Nov 2008). Commitment to reduce CO2 emissions by at least 60% (80%) from 1990 levels by 2050 Established system of legally binding “carbon budgets”

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Building a Low-Carbon Economy – The UK's Contribution to Tackling Climate Change

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  1. Building a Low-Carbon Economy –The UK's Contribution to Tackling Climate Change www.theccc.org.uk

  2. UK Climate Change Bill (Nov 2008) • Commitment to reduce CO2 emissions by at least 60% (80%) from 1990 levels by 2050 • Established system of legally binding “carbon budgets” • Established the CCC as an independent body to provide expert advice on budget levels and the policies to reach them

  3. Climate Change Committee: Responsibilities Recommend Identify implications of proposed budgets for • 2050 CO2 target: • 60%, 80%, or other • First 3 CO2 budgets: 2008-12, 2013-2017, 2018-2022 (≥26%) • How much buy-in of credits allowed • Whether & how international aviation & shipping should be included • Budgets for CO2 or all GHGs • Competitiveness • Security of supply • Fuel poverty • Fiscal revenues • The regions • Ancillary environmental effects Annual reports on • Progress against budgets • Extent of borrowing/banking • Other?

  4. Contents of First CCC Report • Pt. I: Setting the target • 1. Setting 2. Meeting • Pt. II: Setting & meeting the first 3 budgets • 3. Summary 4. C markets 5. Decarb elec 6. Building & industry 7. Transport • Pt III: Extending the carbon budget framework? • 8. International aviation & shipping 9. Non CO2 GHG • Pt IV: Wider economic & social considerations • 10 Competitiveness 11. Econ costs & fiscal 12. Fuel poverty 13. Security 14. Nations • Pt V: Synthesis & recommendations

  5. 1. The 2050 target • Required global emissions reduction • Appropriate UK contribution • Technologies for meeting required reductions

  6. (i) Required global emissions reduction • What’s changed? • Advances in science • Actual emissions higher than forecast • Assessment of damage • Decision rule • keep temperature change close to 2°C and probability of 4°C increase at very low levels • Required global emissions reduction of 50% • 20-24 GtCO2e emissions in 2050 • 8-10 GtCO2e in 2100 • Global trajectories considered • Early or later peak (2015 vs. 2030) • 3%/4% annual emissions reduction

  7. Kyoto GHG emissions trajectories designed by the CCC • Peak in emissions around 2028 or 2016. • Subsequent reductions in CO2 emissions range from 1.5% to 4% per year. • Other Kyoto gas emissions are reduced at consistent rates, with consideration of the ultimate emissions ‘floor’ that might be reasonably reached. Peak 2016 CO2 emissions reducing at 1.5% , 3% or 4%. 2016:3% and 2016:4% were given lower emissions floors Peak 2028 CO2 emissions reducing at 1.5% or 4%.

  8. Some CCC emission scenarios peaking at 2016 and projections of CO2e and T for one case

  9. Probability distributions of global mean temperature increase by 2100

  10. Preferred trajectories: emissions target for 2050 This is broadly in line with the G8 commitment to halve emissions by 2050.

  11. CO2 abatement from IEA BLUE Map

  12. (ii) Appropriate UK contribution 50% global reduction • Burden share • Alternative methodologies (contract and converge, intensity convergence, triptych etc.) • Equal per capita emissions: • 20-24 GtCO2e total at global level IN 2050 • Implies 2.1-2.6 tCO2e per capita 2.1-2.6 CO2e per capita gives a UK reduction of at least 80% in 2050 Aviation and shipping included All GHGs

  13. (ii) Appropriate UK contribution (cont.): the scale of the challenge 695 Mt CO2e International aviation & shipping* UK non-CO2 GHGs Other CO2 Industry (heat & industrial processes) Residential & Commercial heat Domestic transport Electricity Generation * bunker fuels basis 77% cut (= 80% vs. 1990) 159 Mt CO2e 2050 objective 2006 emissions

  14. UK Greenhouse gas emissions 1990-2006

  15. UK sectoral CO2 emissions for 80% reduction at 2050 (MARKAL)

  16. (iii) Meeting required reductions Reducing power sector emissions: Renewables (Wind, solar, tidal and marine, biomass), nuclear, CCS Application of power to transport and heat • Reducing heat emissions: • Energy efficiency • Lifestyle change • Electric heat (e.g. heat pumps, storage heating) • Biomass boilers • CCS in industry • Reducing transport emissions: • Fuel efficiency • Electric/plug-in hybrids • Bio fuels (first vs. second generation)

  17. (iii) Meeting required reductions (cont.): power sector evolution Emissions intensity to 2050 Power generation to 2050

  18. (iii) Meeting required reductions (cont): UK path to an 80% or more reduction in 2050 Wind and nuclear Other renewable and CCS Energy efficiency improvement Renewable heat Electric heat Electric cars/plug in hybrids 1-2% of GDP in 2050 2020 2008 2050

  19. 2. The first three budgets • Level of budget (factors we have considered, CCC proposals) • Use of credits to meet budget • Feasible emissions reductions

  20. (i) Level of budget: factors considered • European Union strategies • 30% reduction in GHG by 2020 versus 1990 if global deal at Copenhagen • 20% unilateral cut • The path to 2050 • 2020 ambition needed to make path to 2050 technically feasible • Early action needed as contribution to global emission containment PROPOSED BUDGETS 2008-12 2013-17 2018-22 • Bottom up sector by sector analysis • Technical feasibility • Costs of achieving reductions • Policies in place or needed to drive emissions reductions

  21. (i) Level of budget (cont.): CCC proposals • Intended budget • To apply once a global deal has been agreed • Interim budget • To apply before there is a global deal • Should prepare for the Intended budget Intended: 42% below 1990 in 2020 (31% below 2005) Interim: 34% below 1990 in 2020 (21% below 2005)

  22. (i) Level of budget (cont.): emissions ceilings (no IAS)

  23. (i) Level of budget (cont.): treatment of aviation and shipping Aviation Shipping • European and UK shares of international emissions can be defined • No major competitiveness problems with EU only policies • In EU 20% and 30% targets, and within UK shares of these targets • In EU ETS – capped from 2012 • But included in EU ETS on arbitrary “allocation” basis, making reconciliation with national budget inclusion complex • Do not include in formal legal ‘budget’ • But allow for in budget setting • And Committee to monitor progress and policies • Precise UK or even European share difficult to define • Dangers that European only policies (e.g. inclusion within the EU ETS) could produce carbon leakage • Not in EU 20% and 30% targets • Not in EU ETS • Do not include in formal legal ‘budget’ • But allow for in budget setting • Committee to monitor progress and policies • Global sectoral deal ideal way forward

  24. CCC proposed UK CO2e emission targets MtCO2e …

  25. (ii) Use of credits to meet targets • Pros • Minimise costs • Promise of finance flow may help in global deal negotiations • Finance flow helps achieve low carbon developing economies • Cons • Essential for developed economies to drive domestic emissions reductions and illustrate feasibility of low carbon economy • CDM type credits (versus notional BAU) can never be as robust as allowances within cap and trade system • Committee distinguishes between: • European Union Allowances (EUAs) in EU ETS • Offset credits (e.g. CDM) • Committee position • No restrictions on use of EUAs to meet budget • Restrictions on use of offset credits • No purchase by government to meet Interim budget • Purchase may be appropriate to transition between Interim and Intended budgets • This strategy is consistent with meeting 2050 target

  26. (iii) Feasible emissions reductions - Power • Power • Renewable and nuclear • Preparation for CCS • Required policies • EU ETS longer term extension • CCS demonstration • Price/non-price policies to drive renewables • Scenarios • 40% emission reduction by 2020 • 30% renewables, nuclear in 2020s • Less renewables (e.g. 25%) and some nuclear by 2020 • Costing 0.2% of GDP • Average carbon intensity in 2020 around 300g/kWh, from current 500g/kWh

  27. (iii) Feasible emissions reductions – Power (cont.): CCC position on coal generation No role for conventional coal beyond early 2020s CCS not proven at production scale New coal investment only with full expectation of retrofit in early 2020s • Policy options: • Requirement for retrofit • Carbon price underpin • Emissions limit

  28. (iii) Feasible emissions reductions – Energy use in buildings and industry • Our approach • Technical potential • Cost effective potential • Realistically achievable potential • Commercial • Technical potential over 30 MtCO2 in energy efficiency and micro-generation • Realistic potential 5-11MtCO2. • 50% covered by caps • Need for wider policy coverage • Residential • Technical potential over 100 MtCO2 • Realistic potential • Energy efficiency potential 22 MtCO2 • Renewable heat potential 10 MtCO2 • Policy • Supplier Obligation • EPCs • Appliance standards • Renewable heat • Industrial • Technical potential 7 MtCO2 • Realistic potential 4-6 MtCO2 • 95% covered by caps

  29. (iii) Feasible emissions reductions – Transport Improved carbon efficiency of vehicles Demand side measures Eco driving: 3 MtCO2 in 2020 Cars: Improvedfuel efficiency, electric/plug in hybrids offer potential for 12 MtCO2 emission reduction Journey planning and modal shift: 3 MtCO2 in 2020 Vans : Fuel efficiency improvement, electric/plug in hybrids offer potential for at least 3 MtCO2 in 2020 • Demand Management: • Eddington Review HGVs: Fuel efficiency improvement offers potential for at least1 MtCO2 in 2020 Information and encouragement. Response is inherently uncertain Need ambitious EU targets and domestic implementing mechanisms( information, fiscal levers)

  30. (iii) Feasible emissions reductions – Transport (cont.): path to 100 g/km emissions by 2020 for new cars in UK

  31. (iii) Feasible emissions reductions – Agriculture • 8% of all UK GHG emissions: 44 MtCO2e • Preliminary cost curve analysis suggests technical potential of 15 MtCO2e: some controversial, some not • No policies currently in place to drive emissions reductions; no reductions included in budget calculations • Further work needed to: • - Indentify realistic potential • - Design policies

  32. (iii) Feasible emissions reductions - Emissions reduction scenarios • Criteria: • Cost per tonne of carbon saved • Measures required on the path to 80% in 2050 • Practical given constraints on deliverability Current detailed policies plus 30% renewable power generation Current Ambition Existing policies plus in policy intent Extended Ambition Includes measures where there is no current policy or commitment Stretch Ambition • Extended Ambition delivers Interim budget • Intended budget measures either credit purchase or some Stretch Ambition actions

  33. (iii) Feasible emissions reductions – resource cost of meeting the Intended budget

  34. 3. Wider social and economic impacts of budgets • Risk in specific sectors accounting for less than 1% of UK GDP and employment • Risk can be mitigated by appropriate policy e.g. free allowance allocation , border carbon price adjustments, sectoral agreements Competitiveness Fuel Poverty 1.7 million increase in fuel poverty numbers but mitigation possible at manageable cost • Technical: supply intermittency manageable • Geopolitical and economic volatility: positive impact of reduced dependence on imported oil and gases Security of supply • Positive impacts from auctioning (£9 bn p.a.) • Negative VED and fuel duty effect (£4 bn p.a.) • £500 m p.a. to offset fuel poverty effects Fiscal Significant difference in pattern of opportunities and challenges: important role for devolved administrations Regional

  35. Conclusion • 80% cut in GHG emission by 2050 relative to 1990, all GHGs, aviation and shipping included • Unilateral 34% cut in GHGs by 2020 relative to 1990 (21% relative to 2005) • 42% cut in GHGs by 2020 relative to 1990 (31% relative to 2005) after global deal is achieved • 34% cut predominately through domestic emissions reduction • 42% through domestic emissions reduction and credit purchase • 2020 cost less than 1% of GDP

  36. CCC proposed UK CO2e emission targets MtCO2e …

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