Climate Change Act

The path to decarbonisation and the fifth carbon budget

By the end of June 2016, the Government must announce the level of the fifth carbon budget. This will set a legal cap on UK carbon emissions for the period from 2028 to 2032.

Five yearly carbon budgets are a key component of the Climate Change Act, and together they plot a route to the 2050 target of an 80% reduction in emissions against 1990 levels. The Committee on Climate Change (CCC) has a statutory duty to advise ministers on the most cost-effective path to decarbonisation. In November 2015, they recommended a 57% reduction in emissions for 2028-2032.

The period of the fifth carbon budget coincides with when the EU’s 2030 emissions target must be met. At the Paris climate summit in December 2015, the EU committed to reducing carbon emissions by 40% by 2030 from 1990 levels. If the UK wants to fulfil this international obligation, therefore, it must ensure that the fifth carbon budget is compatible with what was agreed at Paris.

There has been considerable discussion among Conservative backbenchers about the fifth carbon budget. Two groups of Conservative MPs have written to ministers with contrasting views on the fifth carbon budget. One group has called for the Government to accept the CCC’s decision as soon as possible to send a clear signal to investors. Another has called for the Government to delay the decision to ensure other member states contribute fairly to the EU’s Paris commitment.

The Chair of the CCC, Lord Deben, wrote to the Energy Secretary, the Rt Hon Amber Rudd MP, in January 2016 advising that their recommendation for the fifth carbon budget would be sufficient to meet the EU’s agreed contribution. However, he has also warned that, in the long term, the targets in the Climate Change Act will have to be revised to fulfil the ambition in the Paris Agreement of reaching net zero global emissions by the end of the century. These conclusions were also reaffirmed in April 2016 by the cross-party Energy and Climate Change Select Committee.

Although the overall 2030 EU target has been agreed by national leaders, the country-by-country division is yet to be determined. This has prompted some to caution against the UK setting an overly ambitious domestic target in the fifth carbon budget. If the UK does more than its fair share, they argue, then others in the EU will do less. They add that this would deliver no additional benefit to the climate, and would damage the UK’s competitiveness.

Both of these arguments have been examined. The impact of carbon budgets on the UK’s competitiveness has recently been studied by LSE’s Grantham Institute. They find, firstly, that existing policies to reduce carbon emissions have not had a negative impact on businesses. Nor do they find evidence of ‘carbon leakage’, whereby carbon intensive industries just relocate to countries with less stringent climate change legislation. Secondly, they show that there are economic benefits for countries that take strong climate action, arguing that the UK in particular is well-placed to take advantage of the global low-carbon transition. This week, the Energy and Climate Intelligence Unit (ECIU) released a report showing that across a range of climate policies the UK is not significantly ahead of its EU competitors. They find in fact that the UK is sixth among the 28 member states, far behind the clear leader Sweden.

The CCC has examined what the likely implications of the EU 2030 target are for the UK. They find that the UK can be expected to be given a target of around 54%, within a range of 51% and 57%. This is compatible with their recommendations for the level of the fifth carbon budget. Internationally, the UK Government has long argued for larger, more developed economies to decarbonise at a faster rate. This is the reason why the UK’s share would in any case be larger than the overall EU target of 40% reduction by 2030 from 1990 levels. Moreover, given the EU and UK share the same 2050 target of reducing their emissions by 80% by 1990 levels, the CCC’s advice on the fifth carbon budget provides the most cost-efficient route to 2050, independent of the interim 2030 target.

The Government championed an ambitious deal in Paris last year, and has repeatedly affirmed its commitment to the Climate Change Act. In the same vein, ministers should agree the fifth carbon budget as soon as possible. Amber Rudd announced in her energy policy reset speech in November 2015 that the Government would set out new policies by the end of 2016 to ensure the UK meets its fourth and fifth carbon budgets. The focus should be quickly turned to establishing these new policies and giving investors a clear direction for future energy policy.

Sam Hall is a Researcher at Bright Blue