https://whitehall-ad...rbon-future.pdf

https://whitehall-ad...rbon-future.pdf
The Carbon Plan:
Delivering our
low carbon future
December 2011
The Carbon Plan:
Delivering our
low carbon future
Presented to Parliament pursuant to
Sections 12 and 14 of the Climate Change Act 2008
Amended 2nd December 2011 from the version laid before Parliament on 1st December 2011.
December 2011
© Crown copyright 2011
You may re-use this information (not including logos) free of
charge in any format or medium, under the terms of the Open Government Licence. To view this licence, visit http://www. nationalarchives.gov.uk/doc/open-government-licence/ or write to the Information Policy Team, The National Archives, Kew, London TW9 4DU, or e-mail: [email protected]
Any enquiries regarding this document should be sent to us at Department of Energy & Climate Change, 3 Whitehall Place, London SW1A 2AW.
This publication is available for download at www.official-publications.gov.uk and it is also available from our website at www.decc.gov.uk.
Contents
Foreword
1
Executive summary
3
Part 1: The Government’s approach to energy and climate change
13
Introduction
13
Our principles
14
The vision for 2050
15
2050 futures
16
Planning for the future
18
Part 2: Our strategy to achieve carbon budgets
21
Achieving carbon budgets
21
Buildings
29
Transport
47
Industry
59
Secure, low carbon electricity
69
Agriculture, forestry and land management
85
Waste and resource efficiency
93
Working with the EU and Devolved Administrations
100
Part 3: Delivering the fourth carbon budget
107
Scenarios to deliver the fourth carbon budget
107
Delivering non-traded sector emissions reductions
107
Delivering traded sector emissions reductions
110
Considerations for achieving the fourth carbon budget
111
Managing our performance
118
Annexes
A 2050 analytical annex
B
Carbon budgets analytical annex
C Carbon Plan action summary
121
137
208
1
Foreword
Even in these tough times, moving to a low carbon economy is the right thing to do, for our
economy, our society and the planet. This plan sets out how Coalition Government policies put us
on track to meet our long term commitments. The Green Deal will help cut energy bills, the Green
Investment Bank will attract new investment, and our reforms to the electricity market will generate
jobs in new low carbon industries. Climate change requires global action; every country needs to play
its part. This Carbon Plan shows that the UK is prepared to govern in the long term interests of the
country and build a coalition for change.
David Cameron
Prime Minister
Nick Clegg
Deputy Prime Minister
In June 2011, the Coalition Government enshrined in
law a new commitment to halve greenhouse gas
emissions, on 1990 levels, by the mid-2020s. This
Carbon Plan sets out how we will meet this goal in a
way that protects consumer bills and helps to attract
new investment in low carbon infrastructure,
industries and jobs.
By 2020, we will complete the ‘easy wins’ that have
helped emissions to fall by a quarter since 1990. By
insulating all remaining cavity walls and lofts, while
continuing to roll out more efficient condensing
boilers, we will cut the amount consumers spend
on heating by around £2 billion a year. Having
fallen by a quarter in the last decade, average
new car emissions will fall by a further third in
the next, as internal combustion engines continue
to become more efficient. Emissions from power
stations, already down a quarter since 1990, will fall
a further 40%, with most existing coal-fired power
stations closing.
Over the next decade, we must also prepare for
the future. The 2020s will require a change of gear.
Technologies that are being demonstrated or
deployed on a small scale now will need to move
towards mass deployment. By 2030, up to around a
half of the heat used in our buildings may come
from low carbon technologies such as air- or
ground-source heat pumps. Electric or hydrogen
fuel cell cars will help to reduce vehicle emissions to
less than half today’s levels. New low carbon power
stations – a mix of carbon capture and storage,
renewables and nuclear power – will be built. In the
2020s, we will run a technology race, with the
least-cost technologies winning the largest market
share. Before then, our aim is to help a range of
technologies bring down their costs so they are
ready to compete when the starting gun is fired.
The transition to a low carbon economy will require
investment. But by insulating our homes better, and
driving more fuel efficient cars, we will use less
energy, offsetting the funding needed for low
carbon energy. By investing in more diverse
energy sources, we will be less vulnerable to fossil
fuel price spikes. And by investing in industries that
suit our geography and skills, such as offshore wind
and carbon capture and storage, we will gain a
long-term comparative advantage in industries with
a big future.
This plan shows that moving to a low carbon
economy is practical, achievable and desirable. It will
require investment in new ways of generating
energy, not a sacrifice in living standards. But turning
it into reality will require business, government and
the public pulling in the same direction. We face big
choices on infrastructure and investment. I hope
over the next year this plan can help us to forge a
new national consensus on our energy future.
Chris Huhne
Secretary of State for Energy and
Climate Change
3
Executive summary
1. This plan sets out how the UK will achieve
decarbonisation within the framework of our
energy policy: to make the transition to a low
carbon economy while maintaining energy security,
and minimising costs to consumers, particularly
those in poorer households.
2. Emissions are down by a quarter since 1990.1
Current policies put the UK on track to cut
emissions by over a third, on 1990 levels, by 2020.
In the next ten years, we will develop and deploy
the technologies that will be needed to halve
emissions in the 2020s. This will put the UK on a
path towards an 80% reduction by 2050.
3. By moving to a more efficient, low carbon and
sustainable economy, the UK will become less
reliant on imported fossil fuels and less exposed
to higher and more volatile energy prices in
the future.
Box 1: The Climate Change Act 2008 and the carbon budget framework
The Climate Change Act established a legally binding target to reduce the UK’s greenhouse gas
emissions by at least 80% below base year levels by 2050, to be achieved through action at home and
abroad.2 To drive progress and set the UK on a pathway towards this target, the Act introduced a
system of carbon budgets which provide legally binding limits on the amount of emissions that may be
produced in successive five-year periods, beginning in 2008. The first three carbon budgets were set in
law in May 2009 and require emissions to be reduced by at least 34% below base year levels in 2020.
The fourth carbon budget, covering the period 2023–27, was set in law in June 2011 and requires
emissions to be reduced by 50% below 1990 levels.3
This report sets out the proposals and policies for meeting the first four carbon budgets.
First carbon budget
(2008–12)
Carbon budget
level (million tonnes
carbon dioxide
equivalent (MtCO2e))
Percentage
reduction below
base year levels
Second carbon
budget (2013–17)
Third carbon
budget (2018–22)
Fourth carbon
budget (2023–27)
3,018
2,782
2,544
1,950
23%
29%
35%
50%
1
This figure includes the effect of emissions trading. UK territorial emissions have fallen by 28% over the same period.
2
The base year is 1990 for carbon dioxide, nitrous oxide and methane, and 1995 for hydrofluorocarbons, perfluorocarbons and sulphur hexafluoride.
3
To be reviewed in 2014 in light of EU Emissions Trading System cap.
4 Executive summary
Progress so far
Vision
4. Our past record shows that progress is
possible. Between 1990 and 2010 emissions from
power stations fell by almost a quarter, as the
‘dash for gas’ in the 1990s saw large numbers
of coal-fired power stations replaced. In the last
decade wind and other renewables have grown
to the point that they now provide nearly a tenth
of UK generating capacity. With nuclear power
generating 16% of total UK electricity, a quarter of
electricity generation is now low carbon.
10. However, if we are to cut emissions by 80% by
2050, there will have to be major changes in how
we use and generate energy. Energy efficiency will
have to increase dramatically across all sectors.
The oil and gas used to drive cars, heat buildings
and power industry will, in large part, need to be
replaced by electricity, sustainable bioenergy, or
hydrogen. Electricity will need to be decarbonised
through renewable and nuclear power, and the
use of carbon capture and storage (CCS). The
electricity grid will be larger and smarter at
balancing demand and supply.
5. In buildings, emissions have fallen by 18%,
despite the growth in population and housing.
Regulation has required the introduction of new,
more efficient condensing boilers, saving at least
£800 million this year on energy bills. Eleven million
homes, 60% of all homes with cavity walls, have
been fitted with cavity wall insulation. This will
reduce the amount the UK spends on heating in
2011 by £1.3 billion.
6. In transport, emissions are roughly the same
as they were in 1990. Emissions rose before
2007 as the economy grew and transport
demand increased, but have since fallen due to
improvements in new car efficiency, an increased
uptake of biofuels and, to a lesser extent, the
recent economic downturn.
7. Since 1990 industrial output has grown at an
average of 1% a year while emissions have fallen by
46%. Industry has become more energy efficient
and the UK’s industrial base has shifted towards
higher value, more knowledge-intensive sectors.
8. Agricultural emissions have fallen by almost
a third, due in part to more efficient farming
practices, while the diversion of waste from
landfill, as a result of the landfill tax, has cut waste
emissions by more than two thirds.
9. Government policies are already helping
consumers. Our analysis predicts that average
energy bills for domestic consumers will be 7.1%
lower in 2020 than they would have been without
policy interventions in place.
4
International Energy Agency (2009) Implementing Energy Efficiency Policies.
11. But there are some major uncertainties.
How far can we reduce demand? Will sustainable
biomass be scarce or abundant? To what extent
will electrification occur across transport and
heating? Will wind, CCS or nuclear be the cheapest
method of generating large-scale low carbon
electricity? How far can aviation, shipping, industry
and agriculture be decarbonised?
12. The sectoral plans in this document seek to
steer a course through this uncertainty.
13. In the next decade, the UK will complete
the installation of proven and cost effective
technologies that are worth installing under all
future scenarios. All cavity walls and lofts in homes,
where practicable, are expected to be insulated
by 2020. The fuel efficiency of internal combustion
engine cars will improve dramatically, with CO2
emissions from new cars set to fall by around
a third. Many of our existing coal-fired power
stations will close, replaced primarily by gas and
renewables. More efficient buildings and cars will
cut fuel costs. More diverse sources of electricity
will improve energy security and reduce exposure
to fossil fuel imports and price spikes.
14. The UK is not alone in taking action on energy
efficiency. Japan has set a goal of improving its
energy consumption efficiency from 2003 levels
by at least 30% in 2030. The Swedish Government
has proposed an energy efficiency target to reduce
energy by 20% between 2008 and 2020.4
Executive summary 5
15. Over the next decade the UK will also prepare
for the future by demonstrating and deploying the
key technologies needed to decarbonise power,
buildings and road transport in the 2020s and
beyond. Rather than picking a single winner, this
plan sets out how the UK will develop a portfolio
of technologies for each sector. This has two
virtues. It will reduce the risk of depending on a
single technology. And it will generate competition
that will drive innovation and cost reduction.
16. In electricity, the three parts to our portfolio
are renewable power, nuclear power, and coal- and
gas-fired power stations fitted with carbon capture
and storage. In transport, ultra-low emission
vehicles including fully electric, plug-in hybrid,
and fuel cell powered cars are being developed.
In buildings, the technologies will include air- or
ground-source heat pumps, and using heat from
power stations. Both of these are solutions proven
by their use in other countries.
17. During the 2020s, each of these technologies –
low carbon electricity, low carbon cars and low
carbon heating – will move towards mass roll-out.
We estimate that between 40 and 70 gigawatts
(GW) of new low carbon power will need to be
deployed by the end of the decade. Emissions for
the average new car will need to fall to between
50 and 70 gCO2/km, compared with 144 gCO2/ km
in 2010. Between 21% and 45% of heat supply to
our buildings will need to be low carbon by 2030.
18. By developing options now, the UK will
not only reduce the costs of deploying these
technologies in the 2020s. It will also gain a longterm competitive advantage in sectors that play to
our comparative strengths. These include offshore
wind, carbon capture and storage, and information
services to manage smart grids, heating controls
and transport.
19. To 2030 and beyond, emissions from the
hard-to-treat sectors – industry, aviation, shipping
and agriculture – will need to be tackled. This
will require a range of solutions to be tested by
at the latest, the 2020s, including: greater energy
efficiency; switching from oil and gas to bioenergy
or low carbon electricity; and carbon capture and
storage for industrial processes.
Sectoral plans
Low carbon buildings
20. In 2009, 37% of UK emissions were produced
from heating and powering homes and buildings.
By 2050, all buildings will need to have an emissions
footprint close to zero. Buildings will need to
become better insulated, use more energyefficient products and obtain their heating from
low carbon sources.
Energy efficiency
21. Over the next decade, with trends in
installation rates maintained at today’s levels, all
cavity walls and lofts, where practical, will be
insulated. Alongside this, the Government will
support up to 1.5 million solid wall insulations
and other energy efficiency measures such as
double glazing.
22. The Green Deal, launching in 2012, will
remove the upfront costs to the consumer of
energy efficiency, with the cost being recouped
through savings on their energy bills. The Energy
Company Obligation will support this effort. It
will place a duty on energy companies both to
reduce emissions through undertaking solid wall
insulation and to tackle fuel poverty by installing
central heating systems, replacing boilers, and
subsidising cavity wall and loft insulation. In parallel,
Smart Meters will be deployed to every home
to support consumers in managing their energy
and expenditure intelligently. The Government
will introduce zero carbon homes standards
to cut the energy demand of new homes still
further, reducing emissions and fuel bills. Through
European energy standards and labelling we will
promote the sales of the most efficient electrical
appliances and products on the market.
23. During the 2020s, deployment of solid wall
insulation will increase and installation costs will
fall as the supply chain and the skills base become
established. Chart 1 shows different levels of
ambition for the uptake of solid wall insulation,
ranging from 1 million to 3.7 million additional
homes insulated by 2030.
6 Executive summary
Chart 1: Projected deployment of solid wall insulation over the first three carbon budgets, and
illustrative range of deployment over the fourth carbon budget period and in 2050
9
CB1
CB2
CB3
CB4
Number of solid wall insulations (cumulative, millions)
8
7
Projected deployment
over the first four
carbon budget periods
6
By 2030 expecting to deploy
an additional 1–3.7 million
solid wall insulations.
5
Range of additional
deployment during
the fourth carbon
budget period
4
Illustrative range of
deployment in 2050
3
Projected deployment of
up to 1.5 million insulations
by 2020.
2
1
2050
2048
2043
2038
2033
2028
2023
2018
2013
2008
0
Year
Source: Department of Energy and Climate Change
Low carbon heating
24. Energy efficiency is the immediate priority.
But in this decade we also need to support ways
of heating buildings without emitting carbon.
Through the Renewable Heat Incentive (RHI) and
Renewable Heat Premium Payment, over 130,000
low carbon heat installations are expected to be
carried out by 2020.5 While we do not expect
mass-market deployment of these technologies in
this decade, there is an important opportunity to
build the market, particularly in off-gas grid homes
and in the commercial sector. At the same time
the Government will work with local authorities,
where appropriate, to lay the foundations for
district heating networks, particularly in urban
areas with more densely packed demand for heat.
This should enable the long-term delivery of heat
from low carbon sources.
5
This only includes installations as a result of RHI Phase 1.
25. During the 2020s, we need to begin the mass
deployment of low carbon heat. Technologies such
as heat pumps will begin to expand at scale into
residential areas, overcoming current barriers such
as cost and unfamiliarity, and working with the
supply chain to meet consumer demand. At the
same time, the heating networks that started
in urban areas during this decade will begin to
expand to meet demand in surrounding areas, and
to compete with low carbon heat technologies in
individual buildings, helping to keep costs down.
26. By 2027, based on the scenarios set out in this
plan, emissions from buildings should be between
24% and 39% lower than 2009 levels.
Executive summary 7
Chart 2: Projected deployment of low carbon heat in buildings over the first three carbon budgets
and illustrative ranges of deployment potential in the fourth carbon budget period and in 2050
600
CB1
CB2
CB3
CB4
Total low carbon heat projec tion ( TWh)
500
Projected deployment
over the first four
carbon budget periods
400
Range of additional
deployment during
the fourth carbon
budget period
300
Illustrative range of
deployment in 2050
200
By 2030 delivering between
83 and 165 TWh of low
carbon heat, plus 10–38 TWh
from heating networks.
100
2050
2048
2043
2038
2033
2028
2023
2018
2013
2008
0
Year
Source: Department of Energy and Climate Change
Low carbon transport
27. Domestic transport emissions make up nearly
a quarter of UK emissions. By 2050, domestic
transport will need to substantially reduce
its emissions.
28. Over the next decade, average emissions of
new cars are set to fall by around a third, primarily
through more efficient combustion engines.
Sustainable biofuels will also deliver substantial
emissions reductions. As deeper cuts are required,
vehicles will run on ultra-low emission technologies
such as electric batteries, hydrogen fuel cells and
plug-in hybrid technology. These vehicles could
also help to deliver wider environmental benefits,
including improved local air quality and reduced
traffic noise.
29. To ensure that these emissions savings are
delivered, the Government will continue to
work at European Union (EU) level to press for
strong EU vehicle emissions standards for 2020
and beyond in order to deliver improvements
in conventional vehicle efficiency and give
certainty about future markets for ultra-low
emission vehicles.
30. To support the growth of the ultra-low
emission vehicle market, the Government is
providing around £300 million this Parliament for
consumer incentives, worth up to £5,000 per car,
and further support for the research, development
and demonstration of new technologies.
31. During the 2020s, we will move towards the
mass market roll-out of ultra-low emission vehicles,
although further improvements in the efficiency
of conventional vehicles and sustainable biofuels
are also anticipated to play a key role. Based on
current modelling the Government anticipates
that average new car emissions could need to
be 50–70 gCO2/km and new van emissions
75–105 gCO2/km by 2030.
8 Executive summary
Chart 3: Projected average new car and van emissions over the first three carbon budgets and
illustrative ranges of average new car and van emissions in the fourth carbon budget period and
to 2050
250
Increasing internal combustion engine efficiency
Increasing uptake of ultra-low emission vehicles
Cars and vans (gCO2/km)
200
150
100
50
2050
2047
2044
2041
2038
2035
2032
2029
2026
2023
2020
2017
2014
2011
2008
0
Year
Cars (2030: 50 gCO2/km)
Vans (2030: 75 gCO2/km)
Cars (2030: 60 gCO2/km)
Vans (2030: 90 gCO2 /km)
32. While cars and vans make up the largest
share of emissions, other sectors will need to
decarbonise over time.
33. To support people to make lower carbon
travel choices, such as walking, cycling or public
transport, the Government is providing a
£560 million Local Sustainable Transport Fund
over the lifetime of this Parliament.
34. Industry is leading the drive to reduce
emissions from freight. The Logistics Carbon
Reduction Scheme, for example, aims to reduce
emissions by 8% by 2015, through improved
efficiency and some modal shift to rail. For the
longer term, to make deeper reductions in
emissions, innovation will be needed in ultra-low
emissions technologies such as sustainable biofuels
and electric, hydrogen or hybrid technologies.
35. Emissions from aviation will be capped by being
part of the EU Emissions Trading System (EU ETS)
from 2012, ensuring that any increases in aviation
emissions are offset by reductions elsewhere in the
EU economy, or internationally.
Cars (2030: 70 gCO2/km)
Vans (2030: 105 gCO2/km)
36. By 2027, based on the scenarios set out in this
plan, emissions from transport should be between
17% and 28% lower than 2009 levels.
Low carbon industry
37. Industry makes up nearly a quarter of the
UK’s total emissions. Over 80% of these emissions
originate from generating the heat that is needed
for industrial processes such as manufacturing
steel and ceramics, and the remainder from
chemical reactions involved in processes such as
cement production. By 2050, the Government
expects industry to have delivered its fair share of
emissions cuts, achieving reductions of up to 70%
from 2009 levels.
38. The Government will work with industry to
ensure that low carbon growth continues into the
future. Industry must make significant reductions
in the emissions intensity of production, while the
Government assists in maintaining the competitiveness
of strategically important sectors. Emissions reductions
will come from three sources: first, driving further
efficiencies in the use of energy and materials and the
design of industrial processes; second, replacing fossil
fuels with low carbon alternatives such as bioenergy
Executive summary 9
and electrification; and third, from carbon capture and
storage (CCS) to address combustion and process
emissions, for example in cement and steel.
39. Over the next decade, the main chances for
industry to decarbonise will come from taking up
the remaining opportunities for energy efficiency,
and beginning the move to low carbon fuels, such
as using sustainable biomass to generate heat
for industrial processes. Through the EU ETS
and domestic policies such as Climate Change
Agreements and the CRC Energy Efficiency Scheme
the Government is helping to ensure that these cost
effective energy efficiency measures are being taken
up. Innovation efforts during this period will also be
important, bringing down the cost of decarbonising
industrial processes and moving technology options
such as electrification and CCS closer to commercial
reality. CCS technology research projects are being
strongly backed by UK and international sources of
funding, with the aim of turning CCS into a viable
option for the coming decades.
40. During the 2020s, in addition to energy
efficiency measures, reductions will be driven by
switching to low carbon fuels. As with buildings,
the Government expects industry to take
advantage of the Renewable Heat Incentive,
replacing expensive fossil fuels with low carbon
heat alternatives and thereby accelerating the
decarbonisation of industry in the 2020s. CCS
technology is also expected to start to be
deployed during this decade.
41. Throughout this transition the Government
will work closely with industry to address the
principal risks, including the impact of anticipated
increases in energy costs, to ensure that UK
industry remains internationally competitive. The
Government announced a package of measures to
support sectors which are particularly exposed
to these risks.
42. By 2027, emissions from industry should be
between 20% and 24% lower than 2009 levels.
6
REN21 (2011) Renewables 2011: Global Status Report.
Low carbon electricity
43. The power sector accounts for 27% of UK
total emissions by source. By 2050, emissions from
the power sector need to be close to zero.
44. With the potential electrification of heating,
transport and industrial processes, average
electricity demand may rise by between 30% and
60%. We may need as much as double today’s
electricity capacity to deal with peak demand.
Electricity is likely to be produced from three
main low carbon sources: renewable energy,
particularly onshore and offshore wind farms; a
new generation of nuclear power stations; and
gas and coal-fired power stations fitted with
CCS technology. Renewable energy accounted
for approximately half of the estimated 194 GW
of new electricity capacity added globally during
2010.6 Fossil fuels without CCS will only be used
as back-up electricity capacity at times of very high
demand. The grid will need to be larger, stronger
and smarter to reflect the quantity, geography and
intermittency of power generation. We will also
need a more flexible electricity system to cope
with fluctuations in supply and demand.
45. While the overall direction is clear, major
uncertainties remain over both the most cost
effective mix of technologies and the pace of
transition. The Government is committed to
ensuring that the low carbon technologies with the
lowest costs will win the largest market share.
46. Over the next decade, we need to continue
reducing emissions from electricity generation
through increasing the use of gas instead of coal,
and more generation from renewable sources.
Alongside this, we will prepare for the rapid
decarbonisation required in the 2020s and 2030s
by supporting the demonstration and deployment
of the major low carbon technologies that we
will need on the way to 2050. The reforms to the
electricity market will be the most important step
in making this happen. The introduction of Feed-in
Tariffs with Contracts for Difference from 2014 will
provide stable financial incentives for investment in
all forms of low carbon generation.
10 Executive summary
• working with Ofgem and the industry to
deliver the investment required to ensure that
the electricity transmission and distribution
networks will be able to cope in the future.
47. In addition, the Government is:
• helping industry to reduce the costs of offshore
wind by setting up an Offshore Wind Cost
Reduction Task Force with the aim of driving
down the cost of offshore wind to £100 per
megawatt hour (MWh) by 2020;
48. Maintaining secure energy supplies remains
a core government priority. New gas-fired
generation will play a significant supporting role as
19 GW of existing generation capacity closes over
the next decade.
• supporting the development of CCS technology
at scale in a commercial environment, to bring
down costs and risks, with £1 billion set aside to
support the programme;
49. Over the 2020s, large-scale deployment of
low carbon generation will be needed, with, we
estimate, 40–70 GW of new capacity required
by 2030. This will drive a huge reduction in
emissions from electricity supply. In the 2020s,
the Government wants to see nuclear, renewables
and CCS competing to deliver energy at the
lowest possible cost. As we do not know how
costs will change over time, we are not setting
targets for each technology or a decarbonisation
target at this point.
• supporting the demonstration of less mature
renewable technologies, and committing up to
£50 million over the next four years to support
innovation in marine and offshore technologies;
• enabling mature low carbon technologies
such as nuclear to compete by addressing the
barriers to deployment such as an under­
developed UK supply chain; and
Chart 4: Projected deployment of low carbon generation over the first three carbon budgets and
illustrative ranges of deployment potential in the fourth carbon budget period and in 2050
160
CB1
CB2
CB3
CB4
140
Projected low carbon
generation over the
first four carbon budget
periods
Total low carbon generation/GW
120
100
80
Range of additional
low carbon generation
during the fourth
carbon budget period
Around 40–70 GW of new
low-carbon capacity will be
needed by 2030, in addition to
10 GW of existing capacity that
will still be operating
60
Illustrative range of
low carbon generation
in 2050
40
20
Year
Source: Department of Energy and Climate Change, Redpoint modelling, 2050 Calculator
2050
2048
2043
2038
2033
2028
2023
2018
2013
2008
0
Executive summary 11
50. The scenarios modelled in this plan show that
by 2030 new nuclear could contribute 10–15 GW,
with up to 20 GW achievable if build rates are
higher; fossil fuel generation with CCS could
contribute as much as 10 GW; and renewable
electricity could deliver anywhere between 35 and
50 GW – depending on assumptions about costs
and build rates.
51. By the end of the fourth budget period, our
analysis suggests that emissions from electricity
generation could be between 75% and 84% lower
than 2009 levels.
Agriculture, land use, forestry
and waste
52. As set out above, the majority of emissions
reductions will come from action in buildings,
transport, industry and electricity generation.
However, efforts elsewhere will continue to
contribute – in the next decade, during the fourth
carbon budget period, and ultimately to meeting
the 2050 target.
53. In 2009, agriculture, forestry and land
management together accounted for around 9%
of UK emissions. The Government is encouraging
practical actions which lead to efficiencies such as
improved crop nutrient management and better
breeding and feeding practices, which save both
money and emissions. The Government is also
working to improve its evidence base to better
understand what this sector can feasibly deliver
in the future. The Government will undertake a
review of progress towards reducing greenhouse
gas emissions from agriculture in 2012 which will
assess the impact of existing measures and highlight
further policy options. Next spring an independent
panel will provide advice on the future direction of
forestry and woodland policy in England.
54. In 2009, emissions from waste management
represented a little over 3% of the UK total.
The Government is committed to working
towards a zero waste economy, and by 2050
it is estimated that emissions of methane from
7
landfill (responsible for around 90% of the sector’s
emissions) will be substantially below current
levels. The Government is working to improve our
scientific understanding of these emissions so that
they can be managed better. Our strategy over
the next decade was set out in the Action Plan
which accompanied the Review of Waste Policy in
England, and includes increases to the landfill tax.
By the end of 2013 the Government will develop
a comprehensive Waste Prevention Programme,
and work with businesses and other organisations
on a range of measures to drive waste reduction
and re-use.
A plan that adds up
55. Part 3 of this report outlines some illustrative
scenarios to demonstrate different ways in which
the fourth carbon budget could be met through
different combinations of the various ambitions in
the different sectors. As the Government develops
its policy framework further it will look to meet
the fourth budget in the most cost effective and
sustainable way and keep costs under review,
developing clear impact assessments and consulting
publicly on policies before it implements them.
A full list of the Government’s energy and climate
change commitments for this Parliament is set out
at Annex C.
56. We will also continue to work on the
international stage to ensure that this is a genuinely
collaborative global effort. Other countries
are already taking actions to decarbonise their
economies and we will continue to push for
ambitious action both in the EU and globally.
At the EU level, the UK is pushing for the EU to
show more ambition by moving to a tighter 2020
emissions target, which in turn will drive a more
stringent EU ETS cap. We will review our progress
in 2014. If at that point our domestic commitments
place us on a different emissions trajectory than
the ETS trajectory agreed by the EU, we will, as
appropriate, revise up our budget to align it with
the actual EU trajectory.7
Before seeking Parliamentary approval to amend the level of the fourth carbon budget, the Government will take into account the advice of the
Committee on Climate Change, and any representations made by the other national authorities.
12 Executive summary
Building a coalition
for change
57. To make this transition, industry, the
Government and the public need to be pulling in
the same direction.
58. For industry, the global low carbon market
is projected to reach £4 trillion by 2015 as
economies around the world invest in low carbon
technology. The innovation challenge for industry
is in business models as well as technologies, with
electric vehicles, renewable electricity and solid
wall insulation requiring upfront investment, but
delivering large savings in operating costs.
59. Industry must lead, but the Government
can facilitate. This plan provides more clarity
on the scale of the UK market opportunity and
the pace of transition. In the next decade, the
state will support innovation to ensure that key
technologies can get off the ground. Rather than
pick a winning technology, the Government will
create markets that enable competing low carbon
technologies to win the largest market share
as the pace of change accelerates in the 2020s.
New business models require new institutional
frameworks that underpin long-term investment.
That is the purpose behind both the Green Deal
and Electricity Market Reform. As we make the
transition, the state will need to solve co-ordination
problems and ensure that the system as a whole
coheres – for example, to understand when
infrastructure decisions are required relating to
the electricity grid, the gas network and charging
points for electric cars.
60. The plans for new electricity infrastructure
and changes in the way in which we travel and
heat our homes will require public support. While
public opinion is in favour of tackling climate
change, there is little agreement over how to go
about it. This plan shows that the UK can move
to a sustainable low carbon economy without
sacrificing living standards, but by investing in new
cars, power stations and buildings. However, it will
require the public to accept new infrastructure
and changes to the way in which we heat homes,
and to be prepared to invest in energy efficiency
that will save money over time. As part of this
Carbon Plan, the Government is launching a
new 2050 Calculator, to enable a more informed
debate about UK energy choices and develop
a national consensus on how we move to a low
carbon economy. The Government will also use
this plan to build more consensus globally on how
moving to a low carbon transition is a practical and
achievable goal.
13
Part 1: The Government’s
approach to energy and climate
change
Introduction
1.1 The UK, in common with other countries,
faces two great risks over the coming decades:
• First, if we are not able to constrain global
greenhouse gas emissions, the world faces the
prospect of dangerous climate change, which
will have unprecedented impacts on global
security and prosperity.
• Second, the UK faces challenges to its energy
security as our current generation of power
stations closes and we must ensure supplies
of energy which are resilient to volatile fossil
fuel prices.
The threat of climate change
1.2 Climate change is one of the greatest threats
facing the world today. There is an overwhelming
scientific consensus that climate change is
happening, and that it is primarily the result of
human activity. There is now almost 40% more
carbon dioxide in the atmosphere than there
was before the industrial revolution, the highest
level seen in at least the last 800,000 years. As
a consequence, global average temperatures
continue to rise. 2000–09 was the warmest
decade on record, and 2010 matched 2005 and
1998 as the equal warmest year.8
1.3 The UK accounts for less than 1.5% of global
greenhouse gas emissions,9 so we have a clear
national interest in ensuring that the world tackles
climate change together. Climate change is a
global problem, and it requires a global solution.
Therefore the UK’s international approach
focuses on:
• encouraging the European Union to
demonstrate leadership on climate change;
• influencing global political and economic
conditions to secure action from other
countries to limit greenhouse gas emissions;
• helping developing countries to build the climate
resilience of their economies and move towards
low carbon growth in the future; and
• working for a comprehensive global climate
change agreement.
1.4 At the same time as mitigating climate change,
the Government is committed to ensuring that the
UK is resilient to the effects of a changing climate.
The Climate Change Risk Assessment to be
published next year will provide an assessment of
climate change risks and opportunities for the UK.
The assessment will underpin the development
of a National Adaptation Programme establishing
priorities for UK adaptation policy over the next
five years.
8
For further information on climate science see: Royal Society (2010) Climate Change: A summary of the science. Available at:
http://royalsociety.org/climate-change-summary-of-science/
9
Climate Analysis Indicators Tool. Available at: http://cait.wri.org/
14 Part 1: The Government’s approach to energy and climate change
Maintaining our energy security
1.5 We face three challenges to our energy
security. First, by 2020, the UK could be importing
nearly 50% of its oil and 55% or more of its gas.
At a time of rising global demand, and continued
geopolitical instability, the risk of high and
volatile energy prices, and physical disruptions
will remain. Second, we will lose a fifth of our
electricity generating capacity due to the closure
of coal and nuclear plants over the coming
decade. Third, in the long term, while dependence
on imported energy is expected to fall, we will face
a new challenge in balancing more intermittent
supply of energy from renewables with more
variable electricity demand from electric cars,
or electric heating. Our system will need to be
resilient to mid-winter peaks in heating demand
due to cold weather, and troughs in supply due to
low wind speeds.
1.6 To meet our energy security needs, gas and
oil will continue to play a valuable role as we
make the transition to a low carbon economy.
Gas will be needed over the coming decades
both for heating and for electricity generation.
Even in 2050, gas will contribute to electricity
supply in the form of power stations fitted with
carbon capture and storage (CCS) technology or
as back-up to intermittent renewable generation.
Our energy strategy seeks to underpin secure
and diverse energy supplies, both domestically
and internationally. This involves encouraging
investment in oil and gas production; promoting
reliable supply through more efficient markets
and strengthened bilateral trading relations;
and enhancing price stability through improved
transparency and dialogue.
Our principles
1.7 The Government is determined that we
should address the twin challenges of tackling
climate change and maintaining our energy security
in a way that minimises costs and maximises
benefits to our economy.
1.8 To achieve this, we will follow a clear set of
principles:
• We should always aim for the most cost
effective means to achieve our aims. This
necessitates using less energy across the
economy. And it requires using the most
cost effective technologies to drive further
efficiencies and meet remaining demand.
• A diverse portfolio of technologies,
competing against each other for market
share, can drive innovation and cost
reduction. While our principle is to choose the
most cost effective mix of technologies in any
sector, the reality is that we do not yet know
how these technologies will develop, how their
costs will change, or what other technologies
may yet emerge. In transport this could mean
electric, plug-in hybrid or hydrogen cars, or
the use of biofuels. In heating this could mean
building-level technologies such as air- and
ground-source heat pumps or network-level
options such as district heating. For that reason,
the Government aims to encourage a portfolio
of technologies and create competitive market
conditions in which the most cost effective
succeed over time.
• Clear long-term signals about the regulatory
framework can support cost reduction.
There is a role for the Government in providing
clear, unambiguous signals to the market and
a stable long-term regulatory framework to
create the conditions for the investment that is
fundamental to economic growth and the move
to a low carbon economy.
• The Government should help to tackle
market failures and unblock barriers to
investment to encourage growth in newer
technologies. While competition between
technologies and businesses is the best way to
ensure that we find the most cost effective mix,
there is a role for the Government in identifying
where it can constructively enable the market,
particularly where technology deployment relies
on the creation of new infrastructure.
• Costs must be distributed fairly. The
Government will continue to focus on the
distributional impacts of the low carbon
transition. We are supporting consumers by
Part 1: The Government’s approach to energy and climate change 15
providing subsidised insulation, delivered by
energy companies, to the most vulnerable
households, as well as bill rebates to more
than 600,000 vulnerable pensioners. The
Government also recognises the challenges
confronting energy-intensive industries,
including the difficulties some face in remaining
internationally competitive while driving down
domestic emissions. We are taking active
steps to support these industries through the
transition, recognising the future role these
sectors will play in delivering economic growth.
1.9 Reducing emissions will have wider impacts.
Creating a low carbon and resource efficient
economy means making major structural changes
to the way in which we work and live, including
how we source, manage and use our energy.
The Government is committed to identifying a
sustainable route for making that transition by
balancing greenhouse gas benefits, cost, energy
security and impacts on the natural environment.
By adopting these principles, we seek to maximise
the potential economic benefits to the UK from
making the transition to a low carbon economy,
as well as to minimise adverse impacts for the
environment and public.10 Doing this in the most
cost effective way will help to enable us to:
• use our resources more efficiently. Managing
energy and resource demand reduces costs
to businesses and consumers, releasing
spending power that can increase growth and
productivity elsewhere. Lower demand for
energy reduces risks to the security of our
energy supplies;
• reduce our exposure to fossil fuel price
volatility. According to the Office for Budget
Responsibility, a temporary 20% increase in
the oil price (adjusted to remove inflation)
would lead to a loss of potential output in the
UK of over 0.3% in the following year;11 and
as renewables and CCS could give the UK a
long-term comparative advantage in growing
global markets for these technologies.
The vision for 2050
1.10 These principles will underpin our vision
for a long-term transition to a low carbon
economy. By 2050 we will have transformed
our buildings, transport and industry, the way in
which we generate electricity and our agriculture
and forestry.
1.11 Low carbon buildings: Heating and powering
buildings produced 38% of the UK’s emissions
in 2009. Those emissions are a result of burning
fossil fuels to heat buildings, and generating the
electricity that powers our lighting and appliances.
Buildings will need to be much better insulated and
make use of Smart Meters and heating controls,
and more efficient lighting and appliances, to
reduce their demand for energy. At the same
time, we will move away from the use of fossil
fuels for heating and hot water and towards low
carbon alternatives such as heat pumps or heating
networks. By 2050, emissions from heating and
powering our buildings will be virtually zero.
1.12 Low carbon transport: Transport is a major
contributor to the UK’s energy demand and
greenhouse gas emissions, creating 24% of the
UK total in 2009. Most of those emissions come
from the oil-based fuels we rely upon for road
transport. A step-change is needed to move away
from fossil fuels and towards ultra-low carbon
alternatives such as battery electric or fuel cell
vehicles. New technologies will have implications
for energy security, with increased demands likely
to be placed on the grid by ultra-low emission
vehicles (such as electric cars), as well as presenting
new opportunities for vehicles to help balance
variations in demand for electricity over time and
reducing our exposure to volatile oil prices.
• create long-term comparative advantages.
Being an early mover in technologies such
In summer 2012 the Government will launch a research programme on sustainable pathways to 2050 which will consider the cumulative
impacts of and interactions between different low carbon technologies. See Annex B for further details on the wider environmental
impacts of reducing emissions and meeting carbon budgets.
11
OBR (2010) Assessment of the Effect of Oil Price Fluctuations on the Public Finances. Available at:
http://budgetresponsibility.independent.gov.uk/wordpress/docs/assessment_oilprice_publicfinances.pdf
10
16 Part 1: The Government’s approach to energy and climate change
1.13 Low carbon industry: Industry currently
accounts for nearly one quarter of UK emissions,
generated by burning fossil fuels for heat and by
the chemical reactions involved in some industrial
processes. Production of goods – from paper to
steel – will need to become more energy efficient
and switch over to low carbon fuel sources.
1.14 Low carbon power generation: The
power sector currently accounts for 27% of UK
emissions. As heating, transport and industry
become increasingly electrified, the amount of
electricity we need to generate is very likely to
increase from today, and it will need to be almost
entirely carbon-free. By 2050, the three sources
of UK electricity are likely to be renewables (in
particular onshore and offshore wind farms); coal,
biomass or gas-fired power stations fitted with
CCS technology; and nuclear power.12 The grid
will need to be larger, stronger and smarter to
reflect the quantity, geography and intermittency
of power generation. We will also need to ensure
the security of the fossil fuel resources required to
make the low carbon transition.
1.15 Low greenhouse gas agriculture and
forestry: Emissions from agriculture, land use and
forestry – mostly in the form of nitrous oxide and
methane – made up around 9% of total emissions
in 2009, but will account for an increasingly large
share of overall UK greenhouse gas emissions as
other sectors decarbonise over the next three
decades. In order to meet our 2050 target, the
agricultural sector will need to contribute to
reducing emissions by adopting more efficient
practices. We will also ensure the development of
a sustainable and expanding forestry sector.
2050 futures
1.16 While our vision for 2050 is clear, there are
huge uncertainties when looking 40 years ahead
as to exactly how that vision will be achieved. Our
approach has been to try to explore a range of
plausible scenarios for what the UK might look
like in 2050 and to seek to draw lessons from
the similarities and differences between those
scenarios. In line with our principle of seeking the
most cost effective technology mix, our starting
point for this has been to take the outputs of the
‘core’ run of the cost-optimising model, MARKAL,
which was produced as part of the Department of
Energy and Climate Change’s analysis to support
the setting of the fourth carbon budget.13
1.17 On the supply side, the core MARKAL run
produces a balanced generation mix, with 33 gigawatts
(GW) of nuclear, 45 GW of renewables and 28
GW of fossil fuel with CCS power capacity by
2050. On the demand side, the model run drives
a sharp reduction in per capita energy demand;
in this run, everybody in the UK would use half as
much energy in 2050 as they do today, due to the
adoption of more energy efficient technologies,
with heat pumps, district heating, battery electric
and fuel cell vehicles.
1.18 This is only a starting point. Attempting to
pick a single pathway to 2050 by relying on a single
model is neither possible nor a helpful guide in the
face of great uncertainty. But it does give insight
into the most cost effective way to achieve the
low carbon transition, illustrating the technologies
likely to contribute to reducing emissions, and the
most cost effective timing for their deployment.
It shows that achieving a cost-optimal transition
overall often necessitates deploying technologies
in the medium term that may not yet be statically
cost effective against the carbon price.14
The UK Government works in partnership with the Devolved Administrations in Northern Ireland, Scotland and Wales to deliver the
targets set by the Climate Change Act 2008. While the administrations have a shared goal of reducing the impacts of climate change,
policies on how to achieve this vary across the administrations – the Scottish Government, for example, is opposed to the development
of new nuclear power stations in Scotland. It believes that renewables, fossil fuels with CCS and energy efficiency represent the best longterm solution to Scotland’s energy security. This document focuses largely on UK Government policy on climate change, with Devolved
Administration views set out in ‘Working with the EU and Devolved Administrations’ on page 99.
13
HMG (2011) Fourth Carbon Budget Level: Impact Assessment (final). MARKAL is discussed further at Annex A.
14
The cost effectiveness of measures is affected by the scale and timing of their deployment. Static cost effectiveness does not account for
changes to a measure’s cost effectiveness due to variations in the scale and timing of its deployment.
12
Part 1: The Government’s approach to energy and climate change 17
1.19 Alongside this core MARKAL run the
Government has developed three further ’futures’
that attempt to stress test the results of the core
run by recognising that there will be changes that
we cannot predict in the development, cost and
public acceptability of different technologies in
every sector of the economy.
Figure 1: 2050 futures
Higher
renewables;
more energy
efficiency
Core
MARK
Higher CCS;
more
bioenergy
AL
No
gam
bre techno e-cha
n
akt
hro logy c ging
ugh
ost
in p
ow
er
r
ou
avi
eh le
n b ab
e i new sts
ng
ha , re y co
p-c nge log ge
Ste cha hno stora
tec and
in CCS
Step-change
power and
technology, in
ations
industry applic
Higher nuclear;
less energy
efficiency
1.20 Future ‘Higher renewables, more energy
efficiency’ assumes a major reduction in the cost
of renewable generation alongside innovations that
facilitate a large expansion in electricity storage
capacity. This helps to manage the challenges
of those renewables that are intermittent. It is
consistent with a world where high fossil fuel prices
or global political commitment to tackling climate
change drives major investment and innovation
in renewables.
1.21 As a consequence, the power generation mix
includes deployment of wind, solar, marine and
other renewable technologies, as well as back-up
gas generation. This future also assumes a major
reduction in per capita energy demand driven by
people embracing low carbon behaviour changes
and smart new technologies such as heating
controls, and recognising the financial benefits of
taking up energy efficiency opportunities. We
15
electrify the majority of our demand for heat,
industry and transport using ground- and airsource heat pumps in buildings and electrified
industrial processes, and we travel in ultra-low
emissions vehicles.
1.22 Future ‘Higher CCS, more bioenergy’
assumes the successful deployment of CCS
technology at commercial scale and its use in
power generation and industry, supported by
significant natural gas imports, driven by changes
such as a reduction in fossil fuel prices as a result of
large-scale exploitation of shale gas reserves. It also
assumes low and plentiful sustainable bioenergy
resources (see box 2).
1.23 In this future, significant amounts of
relatively low cost, sustainable biomass result in
CCS also being used with biomass (BE-CCS) to
generate negative emissions.15 Negative emissions
production is a game-changer in that it could offset
the continued burning of fossil fuels elsewhere
in the energy system. In this scenario, BE-CCS
creates around 50 million tonnes carbon dioxide
equivalent (MtCO2e) of negative emissions –
equivalent to almost 10% of today’s total – which
creates ’headroom’ for some fossil fuel use.
As a result, this pathway has less electrification
of heat and transport, with more heat demand
met through network-level heating systems such
as district heating or combined heat and power.
In transport, more demand is met through
sustainable biofuels use in cars and buses, while
strong effort is made to improve the efficiency of
UK land management. No unabated gas generation
is needed to balance the system in this future.
1.24 Future ‘Higher nuclear, less energy
efficiency’ is a future that is more cautious about
innovation in newer technologies. CCS does
not become commercially viable. Innovation in
offshore wind and solar does not produce major
cost reductions. Lack of innovation in solid wall
insulation results in low public acceptability of
energy efficiency measures.
In the 2050 modelling, biomass fuel sources are typically assumed to be ‘zero carbon’ because the CO2 released with their combustion
is equal to the amount sequestered through the process of growing the biomass. Capture of this CO2 through use of CCS technology
(BE-CCS) removes it from the system altogether by pumping it underground – thereby creating ‘negative emissions’.
18 Part 1: The Government’s approach to energy and climate change
Box 2: Sustainable bioenergy
Sustainable bioenergy is a versatile source of low carbon energy which will play a key role in meeting
carbon budgets and the 2050 target. It has applications in each sector – including for the generation of
electricity and heat, and as a replacement for more emissions-intensive transport fuels. In 2010 the UK
used 73.6 terawatt hours (TWh) of bioenergy.
The UK Renewable Energy Roadmap stated that bioenergy could deliver around half of the total
generation needed to meet our 2020 renewable targets. To achieve this level of deployment we
will need to make the most of domestic supplies such as residues and wastes, increased use of
under-managed woodlands and energy crop production on marginal land while also using globally
traded feedstocks.
A key condition for the use of bioenergy is its ability to generate genuine emissions reductions. Clear
sustainability standards – which account for greenhouse gas emissions throughout the lifecycle and
also consider wider environmental impacts – are critical. Current estimates suggest that global and UK
biomass demand is likely to increase towards 2050. However, sustainability concerns may constrain the
availability of particular feedstocks.
The Government’s forthcoming Bioenergy Strategy will set out the role that sustainable bioenergy can
play in cutting greenhouse gas emissions and meeting our energy needs. It will provide the strategic
direction on the future role of sustainable bioenergy against which future policies in this area can be
assessed and developed.
1.25 As a result, nuclear is by far the largest
source of electricity in 2050. Natural gas plays a
role in matching peaks in demand. Compared with
the core MARKAL run, there is less insulation of
existing homes and less use of smart technologies
and appliances in homes to reduce energy use.
Individuals travel more than they do today and
continue to make the most of their journeys
using cars. We succeed in electrifying most of our
demand for heat and transport, with remaining
demand met through a mix of other technologies,
such as district heating.
Planning for the future
1.26 These three futures, alongside the core
MARKAL run, can help us to understand the
choices we face as we make the transition to a
low carbon economy by 2050. By looking at the
commonalities and differences between them,
we can try to understand which technologies and
efforts now may be ’safe bets’ in the face of future
uncertainty, and to identify the points in time
between now and 2050 when choices between
technologies will need to be made if we are to keep
different possible futures open. The Government’s
approach in this document, and in planning for the
first four carbon budgets, is to ensure that we are
supporting the safe bets; that we are acting to keep
open different possibilities where we do not yet
know what the cost effective and appropriate path
may be; and that we identify and plan for decision
points where possible paths diverge.
1.27 The three futures suggest parameters around
the key uncertainties in the transition: the degree
of energy efficiency that may be achieved across
the economy; the lowest cost technology mix for
decarbonising remaining energy demand (especially
heating and transport demand); and the lowest cost
technology mix for decarbonising electricity supply.
1.28 All three futures are published in the 2050
Calculator web tool at http://2050-calculator-tool.
decc.gov.uk and further detail on their specific
choices and implications can be found at Annex A.
These futures indicate a range of deployment for
key technologies in 2050, acknowledging that a
number of factors – notably cost – will ultimately
determine the level of deployment within this range.
Part 1: The Government’s approach to energy and climate change 19
1.29 The 2050 futures set out a helpful framework
for developing the Government’s strategy to
achieve carbon budgets on the way to 2050. In
each sector, we need to ensure that our strategy
for meeting the first four carbon budgets puts
us on a path to deliver this range of ambition in
2050. Part 2 of this document sets out how we
will do this in each sector. Part 3 provides a range
of scenarios for ways in which we could meet the
fourth carbon budget, all of which would put us on
track to deliver these 2050 futures.
Table 1: Summary of 2050 futures
(All figures
in 2050)
Measure
Core
MARKAL
Renewables;
more energy
efficiency
CCS; more
bioenergy
Nuclear;
less energy
efficiency
Energy
saving per
capita,
2007–50
50%
54%
43%
31%
Electricity
demand
increase,
2007–50
38%
39%
29%
60%
Solid wall insulation
installed
n/a16
7.7 million
5.6 million
5.6 million
Cavity wall insulation
installed
n/a16
8.8 million
6.9 million
6.9 million
House-level heating
92%
100%
50%
90%
Network-level heating
8%
0%
50%
10%
Transport
Ultra-low emission cars
and vans (% of fleet)
75%
100%
65%
80%
Industry
Greenhouse gas capture
via CCS
69%
48%
48%
0%
Electricity
generation
Nuclear
33 GW
16 GW
20 GW
75 GW
CCS
28 GW
13 GW
40 GW
2 GW
Renewables17
45 GW
106 GW
36 GW
22 GW
~350 TWh
~180 TWh
~470 TWh
~460 TWh
Buildings
Agriculture
and land use
Bioenergy use
16
MARKAL does not provide figures for numbers of specific insulation measures deployed. The 2050 futures figures are taken directly from the 2050
Calculator, and should be taken as illustrative rather than precise targets for deployment.
17
Note that the 2050 futures do not assume that existing renewables generation is repowered at the end of its lifetime. The 2050 Calculator assumes that
wind turbines have a lifetime of 20 years.
Our strategy to achieve carbon budgets
21
Part 2: Our strategy to achieve
carbon budgets
Achieving carbon budgets
2.1 As set out in Part 1, the Government’s
approach to avoiding the risk of dangerous climate
change has at its heart the Climate Change Act
2008. The Act requires that five-yearly ‘carbon
budgets’ be set three budget periods ahead, so
that it is always clear what the UK’s emissions
pathway will be for the next 15 years.
Achieving carbon budgets one to
three
2.2 The first three carbon budgets, for the years
2008–12, 2013–17 and 2018–22, were set in May
2009. Table 2 overleaf shows the level of the first
three carbon budgets.
Our current policy framework
2.3 The 2050 futures give us a clear vision of the
longer-term changes we will need to see in each
sector of the economy. The Government already
has a comprehensive package of policies in place to
deliver the emissions reductions necessary to meet
the first three carbon budgets and to provide
incentives for the development and take-up of the
portfolio of technologies necessary to put us on
18
track to 2050. Domestic policies such as the Green
Deal, the Renewable Heat Incentive and roll-out
of Smart Meters, along with EU-wide policies such
as the EU Emissions Trading System (EU ETS) and
regulations on new car and van CO2 emissions
standards, are forecast to drive down emissions in
the UK over this decade and provide a platform
for further, deeper, cuts in emissions during the
2020s and beyond. More information on these
policies can be found later in this report.
Emissions projections for carbon
budgets one to three
2.4 The Government’s emissions projections18
provide forecasts for UK emissions over the short
and medium term. These take into account the
estimated energy and emissions savings from our
current policy framework, and reflect estimates of
the key economic factors that drive energy use and
emissions, such as economic growth and fossil fuel
prices (see box 3 on page 23). These projections
are an essential tool for projecting progress
and assessing risks to meeting carbon budgets.
The table overleaf shows the latest emissions
projections (central scenario) for the first three
carbon budgets.
DECC (2011) Updated Energy and Emissions Projections 2011. See: www.decc.gov.uk/en/content/cms/about/ec_social_res/analytic_projs/en_emis_projs/
en_emis_projs.aspx
22 Part 2: Our strategy to achieve carbon budgets
Table 2: October 2011 emissions projections (million tonnes of carbon dioxide equivalent (MtCO2e))
First carbon budget
(2008–12)
Third carbon budget
(2018–22)
3,018
2,782
2,544
23%
29%
35%
2,922
2,650
2,457
−96
−132
−87
−73 to −124
−73 to −172
−19 to −142
Legislated interim budgets19
Percentage reduction from 1990
baseline20
Net UK carbon account
Projected performance against
first three carbon budgets
(negative implies emissions under
budget)
Uncertainty range in projected
over-achievement (high to low
emissions projection)
Second carbon budget
(2013–17)
2.5 As can be seen, with current planned policies,
the latest projections suggest that the UK is on
track to meet its first three carbon budgets and
that we expect to reduce emissions to below their
levels by 96, 132 and 87 million tonnes carbon
dioxide equivalent (MtCO2e) respectively, based
on central forecasts.
2.6 This forecast over-achievement suggests
that the UK is in a strong position to deliver on
more ambitious carbon budgets out to 2020. We
continue to lobby strongly in Europe for a move to
a more ambitious 2020 target and, if successful, we
will amend our second and third carbon budgets
accordingly, following effort share negotiations
with other Member States, to ensure that they are
consistent with new EU obligations.
Achieving the fourth carbon
budget
2.7 On 30 June 2011, the level of the fourth
carbon budget for the years 2023–27 was set
in law, committing the UK to reduce emissions
to 50% below 1990 levels. The Low Carbon
Transition Plan, published in July 2009, set out
the strategy for meeting the first three carbon
budgets.21 This Carbon Plan updates and
supersedes the 2009 report and presents the
Government’s strategy for meeting all four carbon
budgets, with a particular focus on the fourth
carbon budget.
2.8 The level of the fourth carbon budget
(1,950 MtCO2e) assumes a split between emissions
that will fall in the traded sector (690 MtCO2e)
and emissions that will fall in the non-traded sector
(1,260 MtCO2e). In the traded sector, emissions are
capped by the EU ETS – see box 4 on page 24 for
more information.
2.9 Whether or not we manage to reduce
emissions by the amount required to meet carbon
budgets will depend on the level of the UK’s share
of the EU ETS cap. We know that the current
EU ETS cap is not sufficiently tight to deliver the
19
The ‘interim’ carbon budgets are set on the basis of the current EU target to reduce emissions by 20% from 1990 levels by 2020.
20
These percentages have changed since 2009 when quoted in the Low Carbon Transition Plan (HM Government (2009) The UK Low Carbon Transition Plan:
National strategy for climate and energy, www.decc.gov.uk/publications/basket.aspx?FilePath=White+Papers%2fUK+Low+Carbon+
Transition+Plan+WP09%2f1_20090724153238_e_%40%40_lowcarbontransitionplan.pdf&filetype=4) owing to an update in the greenhouse gas inventory
which revised total 1990 baseline UK greenhouse gas emissions from 777.4 MtCO2e to 783.1 MtCO2e. This number is the denominator in this calculation,
hence while the budget levels (in MtCO2e) have not changed, the 1990 baseline and percentage reductions have.
21
HM Government (2009) The UK Low Carbon Transition Plan: National strategy for climate and energy.
Part 2: Our strategy to achieve carbon budgets 23
Box 3: The Government’s emissions projections
Emissions projections are inherently uncertain and the outturn could be higher or lower than the
projections. This is due to uncertainty over future temperatures, fossil fuel prices, carbon prices,
economic growth, demographic trends and the impact of our policies. There is also modelling
uncertainty surrounding the ability to forecast economic relationships, for example the relationship
between economic growth and emissions, uncertainty which is likely to increase over time as the
structure of the UK economy and economic relationships evolve. As an example, while on central
projections we expect the over-achievement in the third carbon budget to be 87 MtCO2e over
the five-year period, the over-achievement might be as much as 142 MtCO2e (under low emissions
projections) or as little as 19 MtCO2e (under high emissions projections). In the case of the traded
sector, the uncertainty increases significantly beyond 2020 due to the fact that we do not have
renewables targets beyond 2020: removing a key input such as this naturally increases the range of
uncertainty. Not yet knowing the level of the future EU ETS cap similarly adds to uncertainty beyond
2020. The Government’s approach is to focus on the central projections when setting carbon budgets,
which require a single value to compare with emissions in 1990, and to carefully monitor the outturn.
necessary emissions reductions to meet the fourth
carbon budget. The UK is pushing for the EU
to show more ambition by moving to a tighter
2020 emissions target, which in turn will drive a
more stringent EU ETS cap. We will review our
progress in 2014. If at that point our domestic
commitments place us on a different emissions
trajectory than the ETS trajectory agreed by the
EU, we will, as appropriate, revise up our budget
to align it with the actual EU trajectory. Before
seeking parliamentary approval to amend the level
of the fourth carbon budget, the Government will
take into account the advice of the Committee on
Climate Change (CCC), and any representations
made by the other national authorities.
Emissions projections for the fourth
carbon budget
2.10 On central projections based on our current
policy framework, UK territorial emissions are
forecast to be around 2,207 MtCO2e over the
fourth carbon budget (or 441.4 MtCO2e a year).
This assumes that emissions savings from the legacy
of current policies will continue, even where those
policies do not currently extend beyond 2020.
This is particularly the case for efficiency standards,
such as the new car CO2 target, where even
without the 2020 car CO2 target being extended
and tightened, it is assumed that – as more new
cars are sold beyond 2020, replacing older, less
efficient vehicles in the fleet – emissions from
transport will continue to fall.
2.11 The projections therefore show that our
current suite of policies on its own is not likely to
be sufficient to deliver the fourth carbon budget.
On central projections, there is an expected
shortfall in emissions of around 181 MtCO2e in
the non-traded sector over the five-year period
(or 36.2 MtCO2e a year).22
How to achieve the fourth carbon budget
2.12 The CCC was set up under the Climate
Change Act to advise the Government on
carbon budgets. Its fourth carbon budget report,
published in December 2010,23 gave a clear
illustration of the kind of actions that the UK
Government and Devolved Administrations would
need to take to deliver the necessary emissions
reductions. All sectors of the economy will need
to play their part by the time of the fourth carbon
budget but the CCC’s advice focuses on the need
for greater energy efficiency, particularly from
energy use in buildings; for greater electrification of
both heat and transport; and for decarbonisation
of the power sector.
22
Section B2 of Annex B contains further discussion of emissions projections for the fourth carbon budget period.
23
See: www.theccc.org.uk/reports/fourth-carbon-budget
24 Part 2: Our strategy to achieve carbon budgets
Box 4: The EU Emissions Trading System
The EU Emissions Trading System (EU ETS) is an EU-wide carbon cap and trade system which started
in 2005, covering electricity generation and the main energy-intensive industries, including refineries
and offshore, iron and steel, cement and lime, paper, glass and ceramics. It sets a declining limit on
emissions and allows participants to trade the right to emit with each other, enabling emissions cuts
to be made where they are cheapest.
Power and industries covered by the EU ETS together make up around 40% of UK emissions, and are
collectively known as the traded sector. The level of emissions in the traded sector is governed by the
UK’s share of the declining level of the EU ETS cap. While the current ETS cap trajectory enables us
to achieve the first three carbon budgets, the fourth carbon budget was set assuming that the ETS
cap will be tightened further in the future. Continuing the current trajectory of the cap into the 2020s
would not be sufficient to deliver the deep emissions reductions needed in the UK power and heavy
industry sectors during the fourth carbon budget.
The scarcity of allowances in the ETS creates a carbon price. While the current carbon price set
by the EU ETS is important to incentivising low carbon generation, it is not enough on its own – it
has not been stable, certain or high enough to encourage sufficient investment in the UK. The
Government therefore plans to introduce a Carbon Price Floor to support the carbon price,
described further in paragraph 2.156.
2.13 The non-traded sector covers all sectors that
fall outside of the EU ETS, including the buildings,
transport and agricultural sectors. In the nontraded sector, there are three areas that have the
potential to contribute significantly to emissions
reductions over the fourth carbon budget period,
in line with our vision for 2050. They are:
• ensuring a step-change in our move towards
ultra-low carbon vehicles, such as electric
vehicles.
• ensuring that our homes are better insulated to
improve their energy efficiency;
2.14 The traded sector covers all sectors that fall
within the EU ETS, including power generation
and most of the industry sector. The main area
to contribute towards meeting the fourth carbon
budget will be the installation of low carbon
electricity generation.
• replacing inefficient heating systems with more
efficient, sustainable ones; and
2.15 The sections that follow illustrate the
Government’s plans in each of these areas.
Part 2: Our strategy to achieve carbon budgets 25
Box 5: The Government’s response to the Committee on Climate Change’s Renewable Energy
Review
In May 2010, the Department of Energy and Climate Change asked the Committee on Climate
Change (CCC) to undertake a review of the potential for renewable energy deployment for 2020 and
beyond, including whether there is scope to increase the current target, taking into account technical
potential, costs and practical delivery.
The CCC approached the work in two phases. Phase 1 provided interim conclusions in September
2010, which agreed that the UK 2020 target was appropriate, and should not be increased. Phase 2,
published in May 2011, provided recommendations on the post-2020 ambition for renewables in the
UK, and the possible pathways to maximise their contribution to the 2050 carbon reduction target.
The Government thanks the Committee for its work and advice. We welcome its recognition that
15% renewables by 2020 is both an appropriate and achievable scale of ambition.
We are committed to achievement of the 2020 renewables target and agree with the CCC that our
focus should now be on delivering that ambition, while working with industry to drive down costs.
The UK Renewable Energy Roadmap, published in July 2011, sets out a programme of actions that
Governments across the UK are taking to set us on the path to achieving the target.24
We acknowledge that renewables have the potential to provide 30–45% of energy by 2030 and
possibly higher levels in the longer term and that, before making any future commitments, we need
to resolve current uncertainties and reduce costs. We have considered and responded to the CCC’s
advice on the post-2020 potential for renewables in the electricity, buildings, industry and transport
sections of this report.
24
See: www.decc.gov.uk/en/content/cms/meeting_energy/renewable_ener/re_roadmap/re_roadmap.aspx
26 Part 2: Our strategy to achieve carbon budgets
Box 6: Emissions data in the Carbon Plan
This report explains the progress the UK has already made in reducing greenhouse gas emissions
since 1990. The sections which follow describe the Government’s strategy to reduce emissions over
the fourth carbon budget in each area of the economy. We have disaggregated historic and projected
emissions along different lines to the National Communication (NC) sector classification25 and the
Standard Industrial Classification (SIC),26 in order to clarify which areas make the most substantial
contribution to emissions.
For the purpose of presenting historic emissions, we have allocated emissions from electricity
generation to the end user of that electricity. This has been done in all sections except electricity
generation where the emissions reported are by source. This breakdown is particularly important for
some areas, such as buildings, where emissions from electricity generation make up the majority of
the total. In most areas, the package of policies discussed targets both emissions relating to electricity
use in that area, as well as emissions from other sources.
For all other figures (save historic emissions), emissions have been allocated by source, i.e. the
emissions directly produced by that sector.27
The chart below shows a comparison of source and end user emissions.
Chart 5: Emissions by source and end user for each section in this report
Emissions by source (2009, MtCO2e)
Emissions by end user (2009, MtCO2e)
Power stations
Power stations
Industry
Industry
Buildings
Buildings
Transport
Transport
Agriculture and land use
Agriculture and land use
Waste
Waste
Exports
Exports
0
50
100
150
Emissions from electricity generation
200
250
0
50
100
150
200
250
Emissions from sources other than electricity generation
Source: DECC National Statistics
Note: The ‘exports’ category relates to emissions within the UK from producing fuels (e.g. from a refinery or coal mine) which are subsequently
exported for use outside the UK.
25
These are consistent with the UK Greenhouse Gas Inventory. Available at: www.decc.gov.uk/en/content/cms/statistics/climate_change/gg_emissions/
uk_emissions/2009_final/2009_final.aspx
26
The SIC is consistent with the Digest of UK Energy Statistics (DUKES). It is also consistent with the breakdown of the Updated Energy and Emissions
Projections (UEP).
27
The historic emissions data quoted have been created on the basis of the NC sectors; the emissions projections data have been created on the basis of the
UEP sectors.
Part 2: Our strategy to achieve carbon budgets 29
BuiLdings
Where we are now
2.16 In 2009, our domestic buildings were
responsible for 25% of the UK’s emissions and
just over 40% of its final energy use. Over three
quarters of the energy we use in our homes is for
space and hot water heating, most of which comes
from gas-fired boilers. Lighting and appliances
account for a smaller percentage of domestic
energy demand, and emissions here are expected
to reduce as the electricity grid is decarbonised.
2.17 The energy we use for heating and powering
our non-domestic buildings is responsible for
around 12% of the UK’s emissions, three quarters
of which comes from private businesses, with
the remainder from public buildings. In addition,
energy use for cooling is more significant in the
commercial sector than for residential buildings.
2.18 Since 1990, emissions from buildings have
fallen by around 9.2 MtCO2e, or 9%.28
2.19 Over this period, government policies,
including Warm Front, the Energy Efficiency
Commitment and the Carbon Emissions
Reduction Target have dramatically accelerated
Chart 6: Proportion of UK emissions from the buildings sector in 2009 (by end use and by source)29
UK GHG emissions in 2009,
by end user
38%
UK GHG emissions in 2009,
by source
Industry 23%
Electricity generation 27%
Buildings 38%
Industry 23%
Transport 24%
Buildings 17%
Agriculture and
land use 9%
Transport 22%
Waste 3%
17%
Agriculture and
land use 9%
Waste 3%
Exports 3%
Emissions from buildings 2009 by source
Emissions from buildings 2009 by end use
Domestic –
space heating
Domestic –
hot water
Domestic –
cooking
Domestic – lighting,
appliances and other
Non-domestic –
space heating
Non-domestic –
hot water
Non-domestic –
cooking
Non-domestic –
lighting, appliances
and other
Source: UK greenhouse gas statistics
28
This section covers all heat and power in relation to domestic, commercial, private and public buildings (but not industrial process heat or power).
The sectoral breakdowns in this report are for illustrative purposes only. Annex B presents emissions and savings data using the standard Updated Energy
and Emissions Projections/National Communication basis.
29
The emissions estimates in this section refer to greenhouse gas emissions from combustion of fuels (primarily gas, oil and coal) and have been presented both
by end use and by source. This breakdown is particularly important where emissions from electricity generation make up a significant amount of the total.
30 Part 2: Our strategy to achieve carbon budgets
the deployment of cavity wall and loft insulation.
In 2010 alone, over 400,000 existing homes
received cavity wall insulation and over a million
lofts were insulated, leading to warmer homes
and savings on energy bills (see chart 7). And, as a
result of the 10.8 million cavity walls insulated so
far, the UK will save over £1 billion this year on its
national heating bill.
2.20 In addition, new buildings standards mean
that a house built today demands only a fraction of
the energy for space heating required by a house
built before 1990. Improvements in this area have
also been supported by new condensing boiler
standards. Since legislation was introduced in 2005
mandating the installation of condensing boilers30 in
all but special applications, installation rates have
increased to over 1.5 million a year (see chart 8),
which in turn has saved 4.1 MtCO2e alone.
This has led to savings for many householders
(approximately £95 off their energy bills this year)
and at least £800 million for the UK as a whole.31
Where we will be in 2050
2.21 By 2050 the emissions footprint of our
buildings will need to be almost zero. We can
achieve this through a mix of two main changes:
• Reducing demand for energy in buildings
By increasing the thermal efficiency of buildings
through better insulation; by encouraging
consumers to use smarter heating controls
and Smart Meters; and by improving the
energy efficiency of lighting and appliances,
and encouraging more efficient use of hot
Chart 7: Cavity walls insulated since 1990 and remaining uninsulated cavities
20 Existing uninsulated cavity walls
remaining: 7.5 million
18 Millions of cavity walls insulated
16 Harder to treat:
4.9 million
14 Easy to treat:
2.6 million
12 July 2011:
10.8 million
10 8
Other cavity wall insulation –
including retrofit: 6.9 million
6
4
Cavity wall insulation – installed in
new builds since 1990: 3.8 million
2
0
1990
1995
2000
2005
Year
Source: Department of Energy and Climate Change
30
Condensing boilers can reach efficiencies of around 90%.
31
Savings calculated based on the average efficiency improvements of condensing boilers.
2010
2015
2020
Part 2: Our strategy to achieve carbon budgets 31
water. Better demand management can save
money, bringing down energy bills, and release
resources to support other activity and
promote growth.
alternatives such as heat pumps and more
efficient systems such as heating networks or
combined heat and power. A move away from
fossil fuels for heating, hot water and appliances
can reduce our dependence on imports and
associated price volatility, thereby improving the
security of our energy supplies.
• Decarbonising heating and cooling supply
By supporting the transition from conventional
gas and oil boilers to low carbon heating
Chart 8: Deployment of condensing and non-condensing boilers since 2001
25
20
15
Millions
Non-condensing boilers
10
5
Condensing boilers
0
2001
2002
2003
2004
2005
2006
Year
Source: Department of Energy and Climate Change
2007
2008
2009
2010
2011
32 Part 2: Our strategy to achieve carbon budgets
Chart 9: Emissions projections in the buildings sector for the first three carbon budgets and
illustrative ranges of emissions abatement potential in the fourth carbon budget period and in 205032
140
CB1
CB2
CB3
CB4
Buildings emissions projec tions (MtCO2e)
120
100
Projected emissions
over the first four
carbon budget
periods
80
60
Range of additional
emission abatement
over the fourth
carbon budget
period
Historical deployment for heating
systems suggest mass
development of low carbon heat
will need to start in the mid to
late 2020s.
40
Early efforts to deploy and
monitor low carbon heating
systems need to build supply
chains and bring down costs
ahead of mass deployment.
20
Illustrative range of
emissions abatement
required in 2050
To maximise benefit from low
carbon heat, cost effective
potential for domestic retrofit of
all installations must be largely
realised by 2027.
2050
2048
2043
2038
2033
2028
2023
2018
2013
2008
0
Year
Source: Department of Energy and Climate Change
32
The emissions projections derive from UEP data. The illustrative ranges for emissions abatement potential for 2050 and the fourth carbon budget derive
from the 2050 futures and fourth carbon budget scenarios – these are discussed in Parts 1 and 3 of this report respectively.
Part 2: Our strategy to achieve carbon budgets 33
How we will make the transition
2.22 Chart 9 on the previous page illustrates the
trajectory we expect emissions from buildings to
follow over the first four carbon budgets on the
way to 2050.
2.23 While we are on track for the first three
carbon budgets, the UK will need between 26 and
75 MtCO2e of additional abatement from buildings
during the fourth carbon budget period, over
and above what the Government expects to be
delivered through current policy. Learning from
history, it has taken around 40 years for cavity
wall insulation to reach today’s level of market
penetration. Achieving the scale of change ahead
therefore requires us to start now.
2.24 This decade we need to complete the cost
effective ‘easy wins’ in the buildings sector. This
means maximising our energy efficiency efforts
over the next decade. This will reduce costs and
the amount of low carbon heating needed in
future years.
2.25 The Government’s current policy package
will depend on the final design of the Green
Deal and Energy Company Obligation in the
light of public consultation. It is likely to result in
all practicable cavity walls and lofts having been
insulated by 2020, together with up to 1.5 million
solid walls also being insulated.
2.26 We also need to prepare for the future.
In the buildings sector, this means acting now to
build the supply chain for low carbon heating,
cooling, and lighting and appliances to stimulate
the innovation and competition that will bring the
cost of these technologies down to a level that will
make them competitive with fossil fuel-based (or
less efficient) alternatives.
2.27 We will begin building the market for low
carbon heating technologies, such as air- and
ground-source heat pumps, so that these can
displace expensive, carbon intensive alternatives.
At the same time, we will encourage further
deployment of heating networks, particularly in
urban areas where building-level solutions may face
more barriers. And in parallel we will continue to
improve the efficiency of our existing gas boilers.
2.28 The 2020s will be a key transitional decade
in delivering mainstream low carbon heat from
heating networks and in buildings, and will see
the expansion of low carbon heat at scale into
residential areas. Progress in the 2020s will be
important in ensuring a smooth and cost effective
transition to low carbon heat – 2030 would be
the latest opportunity at which to begin roll-out
at scale taking into account historical deployment
trends (see chart 10 overleaf).
34 Part 2: Our strategy to achieve carbon budgets
Chart 10: Decision points and key actions for buildings to 2030
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Opportunities this decade include deployment of low carbon heat technologies in off-gas grid homes and commercial buildings
Low carbon
Learning and monitoring of low carbon heat installations through the
Renewable Heat Incentive and the Renewable Heat Premium Payment
Remove barriers to district heating implementing localised projects and pilot schemes
District heating network and supply chain to grow
Renewable
Heat
Incentive
starts
12% of
heat from
renewable
sources
Gas
Decision
on gas
grid
investment
Energy efficiency measures
Improving energy efficiency of buildings
Green
Deal
starts
All new
homes
zero
carbon
from
2016
Smart Meters mass roll-out
Smart
Meters
roll-out
starts
All
All new
remaining
nonlofts and
domestic
cavity
buildings
walls
zero
completed
carbon
from 2019
2021
Part 2: Our strategy to achieve carbon budgets 35
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
buildings
Transition
to low
carbon
mainstream
by this
date
12% of
at from
newable
ources
All
emaining
ofts and
cavity
walls
ompleted
Historical installation rates suggest that
it may take around 20 years to
achieve desired market penetration of low
carbon heat technologies
Use of natural gas to begin to wind down
Last date
to start
transition
to low
carbon
alternatives
36 Part 2: Our strategy to achieve carbon budgets
Reducing demand for energy in
buildings
2.29 Reducingourdemandforenergyisthe
cheapestwayofcuttingemissions,andwillalso
benefitconsumersandoureconomy:
• Inthenear term,itwillreducedemandforgas
andelectricityinbuildings,helpingtobringdown
emissions.
• Inthemedium term,itwillsavemoneyon
bills,releasingspendingpowertobenefit
theeconomyanditwillenablesmaller,and
thereforecheaper,lowcarbonheatingand
coolingsystemstobeinstalled.
• Inthe long term,itwillhelptoreducethe
challengeofbalancingtheelectricitygrid.
2.30 TheGovernmentisaimingtoleadby
exampleinreducingitsenergydemand.On
14 May2010,thePrimeMinistercommittedthe
Governmenttoreducing its carbon emissions
by 10% in 12 months.TheGovernmenthas
achievedthistarget,reducingitsemissionsby
13.8%.33Real-timereportingofenergyusehas
alsobeenimplementedacrosscentralgovernment
headquartersbuildingstoensuregreaterpublic
transparencyofgovernmentenergyefficiency.34
2.31 Wecanachieveareductioninenergy
demandeitherbyimprovingtheenergyefficiency
ofbuildings,lightingandappliances,orbychanging
thewaywebehavesothatweuseenergymore
intelligentlyandreducetheamountweneed.
2.32 Asaresultoftheboilerstandardsintroduced
in2005,savingsmadefromtheintroductionof
condensingboilersupto2020areexpectedto
amounttoaround£2billionayearfortheUK
asawhole.Overthisperiodtotalsavingsfrom
condensingboilerswillamountto£15billion.35
Inaddition,by2020wewillalsocapturethe
remainingpotentialincavitywallsandlofts:
• insulatingallcavitywalls,wherepracticable,by
2020(buildingonaround11millionsince1990),
savinganadditional£200millionayear;and
• insulatingalllofts,wherepracticable,by2020
(buildingon9millionloftssince1990).
Improving the heat efficiency of buildings
2.33 Lookingbeyond2020,wemayneed:
• between 1 million and 3.7 million additional
solid wall insulationsby2030(seechart11
overleaf);and
• between 1.9 million and 7.2 million other
energy efficiency related installations,suchas
improvedglazing,by2030.
2.34 Manyenergyefficiencymeasuresare
inherentlycosteffectiveandhelppeople
andbusinessessavemoneyontheirbills,but
barrierssuchasupfrontcosts,disruptionand
lackofinformationabouthowtotakeupthese
opportunitiescanpresentrealproblems.36
2.35 TheGreen DealistheGovernment’sflagship
energyefficiencypolicy,designedtoovercome
barrierstoimprovingtheUK’sbuildingstock.
Theframework,launchingin2012,willmean
thathouseholdsandbusinesseswillhavethe
opportunitytoimprovetheirenergyefficiencyat
noupfrontoradditionalcost,payingbackthrough
futuresavingsontheirenergybills.
2.36 TheGreenDealwillpromotea‘whole
house’approach,offeringacomprehensivepackage
ofmeasuresandensuringthattheneedsofthe
propertyareassessedasawhole.Thiswillmean
thattheimprovementshappenintherightorder
andthathassleanddisruptionareminimised.
2.37 Inaddition,microgenerationtechnologies
maybeeligiblefortheGreenDealtotheextent
thattheycantypicallybeexpectedtogenerate
33
Thiswasanambitiousandchallengingcommitmentonenergyefficiency,spanning3,000centralgovernmentofficebuildingsand300,000civilservants.
34
Availableongovernmentdepartments’websites.
35
Calculatedonthebasisof20millioncondensingboilersbeinginplacein2020.
36
TheEnergyEfficiencyDeploymentOffice(EEDO),whichwillbesetupintheDepartmentofEnergyandClimateChangebytheendoftheyear,willaim
todriveastep-changeinenergyefficiencybysupportingexistingprogrammesacrossgovernmentandbyidentifyinganddesigningastrategytorealise
furtherenergyefficiencypotentialacrossallsectorsoftheeconomy.
Part 2: Our strategy to achieve carbon budgets 37
Chart 11: Projected deployment of solid wall insulation over the first three carbon budgets and
illustrative range of deployment over the fourth carbon budget period and in 2050
9
CB1
CB2
CB3
CB4
Number of solid wall insulations (cumulative, millions)
8
7
Projected deployment
over the first four
carbon budget periods
6
By 2030 expecting to deploy
an additional 1–3.7 million
solid wall insulations.
5
Range of additional
deployment during
the fourth carbon
budget period
4
Illustrative range of
deployment in 2050
3
Projected deployment of
up to 1.5 million insulations
by 2020.
2
1
2050
2048
2043
2038
2033
2028
2023
2018
2013
2008
0
Year
Source: Department of Energy and Climate Change
energy efficiency savings. The Government intends
to use the Green Deal to provide information
on low carbon heat alongside energy efficiency
measures. The Government will in the future look
to develop policy instruments for low carbon heat
in a way which is compatible with our policies for
reducing energy demand, so that consumers will
be able to assess all options available.
2.38 Private rented buildings are one of the most
difficult sectors to improve. While tenants benefit
from more energy efficient buildings, it is the
landlords who decide whether to pay to make
the changes. The Green Deal will help tackle this
split incentive.
2.39 The Government will work with the sector
to encourage uptake of energy efficiency measures
through the Green Deal. From 2016, domestic
private landlords will not be able unreasonably
to refuse their tenants’ requests for consent to
energy efficiency improvements. In addition,
the Energy Act 2011 contains provisions for a
minimum standard for private rented housing and
commercial rented property from 2018, and the
Government intends for this to be set at Energy
Performance Certificate band E. Use of these
regulation-making powers is conditional on there
being no net or upfront costs to landlords, and the
regulations themselves would be subject to caveats
setting out exemptions. If these powers are used,
the Government envisages that landlords would be
required to reach the minimum standard or carry
out the maximum package of measures fundable
under the Green Deal and Energy Company
Obligation (even if this does not take them to
band E).
2.40 Alongside the Green Deal, the new Energy
Company Obligation (ECO), which will provide
an additional £1.3 billion a year, will play an
important role in supporting the installation of
solid wall insulation, and also in providing upfront
support for basic heating and insulation measures
for low-income and vulnerable households. The
costs of ECO are assumed to be spread across all
household energy bills in Britain.
38 Part 2: Our strategy to achieve carbon budgets
2.41 The UK’s building stock is one of the oldest
in Europe and the Government recognises that,
to enable the transition to a decarbonised building
sector, standards will need to be raised in every
type of housing.
2.42 The Government is committed to successive
improvements in new-build standards through
changes to Part L of the Building Regulations in
England and their equivalents within the Devolved
Administrations. In October 2010, the new
regulations in England and Wales introduced
a 25% improvement on 2006 carbon emissions
standards for new buildings, while regulation in
Scotland delivered a 30% reduction on their 2007
standards. In England, the current review of the
Building Regulations is looking at opportunities
for further improvements planned for 2013
where these can be achieved while meeting our
deregulatory aim. The Government intends to
consult on these changes shortly. The review of
Part L will also look at ways of generating take-up
of greater levels of energy efficiency measures in
existing buildings in order to help support demand
for the Green Deal.
2.43 In December 2010, the Government
committed that all new non-domestic buildings
in England would be zero carbon from 2019.
And in the Plan for Growth,37 published alongside
Budget 2011, the Government committed that
all new homes from 2016 would be zero carbon.
In driving investment in local low carbon energy
generation and energy efficiency, zero carbon
policy can work closely with local spatial planning in
contributing to future growth.
2.44 We also need to tackle the performance
of the existing building stock, and ensure that the
poorest and most vulnerable households are able
to heat their homes affordably, in line with the aim
of the Government’s efforts to tackle fuel poverty
and achieve the statutory target.38
2.45 Subject to public consultation, the ECO will
therefore include an Affordable Warmth target,
aiming to provide heating and insulation measures
to low-income households and households in
private tenures housing someone who is older,
disabled or a child. In some circumstances, this will
mean delivering low carbon heating, but the
focus of this particular element of the ECO policy
is likely to be on more efficient gas systems
for households.
Improving the electrical efficiency of
lighting and appliances
2.46 As well as improving the fabric of our
buildings themselves, it will also be important to
minimise the energy we use for our lighting and
appliances. Energy-using products in our homes
and offices, such as white goods, lighting and
televisions, contribute around 14% of the UK’s
CO2 emissions. By removing the least efficient
products from the market and promoting the sales
of the most efficient, emissions and energy bills are
reduced significantly.
2.47 By the end of 2012, minimum EU
performance standards and labelling conventions
will have been agreed for most domestic and
commercial appliances. Looking further ahead,
these standards will also cover energy-related
products, which may not directly use energy but
which contribute to energy consumption, such as
double glazing and insulation. The first of these is
likely to be regulated from 2014.
2.48 By 2020, the measures agreed so far are
projected to save the UK 7 MtCO2e per annum,
and the next tranche of measures are expected
to save a further 6 MtCO2e per annum, subject to
the stringency and timing of these measures being
finalised in Europe.
Changing behaviour to reduce demand
2.49 The choices consumers and businesses make
about how to use energy can have a huge impact
on energy demand and on the costs they face.
To help homes make the best use of their energy
and prevent waste, the Government is mandating
Smart Meters to be installed in every home by
2019. Rolling out Smart Meters will enable people
to understand their energy use and maximise
37
See: http://cdn.hm-treasury.gov.uk/2011budget_growth.pdf
38
Target to eradicate fuel poverty as far as reasonably practicable by 2016 (Warm Homes and Energy Conservation Act 2000).
Part 2: Our strategy to achieve carbon budgets 39
opportunities for energy saving. The Government
is also mandating the provision of in-home
displays for domestic customers and ensuring that
consumers have the information and advice to
make changes that will cut carbon and energy bills
(through its consumer engagement strategy).
2.50 Energy Performance Certificates (EPCs)
are required on the sale, rent or construction of
a building. Prepared by accredited and suitably
qualified energy assessors, EPCs give consumers
A to G ratings for a property’s energy efficiency
and also provide advice on measures that can be
carried out to improve its efficiency. The Energy
Saving Trust estimates that the average household
could save up to £300 a year by making energy
saving improvements. Display Energy Certificates
are required for buildings occupied by a public
authority which are larger than 1,000 m² and are
frequently visited by the public.
2.51 A revised version of the domestic EPC will
be launched in April 2012. It has been redesigned
and made more consumer friendly with clear
signposting to the Green Deal and information on
which measures qualify for Green Deal finance.
In future, the EPC will also be used as a mechanism
to disclose the existence of a Green Deal on a
particular property.
2.52 The Government will also be producing
guidance to support local authorities and social
landlords to cut carbon emissions and maximise
the opportunities for energy efficiency retrofit.
This will help to drive forward large-scale retrofit
of social housing, helping to stimulate the Green
Deal and Energy Company Obligation markets.
2.53 In order to address the energy efficiency
potential that exists in large, non-energy-intensive
businesses, the Government has put in place the
CRC Energy Efficiency Scheme. This scheme,
currently in its introductory phase, combines
a range of mechanisms to address the barriers
to energy efficiency deployment. Over 2,000
participants submitted reports in July 2011 for
the first compliance year. The Government is
aware that a number of stakeholders have raised
39
concerns about the complexity of the scheme.
Therefore, in early 2012, the Government will
issue a formal consultation on our proposals for
a simplified scheme.
2.54 The Government also believes that there
may be potential for smarter use of heating
controls to help save energy, by giving consumers
and businesses greater control and flexibility
over the way in which they heat and cool their
homes. At a relatively simple level, thermostatic
radiator valves (currently estimated to be deployed
in around 55% of homes with a boiler)39 allow
radiators to be turned down or off in rooms that
are not in use. More sophisticated options, such
as remote controls and sensors that respond
to building occupancy, offer more possibilities.
As these technologies develop, this may enable
consumers to reduce the average internal
temperature of their buildings – delivering savings
of around 10% of energy use on space heating for
every 1°C reduction – without experiencing a big
change in their levels of thermal comfort.
Decarbonising heating and cooling
supply
2.55 Achieving a cut in building emissions to
virtually zero by 2050 will only be achievable if
we decarbonise our supply of heat and cooling as
well as reducing demand. It is likely that we will still
get most of our heat from natural gas well into
the 2020s.
2.56 As things stand, we are increasingly
dependent on other countries for our oil and
gas supplies, and continuing to use these fuels
may mean that we are more exposed to global
pressures which lead to price spikes and increases.
Keeping the price of energy competitive is crucial.
For many years, our domestic consumers have
benefited from the UK’s competitive energy
market – from 2008 to the present day, UK gas
prices have been among the lowest in Europe.
2.57 As we look further ahead, the proportion of
heat provided directly by natural gas will fall as we
see increased use of low carbon technologies, but
BEAMA analysis of EST HEC data and EHCS in the Heating and Hot Water Taskforce (2010) Heating and Hot Water Pathways to 2020.
40 Part 2: Our strategy to achieve carbon budgets
Chart 12: Projected deployment of total low carbon heat in buildings over the first three carbon budgets
and illustrative ranges of deployment in the fourth carbon budget period and in 205040
600
CB1
CB2
CB3
CB4
Total low carbon heat projec tion ( TWh)
500
Projected deployment
over the first four
carbon budget periods
400
Range of additional
deployment during
the fourth carbon
budget period
300
Illustrative range of
deployment in 2050
200
By 2030 delivering between
83 and 165 TWh of low
carbon heat, plus 10–38 TWh
from heating networks.
100
2050
2048
2043
2038
2033
2028
2023
2018
2013
2008
0
Year
Source: Department of Energy and Climate Change
this will be a gradual process. Deployment of heat
pumps and other low carbon heat technologies,
and the construction of district heating systems in
urban areas with high heat demand, will replace
natural gas as the primary source of heat in this
country, a process that has already started and
will take many decades to complete. Continuing
efforts to deploy highly efficient condensing boilers
in homes and businesses remains a priority in the
transition.
2.58 Looking to the future, between 21% and
45% of heat supply to our buildings will need to
be low carbon by 2030. We will therefore need
between 1.6 million and 8.6 million building-level
low carbon heat installations by 2030, delivering
83–165 terawatt hours (TWh) of low carbon heat,
alongside 10–38 TWh of low carbon heat delivered
through heating networks (see chart 12).41
40
The main differences in assumptions between government modelling and that done by the Committee on Climate Change (CCC) are around the cost and
effectiveness of heat pumps where the Government assumes that performance and cost do not improve as quickly as the CCC does, and biomass, where
the Government assumes greater availability for low carbon heat than the CCC. However, the differences in assumptions lead to only a small difference in
the expected deployment of low carbon heat to 2030.
41
In the lower range, our modelling shows mainly commercial installations take up low carbon heat, with a large heat load per installation. In the higher range
most of the additional installations come from domestic-level heat pumps and biomass boilers, with smaller heat loads per installation.
Part 2: Our strategy to achieve carbon budgets 41
2.59 The portfolio of technologies through which
we can achieve the decarbonisation of heating and
cooling supply is diverse.
Box 7: Technology portfolio for low carbon heat
Building-level technologies
Biomass boilers – These work like conventional boilers, but instead of using natural gas or heating oil
they burn biomass, such as wood pellets, to produce the heat used to provide heating and hot water.
Electrical resistance heating – This converts electrical energy directly into heat. It can also be used as
secondary back-up heating or with a storage system which takes advantage of cheaper electricity, sold
during low demand periods such as overnight.
Heat pumps – These use electricity to leverage ambient heat from the air or ground (or in some
cases from water), using a compressor just like a fridge. This allows heat pumps to work at efficiencies
far higher than even the best gas boilers, typically producing three units of heat for every unit of
electricity. Heat pumps can either directly heat the air inside a building or heat up water for central
heating and hot water systems. Some heat pumps can also be operated in reverse cycle mode to
provide cooling. Heat pumps perform better in houses with low temperature heat emitters.42
Micro-combined heat and power (CHP) – CHP is described below and, in the form of micro-CHP,
can be used as an alternative to boilers to provide heat and electricity at building level.
Solar thermal hot water – For buildings with sufficient south-facing roof space, solar panels can
be fitted and connected to a water tank to provide hot water. This will not usually be sufficient to
meet all of a building’s hot water needs year round, but it can be an effective, low carbon way to
supplement other sources of water heating.
Network-level technologies
Combined heat and power (CHP) – Technologies that generate both heat and electricity are
collectively known as CHP. These can use a range of fuels (not necessarily low carbon) including
biomass, wastes and bioliquids. At present, CHP is most commonly used by industry to provide heat
and electricity for large sites. It can also be used to provide a source of heat for heating networks.
Gas grid biomethane injection – Sustainable biomass and wastes can be converted to gas and
upgraded to biomethane, a gas that can directly replace or blend with natural gas in the grid and is
compatible with existing boilers. This could be done at a large scale, or in smaller areas of the grid
ringfenced for this purpose.
Heating networks – Heat can be generated by commercial-scale low carbon heat installations such
as heat pumps or biomass boilers, or using low-grade heat generated in thermal power stations. Heat
exchangers then transfer the heat into buildings via a network of steam/hot water pipes to provide
space heating and hot water.
42
Most houses’ heat emitters in the UK have small surface area and consequently must operate at higher temperature to maintain comfort. Therefore, heat pump
installation is usually accompanied by replacement of radiators (e.g. with underfloor heating, or with radiators more appropriate for use with heat pumps).
42 Part 2: Our strategy to achieve carbon budgets
Building-level technologies
2.60 Decarbonisation at the level of individual
buildings substitutes current heating systems (such
as gas boilers) for low carbon alternatives such as
heat pumps or biomass boilers. Of the technology
choices described in box 7, heat pumps are likely
to be a particularly attractive option. Their ability
to operate at efficiencies of up to 300%, to use
electricity – which will also be decarbonised in the
medium to long term – as a fuel, and the flexibility
for some to provide cooling as well as heating,
makes them a strong candidate to provide space
heating, hot water and cooling for domestic and
commercial buildings into the future.
2.61 The portfolio of options above have specific
strengths and applications for which they are
best suited. There are also technical and practical
barriers to these technologies and measures, which
will need to be addressed if we are to see largescale deployment.
2.62 All households and businesses will need to
play a part in this transformation. The Government
aims to create the right conditions for homes and
businesses to generate their own heat using low
carbon technologies or make use of low carbon
heat from a heat network, but there are a number
of key obstacles to overcome, including the
following:
• Low carbon heat technologies such as heat
pumps and biomass boilers are still expensive
relative to conventional boilers, costing in
excess of £5,000, and payback periods for this
investment are often long. This is by far the
biggest barrier to deployment.
• Low carbon heat technologies take longer to
install compared with a conventional boiler,
which offers a particular barrier given that
heating systems are often ‘distress purchases’ –
bought only when the old system breaks down.
• The installation of technologies such as groundsource heat pumps requires a specialist skill set,
43
meaning that finding installers with adequate
training and skills is a potential barrier to
deployment.
• Heat pumps in particular can place added strain
on the electricity grid. This can partially be
managed through the use of storage, such as
hot water cylinders to store heat, or batteries
to store electricity generated off-peak.
2.63 While we do not expect mass market
deployment ahead of the 2020s, there are
important opportunities now to build a market
for low carbon heat in buildings, particularly in
commercial buildings and off-gas grid homes.
Many public and commercial buildings have already
taken up energy efficiency measures, and work
to develop low carbon heating in public and
commercial buildings will help to build the supply
chain for low carbon heat in the UK. Cooling
demand is also expected to rise significantly in
these buildings, so increasing the efficiency of
air conditioning units and installing low carbon
alternatives such as reversible heat pumps will also
be important. In the residential sector, 4 million
households are not currently heated by mains
gas, and many have to rely on expensive, higher
carbon forms of heating. Heating oil is still used
in around 2 million homes, for example. These
households will gain more from switching to low
carbon heating because their heating bills and
carbon emissions are higher than average and they
currently suffer the inconvenience of having to
have fuel delivered.
2.64 The Government is therefore committed
to providing financial support for low carbon heat
consistent with the UK’s 2020 renewables target.43
The Renewable Heat Incentive (RHI) is the first
financial support mechanism of its kind in the
world to increase the deployment of renewable
heat. Under phase 1 of the scheme, communities,
charities, and public and private sector
organisations can apply to receive a payment for
generating heat using eligible low carbon heat
technologies. The support levels will be set out
in legislation.
The 2009 Renewable Energy Directive sets a target for the UK to achieve 15% of its energy consumption from renewable sources by 2020.
Part 2: Our strategy to achieve carbon budgets 43
2.65 Under phase 1 of the RHI, the Government
expects to deliver:44
• an additional 56.5 TWh of low carbon heat by
2020 (of which, 30.5 TWh will be delivered
to buildings – up to 112,000 low carbon heat
installations), saving 43 MtCO2e overall (of which
over half is from buildings) over the period
2011–20; and
• 11% of our heat coming from new and
diversified renewable sources, as part of an
overall ambition to achieve 12% by 2020.
2.66 The quality of installations and the supply
chain to support low carbon heat need to be
first class to ensure consumer confidence. The
Government is requiring all RHI installations (up to
and including 45 kWh) be installed by an accredited
Microgeneration Certification Scheme installer.
2.67 The Government expects to introduce
support for the domestic sector under the
second phase of the scheme. In the interim, the
Government has launched the Renewable Heat
Premium Payment (RHPP). The RHPP provides
a single payment to households that install low
carbon heat, and could deliver up to 25,000
installations. A crucial part of the RHPP is then
monitoring a significant number of installations
made under the scheme. This information will
inform the Government’s longer-term approach to
support for low carbon heat.
Network-level technologies
2.68 At network level, substituting natural gas with
sustainable biomethane in the grid is, at first glance,
the least disruptive option. Decarbonising our heat
and hot water supply without having to change
our heating systems, and while using a gas grid that
is already built, initially appears like an attractive
option.
2.69 However, injecting biomethane into the
gas grid presents a number of challenges. With
biomass likely to be needed for sectors that are
44
hard to electrify, such as freight and some industrial
processes, combined with doubts over the scale
of sustainable global biomass supply, it would be
high risk to assume that large-scale biomethane
injection into the grid is a viable option. The
gasification process or anaerobic digestion of
UK-sourced waste(s) or biomass could only
meet a small proportion of UK demand, with gas
consumption in buildings currently running at close
to 500 TWh a year. Relying on imports would
leave the UK exposed to international bioenergy
prices that may rise substantially. Heat networks,
where heat is generated remotely and supplied to
buildings, offer a more promising option.
2.70 Up to half the heat demand in England,
and much of it in other parts of the UK, is found
in areas that potentially have heat loads dense
enough to make heat networks a viable means of
delivering heating direct to homes and businesses.
Combined in the medium and long term with
low carbon heat sources, this offers a valuable
alternative to building-level heating as a means of
decarbonising the UK’s heat supply.
2.71 Heating networks have the advantage of
convenience and flexibility, and would allow for
the cost effective deployment of transitional
heat sources. For example, in the nearer term,
it may make most sense for heat networks to
be supplied by combined heat and power plants
fuelled by natural gas but, in the long run, this may
be supplanted by heat from nuclear or carbon
capture and storage power plants, energy from
waste plants or from dedicated large-scale heat
generation through heat pumps or biomass boilers
large enough to supply whole cities. This approach
allows for a portfolio of heating sources to be
deployed which best suit local contexts.
2.72 Heat networks require significant
deployment of new infrastructure and therefore
face a number of barriers, notably the cost
of installing the pipes, as well as questions of
regulation, ownership and charging structures.
Practicalities of geography can also restrict the
The following figures include savings in industry which account for around 26 TWh of renewable heat in 2020, unless specified. These also reflect the
impacts of the change in the large biomass tariff as a result of the EU ruling (however, this is not reflected in the annexes to this document).
44 Part 2: Our strategy to achieve carbon budgets
deployment of heating networks. The Government
will set out in the new year how it will work with
local authorities and other stakeholders to address
barriers to district heating, along with barriers to
other approaches to low carbon heat.
2.73 The Government will therefore work with
local authorities and other stakeholders to explore
potential to remove barriers in these areas.
2.74 The interactions between the different
technologies and approaches described here
for decarbonising our heat supply are complex,
and will make a big difference to how we heat
and cool our homes and businesses in future.
The Government recognises the importance
of low carbon heat to achieving our ambitions
for decarbonising the economy and deploying
renewable energy, as well as the importance to
consumers of heating our homes and businesses in
a secure, affordable way, and will therefore publish
a document on its strategy for decarbonising
heat in the new year.
Part 2: Our strategy to achieve carbon budgets 47
TrAnsporT
Where we are now
Where we will be in 2050
2.75 Domestic transport emitted around 137
MtCO2e in 2009, accounting for around 24% of UK
domestic greenhouse gas emissions (see chart 13
below).45 Domestic emissions from transport rose
steadily between 1990 and 2007, driven primarily
by rising road traffic levels. They have since fallen
back to roughly what they were in 1990. This fall is
partly the result of the recent economic downturn,
but statistical data suggests that the main factors
have been improvements in new car fuel efficiency
and the increased uptake of biofuels, driven by
existing government and EU policy.
2.78 There are many different types of transport
and in this report they have been broken down
into cars and vans, rail, local sustainable travel,
freight, aviation and shipping, as well as considering
the role of biofuels.
2.76 By 2030 we project that current policies
could mean that transport emissions reduce to
around 116 MtCO2e.46
2.77 By 2050 the transport system will need to
emit significantly less carbon than today, while
continuing to play its vital role in enabling economic
growth, and provide many additional benefits such
as lower fuel costs and better energy security.
2.79 The Government’s vision is that by 2050
almost every car and van will be an ultra-low
emission vehicle (ULEV), with the UK automotive
industry remaining at the forefront of global
ULEV production, delivering investment, jobs and
growth. Due to the time needed for fleet turnover,
this requires almost all new cars and vans sold
to be near-zero emission at the tailpipe by 2040.
These ULEVs could be powered by batteries,
hydrogen fuel cells, sustainable biofuels, or a mix
of these and other technologies. We cannot say
for sure which technologies will emerge as the
most effective means of decarbonising car travel,
so it is essential that the Government takes a
technology neutral approach, allowing us to achieve
Chart 13: Proportion of UK greenhouse gas emissions from the transport sector, 2009
Emissions by sector
(end user basis)
Emissions by transport sub-sector
Industry 23%
24%
Buildings 38%
Cars 58%
Transport 24%
Vans 12%
Agriculture and
land use 9%
Heavy goods
vehicles 17%
Buses 4%
Waste 3%
Exports 3%
Rail 3%
Domestic aviation
and shipping 5%
Other 1%
45
The equivalent figures by source are 121.6 MtCO2e, or 22% of UK emissions.
46
Transport emissions in the Updated Energy and Emissions Projections include off-road emissions, which are not included in transport emissions as reported
on the National Communication basis. This means that 2030 emissions shown here are higher than those reported in emissions statistics. Figures exclude
emissions from international aviation and shipping.
48 Part 2: Our strategy to achieve carbon budgets
emissions reductions in the most cost effective
way. Rail travel will be substantially decarbonised
through further electrification, more efficient
trains and lower carbon fuels. If the Government’s
proposals for high speed rail go ahead, a new
national network linking London to Birmingham,
Manchester and Leeds will transform rail capacity
and connectivity, promoting long-term and
sustainable economic growth. Passengers choosing
sustainable travel options such as travel by public
transport, cycling and walking will continue to
deliver major social and economic benefits, and
alternatives to travel, such as working from home,
could increasingly do so too.
2.80 The freight sector will have found lower
carbon ways of working, such as modal shift to rail
and water and more efficient driving techniques,
and adopted the necessary ultra-low carbon
technologies to continue to supply the UK’s
factories and consumers while cutting back carbon
emissions dramatically.
2.81 Domestic aviation and shipping are already
included in UK carbon budgets and so will
need to contribute to meeting the 2050 target.
International aviation and shipping are not currently
included; a decision whether to include them is due
by the end of 2012.
2.82 Sustainable biofuels could play a key role in
reducing emissions across the different transport
sectors, although concerns about sustainable
supply may limit their use.
2.83 There are several interdependencies to
be considered. Electrifying the car fleet or rail
network would reduce tailpipe emissions from
individual vehicles to zero, although the positive
impact on economy-wide emissions relies on
a low carbon grid. As a result there could be
substantial benefits in local air quality and reducing
traffic noise. Uptake of alternatives to travel could
mean more emissions from heating and lighting
commercial and residential buildings. There may
also be competition for sustainable feedstocks
between transport biofuels and bioenergy in
other sectors.
How we will make the transition
2.84 Over the next decade, the Government will
seek to make significant progress towards achieving
the ‘easy wins’ in cutting emissions from transport.
Cars and vans make up the largest share of
emissions. Incentivising more efficient combustion
engines and the use of sustainable biofuels is a
central plank of the plan to reduce these emissions.
Looking ahead, the emergence of ULEVs and
hybrid and electric cars over this period will be
crucial in preparing for progress in the 2020s.
2.85 Other transport sectors will also need to
take steps towards decarbonisation in the next
decade. The freight industry will begin to reduce
its emissions through increased efficiency and
government support on infrastructure. Further
electrification of the rail network will support low
carbon modal shift in the future. Emissions from
domestic aviation will be capped as part of the EU
ETS. And the public will be encouraged to make
lower carbon travel choices, such as taking public
transport or cycling more often.
2.86 With deeper cuts required through the
2020s, we will move towards the mass market
roll-out of ULEVs, such as those powered by
electric batteries, hydrogen fuel cells and plug-in
hybrid technology. Further improvements to the
efficiency of conventional vehicles and sustainable
biofuels are expected to play a vital role. Other
sectors will need to continue to play a role.
2.87 Chart 14 illustrates some possible emissions
trajectories for decarbonising the transport sector
overall over the next decade, over the fourth
carbon budget and out to 2050.
2.88 Details on action needed across the different
modes of transport over the next decade and
then during the fourth carbon budget are set
out below. Chart 15 on pages 50 and 51 gives a
summary of some of the key actions and decision
points that will set us on the way to decarbonising
transport.
Part 2: Our strategy to achieve carbon budgets 49
Chart 14: Emissions projections in the transport sector in the first three carbon budgets and
illustrative ranges of emissions abatement potential in the fourth carbon budget period and in 205047
160
CB1
CB2
CB3
CB4
140
120
Projected emissions
over the first four
carbon budget
periods
MtCO2e
100
Range of additional
emissions abatement
potential over fourth
carbon budget period
The UK will continue to rely on
conventional technologies for
many years, although efficiency
will improve.
80
60
The 2020s are a key transitional
decade, with millions of ULEVs
coming to market.
Illustrative range of
deployment in 2050
40
Most cars have a lifespan of
around a decade, so every new
car and van will need to be near
zero carbon by 2040 to achieve
higher levels of ambition.
20
2050
2048
2043
2038
2033
2028
2023
2018
2013
2008
0
Year
47
The emissions projections derive from Updated Energy and Emissions Projections data. The illustrative ranges for emissions abatement potential for the
fourth carbon budget and 2050 derive from the 2050 futures and fourth carbon budget scenarios – these are discussed in Parts 1 and 3 of this report
respectively.
50 Part 2: Our strategy to achieve carbon budgets
Chart 15: Decision points for transport to 2030
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Emissions from UK cars continue to decline in line
2021
with EU t
EU indicative target
of 95 gCO2/km
EU target of
130 gCO2/km
Government support for early growth of the ULEV market through incentives and support for infrastructure
Cars and vans
Ongoing review of development of ULEV market, including infrastructure requirements and need for additional incentives
Emissions from UK vans continue to decline in line
EU target
of
175 gCO2/km
Electrification of the Great Western Main Line and North West schemes
and energy efficiency improvements
Local
sustainable
travel
EU
indicative
target of
147 gCO2/
km
Possible
EU decisions
on 2025
targets
Ongoing review of the application and measurem
Rail
EU
agreement
on 2020
targets
Potential further electrification schemes a
The Local Sustainable Transport Fund supports local low carbon transport solutions
Freight
Industry-led Logistics Reduction Scheme to reduce its members’ emissions by 8% from 2010
Review of
industry-led
approach
Government support for shift from road to rail and water
Biofuels
International
aviation and
shipping
Review
Decision made on
whether to include
international aviation
and shipping in
UK carbon budgets
Development of a Sustainable Aviation Framework
Sustainable Aviation
Framework published
Increasing biofuel use to 5% by energy
Assessment of road biofuel potential Further biofuels contribution to 2020 renewable targets
between 2014 and 2020
Decision taken
on biofuel use
by 2020
with EU t
EU RED and
FQD targets
Part 2: Our strategy to achieve carbon budgets 51
2020
ne in line
2021
2022
2023
2024
2025
with EU targets
Possible
future EU
car targets
tive target
CO2/km
ncentives
ne in line
with EU targets
EU
cative
get of
gCO2/
km
Possible
future EU
van targets
ation and measurement of the car and van emissions target
ctrification schemes and more efficient stock and intelligent systems
2026
2027
2028
2029
2030
52 Part 2: Our strategy to achieve carbon budgets
Cars and vans
2.89 Over the next decade, the focus will be
on continuing improvements to the efficiency of
conventional petrol and diesel cars, welcoming
ULEVs to market, and supporting research and
development into new ULEV technologies.
Many major motor manufacturers have already
taken a lead in bringing forward ULEV models
and entering the growing UK market. The UK
automotive industry is well placed to stay ahead
of international competitors and remain a vibrant
source of growth in the coming decades.
2.90 The Government’s existing policy mix puts
it on track to progressively reduce the carbon
impact of cars and vans. Currently, a major driver
of emissions reductions for both cars and vans are
the EU new vehicle CO2 targets. These are set at
130 gCO2/km in 2015 and 95 gCO2/km in 2020 for
cars, and 175 gCO2/km in 2017 and 147 gCO2/km
in 2020 for vans. EU emissions standards will
continue to be vital in delivering the Government’s
carbon reduction goals for cars and vans.
2.91 A review of the 2020 car and van targets is
due to complete by 1 January 2013, and in the next
few years we expect the European Commission
to make proposals for post-2020 new car and van
emissions standards. As part of the Government’s
mission to rebalance the UK economy and foster
sustainable economic growth, it is important to
create the conditions for long-term investment
in the UK automotive industry. We will therefore
work towards ambitious but realistic targets
for vehicle standards beyond 2020 which, when
considered alongside domestic policies, are
consistent with both meeting the fourth carbon
budget and reaching near-zero average new car
emissions by 2040.
cost of an eligible vehicle and will be reviewed
regularly to ensure that it remains the most
effective way of incentivising uptake. Consumers
and businesses also benefit from a favourable
tax regime, with plug-in vehicles receiving
exemptions from Vehicle Excise Duty and
Company Car Tax, as well as Enhanced Capital
Allowances.
• The £30 million Plugged-In Places programme
is the key mechanism for commencing the
roll-out of recharging infrastructure in the
UK and providing learning to inform future
development of a national network.
• The Government published an electric vehicle
infrastructure strategy, which set out a clear
vision and the steps the Government is taking
to remove barriers. There is potential for the
Green Investment Bank to provide targeted
financial solutions for appropriate plug-in vehicle
infrastructure projects in the future.
• To ensure necessary technological development
the Government is supporting low and ultra-low
emission vehicle research, development
and demonstration (RD&D), focusing on
priorities identified in conjunction with the
UK Automotive Council. We will continue to
monitor the level of RD&D support to ensure
that barriers to the development of ULEV
technologies through the 2020s are identified
and tackled.
2.93 The Government will continue its role in
working with industry to identify and remove
potential barriers to ULEV uptake as the market
develops, for example in the provision of hydrogen
infrastructure should the market develop this way.
2.92 To support early growth of the ULEV
market, the Government is taking an integrated
and pragmatic approach:
2.94 Over the fourth carbon budget, the
efficiency of the car and van fleet will need to
continue to improve, with accelerated uptake of
ULEVs required in order to meet the 2050 target.
• The 2010 Spending Review made provision
for around £300 million over the life of this
Parliament for consumer incentives to reduce
the upfront cost of eligible ULEV vehicles to
consumers and businesses. The Plug-In Car
Grant provides 25% (up to £5,000) of the
2.95 The Government’s analysis for the fourth
carbon budget has considered what level of
average new car and van emissions might be
necessary in the 2020s, independent of technology
type. For new cars we consider a range of
emissions between 50 gCO2/km and 70 gCO2/ km
Part 2: Our strategy to achieve carbon budgets 53
2.97 Barriers to ULEV uptake include costs
of ownership including insurance; consumer
acceptability, for example over the range of
battery electric vehicles, or payload requirements
for vans; availability, and cost of natural resources
such as lithium and rare earth metals; and the
appropriate infrastructure for different ULEV
technologies, providing adequate re-charging
access and speed. Our strategy is designed to
tackle these barriers as detailed at paragraph 2.92.
Nevertheless uncertainties around when these
barriers will come down could mean mass ULEV
uptake is delayed into the 2030s.
in 2030 to be plausible, and for vans a range
between 75 gCO2/km and 105 gCO2/km. These
scenarios are seen as credible but challenging by
industry, and they are all consistent with the goal
of ensuring that average emissions of new cars
and vans are near-zero at the tailpipe by 2040
(see chart 16).
2.96 By pursuing a framework for improvements
in average fuel efficiency as opposed to specific
technology targets, the Government intends to
create the incentives for industry to develop the
emissions reduction technologies that work best
for consumers.
Chart 16: Projected average new car and van emissions over the first three carbon budgets and
illustrative ranges of average new car and van emissions in the fourth carbon budget period and
to 2050
250
Increasing internal combustion engine efficiency
Increasing uptake of ultra-low emission vehicles
150
100
50
2050
2047
2044
2041
2038
2035
2032
2029
2026
2023
2020
2017
2014
2011
0
2008
Cars and vans (gCO2/km)
200
Year
Cars (2030: 50 gCO2/km)
Vans (2030: 75 gCO2/km)
Cars (2030: 60 gCO2/km)
Vans (2030: 90 gCO2 /km)
Cars (2030: 70 gCO2/km)
Vans (2030: 105 gCO2/km)
54 Part 2: Our strategy to achieve carbon budgets
Box 8: Some technology options for road transport
Battery electric vehicle: A vehicle driven by an electric motor and powered by rechargeable
batteries, as opposed to a hydrogen fuel cell or a petrol/diesel combustion engine.
Flywheel hybrid vehicle: A vehicle with a mechanical flywheel energy storage device that captures
kinetic energy when braking, returning the energy to the wheels on acceleration.
Gas-fuelled heavy goods vehicle: A heavy goods vehicle (HGV) powered by natural gas or biogas
rather than diesel.
Hybrid electric vehicle: A vehicle powered by a combustion engine with varying levels of electrical
energy storage captured when braking and stored in a battery or supercapacitor.
Hydrogen fuel cell electric vehicle: A vehicle driven by an electric motor powered by a hydrogen
fuel cell which creates electricity on board.
Plug-in hybrid electric vehicle: A plug-in version of a full hybrid, usually with a larger battery and a
greater electric driving range. In addition to capturing energy when braking, the on-board battery can
be charged from an external source when the vehicle is not in use.
Series hybrid: A plug-in hybrid where the wheels are driven exclusively by an electric motor with an
additional internal combustion engine connected in series. The engine runs at optimum efficiency to
power an on-board generator to charge the battery. ‘Range extenders’, which use a small combustion
engine to charge the battery to enable longer-distance journeys, are a type of series hybrid.
Ultra-low emission vehicle (ULEV): Any vehicle that emits extremely low levels of carbon emissions
compared with current conventional vehicles.
Rail
2.98 Over the next decade, the Government
will make and start to implement decisions
about rail which will continue over the fourth
carbon budget. Government has committed to
the electrification of the Great Western Main
Line as far west as Cardiff, and routes in the
North West, and, as announced in the recent
Autumn Statement, will also take forward the
electrification of the North Trans-Pennine
route from Manchester to York via Leeds.
Other schemes are also under consideration for
electrification, including of the Midland Mainline
and the Welsh Valleys. While additional abatement
is likely to be modest, it can nevertheless be a cost
effective way to cut carbon, particularly where
the technical difficulties of electrifying are small,
and the lines are well used delivering considerable
wider economic benefits.
2.99 The Government is also working closely with
the rail industry to improve energy efficiency and
reduce emissions across the rail network. Next
year the rail industry will publish its second Rail
Technical Strategy assessing how, over the longer
term, technology can help to deliver a more cost
effective, higher capacity, higher performance and
lower carbon railway.
2.100 A decision on the Government’s strategy
for a national high speed rail network, and on
the proposed route of the initial London–West
Midlands link, is due in December 2011. This initial
phase would be broadly carbon neutral, with
the potential for valuable carbon reductions as
the network is expanded further north. Such a
national network could see as many as 6 million
air trips and 9 million road trips switching to high
speed rail each year, reducing carbon and cutting
congestion on roads and at airports.
Part 2: Our strategy to achieve carbon budgets 55
Local sustainable travel
2.101 Over the next decade, sustainable travel
measures, such as encouraging the use of local
public transport, cycling or walking, will enable
people to make lower carbon travel choices.
In doing so they will reduce emissions, boost the
local economy through reduced congestion, and
improve air quality and health. Alternatives to
travel could also grow in prominence: technological
advances (such as video conferencing) have the
potential to shift the location and pattern of travel
for both work and leisure, with potential carbon
benefits from reduced travel demand, as well as
economic, social, and environmental gains.
2.102 The Government has introduced the Local
Sustainable Transport Fund (worth £560 million
over the lifetime of the current Parliament) to
enable local authorities to deliver transport
solutions that build strong local economies and
cut carbon emissions. In the recent Autumn
Statement the Government announced a
further £50 million to be used by local transport
authorities for small transport improvement
schemes costing less than £5 million, as well as up
to a further £25 million for the Green Bus Fund
for the purchase of low carbon emission buses.
2.103 Over the fourth carbon budget, more
people choosing to take public transport, walk
or cycle could mean up to a 5% reduction in
urban car trips. However, uncertainties around
the impact of individual initiatives, and barriers
such as convenience, safety and appropriateness
to journey, may prevent the highest levels of
abatement from being realised.
Freight
2.104 Over the next decade there are likely to
be a range of measures that will help to reduce the
carbon impact of freight. These include eco-driving
techniques, better management of logistics supply
chains, improved vehicle design using lower carbon
fuels, and making best use of other modes such
as rail.
48
See: www.dft.gov.uk/publications/longer-semi-trailers
2.105 Industry and the Government are already
taking a range of actions to drive down emissions
from freight:
• There is considerable industry appetite to
take the lead in making cost effective carbon
reduction happen. The Government has
endorsed the Freight Transport Associationled Logistics Carbon Reduction Scheme, which
records and reports emissions reductions
from road freight and has set a target for its
members of an 8% reduction in emissions
between 2010 and 2015. The success of this
industry-led approach will be reviewed in 2012.
• The Government provides the Mode Shift
Revenue Support and Waterborne Freight
Grant schemes in England and Wales, to
support modal shift which is not always
commercially viable for the operator. The
Government is also facilitating provision of
infrastructure, such as improved capacity at
our ports by consenting for major container
terminal developments. In addition, Network
Rail is funded to deliver over £200 million
in Strategic Freight Network enhancements
through to 2014, with an additional £55 million
funding being made available in the Logistics
Growth Review to improve rail connectivity to
Felixstowe port.
2.106 The Government has also launched a trial of
longer semi-trailers which will help to identify the
potential carbon benefits that could be achieved
from their wider introduction and the consequent
reduction in the number of lorries on the roads.48
The recently published Logistics Growth Review
also includes a package of measures to overcome
some of these barriers and uncertainties and to
help put the UK on track to deliver a deep cut in
road freight emissions by 2050. These measures
will support green growth by encouraging the
adoption of low emissions HGV technologies and
the development of the UK manufacturing base
in these technologies. The Government is making
available £8 million to pump-prime investment
in low emissions HGVs and their supporting
infrastructure.
56 Part 2: Our strategy to achieve carbon budgets
2.107 Over the fourth carbon budget, significant
further efficiency improvements could be possible,
although there are considerable uncertainties. In
the longer term the sector will require alternative
technologies and fuels to deliver more substantial
carbon reductions. The Government believes
that initial market take-up of some of these low
emission technologies, such as gas-fuelled lorries
and flywheel hybrids, is challenging but achievable
during the fourth carbon budget. This would
require barriers, such as uncertainties over costs
and infrastructure requirements, and concerns
over vehicle range, weight and size issues with
some low emissions options, to be overcome.
Aviation and shipping
2.108 Over the next decade, emissions from
domestic aviation are included in the EU Emissions
Trading System (EU ETS). Domestic aviation
and shipping are included in UK carbon budgets,
although they contribute a very small proportion
of total emissions.
2.109 International aviation and shipping emissions
are not currently included in the UK’s 2050
target and carbon budget system, although
international aviation is included in the EU ETS.
The Government must decide whether to include
them by the end of 2012, or explain to Parliament
why it has not done so. This decision will need to
be considered alongside development of the UK’s
sustainable aviation policy framework through
2012/13, which will also consider whether to
adopt the previous administration’s 2050 aviation
CO2 target.
Biofuels
2.110 Over the next decade, use of biofuels in
the UK is covered by the EU Renewable Energy
Directive (RED),49 which requires that 15% of
total energy consumption and 10% of energy for
transport come from renewable sources by 2020,
and the EU Fuel Quality Directive, which requires
a 6% reduction in the greenhouse gas intensity of
fuel by 2020.50 The Government has committed
to the target of 5% biofuels use by volume by
2014 but has not yet decided on an appropriate
level of biofuel ambition post-2014, pending
further consideration of sustainability issues
(including those about indirect land use change)
and cost effective delivery of the 15% target. The
Government proposes to consult in 2012 on the
approach for biofuels to 2020.
2.111 The main driver of increasing biofuel uptake
is the Renewable Transport Fuels Obligation. This
requires suppliers of liquid fossil fuel intended
for road transport to increase the proportion
of biofuel in their fuel annually until April 2013,
when it will reach 5% of total road transport fuel
supplied by volume. The Government consulted
on changes to this legislation earlier this year and
published a response in November 2011.51
2.112 It is important to ensure that the negative
indirect impacts of biofuels are minimised, and
that in the longer term there remains scope to
deploy biofuels in sectors where there are few
other options to decarbonise. The Government’s
forthcoming Bioenergy Strategy will address
these issues.
2.113 Over the fourth carbon budget, given
this uncertainty, for the purposes of analysis for
the fourth carbon budget we have assumed
biofuel uptake in 2020 of 8% by energy, in line
with recommendations of the Committee on
Climate Change. Over the fourth carbon budget
period, we have modelled scenarios in which this
level increases to 10%, decreases to 6%, or stays
constant at 8% out to 2030. These scenarios do
not prejudge the policy decisions to be made.
49
Under the RED some biofuels, such as those made from waste, can be double counted towards the 10% target, although not towards the 15% target. 50
Relative to the lifecycle greenhouse gas emissions from fossil fuels.
51
See: www.dft.gov.uk/consultations/dft-2011-05
Part 2: Our strategy to achieve carbon budgets 57
next steps
2.114 The key challenge in transport is
decarbonising travel in a way that is both cost
effective and acceptable to consumers. In the
fourth carbon budget, increasing efficiency
in cars, vans and freight practices, ultra-low
emission vehicle technologies, sustainable biofuels,
sustainable travel choices and electrified rail will
all have a role to play, and the Government’s
technology neutral approach will allow industry
to develop the low carbon technologies most
appropriate for users. The existing policy mix puts
the Government on a pathway to realise this vision
for low carbon transport, but it will continue to
be reviewed regularly, and in future will require
further ambitious measures such as EU car and
van emissions targets for beyond 2020.
Part 2: Our strategy to achieve carbon budgets 59
indusTry
Where we are now
2.115 UK industry was responsible for 131.6
MtCO2e of emissions in 2009, accounting for
23% of the UK’s total emissions.52 Over 80% of
these emissions originate from generating the
heat that is needed for industrial processes such
as manufacturing steel and ceramics, and the
remainder from chemical reactions involved in
processes such as cement production.
2.116 Between 1990 and 2009, end user emissions
from industry have reduced by 111 MtCO2e. While
the UK industrial sector has grown by an average
of 1% a year over the last 40 years, the sector’s
emissions have fallen by 46% since 1990. Embracing
cost effective, energy efficiency measures, as well
as sectoral readjustments towards higher-value
products, has helped to drive this lower carbon
growth. The energy intensity of UK industry has
fallen on average by 2.7% a year since 1970. Since
1990 this average has declined to 1.3% a year.53
2.117 Around a quarter of UK energy demand is
consumed by industry. Natural gas, electricity and
oil/petroleum are the main energy sources for the
sector. UK industry employs over 4 million people,
accounting for around 15% of the UK workforce
and a third of the national GDP.54 The sector is
varied and complex, covering very different modes
of production, material demands, ownership and
end products. It is one of the main drivers of a
flexible and strong UK economy.
Where we will be in 2050
2.118 If industrial emissions were to remain steady
over the coming decades, they would grow from
23% now to over half of the emissions allowed
by the 2050 target. In order to achieve the UK’s
commitment to cutting emissions by 80% by 2050,
this level of industry emissions would require an
excessive reduction from other sectors. Thus, the
industry sector has to contribute its fair share.
2.119 Decarbonising the UK economy could
require a reduction in overall industry emissions of
up to 70% by 2050. Achieving this while maintaining
competitive growth in the sector could entail the
following:55
• The historical growth trend of 1970 to 2009
continues, leading to industrial output increasing
by over 30% to 2050.
• Energy demand by industry decreases by up to
a quarter from today’s levels.
• Industry achieves a decrease of up to 40% in
energy intensity through a mix of fuel switching
and taking up remaining efficiency opportunities.
• Over half of industrial energy demand is
supplied by either bioenergy or electricity.
• Carbon capture and storage rolls out during
the 2020s, and by 2050 could capture around a
third of industry’s emissions.56
2.120 This low carbon transition will inevitably
be challenging, but at the same time it has the
potential to bring real benefits for UK industry:
• Taking up the remaining opportunities for
energy, material and process efficiency will
reduce manufacturing costs and boost the
competitiveness of UK industry.
52
The equivalent figure by source is 129.1 MtCO2e (23% of UK emissions).
53
See DECC (2010) Energy Consumption in the UK: Industrial data tables. Available at: www.decc.gov.uk/en/content/cms/statistics/publications/ecuk/ecuk.aspx,
table 4.5.
54
Office for National Statistics (2009) Annual Business Survey, Production and Consumption Sectors (B–E).
55
See Annex A of this document and, for more detail, 2050 Futures from the 2050 Pathways Calculator spreadsheet.
56
AEA Technology (2010) Analysing the Opportunities for Abatement in Major Emitting Industrial Sectors: Report for The Committee on Climate Change.
60 Part 2: Our strategy to achieve carbon budgets
• Low carbon manufacturing, using inputs such
as sustainable biomass and future supplies of
decarbonised electricity may increasingly be
demanded by both UK and export markets.
• Moving to low carbon technologies in other
sectors of the economy will create new markets
for the goods produced by UK industry: the
steel for wind turbines, the aluminium for
electric vehicles and the cement for new homes.
We also depend on industry to manufacture
components for power stations, ships, planes
and home appliances – products which need
to become ever more energy efficient and low
carbon over the coming decades.57
How we will make the transition
2.121 A number of technologies will be needed to
make the transition to low carbon industry. These
technologies are at varying stages of development
and commercialisation, and range from well
established, mature technologies to those which
are still at laboratory stage, meaning there remains
significant uncertainty about how and where they
will be deployed.
2.122 This decade, we expect industry to focus
on cost effective measures such as energy, process
and material efficiency. Industry needs to continue
to seize opportunities to boost energy, process
and material efficiency, and new opportunities
will arise as new technologies and materials are
developed. As technologies mature, energy
efficiency is likely to continue to improve over the
coming decades, albeit at a decreasing rate.
2.123 Action this decade will also help industry
prepare for the future, to support the innovation
needed for more technically challenging or costly
measures involving advanced fuel switching or
carbon capture and storage.
2.124 The 2020s and beyond will see the
continued take-up of remaining efficiency
measures, but also greater deployment of more
advanced decarbonisation measures in two
main areas:
• Fuel switching – The majority of industrial
emissions arise from generating heat from fossil
fuels for manufacturing processes, meaning
that changing to lower carbon fuels such as
sustainable biomass and biogas represents one
of the most important means by which the
sector can decarbonise over time. The type of
fuel switching possible will differ between sub­
sectors.58 For lower temperature processes a
range of options may be possible, for example
using biomass boilers to generate the steam
required, or ‘process integration’ for exploiting
heat already used in higher temperature
processes. Higher temperature processes
often present a greater challenge, and may
need innovative solutions such as sustainable
biomass to replace coke, or a shift towards
the electrification of processes. Fuel switching
will develop gradually, depending on the needs
of each sub-sector of UK industry and, in
particular, the temperature of the heat required.
• Carbon capture and storage (CCS) – For
some industrial processes, greenhouse gas
emissions are an intrinsic part of the chemistry
and can only be mitigated through innovative
options such as CCS. In the long term, the
deployment of a combination of sustainable
biomass and further CCS should be able to
address remaining combustion and the carbon
dioxide component of process emissions.
57
See, for example, CBI (2011) Protecting the UK’s Foundations: A blueprint for energy-intensive industries. Available at: www.cbi.org.uk/media-centre/policy­
briefs/2011/08/protecting-the-uks-foundations-a-blueprint-for-energy-intensive-industries/
58
The industrial sector can be disaggregated into the energy-intensive industry (EII) sector, which tends to require significant amounts of high grade heat
at 1,000°C and above (e.g. iron and steel or aluminium), and the non-EII sector, for which demand is generally for lower grade heat, typically around
100–300°C (e.g. food and drink, pharmaceuticals).
Part 2: Our strategy to achieve carbon budgets 61
2.125 Process emissions will also need to be
tackled. Fluorinated gas (F-gas) emissions from air
conditioning and refrigeration currently make up
around 2% of UK emissions. They are expected
to decrease as a result of the impact of the
current regulatory framework and voluntary
moves by businesses to replace F-gases with other
refrigerants with lower global warming potential.
Energy, process and material efficiency
2.126 The Government’s latest projections suggest
that industrial energy consumption will fall by 12%
by 2030 compared with 2008 levels (see chart 17
overleaf). The main drivers of this drop in energy
consumption will be as follows:
• Conventional energy efficiency – While much
has been achieved, there remain opportunities
for greater energy efficiency in some areas,
for instance through process optimisation and
control or use of continuous processes rather
than having to start and stop equipment. Many
measures can be retrofitted, with rapid payback
periods and little upfront capital investment.
• Process and thermal efficiency – There are
additional opportunities to reduce emissions
through changing processes as well as making
them more efficient, for instance through
changes to improve process integration, or
recovering and re-using heat.
2.127 The Government will continue to incentivise
these efficiency improvements during this decade
and beyond via a set of European and national
policy frameworks:
• European Union Emissions Trading System
(EU ETS) – The cap-and-trade system covers
over 70% of direct and indirect industrial sector
emissions. The main incentive mechanism
for emissions savings within this system is
the gradual tightening of the cap as well as a
resulting carbon price. The Government intends
the EU ETS to remain a critical driver for the
UK’s industrial low carbon transition for this
decade and beyond.
• Climate Change Levy (CCL) and Climate
Change Agreements (CCAs) – Cost effective
energy efficiency measures are also being
supported by government policy instruments
through the CCL. This is a tax charged on high
carbon energy supplied to businesses and the
public sector. The Government introduced
the CCAs to reduce the impact of the CCL
on the competiveness of energy-intensive
industry, while still incentivising industry to take
action to reduce emissions. These voluntary
agreements provide a discount on the CCL
for eligible industries in return for meeting
challenging energy efficiency or emissions
reduction targets.59
• Material efficiency – A number of measures
can reduce the economy’s demand for the
primary manufacture of energy-intensive goods
and therefore reduce associated emissions.
These include greater recycling, greater reuse
with re-melting and greater commoditisation
of products.
59
Current CCAs entitle participants to claim CCL discount until the end of March 2013. The Government announced in the 2011 Budget that the scheme
will be extended to 2023, and is currently developing proposals that will simplify the scheme. These proposals will provide targeted financial benefits to
business in the range of £2.4–£3.4 million from 2012 to 2020.
62 Part 2: Our strategy to achieve carbon budgets
Fuel switching
2.128 Alongside energy efficiency-driven
reductions in demand, government projections
show a shift in energy consumption patterns.
Industry currently receives the majority of energy
from gas use. Towards 2030 government predicts
a switch to more low carbon energy sources, such
as bioenergy and electricity.60
Chart 17: Energy use in 2008 and 2030 by fuel type and total for UK industry
35,000
Thousand tonnes of oil-equivalent
30,000
25,000
20,000
15,000
10,000
5,000
0
Electricity
2008
Gas
Petroleum
Solid/
manufactured fuels
Renewables
Total energy
2030
Source: Department of Energy and Climate Change (Updated Energy and Emissions Projections)61
60
Analysis using the Energy End-Use Simulation Model (ENUSIM) suggests that there is remaining potential for further energy efficiency improvements.
Further detail on future abatement potential has been derived from work undertaken by AEA Technology. We have undertaken analysis to expand the
potential abatement beyond those considered in the AEA work (AEA Technology (2010) Analysing the Opportunities for Abatement in Major Emitting
Industrial Sectors: Report for The Committee on Climate Change). In addition, we have undertaken modelling to calculate abatement due to the uptake of
renewable heat and the initial deployment of CCS.
61
See: DECC (2011) Energy and Emissions Projections Annex C. Available at: www.decc.gov.uk/en/content/cms/about/ec_social_res/analytic_projs/en_emis_
projs/en_emis_projs.aspx. Note: offshore refinery processes are excluded from this chart.
Part 2: Our strategy to achieve carbon budgets 63
2.129 Fuel switching in the industry sector is
expected to take place via several routes:
• Cogeneration/combined heat and power
(CHP) – The combined production of heat and
electricity can reduce primary energy demand
by up to 15% regardless of the fuel input,
making gas CHP an efficient way of using fossil
fuels in industrial processes. Biomass and biogas
can be used for the combined production of
heat and electricity to provide further emissions
reductions.
• Sustainable biomass and biogas – Sustainable
biomass and biogas offer a direct alternative to
fossil fuels as a means of generating hot water
and steam for low temperature processes up to
around 300°C. To maximise energy efficiency
in the use of sustainable biomass, it can be
combined with cogeneration of electricity and
heat. Some high temperature applications, such
as cement kilns, may be suitable for biomass or
waste combustion. Some applications, such as
ceramics or glass furnaces, require high calorific
value and clean burning fuels, and may therefore
require the use of biogas.
• Electrification of processes – As the grid
decarbonises, electricity will become an
important source of low carbon energy for
industrial processes. Electricity is currently used
to drive motors and machinery, compressors
and refrigeration. It is also used to supply
heat demand, particularly where volatile
or flammable products are used or low
temperature controllable heat is required. Some
sectors already make extensive use of electricity
especially where this is the only commercially
available process, as it is for aluminium. Other
processes may require further innovation and
capital investment before being able to use low
carbon electricity.
2.130 In practice, it is likely that in the short
term industry will exploit large-scale CHP
opportunities, and will take up the cost effective
potential for fuel switching to sustainable biomass
(including energy from waste). In the 2020s and
beyond, we may see deployment of options with
longer payback periods and those which require
greater innovation such as use of biomass in high
temperature processes and, as we move towards
a decarbonised electrical grid, electrification of
industrial processes.
2.131 Some critical technologies for fuel switching
(such as advanced forms of sustainable bioenergy
and electrolysis) are not yet at commercial stage.
Public and private support to address innovation
gaps, both in the UK and internationally, will be
critical if we are to make these technologies a
viable part of a low carbon future.
2.132 The Renewable Heat Incentive (RHI) will
support substantial deployment of bioenergy
for the generation of low carbon heat within
the commercial and industrial sectors. The
Government estimates that up to 48% of the
additional low carbon heat anticipated to provide
the 12% low carbon heat necessary to meet the
overall renewable energy target in 2020 will come
from the industrial sector, including the generation
of energy from waste.
2.133 The Government will continue to incentivise
a combination of natural gas-fired and renewable
64 Part 2: Our strategy to achieve carbon budgets
Chart 18: Emissions projections in industry for the first three carbon budgets and illustrative ranges
of emissions abatement potential in the fourth carbon budget period and in 205062
140
120
MtCO2e
100
Projected emissions
over the first four
carbon budget
periods
The long (20–30 year) lifecycles
of capital intensive equipment
means that the 2020s could be
a key decade for decarbonising
large installations.
80
Range of additional
emissions abatement
potential over
the fourth carbon
budget period
Over the coming decade, industry
is likely to realise much of the
remaining potential for cost
effective energy efficiency.
60
Illustrative range of
emissions abatement
potential in 2050
40
Options such as electrification,
advanced uses of biomass and
CCS will only happen in later
decades with early efforts on
innovation.
20
2050
2048
2043
2038
2033
2028
2023
2018
2013
2008
0
Year
Source: Department of Energy and Climate Change
CHP. CHP, especially for large-scale industrial
plants, constitutes a significant opportunity to
enhance energy efficiency and lower emissions
from the industrial sector.
2.134 Chart 18 above illustrates the emissions
trajectory for decarbonising the UK industry
sector up to 2050, focusing in particular on the
range of abatement potential over the fourth
carbon budget period.
62
2.135 The fourth carbon budget range on the
above chart indicates the level of emissions
abatement industry could achieve by taking up
cost effective (that is, measures whose cost is
lower than the projected carbon price) energy
efficiency and fuel switching measures over the
coming one and a half decades. These include
measures incentivised through the European Union
Emissions Trading System and Climate Change
Agreements, for example process optimisation,
and the Renewable Heat Incentive (RHI), using
The emissions projections derive from Updated Energy and Emissions Projections data for the industry and refineries sectors for CO2 emissions and the
National Communication industrial processes and energy supply sectors for non-CO2 emissions. The illustrative ranges for emissions abatement potential
for 2050 and the fourth carbon budget derive from the 2050 futures and fourth carbon budget scenarios – these are discussed in Parts 1 and 3 of this
report respectively. Please also see: AEA Technology (2010) Analysing the Opportunities for Abatement in Major Emitting Industrial Sectors: Report for The
Committee on Climate Change.
Part 2: Our strategy to achieve carbon budgets 65
bioenergy to produce hot water and steam for
industrial processes. The variation between the
fourth carbon budget range is due to different
levels of low carbon heat take-up incentivised
under the RHI. A central set of assumptions on
what energy efficiency and CCS measures industry
may choose to take up is included in the range.
We recognise that there is uncertainty around the
precise choices that will be made in such a diverse
sector of the economy.63
Industrial carbon capture and storage
2.136 CCS has a role to play in capturing emissions
from combustion of industrial heat, for example
from the continued use of coke-fired blast furnaces
for steel production, or for processes where
emissions result directly from the chemistry of the
process itself, such as the manufacture of cement
or lime. Initial deployment of CCS technology is
expected during the fourth carbon budget period,
particularly for sectors with lower capture costs,
e.g. ammonia production.
2.137 Today, CCS technology research projects
are supported by UK and international sources of
funding – with the aim of turning it into a viable
option for the coming decades.64
2.138 Deployment of CCS needs to be planned
within sufficiently long time spans. In the industrial
sector, assets are typically of high capital value,
with lifetimes of up to 40 years. It is often only
possible to make significant changes or innovations
to integrated processes when these assets are
replaced or renewed, which may limit the rate at
which technology can be adopted.
2.139 Critical technologies – such as industrial
CCS, high temperature use of biomass, or further
electrification of thermal processes – may not
be available at commercial scale for 10–15 years.
While the exact phasing of the low carbon
transition is uncertain and depends on investment
choices by industry as well as international action
and competition, we can identify some possible
stages and decision points along the way (see
chart 19 on pages 66 and 67).
2.140 The Government will work with industry to
address key risks of this low carbon transition, such
as reducing the impact of the anticipated increasing
cost of energy, to ensure that UK industry
remains competitive internationally. This will be
particularly important in those sectors which are
especially exposed to rising energy costs as well
as to international competition, where there is a
role for government in helping these industries to
manage the transition. As part of this work, the
Government recently announced a package of
measures to support sectors which are particularly
exposed to these risks.
63
There have been significant revisions undertaken to the 2011 Updated Energy and Emissions Projections (www.decc.gov.uk/en/content/cms/about/
ec_social_res/analytic_projs/en_emis_projs/en_emis_projs.aspx). This may impact upon previously undertaken analysis of abatement potential from, for
example, AEA Technology. Therefore, we have taken up a lower level of ‘realistic’ energy efficiency abatement in our projections. For further information
see: AEA Technology (2010) Analysing the Opportunities for Abatement in Major Emitting Industrial Sectors: Report for The Committee on Climate Change.
64
See, for example, the EU-funded project for industrial CCS where CO2 capture is being applied at a steel plant in Florange, France.
66 Part 2: Our strategy to achieve carbon budgets
Chart 19: Decision points for industry to 2030
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
Fuel switching
Energy efficeincy
Industr y overall
European Union Emissions Trading System (EU ETS)
Energy
Intensive
Industry
Package
Climate Change Agreements
CRC Energy Efficiency Scheme
Renewable Heat Incentive
Possible further legislative action on EU F-gas regulations
Industrial CCS
International demonstration projects on CCS for power stations and industry
12% of
heat
from
renewable
sources
Part 2: Our strategy to achieve carbon budgets 67
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
Post-2020 EU ETS in place
12% of
heat
from
renewable
sources
Negotiations with industry on deployment of CCS, especially for blast furnace investments
First deployment of industrial CCS
Part 2: Our strategy to achieve carbon budgets 69
Secure, loW carbon electricity
Where we are now
2.141 The power sector is the single largest
source of UK emissions today, accounting for 27%
of emissions – 156 MtCO2e – in 2010. By 2050,
emissions from the power sector need to be
close to zero. Historically, the UK has benefited
from robust security of supply, due to domestic
natural resources and to competitive markets
underpinned by independent regulation. We
currently have around 90 GW65 of generating
capacity, giving us around 16%66 surplus capacity
(known as a capacity margin) over electricity
demand at peak times.
2.142 Emissions from power stations have fallen
by 23% since 1990. While demand has increased
by 18% since 1990, the carbon intensity of power
generation has fallen from 690 gCO2/kWh in 1990
to 448 gCO2/kWh in 2009. This is primarily due
to the switch from coal-fired generation to less
carbon intensive gas-fired generation during the
1990s, with use of coal roughly halving, as well as
increased power station efficiency.67 Generation
from renewable sources has steadily increased
since 2006, reaching over 7% of electricity
generation in 2010.68
Chart 20: Cumulative renewable electricity installed capacity, by technology, from 2000 to 2010
12
Installed capacity/GW
10
8
6
4
2
0
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
Year
Offshore wind
Onshore wind
Solar photovoltaic
Hydro
Biomass and waste, including co-firing
Wave/tidal (2.55 MW in 2010)
65
DECC (2011) Digest of UK Energy Statistics 2011 Table 5.7 Plant Capacity.
66
National Grid (2011) Winter Outlook 2011/12.
67
DECC/Defra (2011) 2011 Guidelines to Defra/DECC’s GHG Conversion Factors for Company Reporting Annex 3 Table 3a.
68
DECC (2011) Energy Trends, June 2011.
2010
70 Part 2: Our strategy to achieve carbon budgets
2.143 Latest projections show that as a result of
government policies, emissions from the power
sector are expected to fall by around two thirds
during the next two decades, to 49 MtCO2e a year
in 2030. Over the five years of the fourth carbon
budget period, power stations are projected to
emit 357 MtCO2e.69
2.145 By 2050, electricity supply will need to be
almost completely decarbonised. Power will be
generated largely from renewables, and nuclear
and fossil fuel stations fitted with CCS technology.
Experience from other countries demonstrates
that this is possible: almost 90% of the electricity
supply of both Sweden and France is zero carbon,
using mainly nuclear and hydro power.
Where we will be in 2050
2.146 The nature of the electricity system will
also need to change. Wind and solar power are
intermittent. Nuclear power is hard to turn on
or off quickly. Meanwhile, demand for electricity,
if heating and cars are plugged into the grid, will
also be more variable. As a result, our electricity
system will need to become smarter at balancing
demand and supply. This will mean a combination
of back-up generation capacity, bulk storage of
electricity and greater interconnection, but also
smarter ways of managing energy demand. On
2.144 By 2050, we are likely to need much more
electricity. The 2050 futures set out in Part 1
suggest that electricity supply may need to increase
by around 30–60%. We may need as much as
double today’s electricity capacity to deal with
peak demand. While more energy efficiency
will reduce demand per head of population by
30–50%, this will be outweighed by rising demand
from electrification of heating, transport and parts
of industry, and economic and population growth.
Chart 21: Emissions projections for electricity for the first three carbon budgets and illustrative
ranges of emissions abatement potential in the fourth carbon budget period and in 205070
200
CB1
CB2
CB3
CB4
150
Projected emissions
over the first
four carbon budget
periods
100
MtCO2e
Range of additional
emissions abatement
potential over the
fourth carbon
budget period
50
Illustrative range of
emissions abatement
potential in 2050
0
2050
2048
2043
2038
2033
2028
2023
2018
2013
2008
–50
Year
69
DECC (2011) Updated Energy and Emissions Projections 2011. Available at: www.decc.gov.k/en/content/cms/about/ec_social_res/analytic_projs/en_emis_
projs/en_emiss_projs.aspx. These do not take into account the measures due to be introduced as a result of the Electricity Market Reform.
70
The emissions projections derive from Updated Energy and Emissions Projections data. The illustrative ranges for emissions abatement potential for
2050 and the fourth carbon budget derive from the 2050 futures and fourth carbon budget scenarios – these are discussed in Parts 1 and 3 of this
report respectively.
Part 2: Our strategy to achieve carbon budgets 71
Chart 22: Projected deployment of low carbon generation over the first three carbon budgets and
illustrative ranges of deployment potential in the fourth carbon budget period and in 2050
160
CB1
CB2
CB3
CB4
140
Projected low carbon
generation over
the first four carbon
budget periods
Total low carbon generation/GW
120
100
80
Range of additional
total low carbon
generation during
the fourth carbon
budget period
Around 40–70 GW of new
low-carbon capacity will be
needed by 2030, in addition to
10 GW of existing capacity that
will still be operating
60
Illustrative range of
total low carbon
generation in 2050
40
20
2050
2048
2043
2038
2033
2028
2023
2018
2013
2008
0
Year
Source: Department of Energy and Climate Change, Redpoint modelling, 2050 Calculator
the way to 2050, some flexible fossil fuel plant is
likely to be needed to ensure security of supply.
In 2050, the role of fossil fuels is likely to be limited
to power stations fitted with CCS, although it is
possible that some unabated gas could still be used
as back-up capacity without compromising our
emissions targets.
How we will make the transition
2.147 Over the next decade, the UK will need
to invest in new generation capacity to replace
the coal and nuclear power stations that are set
to close by the early 2020s in order to maintain
our energy security, while meeting our legal
commitments to reduce carbon emissions and
increase renewable electricity generation.
2.148 To do this, the coming years will see a
continuation of previous trends: more switching
from coal to gas-powered generation, and
renewable electricity rising to 30% of electricity
generation by 2020. In common with other
countries, the UK will move to a more diverse
range of energy sources to increase energy
security and reduce exposure to volatile fossil fuel
prices, as well as to cut emissions.
2.149 In addition to cutting emissions this decade,
the UK also needs to prepare for the rapid
decarbonisation required in the 2020s and 2030s
by demonstrating and deploying the major low
carbon technologies that we will need on the way
to 2050. CCS, renewables and nuclear power
need to be deployed during this decade, and costs
minimised, if they are to be deployed at scale in
the next. Industry will lead, but the Government is
playing a facilitating role for each technology.
72 Part 2: Our strategy to achieve carbon budgets
2.150 During the 2020s, deep cuts in emissions
from the power sector are necessary to keep
us on a cost effective path to 2050. There is a
clear opportunity for large-scale new low carbon
capacity in the next two decades, created by
the combination of existing plant closures and
an increase in demand. Government modelling
suggests that around 60–80 GW of new electricity
capacity will need to be built by 2030, and of this
around 40–70 GW will need to come from low
carbon technologies, such as nuclear, renewables
and fossil fuel stations with CCS.71
2.151 The Government does not have targets
for particular generation technologies for 2030.
As the 2050 futures in Part 1 illustrate, different
combinations of the three key low carbon
technologies are all plausible. The Government’s
aim is therefore to run a low carbon technology
race between CCS, renewables and nuclear
power. Diversity will bring competition between
technologies that will drive innovation and cost
reduction, and will hedge against the risk of one
technology failing to reduce costs or become
publicly acceptable. The low carbon power
that can deliver at least cost will gain the largest
market share.
flexibility that we will need to meet peak demand
and manage intermittent generation from some
renewables, as well as baseload generation capacity,
while new nuclear and renewable capacity is built.
2.153 Beyond 2030, as transport, heating, and
industry electrification occurs, low carbon capacity
will need to rise significantly. The futures described
in Part 1 show that we are likely to need 100
GW or more of new low carbon generation
capacity in 2050; the exact amount will depend
on the technology mix and electricity demand.
We currently have only 20 GW of low carbon
capacity,72 meaning that we need to build an
average of around 2.5 GW of new low carbon
capacity a year for the next 40 years. Although
challenging, these build rates are achievable: the UK
has built coal-fired power stations at an equivalent
rate in the past, and nuclear power stations have
been built at a rate of up to 4.5 GW a year.73 As
set out in the Electricity Market Reform White
Paper,74 the mix of low carbon technologies that
is built on the way to 2050 is for the market to
decide: the technologies with the lowest costs will
win the biggest market share.
2.152 The transition to low carbon power
will not happen overnight. Over the next two
decades, gas-fired power plants will provide the
71
Based on modelling by Redpoint Energy commissioned for the Carbon Plan. Please see Annex B for further details.
72
DECC (2011) Digest of UK Energy Statistics 2011 Table 5.7. Plant capacity – 9.6 GW renewable capacity and 10.9 GW nuclear.
73
Nuclear Energy Association (2008) Nuclear Energy Outlook 2008 p.318 – France, 1979–88, an average of 4.5 GW a year.
74
DECC (2011) Planning Our Electric Future: A White Paper for secure, affordable and low carbon electricity. Available at: www.decc.gov.uk/en/content/cms/
legislation/white_papers/emr_wp_2011/emr_wp_2011.aspx
Part 2: Our strategy to achieve carbon budgets 73
Box 9: Decarbonisation of the power sector to 2030
There are many different ways to achieve the decarbonisation of the power sector. It is impossible
to predict which will be the most cost effective route and what the power generation sector will
look like in 2030. Nevertheless, we can use economic models to produce projections using the best
evidence currently available. The scenarios modelled for this report suggest that around 40–70 GW
of new low carbon electricity generating capacity will be needed by 2030, depending on demand
and the mix of generation that is built.
The analysis considered a range of decarbonisation scenarios which are consistent with meeting
carbon budgets and the 2050 goal. The Government is not setting an explicit decarbonisation goal for
2030 now given the uncertainties involved in setting a target this far in the future – but the actions
being taken now are intended to ensure that we are keeping a range of options in play.
These outcomes should not be interpreted as government technology targets. The Government
is happy for fossil fuels with CCS, nuclear or renewables to make up as much as possible of the
40–70 GW we think we may need. The Government would like to see the three low carbon
technologies competing on cost in the 2020s to win their share of the market.
• Nuclear is currently projected to be the cheapest low carbon technology in the future. Depending
on assumed possible build rates, new nuclear contributed anywhere from 10–15 GW by 2030
in the scenarios modelled. Actual build rates could make this range higher or lower: industry has
announced ambitions to build 16 GW by 2025, and if one reactor could be completed each year
from 2019 onwards, it would be possible to reach around 20 GW by 2030.
• Fossil fuel generation with CCS could make a significant contribution by 2030, depending on
whether it can compete on cost with other low carbon technologies. CCS contributed as much
as 10 GW by 2030 in the scenarios modelled. This should not be seen as an upper limit to its
potential – more could be deployed if costs reduce quickly as a result of government and industry
actions. Industry has set out in their strategy for CCS ambition for at least 20 GW of fossil plant
with CCS in operation by 2030.
• The role of renewable electricity during the 2020s will depend on the extent of deployment
to 2020 and the pace at which costs reduce as a result of the ongoing joint government/industry
work. The analysis showed that renewable electricity could provide 35–50 GW by 2030, with the
upper end assuming either high electricity demand or significant cost reductions. The Committee
on Climate Change’s Renewable Energy Review suggests that we could have over 55 GW of
renewable electricity capacity by 2030, subject to resolution of current uncertainties such as cost
reductions and barriers to deployment, and industry has expressed similar levels of ambition.
74 Part 2: Our strategy to achieve carbon budgets
2.154 The rest of this section looks in more
detail at six key areas that will enable the low
carbon transition: reform of the electricity market;
and specific action to facilitate nuclear, CCS,
renewables, unabated gas and investment in the
electricity system. More detail on energy efficiency
is set out in the sections on buildings (page 29) and
industry (page 59).
Overcoming barriers to low carbon
generation
2.155 There are common problems faced by all
low carbon generators:
• The carbon price has not been high or certain
enough to encourage sufficient investment in
low carbon generation.
• The current electricity price is driven mainly by
gas power stations. Gas plant has much lower
fixed costs relative to its running costs than low
carbon plant, which tends to be expensive to
build but cheap to run. It is therefore difficult
to make the case for capital investment in low
carbon in a market where electricity prices
move in line with the price of gas.
• There are high barriers to market entry,
including poor market liquidity and regulatory
burdens.
2.156 The reforms that the Government has
proposed in the Electricity Market Reform White
Paper are designed to address these problems,
creating a level playing field for low carbon
technologies:
• A Carbon Price Floor to be introduced from
April 2013 to reduce investor uncertainty, place
a fair price on carbon and provide a stronger
incentive to invest in low carbon generation
now.
• The introduction of new long-term contracts
from 2014 (Feed-in Tariffs with Contracts for
Difference), to provide stable financial incentives
to invest in all forms of low carbon electricity
generation. These will replace the existing
Renewables Obligation (although they will run
in parallel with it to 2017);
• An Emissions Performance Standard set at
450 gCO2/kWh starting in 2013, to reinforce
the requirement that no new coal-fired power
stations are built without CCS, while allowing
the necessary short-term investment in gas to
take place.
2.157 The Government is concerned that by the
end of this decade there will be a risk of insufficient
electricity capacity to meet peak demand, and
therefore it recently consulted on options for a
capacity mechanism to ensure future security of
electricity supply. The options are either a targeted
mechanism in the form of a strategic reserve
(whereby an amount of generating capacity is
procured and held outside of the normal market
and only despatched when required) or a marketwide mechanism (whereby all reliable capacity –
either generation or non-generation technologies
such as demand-side response – is rewarded).
Further detail on this and the institutional
arrangements needed to deliver Electricity Market
Reform will be published at the turn of the year, as
part of a Technical Update.
2.158 Timely planning decisions are also critical to
the deployment of low carbon infrastructure. The
Government is reforming the major infrastructure
planning regime as follows:
• To ensure accountability, the Planning
Inspectorate will consider applications for
energy infrastructure over 50 megawatts (MW)
and advise the Secretary of State for Energy
and Climate Change, who will make the
final decision.
Part 2: Our strategy to achieve carbon budgets 75
• To provide a clear decision-making framework
for applications for nationally significant energy
infrastructure, the Secretary of State designated
six National Policy Statements for energy in
July 2011.
2.159 Electricity Market Reform and planning
reform will address the main barriers that face all
low carbon generation. But the Government is also
addressing barriers specific to each technology, as
outlined below.
Nuclear
2.160 Nuclear power is a proven technology able
to provide continuous low carbon generation,
and to reduce the UK’s dependence on fossil fuel
imports. New nuclear power stations will help
to ensure a diverse mix of technology and fuel
sources, which will increase the resilience of the
UK’s energy system.
2.161 Nuclear is currently cost-competitive with
other electricity generation technologies, and
recent independent studies indicate that new
nuclear is likely to become the least expensive
generation technology in the future.75 The recent
Weightman Report on lessons from Fukushima
confirmed that there are no fundamental safety
weaknesses in the UK’s nuclear industry.76
2.162 The Government believes that new
nuclear power should be free to contribute as
much as possible towards the UK’s need for
new low carbon capacity. The Nuclear National
Policy Statement identifies those sites which the
Government believes are potentially suitable for
deployment by 2025,77 although it is for energy
companies to develop new nuclear power stations,
and to decide at what point they wish to develop
a site. An application for a new nuclear power
station at Hinkley Point (3,260 MW output)
was submitted to the Infrastructure Planning
Commission by EDF Energy on 31 October 2011.78
Energy companies have announced intentions
to bring forward 16 GW of new nuclear power
stations by 2025 (see chart 24). To enable this to
happen, the Government has taken forward a
series of targeted facilitative actions, including
the following:
• Reducing regulatory and planning risks
for investors and ensuring that owners and
operators have robust funding plans for waste
management and decommissioning.79
• Ensuring that there is an appropriately skilled
workforce to deliver industry’s ambitions
on new nuclear build – Cogent, the Sector
Skills Council, has produced labour market
intelligence that allows the Government to
identify, monitor and, working with skills bodies,
take action where necessary to address skills
gaps. The Nuclear Energy Skills Alliance, a
grouping of key skills bodies, has been set up to
continue to identify mitigating actions and track
progress against them.
75
Parsons Brinckerhoff (2011) Electricity Generation Cost Model 2011 Update Revision 1. Available at: www.decc.gov.uk/assets/decc/11/meeting-energy-demand/
nuclear/2153-electricity-generation-cost-model-2011.pdf. This includes the costs of decommissioning.
76
Office for Nuclear Regulation (2011) Japanese Earthquake and Tsunami: Implications for the UK nuclear industry. Available at: www.hse.gov.uk/nuclear/
fukushima/
77
HM Government (2011) National Policy Statement for Nuclear Power Generation (EN-6).
78
The Infrastructure Planning Commission has 28 days from the day after the date of receipt to review the application and decide whether or not they
can accept it.
79
These are National Policy Statement; Regulatory Justification; Funded Decommissioning Programme; and Generic Design Assessment.
76 Part 2: Our strategy to achieve carbon budgets
Chart 23: Decarbonisation of the power sector to 2030
2011
2012
2013
First new nuclear
power station80
Planning
application
to IPC
Site licence
2015
2016
2017
Construction
2018
2019
2020
Starts operating
Development
consent
issued
Next generation
of new nuclear
Nuclear
Development and
preparatory work
2014
Early plants operating
CCS
CCS
programme
launched in
Q1
Investment decisions
on full scale
commercial plants
taken
Renewables
Piloting of Contracts for Difference (CfD) auctions for renewables
Opportunity this decade to reduce costs and remove barriers to deployment
Around 30%
of electricity
from
renewable
sources
Electricity systsem
Gas
Gradual shift in role of unabated gas
Electricity
systems
policy
published
Smart Meters mass roll-out
Smart
Meters
roll-out
starts
Develop shared view
on future expectations
from system
Negotiations start
on Distribution Network
Operator investment
plans for next price
control period
Carbon Price
Floor in force
80
RIIO-ED1 price control review
All subject to development consent.
First CfD
contracts
signed
Renewables
Obligation
closed
2020 renew
target
Part 2: Our strategy to achieve carbon budgets 77
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
Operating
Next tranche of nuclear plants come on line over this period
Full scale commercial plants operating
r renewables
Gradually introduce more competition between low carbon technologies
ent
Renewables increasingly competing on cost with other forms of low carbon generation
Around 30%
of electricity
from
renewable
sources
unabated gas
power stations to increasing use as flexible and back-up generation
l review
2020 renew
target
ables
2030
78 Part 2: Our strategy to achieve carbon budgets
• Rebuilding the nuclear supply chain – The
Government is working with the industry-led
‘[email protected]’ programme, which aims to engage
companies with the nuclear sector and raise
the profile of opportunities presented by new
build. The Government is collaborating with
the Nuclear Advanced Manufacturing Research
Centre as it works to attract and improve the
capabilities of UK companies through the Fit
4 Nuclear programme. It is also working with
the Nuclear Industry Association to facilitate
increased co-ordination across those with
contracts to let, in order to make best use of
supply chain capacity.
technology over the next 40 years (see chart 25).
Successful deployment of CCS will allow fossil fuels
to continue to contribute to security of supply by
providing flexible electricity generating capacity
that will help to balance continuous nuclear
power, intermittent wind power and variable
demand. Without CCS, the role of unabated
fossil fuels in the electricity market by 2050 will be
limited to back-up for periods of high demand.
2.164 As yet there are no full-chain commercialscale CCS power projects in the world, but there
are eight operational CCS plants, nearly all linked
to natural gas processing. Each of the individual
components is already used in other applications,
such as injection facilities for the use of CO2 in
enhanced oil recovery operations. Studies show
that in the 2020s fossil fuel generation with CCS is
expected to be cost-competitive with some other
low carbon electricity generation technologies, and
will provide a flexible generation source.81
carbon capture and storage
2.163 CCS is a chain of processes for capturing,
transporting and storing greenhouse gases
underground to reduce emissions from large
sources such as fossil fuel power stations. CCS has
the potential to become an important low carbon
Chart 24: Trajectory for new nuclear capacity to 2050
80
2050 – high
70
New nuclear capacity/GW
60
50
40
30
20
2050 – low
10
2050
2048
2046
2044
2042
2040
2038
2036
2034
2032
2030
2028
2026
2024
2022
2020
2018
2016
2014
2012
2010
0
Year
Industry ambition for 2025
2030 – one reactor every year 2019–30
2030 – one reactor every other year 2019–24,
then one reactor a year to 2030
2030 – one reactor every other year 2019–30
Source: Modelling by Redpoint Energy for the Carbon Plan; Department of Energy and Climate Change
81
Parsons Brinckeroff (2011) Electricity Generation Cost Model 2011 Update Revision 1. Available at: www.decc.gov.uk/assets/decc/11/meeting-energy-demand/
nuclear/2153-electricity-generation-cost-model-2011.pdf
Part 2: Our strategy to achieve carbon budgets 79
2.165 The next step is to bring down costs and
risks by supporting development of the technology
at scale in a commercial environment. That is why
the Government is firmly committed to CCS.
There are a number of promising CCS projects
proposed in England and Scotland and we expect
to commence a selection process as soon as
possible, with £1 billion set aside to support the
programme. Progress is also being made around
the world – the US and Canada have both just
broken ground on their first industrial-scale CCS
projects on power plants.
renewable electricity
2.167 The Government is committed to
dramatically increasing the amount of renewable
electricity generation in the UK. Meeting the 2020
renewables target is likely to require renewables to
provide over 30% of electricity generation in 2020.
Making use of some of the best wind and marine
resources in Europe will help to lower emissions
and the demand for fossil fuels.
2.168 Looking out to the fourth carbon budget
period and beyond, the Government agrees with
the conclusions of the Committee on Climate
Change’s (CCC’s) Renewable Energy Review that
renewable electricity has the potential to provide
over 40% of power generation by 2030 (see chart
26). However, delivering this will require costs to
be significantly reduced. To drive cost reductions
in offshore wind to £100/MWh by 2020, the
Government has established an industry-led Task
Force, which will report by spring 2012. It has also
committed up to £50 million over the next four
2.166 The Government is also undertaking other
actions which will be set out in the CCS Roadmap
that will be launched alongside the call for projects. These include development and implementation
of the regulatory framework necessary to facilitate
CCS projects, and implementation of the policy
that there can be no new coal without CCS
(enforced by an Emissions Performance Standard).
Chart 25: Trajectory for CCS capacity to 2050
45
40
2050 – high
New low carbon capacity/GW
35
30
25
20
15
10
5
2050 – low
Year
2030 – minimum industry ambition
2030 – high build rate
2030 – low build rate
Source: Modelling by Redpoint Energy for the Carbon Plan; Department of Energy and Climate Change.
2050
2048
2046
2044
2042
2040
2038
2036
2034
2032
2030
2028
2026
2024
2022
2020
2018
2016
2014
2012
2010
0
80 Part 2: Our strategy to achieve carbon budgets
years to support innovation in offshore and marine
technologies.
on a draft National Planning Policy Framework,
setting out its objectives for the local planning
system, including information on how local plans
and development management decisions should
support the delivery of renewable and low
carbon energy and supporting infrastructure.
The Government is also looking at how the
planning application process can be improved,
including reducing the amount of information
expected from applicants and introducing a
Planning Guarantee that no application should
take longer than one year to reach a final
decision, including any appeal.
2.169 Levels of renewable energy penetration
greater than 40% by 2030 may be technically
feasible, but the Government also needs to
consider the costs, sustainability and deliverability
of such deployment levels, including the
challenges for balancing variable electricity supply
with demand.
2.170 The Government’s immediate focus for
renewables is on delivery. In addition to tackling
the common barriers to deployment across all
low carbon technologies described above, the
Government is taking further targeted action
on renewables as follows:
• Introducing a new system of marine
planning and licensing to deliver sustainable
development in the marine environment –
The UK administrations are introducing new
marine planning and licensing systems designed
to provide regulatory simplicity and certainty for
developers.82
• Reforming the local planning system to
make it simpler and swifter – In addition to
reforming the major infrastructure planning
regime, the Government recently consulted
Chart 26: Trajectory for renewable electricity capacity to 2050
120
2050 – high
New electricity capacity/GW
100
80
60
40
2050 – low
(assumes no
repowering)
20
2050
2048
2046
2044
2042
2040
2038
2036
2034
2032
2030
2028
2026
2024
2022
2020
2018
2016
2014
2012
2010
0
Year
Current
capacity
Renewables
Roadmap – high
Renewables
Roadmap – low
CCC Renewable Energy Review, central scenario
2030 – cost reductions on high demand
2030 – no cost reduction
Source: Modelling by Redpoint Energy for the Carbon Plan; Department of Energy and Climate Change.
82
Marine plans will for a framework for the sustainable development of marine renewables, informing licensing decisions and major infrastructure decisions
for larger offshore projects.
Part 2: Our strategy to achieve carbon budgets 81
• Access to investment capital – Offshore wind
and energy from waste are likely to be priorities
for support from the Green Investment Bank
(GIB), which should be able to lend money from
2015, when most funding for the construction
of Round 3 offshore wind is required.83 Prior
to the GIB’s creation, there will be £775 million
of government funding available in 2012/13 to
invest in the low carbon economy.
• Ensuring sustainable bioenergy feedstock
supply – The Government is currently
developing a Bioenergy Strategy, which will
help to provide strategic direction in ensuring
that biomass feedstocks used for bioenergy are
sustainable and that they are directed towards
the most appropriate uses in electricity, heat
and transport.
• Facilitating development of renewable supply
chains – The Government has committed up
to £60 million to encourage the development
of port and manufacturing facilities for offshore
wind and marine energy parks.
• Facilitating access to the electricity grid – The
Government has reformed grid access, and is
now working to ensure the delivery of new
onshore grid investment, and to establish the
offshore framework necessary to deploy future
levels of renewable electricity.
unabated gas
2.171 Gas generation capacity will continue to
play an important role in providing flexibility and
balancing the system. We are likely to need new
gas plant within the next decade to replace coal
and nuclear closures. There is currently 8.7 GW
of gas power station capacity with consent to
build and around 4.3 GW under construction.
The capacity mechanism should continue to ensure
sufficient reliable capacity, including gas, to meet
our electricity needs.
2.172 The precise share of gas in the overall
energy mix over the fourth carbon budget will be
determined by a number of factors. Government
modelling suggests that unabated gas could retain a
significant role in electricity generation through the
2020s, potentially still producing up to two thirds
of today’s generation levels in 2030.84 As the share
of renewables in the electricity mix rises, increasing
the amount of intermittency on the system, we
are likely to need increased back-up gas generation.
2.173 In the longer term, there will be a more
fundamental shift in the role of gas in electricity
supply. From 2030 onwards, a major role for gas
as a baseload source of electricity is only realistic
with large numbers of gas CCS plants.85 However,
we may still need unabated gas for back-up even in
2050 – the 2050 futures in Part I suggest the need
for significant volumes of back-up gas operating
at low load factors in scenarios with high levels of
renewable generation.
83
Third round of offshore wind site allocations by the Crown Estate.
84
Based on modelling by Redpoint Energy commissioned for the Carbon Plan. Please see Annex B for further details.
85
HM Government (2011) 2050 Pathways Analysis: Response to the Call for Evidence.
82 Part 2: Our strategy to achieve carbon budgets
reducing electricity demand and
balancing the electricity system
2.174 The Government is also currently assessing
whether sufficient support and incentives
already exist to make efficiency improvements in
electricity usage, or whether there is a need for
additional measures. The results of this work will
be published in summer 2012. At the same time,
the Government will publish its policy on balancing
the future electricity system. This will cover the
whole electricity system and set out the role for
government in ensuring that the electricity system
supports the low carbon transition in the most
secure and affordable way, the most efficient use
of assets.
Ensuring that the grid is able to deliver
2.175 The scale of investment required in the
electricity network is unprecedented. This is
illustrated by plans submitted to Ofgem by the
GB electricity Transmission Owners (TOs) for
up to £15 billion of new network investment for
2013–21. The Government is working with Ofgem
and industry to help meet the network challenges
to support a secure, efficient and affordable,
low carbon future.
2.176 Onshore, a new grid connection regime
introduced in 2010 has meant that projects,
particularly renewables, are now getting much
speedier connection dates. To date, 73 large
projects – with a total capacity of 26 GW – have
advanced their connection dates by an average
of six years. Work is under way to ensure that
the transmission system can be extended and
reinforced to connect newer generation that
will increasingly be in areas located further away
from the main network, in particular through
Ofgem’s new investment framework, RIIO
(Revenue=Incentives+Innovation+Outputs). In
2009 the Electricity Networks Strategy Group
(ENSG), a high-level industry group chaired by
the Department of Energy and Climate Change
and Ofgem, assessed the potential transmission
network investment required to 2020. Since
then, the TOs have been submitting their priority
investments to Ofgem, which has resulted in
approval of around £400 million of investment to
date. The ENSG is currently refreshing this ‘2020
vision’ and considering analysing possible network
requirements post-2020.
2.177 The Government is taking action now to
ensure that distribution networks can cope in the
future. The Department of Energy and Climate
Change and Ofgem co-chaired Smart Grid
Forum is developing shared assumptions of future
electricity demands and necessary investment
levels. At the same time Ofgem has set up the
Low Carbon Networks Fund, which is making
£500 million available to networks that introduce
new innovation and commercial models onto
the network.
2.178 Connecting offshore renewable electricity
quickly will also require significant investment in
offshore transmission assets. The Government
has put in place an innovative regulatory regime
to deliver offshore energy connections in a cost
effective, timely and secure manner. A key element
of the regime is the competitive tender process
run by Ofgem to appoint Offshore Transmission
Owners (OFTOs) to construct (where a generator
chooses not to do so itself), and own and operate
the offshore transmission assets.
2.179 In recognition of the importance of
developing a co-ordinated offshore and onshore
transmission network and the potential benefits
this could bring, the Government and Ofgem are
currently undertaking an Offshore Transmission
Co-ordination Project to consider whether
additional measures are required within the
competitive offshore transmission regime
to further maximise the opportunity for
co-ordination. Interim conclusions will be published
this winter.
Part 2: Our strategy to achieve carbon budgets 85
AgricuLTure, foresTry And
LAnd MAnAgeMenT
Where we are now
2.180 Agriculture, forestry and land management
together accounted for around 9% of UK
emissions in 2009.86 We expect that emissions
will be reduced further between now and 2050,
but unlike some areas it will not be possible to
eliminate those emissions entirely which, to a
substantial degree, result from natural processes
in soils and the digestive systems of farm animals.
2.181 Good progress has already been made
since 1990, with emissions from the agriculture
sector down by more than 30%, partly due to
lower livestock numbers, but also to the more
efficient use of fertilisers in crop production and
the decoupling of subsidies from production.
Over the same period, the land use, land use
change and forestry sector has changed from
a net source of emissions to a net carbon sink.
This is primarily because of lower emissions
from soils due to less intensive agriculture, and
increased removals by forests due to high levels of
afforestation from the 1950s to the 1980s.
2.182 Because the agricultural sector covers a
diverse range of practices that are part of complex
biological systems, emissions from agriculture are
heavily affected by variable, uncontrolled elements
such as climate, weather and soil conditions, as
well as by controlled activities such as livestock
diet. One element of uncertainty arises from the
fact that there are considerable variations in the
level of emissions created, even where farmers are
Chart 27: Proportion of UK greenhouse gas emissions from the agriculture, forestry and land
management sector, 2009
Emissions and removals from the agriculture,
forestry and land management sector, 2009
UK 2009 GHG emissions by sector
(end user basis)
9%
60
Industry 23%
Buildings 38%
50
Transport 24%
Agriculture and
land use 9%
40
Waste 3%
30
Exports 3%
20
10
0
Livestock
Fertiliser use
Other
Net removals from land use change
Total emissions net of removals
86
On source and end user basis. The figure by end user is slightly higher (48 MtCO2e compared with 45 MtCO2e by source). This includes both emissions and
the removal of carbon from the atmosphere by sinks such as forests.
86 Part 2: Our strategy to achieve carbon budgets
adopting the same practices. For example, different
soil types and moisture conditions will lead to
different levels of emissions from the same degree
and method of fertiliser application. As a result,
estimates for emissions from agriculture lie within
an uncertainty range of around +250%/–90%.
This is the reason for the Government’s focus on
research to expand the evidence base.
Where we will be in 2050
2.183 The Government is committed to
reducing emissions from agriculture and land
use, and the strategy is to focus on the following
practical action:
• In the agriculture sector, improvements in
crop nutrient management and in breeding and
feeding practices will reduce emissions, are likely
to increase productivity and save money, and in
many cases may also bring environmental co­
benefits.
• Sustainable forest management can deliver
significant emissions savings through carbon
sequestration in new woodlands, and through
increased use of sustainable wood products
which store carbon and act as substitutes for
materials with higher emissions associated with
their production.
• Soils, which naturally store carbon and are
important in climate regulation, need to be
managed in a way that protects – and, where
possible, increases – these stores, particularly
as climate change may affect natural processes
in a way that could cause some of the store to
be lost.87
2.184 The pressures of a growing global
population and increasing demands for a more
resource intensive diet were highlighted in
the Foresight Report on the future of food
and farming,88 which identified managing the
contribution of the food system to the mitigation
of climate change as one of the most important
challenges for policy makers. The Government
has committed to champion a more integrated
approach to global food security by governments
and international institutions that makes the links
with climate change, poverty, biodiversity, energy,
water and other policies. The Government has also
committed to work in partnership with the whole
food chain, including consumers, to ensure that
the UK leads the way in sustainable intensification
of agriculture. This will ensure that agriculture
and the food sector can contribute fully to the
low carbon economy by increasing productivity
and competitiveness while reducing emissions,
protecting and enhancing the natural environment,
and using resources more sustainably.
2.185 The sector could also play a role in
supporting the diversification of our energy supply
by providing sustainable feedstocks for bioenergy.89
How we will make the transition
2.186 Whereas in other sectors of the economy
a portfolio approach has been proposed – where
the most cost effective technologies are supported
and a range of possible abatement levels in the
fourth carbon budget period are presented –
the uncertainties in the agriculture and land
management sector mean that our analysis
assumes one level of possible emissions abatement
potential that might be delivered in the first four
carbon budgets. The trajectory graph in chart 28
below provides an illustrative view of this emissions
reduction scenario.
2.187 In agriculture the Government is taking
a phased approach to reducing emissions. Over
the next decade it will focus on encouraging
production efficiencies such as improving crop
nutrient management, and breeding and feeding
practices, which save both money and emissions.
The Government recognises that further action
will be needed in the future that goes beyond this,
but that there is a great deal of uncertainty around
87
UK soils hold around 10 billion tonnes of carbon, half of which is in peat habitats. This is more than in all the trees in the forests of Europe (excluding
Russia), and equivalent to more than 50 times the UK’s current annual greenhouse gas emissions. Source: Defra (2009) Safeguarding Our Soils: A strategy for
England. Available at: http://archive.defra.gov.uk/environment/quality/land/soil/documents/soil-strategy.pdf
88
Government Office for Science (2011) The Future of Food and Farming: Challenges and choices for global sustainability. Available at:
www.bis.gov.uk/assets/bispartners/foresight/docs/food-and-farming/11-546-future-of-food-and-farming-report.pdf
89
Annex A sets out the amount of demand for sustainable bioenergy in the three 2050 futures.
Part 2: Our strategy to achieve carbon budgets 87
what actions can successfully reduce emissions
to the levels that will be required by 2050. We
are therefore also putting in place the research
and structures that will give us the knowledge
and practical tools to reduce emissions in the
longer term.
2.188 Chart 29 on page 90 shows some of the key
actions and decision points that will set us on the
way to further reducing emissions from the sector
to 2030.
Agriculture
2.189 Over the next decade, a range of actions
are being taken in the agriculture sector – both
industry- and government-led – which will keep us
on track towards the level of emissions abatement
identified in the fourth carbon budget period.
2.190 In England, the agricultural industry
partnership published the Agriculture Industry GHG
Action Plan: Framework for Action in 2010, outlining
how reductions could be delivered by the end of
the third carbon budget period through the
uptake of more resource efficient practices.90
It has committed to reducing emissions by
3 MtCO2e a year during the third carbon budget
period, and in 2011 published a Phase 1 Delivery
Plan which explained how the Action Plan will be
implemented. Many of the measures identified –
such as better use of nutrients, improving
livestock productivity and better use of on-farm
energy and fuel – could be adopted at minimal
or no cost and would help to improve industry
competitiveness. The meat and dairy sector bodies
have also delivered industry-led environmental
product roadmaps, which encourage farmers to
employ more sustainable farming practices and
management techniques.91
Chart 28: Greenhouse gas emissions projections in the agriculture sector in the first three
carbon budgets and illustrative emissions abatement potential in the fourth carbon budget period92
50
CB1
CB2
CB3
CB4
45
40
Projected emissions
over the first four
carbon budgets
MtCO2e
35
30
Additional emissions
abatement potential
over the fourth carbon
budget period
25
20
15
10
5
2050
2048
2043
2038
2033
2028
2023
2018
2013
2008
0
Year
90
For further information see: www.nfuonline.com/ghgap
91
See: www.eblex.org.uk/documents/content/publications/p_cp_testingthewater061210.pdf and www.dairyco.net/library/research-development/environment/
dairy-roadmap.aspx
92
The emissions projections derive from Updated Energy and Emissions Projections data. The illustrative emissions abatement potential for the fourth carbon
budget derives from the fourth carbon budget scenarios discussed in Part 3 of this report.
88 Part 2: Our strategy to achieve carbon budgets
2.191 To support these industry-led efforts to
reduce emissions, the Government has undertaken
a number of initiatives, including the following:
• Investing £12.6 million, in partnership with
the Devolved Administrations, to strengthen
understanding of on-farm emissions, and enable
better reporting of actions taken on the ground
and more targeted advice.
• Investing in a wider programme of research on
measures with potential to reduce emissions,
for example the impact and cost effectiveness
of tackling endemic diseases in cattle, improving
nutrient use through better feed management
and optimising lifetime protein use for milk
production.
• Engaging in partnerships with Research Councils
and industry through the Technology Strategy
Board, and internationally through the Global
Research Alliance, to promote exchange of
data, training and research to help improve
how agricultural greenhouse gas research is
conducted and to enhance scientific capability.
• Funding a pilot project to trial methods for
delivering integrated environmental advice
for farmers – including on greenhouse gas
emissions – with a view to wider delivery by the
Government and industry advisors.
• Including climate change mitigation as a topic
of advice under the Farm Advisory System
contract during 2012 and 2013.
• Committing, in the Natural Environment White
Paper, to review use of advice and incentives
for farmers and land managers, to create a
more integrated, streamlined and efficient
approach that is clear and that can yield better
environmental results.
2.192 There is a close relationship between the
level of agricultural production and emissions from
the sector. The Common Agricultural Policy (CAP)
and other factors that impact on production
levels are likely to be strong drivers of action on
emissions. Alongside the EU’s budget negotiations
for 2014–20, the shape of the CAP for this period
is currently being re-negotiated. The European
Commission’s proposals for the future of the CAP
were formally released on 12 October 2011.93
These will be negotiated by Member States in the
Agriculture Council and, for the first time, with
the European Parliament through co-decision.94
Through funding for the UK’s agri-environment
programme, the CAP already incentivises
actions that deliver emissions reductions and the
Government is committed to making the CAP
more effective in delivering environmental benefits.
The negotiations are expected to last throughout
2012 and 2013, and final legislation is due to come
into effect on 1 January 2014.
2.193 In 2012 the Government will involve a
number of interested organisations in evaluating
the likely impact of all these policies in England,
as well as in assessing the progress being made
by the industry-led Action Plan, in order to
identify the policy options for the future.95 It is
probable that the sector will reduce emissions
through a combination of on-farm measures that
can be successfully implemented (and others
that may emerge over time or as a result of
further improvements in technology), supported
by developments in the broader policy and
economic landscape.
2.194 Over the fourth carbon budget period,
the Government’s analysis (based on a review
of the Scottish Agricultural College’s (SAC’s)
analysis for the Committee on Climate Change)
suggests that, at a carbon price of zero, there is
around 7.5 MtCO2e a year (central estimate, of
which 5 MtCO2e is in England) of total annual
abatement potential from the application of
on-farm measures.96
93
See: www.defra.gov.uk/food-farm/farm-manage/cap-reform/
94
This means joint decision making by both the European Parliament and the Council.
95
See: www.defra.gov.uk/corporate/about/what/business-planning/
96
In their 2008 advice on the level of the first three carbon budgets, the Committee on Climate Change relied on analysis carried out by SAC, which considered a range of measures that can be adopted by farmers, including measures to improve crop nutrient management, manure treatment and storage,
plant breeding, soil drainage and the modification of livestock diets. The central estimate includes the abatement that industry expects to deliver during the
third carbon budget period. This is within a range of between 3 MtCO2e and 19 MtCO2e by the end of the fourth carbon budget period.
Part 2: Our strategy to achieve carbon budgets 89
2.195 While in theory this represents an additional
16.9 MtCO2e of abatement over the fourth carbon
budget period compared with baseline projections,
the uncertainty in our data means that it is difficult
to determine the exact potential for reductions
in the fourth carbon budget period and beyond.97
Work is under way to improve the agriculture
greenhouse gas inventory, which will help to refine
the analysis of what is feasible.
Forestry and land management
2.196 The Government is committed to strong
support for woodland creation and for bringing
more woodland into active management. An
independent panel will provide advice to the
Government in spring 2012 on the future direction
of forestry and woodland policy.98 The measures
outlined in this section are therefore subject to the
panel’s findings and the Government’s response.
2.197 Over the next decade, the Government
will continue to support woodland creation
through a number of measures, including
the following:
• Rural Development Programme funding and
the Woodland Carbon Task Force – The
Government will continue to support woodland
creation through woodland grant schemes. The
Woodland Carbon Task Force was set up by the
Forestry Commission to enable a step-change
in the level of woodland creation to help deliver
abatement in the sector. It will help to ensure
that the contribution of woodland creation to
carbon budgets is recognised, and will develop
a spatial framework to identify where woodland
creation will have the most benefit.
• The Woodland Carbon Code, which helps
to promote high quality UK-based forest
carbon projects, and – together with recent
changes to the guidance for businesses on
measuring and reporting greenhouse gas
emissions99 – encourages investment in
domestic woodland creation projects by helping
organisations to report these reductions as
part of their net emissions.100 The Woodfuel
Implementation Plan, which outlines the actions
that Forestry Commission England will take to
support the development of a robust woodfuel
supply chain over the next four years.101 This
helps to fulfil commitments made under the
EU Renewable Energy Directive, and is part
of a wider programme to increase sustainable
timber production from privately owned
woodlands.
• A revised UK Forestry Standard, supported
by new Forests and Climate Change Guidelines,
promotes carbon management in the UK’s
woodlands,102 and also provides guidance on
adapting woodlands to the impacts of climate
change, promoting resilience and ensuring that
future abatement is delivered.103
2.198 However, in the land use, land change
and forestry (LULUCF) sector there are still
significant uncertainties about current emissions,
future trends, and the potential for permanent
sequestration of greenhouse gas emissions through
land management. Further work is therefore
being carried out to explore the potential to
refine further the LULUCF inventory and also
to understand the effect of land management
practices on soil carbon within current policies.
97
It is also important to note that some of the mitigation measures SAC identified are likely to be unacceptable because of the potential adverse impacts on
biodiversity or animal welfare, and some may even have perverse effects on greenhouse gas emissions which have yet to be fully assessed. The estimates of
abatement potential make no allowance for such issues, so the level of cost effective abatement achieved from these measures is unlikely to be at the upper
bound suggested by the analysis.
98
See: www.defra.gov.uk/forestrypanel/
99
See: www.defra.gov.uk/environment/economy/business-efficiency/reporting/
100
See: www.forestry.gov.uk/carboncode
101
See: www.forestry.gov.uk/england-woodfuel
102
See: www.forestry.gov.uk/ukfs
103
In this context the Defra and Forestry Commission’s Action Plan for Tree Health and Plant Biosecurity addresses the risk of future tree pest and disease
outbreaks to forest carbon storage.
90 Part 2: Our strategy to achieve carbon budgets
Chart 29: Decision points for agriculture, forestry and land management to 2030
2011
2012
2013
2014
2015
2016
Industry-led Greenhouse Gas Action Plan
Phase 2
Phase 1
2017
2018
2019
2020
Phase 3
Phase 2
delivery plan
Annual
Report
Agriculture
Project considering improvements to the agricultural greenhouse gas inventory
Agricultural greenhouse
gas inventory project
complete
Integrated advice pilot project
Integrated
advice proposals
EU Common Agricultural Policy 2007–13
CAP
CAP 2014–20 negotiations
2014–20
proposals
published
EU Common Agricultural Policy 2014–20
Identification/development/implementation of possible future policy options
2012
progress
review
Woodland Carbon Task Force
Forestry and land management
Independent panel reviewing forestry policy in England
Government response
to Independent Panel
on Forestry report
Research to better understand emissions from peat
Decision required
on how to proceed
Sustainable Growing
Media Task Force
roadmap published
Research to refine LULUCF inventory and better
understand the effect of land management
practices on soil carbon
Policy review of
horticultural use
of peat
Woodfuel Implementation Plan
2020
Phase-out of
horticultural peat
in England in
amateur sector
2030
Phase-out of
horticultural peat
in England in
professional sector
Management of the Woodland Carbon Code
Annual
review
Annual
review
Annual
review
Annual
review
Engagement with and support of the Forest Law Enforcement, Governance and
Trade process for public procurement of timber products
2030
Part 2: Our strategy to achieve carbon budgets 91
2.199 Internationally, continuing support for
the Forest Law Enforcement, Governance and
Trade process and chain of custody requirements
for public procurement of timber products,104
together with the development of biomass
sustainability criteria for renewable energy
production, will promote sustainable approaches
to forest management, helping to reduce emissions
from deforestation and forest degradation globally.
next steps
2.203 The uncertainty in the agricultural
greenhouse gas emissions inventory means that
a continued focus is required on research and
statistics. For example, the Farm Practices Survey
provides information on behaviours for a range of
on-farm practices across the whole sector.109 The
2012 progress review will evaluate the results of
evidence such as this with interested organisations.
2.200 The Soil Protection Review105 addresses
threats to soil degradation and contains measures
to protect soil organic matter, and so soil carbon.
In addition, given the importance of peatlands as
carbon stores, the Government is undertaking
research to further our knowledge of emissions
from peat. This includes a review of restoration
methods used in blanket peatlands to assess which
could provide the best outcomes for reducing
peatland emissions. Peat extraction in the UK
causes around 0.4 MtCO2e of emissions annually,
and in the Natural Environment White Paper the
Government committed to phase out the use of
peat in horticulture in England by 2030.106
2.201 Over the fourth carbon budget, the
Committee on Climate Change has indicated
that increased woodland creation could deliver
1–3 MtCO2e abatement a year by 2030,107 although
assessing the cost effectiveness of abatement is
complex because of the dynamics of forest growth
and carbon uptake, the nature of the woodland
and approaches to its management, and the end
use of harvested wood products.
2.202 Looking ahead to 2050, current projections
indicate that increasing woodland planting to an
average of 24,000 hectares per annum across the
UK between now and 2050 would increase forest
carbon uptake by 7.7 MtCO2e per annum in 2050,
compared with the level which would be achieved
by maintaining 2010 planting rates (6,000 hectares
per annum).108
104
The Government’s timber procurement policy is set out at: www.cpet.org.uk/uk-government-timber-procurement-policy
105
See: www.defra.gov.uk/food-farm/land-manage/soil
106
In 2009, of the 3 million cubic metres of peat sold in the UK as growing media and soil improvers, around 80% was sold in England.
107
Indicative estimates of the cost of abatement through woodland creation are of the order of £0–£70 per tonne CO2e.
108
This is based on the analysis presented in Read, DJ, Freer-Smith, PH, Morrison, JIL et al. (eds) (2009) Combating Climate Change – A role for UK forests (the
Read Report). Available at: www.forestry/gov/uk/readreport
109
See: www.defra.gov.uk/statistics/foodfarm/enviro/farmpractice/
Part 2: Our strategy to achieve carbon budgets 93
WAsTe And resource efficiency
Where we are now
2.204 In 2009, emissions from the waste
management sector represented a little over 3% of
the UK total.110 Between 1990 and 2009 emissions
were reduced by nearly 70%, primarily due to the
landfill tax – which incentivises reductions in the
amount of biodegradable waste sent to landfill –
and the increased capture and use of landfill gas
for energy.
2.205 It will not be possible to eliminate these
emissions completely as some biodegradable waste
takes a long time to fully decompose, but by 2050
it is estimated that emissions of methane from
landfill – which accounted for nearly 90%
of emissions from the sector in 2009 – will
be substantially below current levels. The
Government is working to improve our scientific
understanding of these emissions so they can be
predicted with more certainty.
2.206 The Government is committed to working
towards a zero waste economy, and the three
broad strands of the Government’s approach to
tackle emissions from the sector relate to the
following areas:
• Preventing waste arising – The best thing
that can be done to minimise the greenhouse
gas impacts of waste is not to produce it in the
first place. This eliminates the need to manage
waste, and removes the embedded carbon
throughout the supply chain that went into the
product, thereby reducing emissions both in
other sectors of the UK economy and in other
countries.111 More efficient use of resources –
including energy and water – by businesses will
help the UK to move to a greener economy and
deliver economic and environmental benefits.
Chart 30: Proportion of UK greenhouse gas emissions from the waste sector, 2009
UK emissions by sector
(end user basis)
Emissions by waste sub-sector
3%
Industry 23%
Buildings 38%
Landfill methane 89%
Transport 24%
Waste-water handling 10%
Agriculture and
land use 9%
Incineration 2%
Waste 3%
Exports 3%
110
On source and end user basis. The waste management sector comprises emissions from landfill, waste-water handling and waste incineration.
111
Direct emissions from the management and disposal of waste are only a small proportion of the total greenhouse gas emissions caused by wasteful
use of resources. The majority of these emissions occur outside the UK.
94 Part 2: Our strategy to achieve carbon budgets
• Reducing methane emissions from landfill –
There are three broad approaches that may be
taken: preventing biodegradable waste from
arising in the first place; diverting biodegradable
waste that is produced away from landfill to
other forms of treatment, such as recycling or
waste to energy facilities; and reducing methane
emissions from landfill sites, for example by
increasing the proportion of methane that is
captured and converted to energy. There are,
however, considerable uncertainties in the way
we calculate emissions from landfill, which the
Government is working to address.
• Efficient energy recovery from residual
waste – Recovering energy from waste rather
than sending it to landfill displaces energy
produced from fossil fuels, avoids methane
emissions from landfill and is generally a good
source of feedstocks to meet UK bioenergy
needs.
How we will make the transition
Preventing waste arising
2.209 The Government’s approach to reducing
waste is underpinned by the waste hierarchy
(see chart 31), a framework that ranks waste
management options according to what is best
for the environment.112
2.210 The further up the hierarchy waste
is treated, the greater the emissions savings:
preparing for re-use is often a less intensive way
of replacing primary production of products
than recycling.113 An example of this is textiles,
where preparing 1 tonne for re-use could save
12 tonnes more CO2e than recycling. However,
waste prevention incorporates a wide number of
different actions and behaviours, and the barriers
to these behaviours becoming embedded are
complex and will be different for individuals and
businesses. They include the costs of innovation
and market development of new products or
business models, lack of access to information
to enable decisions, and lack of incentives to
change behaviours.
2.207 Emissions from waste management have
already fallen by nearly 70% between 1990
and 2009. In the next decade the Government
will continue to take action on reducing waste
with the increase of the landfill tax to £80 per
tonne in 2014/15. We are also undertaking a
consultation on restricting wood waste to landfill.
Legacy issues mean that it will not be possible to
eliminate emissions completely by 2050, as some
biodegradable waste takes longer than this to fully
decompose, but by 2050 we expect levels to be
substantially below where they are now.
2.211 Recent research has identified savings
of around £23 billion and 29 MtCO2e a year
available to UK business from resource efficiency
measures to minimise waste and use of materials
that pay back within a year or less, including
around £18 billion from waste measures alone.
This figure could be more when longer-term
investment is considered – an estimated additional
£33 billion, resulting in a total opportunity of
around £55 million and 90 MtCO2e in total for
all measures.114
2.208 Chart 33 on page 98 gives a summary of
some of the key actions and decision points that
will help to reduce emissions from the waste
sector and improve resource efficiency.
2.212 In addition, using water more efficiently
helps both to adapt to the impacts of climate
change, where more variable rainfall is expected,
and to reduce the greenhouse gases associated
with pumping and treatment, and heating.115
112
Guidance on applying the principles of the waste hierarchy can be found at: www.defra.gov.uk/publications/files/pb13530-waste-hierarchy-guidance.pdf
113
It is possible to deviate from the hierarchy where lifecycle evidence suggests that to do so would have a better environmental impact, such as for lower
grade wood where energy recovery is better than recycling due to the level of contaminants; and for anaerobic digestion, which sits above recycling for food
waste because it produces both energy and digestate (which can displace artificial fertilisers).
114
This analysis is based on a 2009 base year and refers to annual savings from low or no cost measures which deliver within one year; all potential longer-term
measures up to 2050. See: Oakdene Hollins (2011) The Further Benefits of Business Resource Efficiency at: http://randd.defra.gov.uk/Default.
aspx?Document=EV0441_10072_FRP.pdf
115
The water industry currently produces about 1% of the UK’s overall greenhouse gas emissions in the supply of water and treatment of waste water.
Part 2: Our strategy to achieve carbon budgets 95
Measures that increase the efficiency of use of hot
water may be financed under a Green Deal, as
reductions in the energy used will generate savings.
2.213 Over the next decade, government action
will include the following:
• Development of a comprehensive Waste
Prevention Programme by the end of 2013,
alongside a range of measures under a broader
resource efficiency programme to drive waste
reduction and re-use, working with businesses
and other organisations across supply chains.
• Working closely with business to explore the
potential for responsibility deals in a number
of sectors that would cover products and
materials identified as having high embedded
carbon. On packaging, the Government intends
to launch a consultation on increased recycling
targets for packaging producers in the period
2013–17.
• Working to make corporate reporting of
greenhouse gas emissions – which helps
organisations to manage their emissions,
and allows informed decisions about how a
company is managing climate change risks –
more widespread and consistent. Guidance was
published in 2009 to help organisations with this
process, and the Government will announce
whether it intends to introduce regulation in
this area later in 2011.
2.214 In addition, the Waste and Resources
Action Programme (WRAP) works to help
businesses realise the benefits of being more
resource efficient, through partnerships and
voluntary agreements. WRAP is focusing its
work up the waste hierarchy to minimise waste
production and associated greenhouse gas
emissions. One priority for action is to tackle
food waste and divert it from landfill, with a goal
of aiming to reduce emissions associated with
avoidable food and drink waste by 3.2 MtCO2e
by 2015.
2.215 One of the ways this will be achieved is
through the Love Food Hate Waste initiative,
which helps consumers to reduce avoidable food
waste. Overall, WRAP achieved like-for-like savings
of 5.5 MtCO2e per annum between 2008 and
2011.116 WRAP’s emissions target for the next
period, from 2011–15, is for a further 4.8 MtCO2e
per annum savings (excluding water savings).
Chart The
31: The
waste
hierarchy
waste
hierarchy
Stages
Prevention
Preparing for re-use
116
Includes
Using less material in design and manufacture.
Keeping products for longer; re-use.
Using less hazardous material.
Checking, cleaning, repairing, refurbishing, whole items or spare parts.
Recycling
Turning waste into a new substance or product. Includes composting if it meets quality protocols.
Other
recovery
Including anaerobic digestion, incineration with
energy recovery, gasification and pyrolysis which
produce energy (fuels, heat and power) and
materials from waste; some backfilling operations.
Disposal
Landfill and incineration without energy recovery.
From 1 April 2010 WRAP took on additional responsibilities for resource efficiency; therefore the figures quoted compare WRAP performance against
original WRAP targets as set out at the beginning of the business plan period.
96 Part 2: Our strategy to achieve carbon budgets
Reducing landfill methane emissions
2.216 Over the next decade, the Government’s
actions to reduce landfill methane emissions
include the following:
• The landfill tax, which provides a financial
incentive for local authorities and business waste
producers to find alternative ways of handling
their waste by gradually increasing the costs of
landfill and which is the primary mechanism for
reducing biodegradable waste to landfill. It was
introduced in 1996 and set at £7 per tonne (for
non-inert waste); it has increased to £56 per
tonne and the Government has announced that
it will continue to increase to £80 per tonne
in 2014/15.
• A commitment in the Government Review of
Waste Policy in England 2011117 to a consultation
on restricting sending wood waste to landfill.
This is a significant source of biodegradable
waste to landfill: on average, every tonne of
wood waste diverted from landfill would save
around 1 tonne of CO2e.
• A review of the case for restricting sending
other wastes to landfill, including textiles and
all biodegradable waste, before the end of
this Parliament.
2.217 Each of these measures will help to deliver
emissions reductions over the fourth carbon
budget:
• The continued increases to the landfill tax are
projected to further reduce methane emissions
from landfill to a projected 84% reduction from
1990 levels by 2025.
• Any restriction on sending wood to landfill
would likely start reducing emissions during
the third and fourth carbon budget periods,
depending on how and when it were to
be implemented.
117
• Any further restrictions on sending other waste
to landfill would likely take effect – and start
reducing landfill methane emissions – during the
fourth carbon budget period.
2.218 The steps outlined in the Review of Waste
Policy, plus the continued increases to the landfill
tax, mean that the Government’s central estimate
of methane emissions from landfill in 2050 is that
they will be around 61% below 2009 levels (see
chart 32 below).
2.219 However, unlike energy-related emissions,
methane emissions from landfill are modelled, not
measured. Calculations of total emissions from
landfill are therefore very sensitive to the amount
of methane that is assumed to be captured at
landfill sites. While there has been a substantial
investment programme in methane capture
technology over the last two decades, the precise
rate of methane capture remains highly uncertain
and could potentially be lower than assumed.
This is reflected in the uncertainty range in chart
32, which shows estimated emissions in 2050 of
between 1.7 and 17.6 MtCO2e (equal to reductions
of 96.9% and 68.1% respectively from the 1990
central case scenario).
2.220 In addition, the volume of waste generated,
the rate of change of this volume and the
composition of the waste are dynamic, and
experience has shown that these are difficult
to model accurately over longer time frames.
Developments in key variables such as economic
growth, commodity markets, consumption
patterns, consumer attitudes and behaviours, and
waste treatment technology mean that there are
markedly different pathways for how the UK waste
system could evolve to 2050.
2.221 The Government is keen to improve the
accuracy of modelling projections and has put in
place a programme of action to help improve our
scientific understanding of both landfill methane
formation and the amount of methane that is
captured. This includes a survey of landfill sites,
taking actual measurements of methane emission,
See: www.defra.gov.uk/publications/files/pb13540-waste-policy-review110614.pdf
Part 2: Our strategy to achieve carbon budgets 97
Chart 32: Historical and projected emissions of methane from landfill, 1990–2050
90.0
Historical
Projected
UK emissions of landfill methane (MtCO2e)
80.0
70.0
60.0
50.0
40.0
30.0
20.0
10.0
0.0
1990
1995
2000
Central case
2005
2010
2015
Uncertainty range
2020
2025
2030
2035
2040
2045
2050
Year
Source: UK Greenhouse Gas Inventory and government analysis
oxidation and capture. The results of the survey
will inform further opportunities for capturing
more methane at landfill sites.
2.222 In addition, the Government is undertaking
an ongoing programme of work in conjunction
with the Environment Agency (EA) to improve
the scientific understanding of landfill methane
generation and capture rates at landfill sites. The
Government is also committed to working closely
with industry and the EA to continue reductions
in the amount of methane emitted from landfill
sites. This work will explore opportunities to
capture methane from closed sites that do not
have infrastructure for capturing landfill gas, and
resulting improvements to methane capture rates
could deliver emissions savings as early as the
second carbon budget period.
118
Energy from waste
2.223 The Government’s aim is to get the
most energy out of waste, not to get the most
waste into energy recovery. Through effective
prevention, re-use and recycling, residual waste
will eventually become a finite and diminishing
resource. However, until this becomes a reality,
efficient energy recovery from residual waste
can deliver environmental benefits and provide
economic opportunities.
2.224 Efficient energy recovery from waste
prevents some of the negative greenhouse gas
impacts of waste in landfill and helps to offset
fossil fuel power generation. Over the next
decade, the Government is taking forward a
range of measures through the Review of Waste
Policy Action Plan and the UK Renewable Energy
Roadmap118 to overcome barriers to deployment of
energy from waste through a range of existing and
more innovative technologies.
DECC (2011) UK Renewable Energy Roadmap. Available at: www.decc.gov.uk/assets/decc/11/meeting-energy-demand/renewable-energy/2167-uk­
renewable-energy-roadmap.pdf
98 Part 2: Our strategy to achieve carbon budgets
Chart 33: Decision points for waste to 2020
2011
2012
2013
2014
2015
2016
2017
2018
2019
2008–11 WRAP target: to save 5 MtCO2e a year
2011–15 WRAP target to save 4.8 MtCO2e a year
Resource use
Engagement with business and other organisations to drive waste reduction
and re-use as part of a broader resource efficiency programme
Comprehensive
waste prevention
programme
in place
Consultation on increased recycling targets for packaging producers in the period 2013–17
Decision required
on how to
proceed
Decision on
whether to
regulate for
corporate
reporting of
emissions
Consultation on restricting wood waste to landfill
Decision on
whether to
restrict wood
waste to
landfill
Landfill methane
Review case for other landfill restrictions (e.g. textiles, all biodegradable waste)
Decision
required
on how to
proceed
Continuation of landfill tax, which increases from £56 per tonne in 2011 to £80 per tonne in 2014/15
Promote increased energy from waste through anaerobic digestion,
which could deliver between 3 and 5 TWh of electricity by 2020
Consideration of further options for capturing landfill methane from closed sites
Research programme to improve understanding of landfill methane formation and how it is captured
Decision required on
how to proceed
2020
Part 2: Our strategy to achieve carbon budgets 99
next steps
2.225 The actions set out in the Review of Waste
Policy, at each level of the waste hierarchy, will
all contribute to reducing the volume of material
that ends up in landfill and tackle emissions from
the sector.
2.226 The challenge for the Government is how
to move beyond the existing trajectory to deliver
the vision of a zero waste economy. It is likely that
further action will be needed, working closely with
local government, industry, civil society, consumers
and communities, if the goals are to be achieved.
The Government will continue to review how the
measures outlined are contributing to the zero
waste economy vision and identify areas where
we can go further and faster.
100 Part 2: Our strategy to achieve carbon budgets
Working with the EU and
Devolved Administrations
can deliver tangible economic and environmental
benefits, especially when compared with a scenario
of delayed action.
The european union
2.230 The Government will work with its
European partners to build support for policies to
promote energy efficiency, and facilitate investment
in new energy infrastructure (with significant
investment in low carbon infrastructure) and
decarbonisation of transport through development
of electric and other low carbon vehicles, as part
of the delivery of these ambitious plans.
2.227 The UK’s policies should be seen in the
context of the European Union’s (EU’s) wider
objective of transition to a low carbon, resource
efficient and climate resilient economy and its
political commitment to reduce carbon emissions
by at least 80% by 2050, while maintaining secure
and affordable energy supplies and preserving
the EU’s international competitiveness. The
interconnected nature of Member States’ trading
and energy supply relationships means that much
of the change needed to achieve these objectives
will need to be delivered at the EU as well as the
national level.
2.228 The EU has the opportunity to
demonstrate to others the benefits of low carbon
growth, and to strengthen economic and trading
relationships with other countries that want to
collaborate on low carbon development. Strong
EU leadership will be crucial in building momentum
internationally and, by making the transition to
a sustainable low carbon economy, the EU can
significantly enhance its long-term economic and
energy security interests. The Government will
work with its partners in Europe to look for
opportunities to secure the transition to an EU low
carbon economy, encouraging greater ambition
in areas including energy, transport, product
standards and finance.
2.229 The Prime Minister and the Government
are fully committed to increasing the EU’s
emissions reduction target from 20% to 30% by
2020 compared with 1990 levels. This should act as
a means of showing its commitment to the longerterm vision of a sustainable low carbon economy,
and driving the investment in new technologies
necessary to achieve the level of change that this
would require. The Government will share with
other Member States evidence which shows that
the costs of greater ambition are manageable and
119
northern ireland
2.231 The Northern Ireland Executive is
committed to tackling climate change and to
building a sustainable low carbon economy that
will bring prosperity for all. By demonstrating
leadership, the Executive will inspire business,
industry, the public sector and individuals to work
together to help reduce UK emissions by 80%
below 1990 levels by 2050.
2.232 The Executive views the transition to a low
carbon economy as a potentially powerful driver
of economic growth, and is committed, through
its Sustainable Development Strategy,119 to build
a dynamic, innovative economy that delivers the
prosperity required to tackle disadvantage and
lift communities out of poverty. The Strategy sets
strategic objectives to increase the number of jobs
in the low carbon economy; increase the energy
efficiency and resource efficiency of businesses;
and ensure that our provision of learning and skills
responds to the needs of the low carbon economy.
2.233 Although current projections suggest
that Northern Ireland is ahead of its 2025
emissions reduction target, the Northern Ireland
Environment Minister has pledged greater
ambition and has tasked the Committee on
Climate Change to consider the shape of further
legislation to underpin longer-term targets.
2.234 The agriculture sector in Northern Ireland
is an instrumental part of our low carbon future.
See: www.ofmdfmni.gov.uk/index/economic-policy/economic-policy-sustainable-development.htm
Part 2: Our strategy to achieve carbon budgets 101
It encompasses wider social and economic
sustainability factors in addition to environmental
considerations, playing a larger role in the local
economy when compared with the rest of the UK.
The government-led Greenhouse Gas Stakeholder
Group is developing a range of primary
production-focused mitigation measures based on
a review of available scientific evidence to support
the sector. A forthcoming strategy will focus on
delivering a steady reduction trajectory up to 2020
and beyond. With improved measurement and
inventories available from 2015, the sector will be
able to prioritise actions to ensure that producers
in Northern Ireland are at the forefront of
demonstrating the sustainability of food production
while ensuring their own business competiveness.
2.235 Within Northern Ireland, we are almost
entirely dependent on imported fossil fuels for
most of our energy needs. The Northern Ireland
Energy Minister leads an Interdepartmental
Working Group on Sustainable Energy to ensure
a co-ordinated approach across government to
the promotion of sustainable energy. Looking to
2050, we are seeking to shift the balance of our
energy mix towards cost effective decarbonisation
of our electricity supply as far as is practicable. The
Executive’s Strategic Energy Framework120 seeks
to achieve 40% of electricity consumption from
both onshore and offshore renewable sources by
2020. The Offshore Renewable Energy Strategic
Action Plan121 sets out a target of at least 600 MW
of offshore wind and 300 MW of tidal energy by
2020 and provides the framework for the current
Northern Ireland Offshore Leasing Round. The
draft Onshore Renewable Electricity Action
Plan,122 which has been subject to a Strategic
Environmental Assessment, looks at potential
onshore renewable energy mixes to contribute
to that 40% target. In parallel, significant work
is ongoing to underpin low carbon/renewables
with an electricity infrastructure that is robust,
flexible and able to respond to future demand for
renewable energy and smart grids/demand-side
management.
2.236 The Northern Ireland Executive believes
that current transport arrangements and the
high level of dependency on the private car,
particularly in urban areas, are not sustainable.
Active Travel promotes travel alternatives that
lead to public health benefits through walking,
cycling and reducing our reliance on the car.
Travelwise engages with businesses, schools and
commuters to promote and encourage sustainable
modes of travel. Measures are already in place to
reduce carbon intensity in road construction and
maintenance, and to recycle construction materials
and by-products where feasible. Translink, the
main public transport provider, has started a major
investment in techniques to reduce fuel use on
its bus fleet. A revised Regional Transportation
Strategy123 proposes a range of high-level aims and
strategic objectives that will inform how emissions
will be reduced into the future. Consideration will
also be given to new forms of transportation, such
as light rail, and a pilot programme for electric
vehicles is under way.
2.237 Northern Ireland has a unique geographical
position in the UK. Given the unavoidable
reliance on aviation and shipping, both in terms
of the economy and wider social considerations,
there is a need to ensure that transport-related
carbon policy interventions developed at UK
and EU level do not have a disproportionate and
differential impact.
2.238 Social housing has already seen a significant
drive to improve energy efficiency, as this is a key
component in reducing not only carbon emissions
but also rates of fuel poverty. Other pressures in
the private residential sector, such as increased
recycling and waste to landfill targets, planning
policy and building regulations, and increased
energy prices, will increase the need for improved
energy efficiency. Behavioural changes and the
availability of new renewable technology with
condensed payback periods for householders
will be key to reducing emissions. The Executive
has set a target of a 10% increase in the amount
120
See: www.detini.gov.uk/strategic_energy_framework__sef_2010_-3.pdf
121
Following the recent completion of a Habitats Regulations Appraisal, the draft Plan is being finalised for publication. See: www.offshorenergyni.co.uk/data/
draft_strategic_action_plan.pdf
122
See: www.detini.gov.uk/deti-energy-index/draft_onshore_renewable_electricity_action_plan.htm
123
See: www.drdni.gov.uk/rts_2011_consultation_document.pdf
102 Part 2: Our strategy to achieve carbon budgets
of heat from renewable sources by 2020,
supported by a Northern Ireland Renewable
Heat Incentive.124 In addition, natural gas roll-out
continues to around 150,000 gas customers in
Northern Ireland and, if greater gas roll-out were
to follow, this would reduce emissions in a region
where some 70% of energy consumers remain
dependent on oil for their heating needs.
2.239 The Cross-Departmental Working Group
on Climate Change will support sectoral initiatives
by bringing together government departments to
ensure that they are working towards a common
goal, reporting annually to the Executive to ensure
that they are on course to achieve set targets. The
group will improve data sources and measurement,
and accountability and governance, and strengthen
the delivery framework through focused strategies
and policies.
2.240 The Northern Ireland Executive is
committed to creating a low carbon future,
ensuring that by 2050 Northern Ireland is
economically competitive, socially prosperous and
delivering an environmental legacy to be proud of.
scotland
2.241 The Scottish Government is committed
to the low carbon agenda over the long term.
Scotland has a competitive advantage in attracting
low carbon jobs, investment and trade which
will drive economic growth. Through our worldleading Climate Change (Scotland) Act 2009, we
have provided certainty for business and the public
about Scotland’s low carbon future.
2.242 The Scottish Government believes that
decarbonisation of electricity supply, heat use
and transport will be key to meeting Scotland’s
emissions targets, particularly those in the
2020s and beyond. This should be achieved
without resorting to new nuclear generation
development.125 Increasing the amount of available
clean electricity will be important in lowering the
carbon intensity of other sectors of the Scottish
economy, notably heat and transport which, as
they reduce their reliance on gas, petrol and diesel,
will increasingly draw on electricity for power.
2.243 To create a transition to a low carbon
economy, continuing development and deployment
of technologies that enable more efficient use
of the energy we produce will also become
increasingly important.
2.244 The two cornerstones of energy supply
transition in Scotland are renewables and
carbon capture and storage (CCS). The Scottish
Government believes that Scotland is well placed
to take a leading role in the development and
commercialisation of renewables and CCS126 into
the 2020s, and has targeted developing renewable
generation in Scotland to be equivalent to 100% of
demand by that time.127
2.245 Heat makes up about half of all energy
demand and is integrally linked to the Scottish
Government’s aims to improve energy efficiency.
The target to provide 11% of heat demand from
renewables by 2020 is the platform for renewable
heat to play an increasingly significant role in the
following decades. The Scottish Government is
taking a number of steps to assist the penetration
of heat-based technologies in future years.128
2.246 Progress towards a decarbonised road
transport system by around 2030 will continue,
as will efforts to develop more sustainable
communities which encourage active travel and
other positive travel choices. Digital technologies
offer the prospect of an overall reduction in
travel demand, while freight policy will continue to
encourage more sustainable goods movement.
124
See: www.detini.gov.uk/the_development_of_the_northern_ireland_renewable_heat_incentive.pdf
125
The UK Government works in partnership with the Devolved Administrations in Northern Ireland, Scotland and Wales to deliver the targets set by the
Climate Change Act 2008. While the administrations have a shared goal of reducing the impacts of climate change, policies on how to achieve this vary
across the administrations – the Scottish Government, for example, is opposed to the development of new nuclear power stations in Scotland. It believes
that renewables, fossil fuels with carbon capture and storage, and energy efficiency represent the best long-term solution to Scotland’s energy security.
126
Scottish Government (2010) Carbon Capture and Storage – A Roadmap for Scotland. Available at: www.scotland.gov.uk/Publications/2010/03/18094835/0
127
Scottish Government (2011) 2020 Routemap for Renewable Energy in Scotland. Available at: www.scotland.gov.uk/Publications/2011/08/04110353/0
128
Scottish Government (2009) Renewable Heat Action Plan for Scotland: A plan for the promotion of the use of heat from renewable sources. Available at:
www.scotland.gov.uk/Publications/2009/11/04154534/0
Part 2: Our strategy to achieve carbon budgets 103
2.247 Indications are that fuel prices are likely to
increase further over the next decade. Improving
the energy efficiency of the homes and heating
of those at risk from fuel poverty will therefore
continue to be a vital part of the Scottish
Government’s efforts to reduce emissions and
increase energy security. A strategic group will
co-ordinate stakeholder input into the delivery
on commitments on sustainable housing and help
to develop a Strategy for Sustainable Housing
in Scotland.
2.248 It is not just the impacts of climate change
itself that can have particular consequences for
remote, rural and island communities, but also the
effects of measures intended to reduce emissions.
It will be important to ensure that, in moving to a
low carbon economy, the differential impacts of
policies on these communities are fully considered
and tailored, and flexible solutions found for
the future.
Wales
2.249 The Welsh Government remains fully
committed to leading and delivering meaningful
action to tackle the causes and consequences of
climate change. The Climate Change Strategy for
Wales, published in 2010, confirms its commitment
to drive down emissions and sets out the action
it will take in specific sectors.129 The Welsh
Government is now taking forward work
to deliver on its commitments, and solid progress
has been achieved since the Strategy’s publication.
2.250 The Strategy confirms the Welsh
Government’s principal target to reduce
greenhouse gas emissions in areas of devolved
competence by 3% a year from 2011 against a
baseline of average emissions between 2006
and 2010. The Welsh Government is also
committed to achieving at least a 40% reduction
in all emissions in Wales by 2020 against a 1990
baseline. The Strategy confirms a range of sector
specific emissions reduction targets in the following
areas: transport, agriculture and land use, waste,
residential, public and business.
129
2.251 The Welsh Government’s approach to
tackling climate change is managed as part of
its wider agenda on sustainable development.
The Welsh Government is one of only a few
administrations in the world that has a legal duty in
relation to sustainable development. As a result, its
approach focuses on enhancing people’s quality of
life, both now and in the future. This principle has
informed the selection of measures it has adopted
to reduce emissions as the action it is taking to
ensure that Wales is well prepared to manage the
consequences of a changing climate.
2.252 An example of this is arbed, the Welsh
Government’s flagship strategic energy efficiency
programme. By the end of the first phase of
arbed earlier this year, the scheme had provided
£30 million of funding for energy efficient homes,
skills and long-term jobs. As a result, at least
6,000 homes have benefited from the arbed
scheme to date.
2.253 The second phase of arbed shares the same
objectives as the first phase, but, in order to fulfil
EU funding requirements, the delivery model will
be adjusted. The first set of project proposals for
the second phase of arbed will be reviewed by the
end of 2011.
2.254 Over the next five years, Nest, the Welsh
Government’s fuel poverty scheme, is expected to
help up to 15,000 households a year in Wales with
advice and home energy improvements to reduce
their fuel bills, maximise their income and improve
the energy efficiency of their homes. Around
4,000 households a year are expected to receive
energy improvement packages.
2.255 The three key elements of the Welsh
Government’s energy policy – energy savings and
efficiency, low carbon energy generation and the
maximisation of long-term job opportunities for
Wales – will ensure that it makes the most of
Wales’ potential and the predicted investment.
Ultimately, the goal is to place Wales at the
forefront of the drive towards a low carbon
energy economy.
Welsh Government (2010) Climate Change Strategy for Wales. Available at: http://wales.gov.uk/topics/environmentcountryside/climatechange/tacklingchange/
strategy/walesstrategy/?lang=en
104 Part 2: Our strategy to achieve carbon budgets
2.256 Wales has the potential annually to
produce up to 40 TWh of electricity from
renewable sources by 2025, with 25% of this
from marine, 50% from wind (both offshore
and onshore), and the majority of the remainder
secured from sustainable biomass power or
smaller local (including micro) heat and electricity
generation projects using wind, solar, hydro
or indigenous biomass.
2.257 Practical measures include the Ynni’r Fro
programme, which supports investment in
community-scale energy generation projects
and gives practical and financial support for
installers to gain Microgeneration Certification
Scheme accreditation.
2.258 To date, Wales has some 830 MW of
renewable energy operational, which represents
a doubling in renewable energy operating capacity
since 2007. This capacity represents enough
electricity to power almost a half a million homes
in Wales.
2.259 If the Welsh Government is to deliver its
emissions reduction targets, every sector and
community in Wales will need to contribute.
Consequently, it is working with the Climate
Change Commission for Wales and other delivery
partners to help achieve this.
2.260 The Welsh Government’s approach, set
out in its Climate Change Engagement Strategy
published earlier this year,130 focuses on enabling
people to act, and providing the tools at a national
level which makes action at the local level effective.
The Welsh Government will:
• provide the vision of a low carbon future, which
will inspire action at all levels;
• develop the capacity for action at the local level;
and
• provide the evidence base to inform and focus
action.
2.261 To support its engagement work in this area,
the Welsh Government launched the Support for
Sustainable Living grant scheme in March 2011,
which funds engagement on climate change and
will also help to develop capacity within Wales
to produce demonstrable outcomes from this
engagement. It has also enabled access to expert
advice and support for delivery and evaluation
through its Support for Sustainable Living service.
The combination of grant funding and expertise is
already enabling local action across Wales.
2.262 In terms of delivery of the Climate
Change Strategy itself, the Welsh Government
is putting in place a comprehensive monitoring
framework to measure the progress it is making
on meeting its emissions reduction targets. To
do this, it is developing a suite of indicators to
track implementation of each of the measures
contained in the Delivery Plan for Emission
Reduction131 to ensure that they are delivering the
anticipated emissions savings. This framework is
consistent with that being developed by the UK
Government for monitoring progress against its
own carbon budgets.
2.263 The Welsh Government will also be
monitoring external factors that drive emissions,
such as wider economic performance, so that its
performance in delivering its specific commitments
can be reported in its annual report early in 2012
within the context of wider emissions trends.
130
See: http://wales.gov.uk/docs/desh/publications/111102engagementen.pdf
131
See: http://wales.gov.uk/docs/desh/publications/101006ccstratdeliveryemissionsen.pdf
Delivering the fourth carbon budget
107
Part 3: Delivering the fourth
carbon budget
Scenarios to deliver the
fourth carbon budget
Delivering non-traded sector
emissions reductions
3.1 Part 2 has set out the potential for each sector
of the economy to deliver emissions reductions
over the fourth carbon budget period. As the
Government’s approach is to encourage a portfolio
of technologies in each sector, there is uncertainty
about the exact level of emissions reductions that
will be delivered over the fourth budget period.
In this part of the report we set out a series of
illustrative scenarios that combine different levels
of emissions from all sectors of the economy in
order to deliver the fourth carbon budget.
3.3 The non-traded sector consists of those
sectors of the economy not covered by the
European Union Emissions Trading System (EU
ETS). The level of emissions required in the nontraded sector is 1,260 million tonnes carbon
dioxide equivalent (MtCO2e) over the fourth
budget period, in order to meet the overall budget
of 1,950 MtCO2e. This section considers four
illustrative scenarios showing how emissions could
be reduced to meet this 1,260 MtCO2e level in
the non-traded sector. Further details on these
scenarios can be seen at Annex B.
3.2 As well as delivering the fourth carbon budget,
these scenarios would all put us on track to deliver
the 2050 target (as illustrated in the 2050 futures
in Part 1).
3.4 In these scenarios we focus on those areas that
have the most potential to contribute to emissions
reductions over the fourth budget period, in line
with our vision to 2050. These include:
• replacing inefficient heating systems with more
efficient, sustainable ones;
• ensuring a step-change in our move towards
ultra-low carbon vehicles, such as electric
vehicles; and
• ensuring that our homes are better insulated to
improve their energy efficiency.
108 Part 3: Delivering the fourth carbon budget
3.5 In the scenarios that follow, we flex the level of
deployment and consequent emissions expected
from these major sectors. Other sectors, such
as industry and agriculture, are also assumed to
deliver additional emissions reductions. However,
given their relatively small impact on the fourth
carbon budget, we do not flex the amount
delivered by these sectors in the scenarios.
scenario 1: High abatement in
low carbon heat
3.6 This scenario assumes a very high level of
emissions reductions from the uptake of low
carbon heat in buildings and industry, along with
significant emissions reductions from other
sectors. The scenario would deliver emissions
of 1,253 MtCO2e in the non-traded sector
over the fourth carbon budget period.
3.7 This scenario assumes that:
• around 8.6 million low carbon heat installations
have been deployed in buildings by 2030, in
domestic, commercial and public buildings,
delivering 165 terawatt hours (TWh) of low
carbon heat, and a further 38 TWh from
heating networks;
• significant improvements to the thermal
efficiency of buildings, including completing
most cavity wall and loft insulations by 2020
and insulating up to 5.2 million solid walls by
2030; and
• average fuel efficiency of new cars and vans
in 2030 of 60 gCO2/km and 90 gCO2/km
respectively, and sustainable biofuel penetration
of 8% through the 2020s.
scenario 2: High abatement in
transport and bioenergy demand
3.8 This scenario assumes a very high level
of emissions reductions from transport and
bioenergy, with comparatively lower reductions
from low carbon heat. This scenario reflects
a situation where bioenergy is plentiful, with
sustainability concerns addressed effectively and
technological innovation leading to more advanced
feedstocks becoming viable. Significant uptake of
ultra-low emission vehicles is driven by increased
consumer demand following reductions in cost
or improvements in range, or strong policy
drivers such as an EU-wide car and van emissions
target. The scenario would deliver emissions of
1,248 MtCO2e in the non-traded sector over the
fourth carbon budget period.
3.9 Scenario 2 assumes:
• average fuel efficiency of new cars and vans
in 2030 at 50 gCO2/km and 75 gCO2/km
respectively, and sustainable biofuel penetration
of 10% in 2030;
• approximately 7.2 million low carbon heat
installations in buildings by 2030, delivering
138 TWh of low carbon heat, and a further
10 TWh from heating networks; and
• significant improvements to the thermal
efficiency of buildings, including completing
most cavity wall and loft insulations by 2020 and
insulating up to 5.2 million solid walls by 2030.
scenario 3: focus on high
electrification
3.10 This scenario assumes the very high levels
of emissions reductions in both low carbon
heat (as in Scenario 1) and transport (as in
Scenario 2), alongside comparatively lower
emissions reductions from domestic energy
efficiency upgrades and lower uptake of biomass
in industry. This scenario might reflect a situation
where consumer acceptance of new technologies,
such as electric or hydrogen fuel cell vehicles,
and low carbon heat installations, is high, or
where exogenous factors, such as high fossil fuel
prices, drive a consumer search for low carbon
alternatives. Although a situation where low
carbon heat installations are deployed in homes
that already have insulation would clearly be
most cost effective, this scenario represents the
possibility of consumer reluctance to take up solid
Part 3: Delivering the fourth carbon budget 109
wall insulation. Finally in this scenario, bioenergy
supply is constrained (perhaps due to sustainability
concerns), leading to a prioritisation of its use in
industry rather than transport and buildings. The
scenario would deliver emissions of 1,249 MtCO2e
in the non-traded sector over the fourth carbon
budget period.
3.11 This scenario assumes:
• around 8.6 million low carbon heat installations
in buildings by 2030, delivering 165 TWh of
low carbon heat, and a further 38 TWh from
heating networks;
• average fuel efficiency of new cars and vans
in 2030 at 50 gCO2/km and 75 gCO2/km
respectively, and sustainable biofuel penetration
of 10% in 2030; and
• most cavity wall and loft insulations completed
by 2020 and up to 2.5 million solid walls
insulated by 2030.
scenario 4: purchase of
international credits
price of £32/tCO2e (average over the fourth
budget period), this would cost the Government
£2.7 billion. This cost will be at least partly offset
by the lower cost of delivering less abatement in
heat and transport. Alternatively or in addition
to buying credits, the Government could bank
over-achievement from earlier carbon budgets or
borrow forwards from the fifth carbon budget.
3.14 This scenario assumes:
• 1.6 million low carbon heat installations in
buildings by 2030, delivering 83 TWh of low
carbon heat – achieved through roll-out of a
portfolio of heat pumps and biomass boilers in
domestic, commercial and public buildings – and
a further 10 TWh from heating networks;132
• significant improvements to the thermal
efficiency of buildings, including most cavity wall
and loft insulations completed by 2020 and up
to 4.5 million solid walls insulated by 2030; and
• in transport, average fuel efficiency of
new cars and vans in 2030 of 70 gCO2/km
and 105 gCO2/km respectively, and 6%
penetration of biofuels in 2030.
3.12 Under this scenario, some effort to hit the
2050 target is delayed until the 2030s and 2040s,
with a lower level of emissions reductions over the
fourth budget period. This scenario would require
greater action (and therefore potentially higher
costs) during later decades in order to remain on
track to hit the 2050 target. Emissions over the
fourth carbon budget period would be reduced to
1,345 MtCO2e in the non-traded sector, above the
1,260 MtCO2e budget level.
3.13 This scenario shows that achieving relatively
lower levels of abatement in both low carbon heat
and transport could necessitate the Government
relying on other flexibility mechanisms under the
Climate Change Act in order to meet the fourth
carbon budget. In this scenario, the Government
would need to purchase around 85 MtCO2e
worth of carbon credits. At the forecast carbon
132
In scenario 4, our modelling shows mainly commercial installations take up low carbon heat, with a large heat load per installation. In scenario 1, most of the
additional installations come from domestic-level heat pumps and biomass boilers, with smaller heat loads per installation.
110 Part 3: Delivering the fourth carbon budget
Delivering traded sector
emissions reductions
3.15 The level of emissions reductions in the
traded sector is dictated by the level of the EU ETS
cap. In this section we will look at two illustrative
scenarios showing how traded sector emissions
could be reduced. In both scenarios, the level of
emissions reductions in the UK would be sufficient
to fall within an EU ETS cap of 690 MtCO2e. This is
the level currently assumed for the fourth carbon
budget period. However, this will be reviewed in
2014, as set out in the ‘Achieving carbon budgets’
section on page 21. As a consequence, under
these scenarios UK businesses covered by the EU
ETS would be net sellers of EU ETS allowances.
Both scenarios have been modelled under a
central assumption of electricity demand and an
assumption of high electricity demand. Further
details on these scenarios can be seen at Annex B.
scenario A: power sector carbon
intensity of 50 gco2/kWh
3.16 Under this scenario, emissions over the
fourth carbon budget period would be reduced
to 592–596 MtCO2e in the traded sector (based on
central and high electricity demand respectively –
see Annex B for more detail).
3.17 This scenario assumes that emissions in
the power sector are reduced significantly. To
illustrate this, we have modelled a situation where
the carbon intensity of generating electricity falls
to 50 gCO2/kilowatt hour (kWh) by 2030. The
‘Secure, low carbon electricity’ section on page 69
sets out further detail on the implications of this
scenario for the generation mix. Since this scenario
reduces emissions to well below the required 690
MtCO2e level, it would leave UK businesses in the
EU ETS with 94–98 MtCO2e worth of surplus
EU ETS allowances that could be sold to others,
generating £4.8–5.0 billion at the forecast carbon
price of £51/tCO2e, or banked for future use.
scenario B: power sector carbon
intensity of 100 gco2/kWh
3.18 Under this scenario, emissions over the
fourth carbon budget period would be reduced
to 626–629 MtCO2e in the traded sector (based
on central and high electricity demand respectively
– see Annex B for more detail).
3.19 Scenario B assumes that emissions in the
power and heavy industry sectors are reduced,
but at a lower level in the power sector than that
assumed in Scenario A. This illustrative scenario
assumes that the carbon intensity of electricity
generation falls to 100 gCO2/kWh by 2030. In this
scenario, emissions are still reduced sufficiently to
meet the 690 MtCO2e level, leaving UK businesses
in the EU ETS with 61–64 MtCO2e worth of
surplus EU ETS allowances that could be sold to
others, generating £3.1–3.3 billion at the forecast
carbon price of £51/tCO2e, or banked for
future use.
Part 3: Delivering the fourth carbon budget 111
Considerations for achieving
the fourth carbon budget
3.20 In developing the scenarios presented in
this report, the Government has explored and
taken into account the wider impacts on the UK
economy that this range of decarbonisation could
produce, as well as weighing up costs and benefits.
In this section, we set out these considerations in
brief; Annex B provides further detail.
Managing uncertainty
3.21 The current EU ETS Directive sets a cap on
net emissions from the power and industry sectors
for the whole EU, and this cap shrinks by a fixed
amount each year from 2013 to ensure that overall
emissions reductions are delivered in these sectors
across the EU. The Government will review the
EU ETS trajectory in early 2014. If at that point
our domestic commitments place us on a different
emissions trajectory to the EU ETS trajectory
agreed by the EU, we will, as appropriate, revise
our budget up to align it with the actual EU
trajectory. Before seeking Parliamentary approval
to amend the level of the fourth carbon budget,
the Government will take into account the advice
of the Committee on Climate Change (CCC) and
any representations made by the other national
authorities. A change in the EU ETS cap will not
change the level of emissions reductions required
outside of the EU ETS.
3.22 While it is not possible to speculate now on
what the EU ETS cap will be in the future, we can
consider some examples of what it might be, to
analyse the potential implications. If the legislation
setting out the trajectory of the EU ETS cap is
not changed, then the UK cap on emissions in
the traded sector over the fourth budget period
could be around 860 MtCO2e and we could
amend the fourth carbon budget to a level of 2,120
MtCO2e (1,260 MtCO2e in the non-traded sector
plus 860 MtCO2e in the traded sector). Under
the two scenarios in the traded sector outlined
above, this would mean UK businesses covered
by the EU ETS having a greater number of surplus
133
EU ETS allowances to sell – 264–268 MtCO2e in
Scenario A and 231–234 MtCO2e in Scenario B.
The revenues raised from this surplus would
depend on the carbon price, which is likely to be
a lower price than a scenario where the EU ETS
cap is lower. Alternatively, the Government could
decide to decarbonise at a slower rate, resulting
in lower surplus EU ETS allowances, although
this would have implications for the pace of
decarbonisation required in later carbon budgets
to reach the 2050 target.
3.23 On the other hand, we are pushing strongly
for the EU to move to a more ambitious target
for 2020. As an example, if the EU agreed to a
target to reduce emissions by 30% from 1990
levels by 2020, this could potentially mean a tighter
EU ETS cap which reduces the cap on traded
sector emissions to 590 MtCO2e.133 In this instance,
the fourth carbon budget could be amended to
1,850 MtCO2e (1,260 MtCO2e in the non-traded
sector and 590 MtCO2e in the traded sector).
Scenario A would result in emissions falling to
592–596 MtCO2e, 2–6 MtCO2e above the
required level. UK-based businesses covered
by the EU ETS would therefore need to buy
corresponding EU ETS allowances. Scenario B
would result in emissions in the traded sector
falling short of the 590 MtCO2e required in the
traded sector by 36–39 MtCO2e and UK-based
businesses under the EU ETS would need to
purchase EU ETS allowances. In these scenarios,
the price of allowances would be likely to be
greater due to the tighter EU ETS cap.
Domestic action and international
credits
3.24 The Climate Change Act allows credits
purchased from overseas to be used for
compliance with UK carbon budgets. A limit on
how many credits can be bought in any given
carbon budget period must be set 18 months
before the start of that period. As announced
in May 2011, the Government intends to reduce
emissions domestically as far as is practical and
affordable. However, keeping open the option of
This assumes that the tighter EU ETS cap agreed as part of an EU deal on moving to a 30% target would continue at the same rate of reduction
beyond 2020.
112 Part 3: Delivering the fourth carbon budget
trading is prudent in order to retain maximum
flexibility in minimising costs in the medium-tolong term.
• static cost effectiveness – comparing the
estimated cost of a measure with the forecast
carbon price for the same time period;
3.25 As explained in Part 2, emissions projections
suggest that we will reduce emissions to below
the level of the first three carbon budgets, and
this over-achievement could in theory be banked
for later use.134 It is not government policy to rely
on over-achievement in a given carbon budget to
help meet future carbon budgets, or to factor it
into future plans and there are two reasons why
this is a sensible approach. First, the UK is pushing
Europe to adopt a more ambitious 2020 target and
this would lead to tighter second and third carbon
budgets, meaning that we would have less (or even
no) over-achievement to bank. Second, there is
significant uncertainty in projections – if emissions
are higher than projected we may have little or no
over-achievement.
• dynamic cost effectiveness – considering what
action needs to be taken in the fourth budget
period to be on track to meet the 2050 target
in the most cost effective way;
3.26 While we are aiming to meet future carbon
budgets without counting on any over-achievement
in previous carbon budgets, we do see a role
for banking to provide flexibility for short-term
adjustments and smoothing of unexpected
fluctuations in emissions and as a contingency
for unexpected events. We are therefore not
ruling out the use of banking at this stage and may
look to bank any over-achievement into future
carbon budgets to maintain this contingency to
manage uncertainty. Any future decisions on
banking will need to be taken in the light of EU and
international decisions.
costs of meeting the fourth carbon
budget
3.27 The fourth carbon budget scenarios have
been developed taking into account a number
of factors:
• technical feasibility – taking account of likely
technological development and necessary
build rates; and
• practical deliverability and public acceptability –
considering potential barriers to delivery.
3.28 As explained in the ‘Achieving carbon
budgets’ section on page 21, the Government
already has a robust policy framework in place
to meet the first three carbon budgets that will
continue to deliver emissions reductions over the
fourth budget period. The total net present cost
over the lifetime of the policies included in the
current policy package is estimated at £9 billion
(excluding the value of greenhouse gas (GHG)
emissions savings in the non-traded sector).
Including the value of GHG savings in the nontraded sector results in the package delivering a
net benefit, on central estimates, of £45 billion.135
The fourth carbon budget is not expected to lead
to any additional costs over the course of this
Parliament. Beyond that, the cost of meeting the
fourth carbon budget will depend on the policies
that are implemented over the coming decade.
3.29 The Impact Assessment on the level of
the fourth carbon budget explained how an
‘early action’ pathway – where greater emissions
reductions are made early on – is more likely to
be cost effective than an emissions pathway that
leaves greater levels of emissions reductions to
later years.136 Over the fourth budget period, this
134
The Climate Change Act allows banking and borrowing and this offers a further flexibility mechanism in meeting our carbon budgets. Banking is where
the Government reduces emissions to below the level of the carbon budget and ‘banks’ the savings into future carbon budgets, making them easier to
meet. Borrowing is where the Government takes part of a future carbon budget and brings it forward to cover higher emissions in the current carbon
budget period. No more than 1% of the future carbon budget can be borrowed and the future carbon budget is reduced (i.e. made tougher to meet)
by the same amount as is borrowed. Before banking or borrowing the Government must obtain and take into account the views of the CCC and
Devolved Administrations.
135
Excludes EU ETS.
136
The Impact Assessment is available at: www.decc.gov.uk/media/viewfile.ashx?filetype=4&filepath=What%20we%20do/A%20low%20carbon%20UK/
Carbon%20budgets/1685-ia-fourth-carbon-budget-level.pdf&minwidth=true. Further detail on the economic benefits of early action is set out at Annex B.
Part 3: Delivering the fourth carbon budget 113
may require implementing some measures that
might not be cost effective when considering the
fourth carbon budget alone, but would support
a more efficient transition to meeting the 2050
target.137 Doing so is likely to avoid higher costs
in the longer term for a number of reasons.
For instance, early innovation can help to bring
new technologies to market and drive down
costs, as well as avoiding expensive lock-in to
sub-optimal transition technologies. Our current
evidence suggests that the net cost of meeting the
fourth carbon budget ranges from £26 billion to
£56 billion (excluding the value of the reduction
in greenhouse gas emissions).138 This includes
the costs and benefits over the lifetime of the
measures (which often stretches well beyond the
fourth budget period), discounted to today’s prices.
When the benefits of the carbon savings that will
be delivered by our scenarios are also taken into
account, the net present value ranges from a net
benefit of £1 billion to a net cost of £20 billion.
3.30 Action to meet the fourth carbon budget
can be achieved without large impacts on overall
economic output. The macro impact of meeting
the fourth budget level is estimated to be an
average cost of around 0.6% of GDP a year over
the period 2023–27 (the average cost of meeting
the first three carbon budgets is estimated at
around 0.4% of GDP a year). This compares
favourably with the expected cost of not tackling
global climate change (see Annex B for more
detail). For example, the Stern Review (2006)
estimated the cost of not tackling climate change to
be between 5% and 20% of global GDP.
3.32 Annex B provides further details on the
breakdown of costs for the non-traded sector
Scenarios 1–4 and traded sector Scenarios
A and B, and an explanation of how we have
combined scenarios to produce the cost
estimates above. The costs quoted above are
subject to significant uncertainty given the range
of assumptions we need to make about the
evolution of future economic growth, fossil fuel
prices and technology costs so far out into the
future. Sensitivity analysis of fossil fuel price and
technology cost assumptions shows that the overall
costs of delivering the fourth carbon budget could
vary significantly. See box 10 overleaf for more
detail on sensitivities.
3.33 This uncertainty highlights the need to
continue to appraise costs and abatement potential
as the evidence base evolves. The Government will
continue to draw up detailed impact assessments
for individual policies before they are introduced,
to assess as accurately as possible the costs and
benefits of the specific policies necessary to deliver
carbon budgets.
3.34 In addition, the portfolio approach outlined
earlier in this report ensures that the Government
retains the flexibility to achieve a cost effective
transition: if costs do not fall as fast as we have
assumed in one sector, we would have to rely on
greater savings from other sectors in order to
meet the fourth carbon budget.
3.31 Importantly, the modelling results do not
account for the benefit of tackling global climate
change, which will lead to future changes in
temperature and shifts in precipitation patterns.
This benefit includes avoiding risks to future
UK growth.
137
More information on the cost effectiveness of the abatement potential considered for the fourth carbon budget scenarios can be found at Annex B.
138
The costs of delivering the fourth carbon budget scenarios will depend on how the traded and non-traded sectors are combined. Scenarios 1–4 in the
non-traded sector imply different levels of electricity demand. To understand the cross-economy picture it is important to combine these with the traded
sector scenario that best reflects the implications for electricity demand from levels of electrification in the transport and heat sectors. For example,
Scenario 3, which includes high levels of electrification in heat and transport, has the effect of increasing electricity demand by about 10% in 2030. This
scenario is compatible with either traded sector Scenario A or B under high electricity demand. Levels of abatement in Scenario 4 suggest that Scenario A
or B under central demand would be more appropriate.
114 Part 3: Delivering the fourth carbon budget
Box 10: Case study on transport costs
The fourth carbon budget scenarios have been modelled on the basis of assumptions about the
improvement to fleet average new car and van CO2 emissions. This improvement could be delivered
by a number of different vehicle mixes, all of which will have different cost implications. The costs also
depend heavily on the assumptions we make regarding factors such as technology costs, fossil fuel
prices and the rebound effect (where people drive more as cars become more efficient and therefore
cheaper to drive). For example, under central assumptions, Scenario 3 in the non-traded sector has
a net present value (NPV) of –£2 billion (i.e. a net cost). But this number could vary widely under
different assumptions:
• Battery costs today are reported up to around $1,000/kWh. In our analysis we assumed battery
costs falling to $300/kWh in 2030. If battery costs were lower in 2030 – $150/kWh (compared
with the CCC’s assumption of $200/kWh) – then the NPV of Scenario 3 would be £7 billion (i.e. a
net benefit). If battery costs only came down to $800/kWh then the NPV of Scenario 3 would be
–£36 billion (i.e. a net cost).
• In respect of fossil fuel prices, our analysis was based on the Government’s central view of fossil
fuel prices. However, under high fossil fuel price assumptions, Scenario 3 would have an NPV of
£4 billion (i.e. a net benefit), whereas under low fossil fuel price assumptions the NPV of Scenario 3
could be –£10 billion.
• We believe that a rebound effect from more efficient vehicles is likely. However, if we were to
assume no rebound effect then Scenario 3 would have a zero NPV (i.e. the benefits would roughly
equal the costs), as the additional costs associated with the rebound effect, such as increased
congestion, would be avoided.
These are all individual effects – in reality, a number of the assumptions could differ from our central
forecasts, meaning that the scale of change to the cost numbers could be greater still.
Innovation
3.35 Innovation will be crucial to delivering the
cost reductions we expect to see in technologies
(such as ultra-low emission vehicles) that are
critical to delivering the fourth carbon budget.
This innovation will transform UK infrastructure to
support the transition to a low carbon economic
base. The long-term certainty provided to
business by carbon budgets is a necessary but
not sufficient factor in ensuring that investment
in innovation takes place: success in this area over
the coming years will depend on the policies that
are implemented.
3.36 The Government directly supports
innovation through measures that support the
research, development and demonstration
139
(RD&D) of low carbon technologies. In the 2010
Spending Review, the Department of Energy and
Climate Change was allocated over £150 million
to support innovation in energy generation and
demand-side technologies. Programmes for
innovation in offshore wind (£30 million), marine
energy (£20 million) and buildings (£35 million)
have already been announced and, subject to value
for money assessments, these will be launched
in the coming months. Together with other
innovation funding streams, total public funding
for low carbon energy innovation delivered by
members of the Low Carbon Innovation Group
(LCIG) will amount to over £800 million during the
Spending Review period.139
3.37 The Government also indirectly supports
innovation by creating long-term, credible markets
LCIG comprises representatives of the Department of Energy and Climate Change, the Department for Business, Innovation and Skills, the Carbon Trust,
the Energy Technologies Institute, the Technology Strategy Board and the Research Councils.
Part 3: Delivering the fourth carbon budget 115
for low carbon technologies and by removing
barriers to their uptake, giving businesses and
industry the confidence to invest in RD&D.
The EU ETS and Electricity Market Reform in
the power sector, or EU new vehicle emissions
standards in the transport sector, are examples of
policies which seek to create long-term certainty
in markets.
3.38 Low carbon innovation also creates
opportunities for UK businesses to capture a
greater share of the global low carbon market.
This market was worth more than £3.2 trillion
in 2009/10 and is projected to reach £4 trillion
by 2015 as economies around the world invest
in low carbon technologies across a broad range
of sectors. The UK share of the market was
more than £116 billion in 2009/10, and could be
much larger.140 The Government provides support
for UK businesses to maximise these opportunities
and grow their low carbon exports, in particular
through UK Trade & Investment’s Green Export
Campaign and services for business.
Cost, price and bill impacts and
competitiveness
Direct impacts
3.39 A key factor when delivering the fourth
carbon budget is understanding the potential
impact on consumers, businesses and industry
through energy prices and bills. Some policies,
such as home energy efficiency measures or
improving process efficiency in industry, can help
to reduce bills. Today, the bulk of increases in
domestic energy bills have been caused by the
rise in wholesale gas prices, with costs of climate
change and energy measures only contributing
a small proportion of the overall increase. See
box 11 below for more details. The Government is
committed to keeping these impacts under review
and updated estimates of the impact of policies on
energy prices and bills will be published alongside
future Annual Energy Statements.
Box 11: Energy bill impacts
Alongside the Annual Energy Statement on 23 November 2011, the Department of Energy and
Climate Change published a comprehensive updated assessment of the estimated impacts of energy
and climate change policies on energy prices and bills.141 This covers policies and proposals put forward
by the previous Government, as well as changes to those policies and new policies announced by the
current Government. Only those policies in place or that have been planned to a sufficient degree of
detail (i.e. with quantified estimates of costs and benefits) have been included in the modelling. It does
not estimate the impacts of scenarios to meet the fourth carbon budget as the policy mechanisms to
deliver these have yet to be determined. The key messages were:
• Recent increases in energy bills have been largely driven by rising international prices for fossil
fuels, particularly gas, and not by energy and climate change policies. Energy bills are likely to
continue on an upward trend over time, with or without policies, due to rising fossil fuel prices
and network costs.
• Government policies are estimated to be adding just 2% on average to a typical household energy
bill in 2011, compared with a bill in the absence of policies. By 2020 households will, on average,
save money (£94 or 7%)142 on their energy bills compared with what they would have paid in
the absence of policies. The impact of policies in helping people to save energy, or use it more
efficiently, is expected to more than offset the impact that policies delivering low carbon investment
will have on energy prices.
140
BIS (2011) Low Carbon and Environmental Goods and Services Report for 2009/10. Available at: www.bis.gov.uk/assets/biscore/business-sectors/docs/l/11-992x­
low-carbon-and-environmental-goods-and-services-2009-10
141
See: www.decc.gov.uk/en/content/cms/meeting_energy/aes/impacts/impacts.aspx
142
Real 2010 prices.
116 Part 3: Delivering the fourth carbon budget
Box 11: Energy bill impacts (continued)
The UK ranks well internationally for household energy prices. When compared with the EU 15, UK
consumers have faced the lowest domestic gas prices for the last three years (2008–10) and the third
or fourth lowest electricity prices for the past two years.
The impact of policies on energy bills for businesses is typically larger than for households because
households are supported by a greater number of energy efficiency policies than are available for the
business sector. For most businesses, however, direct energy costs are a relatively small proportion
of total costs. For example, in 2009 purchases of energy and water accounted for around 2.7%
of total costs for the UK manufacturing sector. This means that a 10% rise in direct energy costs
increases total costs by just 0.27%. In contrast, employment costs represented around 20% of total
manufacturing sector costs in 2009.
Businesses that are medium-sized users of energy currently face energy bills that are on average 18%
higher as a result of policies. By 2020 the impact of policies is estimated to be 19%.
Businesses that are large energy-intensive users – where energy costs represent a significant
proportion of their total operating costs – face varying impacts depending on, among other things,
their mixture of gas and electricity use, the extent to which they consume on-site generated
electricity (exempt from a number of policy costs, such as the Renewables Obligation) and their ability
to use their buying power to negotiate lower prices. Policies are estimated to be adding 3–12% to
energy bills for these users in 2011 and between 2% and 20% in 2020.
Average UK gas prices for all sizes of industrial users have been the lowest in the EU 15 since mid­
2009. UK electricity prices have historically been similar to the EU 15 median for both medium and
large industrial users.
The estimated impact of policies on household and business energy bills has fallen since the previous
analysis that the Department of Energy and Climate Change published in July 2010. This reflects,
among other things, the Coalition Government’s proposals on Electricity Market Reform (EMR), the
Green Deal and proposed new cost effective levels of support for large-scale renewable electricity,
as well as the decision to make a £40 million saving in 2014/15 on spending for the small-scale Feedin Tariffs scheme. It also reflects the decision to fund the Renewable Heat Incentive from general
taxation rather than through a levy on fossil fuel suppliers, and to consider several alternative funding
options for the Government’s CCS commitments rather than through their own levy.
3.40 The Government is paying careful attention
to distributional impacts of the transition to a
low carbon economy. We are working to ensure
that consumers are able to find information that
allows them to compare and switch suppliers to
get the best deals. In the domestic sector we are
particularly conscious of lower income households
at risk of fuel poverty. The Government is taking a
range of actions, through mechanisms such as the
Warm Home Discount Scheme and Winter Fuel
Payments, to ensure that vulnerable households
are protected.
3.41 In the business sector, increased costs as a
result of higher energy prices and climate change
and government policies represent a potential
challenge for energy-intensive industries. The
Government recognises these issues, and the
difficulties some face in remaining internationally
competitive while driving down domestic
emissions. Therefore, in addition to the measures
set out in the 2011 Budget, the Government is
taking steps to reduce the impact of policy on the
cost of electricity for energy-intensive industries
whose international competitiveness is most
Part 3: Delivering the fourth carbon budget 117
affected by energy and climate change policies, and
to support energy-intensive industries in becoming
more energy efficient, where it is cost effective for
them to do so.
3.42 In the short term, cost effective energy and
resource efficiency measures can deliver both
economic and environmental gains. The Carbon
Trust found that a 35% improvement in the energy
efficiency of UK buildings by 2020 would realise
over £4 billion worth of benefits. Such energy
efficiency measures could also stimulate activity
in the construction sector where lack of effective
demand is seen as the immediate constraint on
growth. The Government continues to explore
the opportunities presented by the low carbon
transition and to help UK businesses to capitalise
on these. The UK has a comparative advantage in
traditional environmental goods and services such
as recycling and water treatment, for example, and
the strongest growth areas (both in terms of sales
and employment) in the environmental goods and
services sector are emerging sectors such as wind,
solar, photovoltaics and carbon finance.
3.43 In the longer term, establishing credible
and consistent long-term commitments through
the carbon budget framework helps to reduce
uncertainty about the strength of the market
for green alternatives, improving incentives for
innovation. The low carbon transition will also
increase UK resilience to volatility in international
fossil fuel prices and the negative impacts on
the economy that these can create. The macro
economic implications of the transition are
considered in more detail at Annex B.
Indirect impacts – carbon leakage
3.44 Not all other countries have yet matched
the scale of the UK’s low carbon ambitions. There
is a risk that imposing relatively higher costs on
domestic producers of energy-intensive goods,
through climate change policies, will lead companies
to consider shifting production and investment
to regions of the world with less stringent
environmental policies. This potential for ‘carbon
leakage’ is a concern. There is no advantage –
either to the UK economy or for global emissions
reductions – in businesses relocating to countries
where emissions continue unabated.
3.45 There are a number of options to manage
the risk of carbon leakage. For instance, in the
EU Emissions Trading System, which requires
significant reductions from the power and heavy
industry sectors, the risk of leakage is addressed
and largely mitigated through the provision of free
allowances to sectors that are considered to be
at risk of leakage. Thus heavy industry is provided
with an incentive to reduce emissions, without
risks to competitiveness.
Energy security
3.46 There are three different, linked challenges
that relate to security of electricity supply:
• diversification of supply: how to ensure that
we are not over-reliant on one energy source
or technology;
• operational security: how to ensure that,
moment to moment, supply matches demand,
given unforeseen changes in both; and
• resource adequacy: how to ensure that there
is sufficient reliable capacity to meet demand,
for example during winter anticyclonic (high
pressure) weather conditions when demand is
high and wind generation low for a number of
days.
3.47 Increasing our sources of low carbon
generation as we meet the carbon budgets will
help to address the first challenge, though higher
levels of intermittent generation potentially
increase the second and third challenges. In
addition, by 2020 the UK could be importing nearly
50% of its oil and 55% or more of its gas.
3.48 Our strategy for meeting the carbon budgets
takes these impacts into account – more detail can
be found in the ‘Secure, low carbon electricity’
section on page 69 and at Annex B.
Sustainability
3.49 The Government’s strategy for meeting the
fourth carbon budget takes into account wider
118 Part 3: Delivering the fourth carbon budget
impacts on sustainability (including potential
biodiversity considerations in relation to changes
in land use for bioenergy, and the cumulative
and indirect environmental impacts of a range of
changes to our future energy mix). These impacts
are considered in more depth at Annex B.
Consumption emissions
3.50 Finally, the focus of UK climate change
policy is on the production of emissions. The
Government recognises that the ‘consumption’
perspective – which accounts for all the emissions
produced globally to support UK consumption
(including emissions in other countries as a result
of the production of goods that we import into the
UK) – is increasingly important.
3.51 The Government is working to better
understand the impact of consumption emissions.
This includes annual monitoring of total emissions
associated with UK consumption,143 and analysis
of where these emissions occur and which
products they are associated with.144 This evidence
will be used to help inform and target a range
of actions including support for UK businesses
to measure and reduce emissions throughout
their supply chains, and the standards and
labelling schemes which apply to products on
the UK market.
Managing our performance
3.52 Ensuring delivery of the emissions reductions
necessary to deliver carbon budgets requires a
robust framework to track progress and flag when
issues or policy changes mean that we risk going
off track.
3.53 The Climate Change Act provides an
effective system of legal accountability. The
independent Committee on Climate Change
(CCC) publishes an annual report in which it
scrutinises the Government’s progress in meeting
carbon budgets. The Government has to lay a
response to the points raised by the CCC before
Parliament by 15 October each year. The statutory
requirement to produce a report on policies after
a new budget has been set also forms part of the
accountability regime under the Climate Change
Act. This report meets that obligation for the
fourth carbon budget.
3.54 In addition, the Government published
the draft Carbon Plan in March 2011 to provide
further transparency and accountability about the
key actions that each government department
and the Devolved Administrations are taking in
each sector during the lifetime of this Parliament.145
Annex C updates the Carbon Plan action
summary milestones, including those that relate
to the flagship actions in each sector set out in
Part 2 of this document. These therefore assist
Parliament and the public in assessing whether
the Government is making sufficient progress
in achieving the actions necessary to deliver
carbon budgets.
3.55 All departments that lead or have an impact
on the majority of policies that affect emissions are
held accountable for delivery through a framework
of regular monitoring and reporting against their
actions and indicators of progress.146 The wider
actions of all government departments are kept
143
Embedded Carbon Emissions Indicator: http://randd.defra.gov.uk/Default.aspx?Menu=Menu&Module=More&Location=None&ProjectID=17729&From
Search=Y&Publisher=1&SearchText=emissions%20indicator&SortString=ProjectCode&SortOrder=Asc&Paging=10#Description
144
UK Consumption Emissions by Sector and Origin: http://randd.defra.gov.uk/Default.aspx?Menu=Menu&Module=More&Location=None&ProjectID=17718
&FromSearch=Y&Publisher=1&SearchText=consumption%20emissions&SortString=ProjectCode&SortOrder=Asc&Paging=10#Description
145
See: www.decc.gov.uk/en/content/cms/tackling/carbon_plan/carbon_plan.aspx
146
These are the Department for Business, Innovation and Skills, the Department for Environment, Food and Rural Affairs, the Department for Communities
and Local Government, the Department for Transport, the Department of Energy and Climate Change and HM Treasury.
Part 3: Delivering the fourth carbon budget 119
under review, with particular attention paid to
new initiatives that may have a knock-on effect
on emissions. The Government as a whole then
reports progress against the actions in the Carbon
Plan on a quarterly basis via the Number 10
website, to support Parliament and the public in
holding the Government to account.
2050 analytical annex
121
Annex A: 2050 analytical annex
A1 This annex provides further detail on the 2050
futures and their implications, in particular for
costs. The analysis in this annex refers to impacts
in 2050 and does not look at the trajectory for
getting there. For details of the implications of
climate and energy policy during the 2010s and
2020s, please refer to Annex B.
2050 futures
Higher
renewables;
more energy
efficiency
Core
MARK
Higher CCS;
more
bioenergy
AL
No
gam
bre techno e-cha
n
akt
hro logy c ging
ugh
o
in p st
ow
er
r
ou
avi
eh le
n b ab
e i new sts
ng
ha , re y co
p-c nge log ge
Ste cha hno stora
tec and
in CCS
Step-change
wer and
po
in
,
y
og
technol
ions
at
lic
pp
a
y
tr
indus
Higher nuclear;
less energy
efficiency
1
Cost-optimising models are explained in more detail later in this annex.
A2 To illustrate a typical cost-optimising model
run,1 we have described a core MARKAL
(MARKet ALlocation) pathway, one of the
runs produced as part of the analysis that the
Government used to set the level of the fourth
carbon budget target. This run provides a
benchmark against which the three 2050 futures,
referenced in Part 1 and constructed using the
2050 Calculator, can be compared. It should be
noted that some environmental impacts, such as
noise, landscape and biodiversity, are not quantified
here. These are discussed further at Annex B.
A3 To develop 2050 futures, the Government
has used the MARKAL and ESME (Energy System
Modelling Environment) cost-optimising models in
order to understand what levels of ambition in the
deployment of technologies may be plausible in 40
years’ time. There are many thousands of plausible
pathway combinations which could be constructed
using the Calculator, and the electricity generation
mixes, levels of electrification and levels of demand
reduction chosen in these futures should not be
seen as the only likely or available combinations.
The three futures are consistent with the
Government’s stated ambitions on specific
technologies up to 2020, but do not assume any
specific policy measures thereafter.
122 Annex A: 2050 analytical annex
actual penetrations of specific technologies and
targets were included. For other policies the
representation is indirect, and a UK-wide CO2
emissions constraint in 2020 was imposed to
mimic the assumed impact.
core MArKAL
Higher
renewables;
more energy
efficiency
Core
MARK
Higher CCS;
more
bioenergy
AL
No
g am
bre techno e-cha
n
akt
hro logy c ging
u gh
o
in p st
ow
er
r
ou
avi
eh le
n b ab
e i new sts
ng
ha , re y co
p-c nge log ge
Ste cha hno stora
tec and
in CCS
Step-change
power and
technology, in
tions
industry applica
Higher nuclear;
less energy
efficiency
Energy saving per capita: 50%
Electricity demand: 470 TWh
A4 The core MARKAL run was created using the
UK MARKAL model. Further information on the
assumptions and modelling structure supporting
the core MARKAL (described as run ‘DECC-1A’)
can be found at: www.decc.gov.uk/assets/decc/11/
cutting-emissions/carbon-budgets/2290-pathways­
to-2050-key-results.pdf
A5 These outputs were produced with a number
of underlying assumptions imposed on the model.
The results below should be interpreted in the light
of these assumptions.
• The UK MARKAL model covers CO2 emissions
from energy use and does not model non-CO2
greenhouse gases (GHGs), land use, land use
change and forestry (LULUCF) and international
aviation and shipping sectors. As a consequence,
the 80% 2050 target covering all GHGs on the
net UK carbon account was translated to a
‘MARKAL equivalent’ of a 90% reduction for
the core MARKAL run.2
• The core MARKAL run included the impact of
the draft Carbon Plan3 commitments to 2020
on the basis that policy and initiatives are already
in place to achieve them. For key technologies
and policies this representation is explicit;
• The core MARKAL run was based on central
estimates of fossil fuel prices and central
estimates of service demands.4
What is the sectoral picture in 2050?
A6 Electricity generation capacity is split between
carbon capture and storage (CCS) (29 gigawatts
(GW)), nuclear (33 GW) and renewables (45
GW). Wind power is installed earlier as part of
the Carbon Plan commitments, with 28 GW in
place by 2020. In terms of energy supplied, nuclear
and CCS together deliver the majority (74%).
Unabated gas plays a significant back-up role in
2050 to balance the system, but largely fades out
as a baseload technology from 2030 onwards.
Electricity imports and small-scale combined heat
and power (CHP) also contribute. CCS with
power generation is an important technology
from 2020 onwards, generating more than a
third of all electricity. The MARKAL run uses this
technology to achieve negative emissions rates
for electricity by sequestering the CO2 associated
with the biomass share (25% of fuel input to these
generators in 2050 is biomass).
A7 In buildings, a reduction in space and water
heating demand is accompanied by a large
reduction in final energy consumption. Natural
gas disappears from heating almost entirely, while
electricity consumption increases significantly. Heat
pumps, which draw heat from the surrounding
environment with the help of some electricity,
serve a larger proportion of heating service
demand than any other technology.
A8 The chemicals, iron and steel, and non­
ferrous metals sectors all exhibit the maximum
allowable demand reductions of 25% from the
central estimate of service demand, driven by
2
The core MARKAL run was constrained both to mimic the achievement of the UK’s 80% target in 2050 and to ensure a plausible trajectory for getting there.
3
HM Government and DECC (2011) Carbon Plan.
4
These two central conditions are also applied to the MARKAL runs used to cost the three 2050 futures which follow.
Annex A: 2050 analytical annex 123
A10 As the MARKAL model does not account
for non-CO2 emissions, much of agriculture’s
GHG impact is not explicitly accounted for (other
than as part of the overall 90% decarbonisation
constraint). LULUCF emissions and removals are
also not considered. If domestic forestry were
to make a significant contribution to bioenergy
feedstock supplies, carbon sequestration associated
with land use change would deliver additional
abatement. The core MARKAL run demands
350 terawatt hours (TWh) of bioenergy a year
by 2050.
What does this scenario imply for
security of supply and wider impacts?
A11 A balanced generation mix with a relatively
high deployment of intermittent renewable
generation technologies such as wind and marine
power means that the back-up requirements of
this run are significant. An additional 33 GW of
gas plant is needed to meet the system balancing
requirements imposed by the model.
A12 Per capita energy demand falls by 50%
compared with 2007, while total electricity
demand increases by almost a quarter from
2007 levels.
‘Higher renewables; more energy
efficiency’
Higher
renewables;
more energy
efficiency
r
ou
avi
eh le
n b ab
e i new sts
ng
ha , re y co
p-c nge log ge
Ste cha hno stora
tec and
A9 Of all the end-use sectors, transport shows
the lowest demand response in the core MARKAL
run, with approximately 5% reductions for most
service demand categories. The mix of end-use
technologies is extremely varied in 2050 when
compared with today. Battery electric, biomass-to­
liquids and hydrogen fuelled vehicles are all used.
However, conventionally fuelled vehicles are not
expected to be significantly used by 2050 under
this optimised pathway.
A13 In order to meet the demands of CCS and
system back-up generation, natural gas remains
an important part of the fuel mix in 2050, with
264 TWh of imports. Oil plays a much smaller role
than it does today, with the UK importing roughly
a sixth of what was brought into the country in
2000, despite declining natural reserves.
in CCS
Step-change
power and
technology, in
tions
lica
industry app
Core
MARK
Higher CCS;
more
bioenergy
AL
No
gam
bre techno e-cha
n
akt
hro logy c ging
ugh
o
in p st
ow
er
MARKAL’s demand-response assumptions. This
central estimate does not reflect the Updated
Energy and Emissions Projections that the
Government has used in this report, and posits
a higher baseline level of demand. The MARKAL
model suggests that some industries might scale
back operations significantly. Industry also benefits
from the ability to adopt CCS in the MARKAL
model. By 2050, 48 million tonnes carbon dioxide
equivalent (MtCO2e) a year is sequestered from
industrial processes.
Higher nuclear;
less energy
efficiency
Energy saving per capita: 54%
Electricity demand: 530 TWh
A14 The ‘Higher renewables; more energy
efficiency’ future was created using the 2050
Calculator. This scenario is presented in the web
tool of the Calculator which can be found at:
http://2050-calculator-tool.decc.gov.uk
A15 The ‘Higher renewables; more energy
efficiency’ future is based on a step-change in per
capita energy demand reductions and a major
reduction in the cost of renewable generation. This
is accompanied by innovations to develop a large
expansion in electricity storage capacity to manage
the challenges of intermittent generation.
What is the sectoral picture in 2050?
A16 ‘Higher renewables; more energy efficiency’
chooses a generation mix with a relatively high
installation of renewable generation capacity
compared with the other two futures, with wind
delivering 55% of the total electricity supply. Other
renewable technologies, such as solar PV, marine
and hydroelectric power, also play a role. To meet
124 Annex A: 2050 analytical annex
A17 Some 7.7 million solid walls and 8.8 million
cavity walls are insulated by 2050. In buildings,
behaviour change and smarter heating controls
result in lower average home temperatures (one
and a half degrees below today) complementing
more energy efficient homes. All domestic heating
demand across the UK is met through house-level
electrified heating systems.
A18 Industry grows steadily and achieves energy
demand reductions of a third. Some 48% of
remaining emissions are captured by CCS.
A20 Thanks to high levels of demand reduction,
extensive electrification of both heating and
transport, and the deployment of CCS in industrial
applications, sustainable bioenergy has a relatively
small role in comparison with the other scenarios,
delivering 182 TWh of final energy demand.
A23 Apart from its electricity back-up role, gas
plays a much smaller role than it does today, as
the UK becomes more energy independent. Net
natural gas imports are almost zero in 2050 with
total domestic consumption at 100 TWh a year.
A24 Bioenergy is harvested from approximately
25,000 km2 of land area in the UK and other
countries. Local air quality is likely to be better
in this pathway than it is today. In particular, the
damage to human health arising from air pollution,
principally particulate matter, could be around
60%–85% lower in 2050 compared with 2010.
‘Higher nuclear; less energy
efficiency’
Higher
renewables;
more energy
efficiency
r
ou
avi
eh le
n b ab
e i new sts
ng
ha , re y co
p-c nge log ge
Ste cha hno stora
tec and
A19 All cars and buses are fuelled by batteries
or hydrogen fuel cells. These technologies create
improved energy efficiency, allowing people to
drive as far as today while using less energy than
they do today. There is an increase in the use of
public transport, walking and cycling; 63% of the
distance travelled domestically is made by cars in
2050, compared with 83% in 2007.
energy demand being met by electric low carbon
technologies. However, electricity demand is still
over a third higher than in 2007.
in CCS
Step-change
power and
technology, in
tions
industry applica
Core
MARK
Higher CCS;
more
bioenergy
AL
No
g am
bre techno e-cha
n
akt
hro logy c ging
ugh
o
in p st
ow
er
baseload needs and ensure security of supply,
there is still a requirement for baseload capacity
from nuclear and CCS. Some 20 GW of pumped
storage provides 400 GWh of extra storage
capacity, compared with 9 GWh today.
Higher nuclear;
less energy
efficiency
What does this scenario imply for
security of supply and wider impacts?
Energy saving per capita: 31%
Electricity demand: 610 TWh
A21 A generation mix with a high proportion
of intermittent generation means that there is a
pressing need to balance the system to cope with
adverse weather conditions, such as a drop in
North Sea wind. Twenty-four GW of back-up gas
plant is required to meet a five-day wind lull and
demand peak across the UK as well as innovation
success and cost reductions in electricity storage.
A25 The ‘Higher nuclear; less energy efficiency’
future was created using the 2050 Calculator.
This scenario is presented in the web tool of the
Calculator which can be found at:
http://2050-calculator-tool.decc.gov.uk
A22 Because of efforts made to improve energy
efficiency across the economy, the increase in
electricity demand is not the highest of the three
scenarios despite having the highest proportion of
A26 The ‘Higher nuclear; less energy efficiency’
future describes what we might do if it proved
difficult to deploy newer technologies (such as
CCS technology in power and industry). The
extent to which individuals change their behaviour
and energy consumption patterns to reduce
energy demand is lower in this future.
Annex A: 2050 analytical annex 125
A27 ‘Higher nuclear; less energy efficiency’ relies
heavily on nuclear power (75 GW of installed
capacity) with the lowest deployment of CCS,
wind and other renewable generation in 2050
across the three futures. Although deployment is
relatively low, there is still 20 GW of wind capacity
present on the grid, as the UK’s natural advantages
and previous investments in earlier years mean
that some installations will remain cost effective.
A28 Some 5.6 million solid walls and 6.9 million
cavity walls are insulated by 2050. Average internal
temperatures by 2050 are half a degree higher
than they are today. Domestic and commercial
heating is largely decarbonised through a
combination of air- and ground-source heat
pumps, while 10% of demand is met through
local-level district heating.
A29 CCS is not successful at a commercial scale
and, alongside steady growth, this means that
industry is responsible for a large proportion of
remaining emissions, making up more than half of
the total by 2050.
A31 As it is not possible for CCS to generate
‘negative emissions’ in this scenario, sustainable
bioenergy is extremely important for
decarbonising ‘hard to reach’ sectors like industry.
Bioenergy supply is 461 TWh of final energy
demand, with industry the second highest demand
sector after transport.
What does this scenario imply for
security of supply and wider impacts?
A32 Nuclear power’s role means less back-up
is required to balance the system. An additional
14 GW of gas plant is required to meet a five-day
wind lull and demand peak across the UK.
A34 Natural gas imports fall by 2050 as the lack of
CCS removes the most important long-term low
carbon role for the fuel. The UK imports less than
a quarter of the amount of gas bought in 2010,
with total domestic use of 189 TWh in 2050.
A35 Local air quality is likely to be better in
this pathway than it is today. In particular, the
damage to human health arising from air pollution,
principally particulate matter, could be around
45%–80% lower in 2050 compared with 2010.
The land use impact is considerable – bioenergy is
harvested from approximately 45,000 km2 of land
area in the UK and other countries.
‘Higher CCS; more bioenergy’
Higher
renewables;
more energy
efficiency
r
ou
avi
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ng
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Ste cha hno stora
tec and
A30 Around 80% of cars are ultra-low emission
vehicles (ULEVs), powered by batteries or
hydrogen fuel cells. People travel 6% further than
today, but there is a gradual movement away from
using cars towards more efficient public transport.
Some 80% of distance travelled domestically is
made by cars in 2050, 3% lower than in 2007.
A33 Per capita energy demand reductions are
the smallest of the three futures. Because of
electrification technologies being widely deployed
for heating and transport, the demand for
electricity is the highest, increasing by more than
50% compared with 2007.
in CCS
Step-change
power and
technology, in
tions
industry applica
Core
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Higher CCS;
more
bioenergy
AL
No
gam
bre techno e-cha
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ugh
o
in p st
ow
er
What is the sectoral picture in 2050?
Higher nuclear;
less energy
efficiency
Energy saving per capita: 43%
Electricity demand: 490 TWh
A36 The ‘Higher CCS; more bioenergy’ future
was created using the 2050 Calculator. This
scenario is presented in the web tool of the
Calculator which can be found at: http://2050­
calculator-tool.decc.gov.uk
A37 The ‘Higher CCS; more bioenergy’ future
assumes the successful deployment of CCS
technology on a commercial scale and its use in
power generation and industry, supported by
126 Annex A: 2050 analytical annex
significant gas use. CCS is also used with sustainable
and plentiful biomass supplies (BECCS) to generate
‘negative’ emissions.
What is the sectoral picture in 2050?
A38 Electricity generation is provided by a
balanced mix of cost competitive renewables
(36 GW of capacity), CCS (40 GW of capacity)
and nuclear power (20 GW of capacity). Biomassfired CCS technology plays a major role, and helps
to bring about negative net emissions from the
power sector by 2050.
A39 People embrace new technologies and
smart controls in their homes, as well as insulation
measures: 5.6 million solid walls and 6.9 million
cavity walls are insulated, and domestic and
commercial heating is almost entirely decarbonised.
Half of domestic heat demand is met by houselevel electric heat pumps, with the other half
generated using network-level systems such as
district heating and CHP.
A40 Industry grows steadily and achieves energy
demand reductions of one third. Some 48%
of remaining emissions are captured by CCS.
Geosequestration has an appreciable impact,
taking one million tonnes of CO2 out of the
atmosphere every year by 2050.
A41 Some 65% of cars and all buses are run
using ultra-low emission fuel sources. People still
travel 6% more than they do today, but there is a
substantial shift towards cycling and using public
transport more often. Some 74% of distance
travelled domestically is still made by cars.
A42 Sustainable bioenergy use in this future is
highest of the three futures, delivering 471 TWh
of final energy demand. Much of the supply is
directed towards power generation in order to
meet demand from CCS stations and help create
‘headroom’ for the continued use of fossil fuels.
What does this scenario imply for
security of supply and wider impacts?
A43 A balanced generation mix and a much lower
reliance on electrified demand-side technologies
mean that the back-up requirements of this
scenario are the lowest of the three futures. No
additional gas plant is required to meet a five-day
wind lull and demand peak across the UK in 2050.
A44 Per capita energy demand falls by 43%
compared with 2007, while total electricity demand
increases by 29% from 2007 levels. This is the
lowest of the three scenarios, as a consequence of
a widespread roll-out in non-electric low carbon
technologies in heating and transport.
A45 In order to meet the demands of gas-fired
CCS, natural gas imports play a bigger role in
this scenario, with 215 TWh of imports being
the largest of the three scenarios, though still
approximately half of what the UK imported
in 2010.
A46 Approximately 51,000 km2 of land area
in the UK and other countries is used to grow
bioenergy. Heavy use of bioenergy could have a
negative impact on local air quality. In particular,
the damage to human health arising from air
pollution, principally particulate matter, could
be between 80% lower to 60% higher in 2050
compared with 2010. Given the scope for adverse
implications for air quality, if the UK were to adopt
this pathway, the Government would develop a
policy framework that ensured that improved
pollution abatement technology was fully deployed
so that the health impacts of air pollution could
be minimised.
Annex A: 2050 analytical annex 127
Understanding the costs of
2050 futures
A47 The Stern Review Report on the Economics
of Climate Change5 concluded that tackling climate
change is a rational and prudent macroeconomic
strategy, with the benefits of strong, early action
on climate change far outweighing the long-term
costs of not acting. Figure A1 summarises the costs
of action versus inaction on climate change.
Figure A1: Costs of action versus inaction on climate change
Costs of inaction on climate change:
Costs and benefits of action
on climate change:
Damage costs of climate change:
costs of population movements,
deteriorated ecosystems and
severe weather damages: up to
20% of GDP globally
Investment, operating and fuel costs:
capital, operating and fuel costs associated
with transition to a low carbon economy
Energy security:
exposure to fossil fuel price
volatility and shortages
Efficiency savings and innovation:
energy and resource efficiency and
innovation spillovers
Wider macroeconomic impacts:
structural change in the economy (e.g. jobs
supported in the low carbon economy)
A48 History shows us that it is extremely difficult
to forecast future costs with any degree of
accuracy. To understand the costs of the 2050
futures we have used a range of models: MARKAL,
ESME and the new 2050 Calculator, which includes
costs data. The history and methodology of each
of these models are set out below.
5
Stern, N (2006) Report on the Economics of Climate Change. HM Treasury.
128 Annex A: 2050 analytical annex
Box A1: MARKAL fact box
History
MARKAL (MARKet ALlocation model) is an internationally peer-reviewed model
that has been used in many countries over the last 30 years to model national
energy system change over the long and medium term. UK MARKAL has been
used extensively by the UK Government and the Committee on Climate Change
(CCC) to estimate the costs of meeting the 80% GHG emissions reduction target
in 2050. MARKAL results have been recently published in:
• AEA (2011) Pathways to 2050 – Key Results. MARKAL Model Review and Scenarios
for DECC’s 4th Carbon Budget Evidence Base. Final report;6
• Usher, W and Strachan, N (2010) UK MARKAL Modelling – Examining
Decarbonisation Pathways in the 2020s on the Way to Meeting the 2050
Emissions Target. Final Report for the Committee on Climate Change. University
College London;7
• Department of Energy and Climate Change (2009) Climate Change Act 2008
Impact Assessment.8
Methodology
MARKAL is a cost-optimising model. Targets and assumptions are set in MARKAL
(as described in the scenarios that the Government is exploring) to define an end
point in 2050; the model then works backwards to construct a pathway to it in
the least expensive (optimal) way. The model can be constrained in various ways
to show optimal pathways under different conditions. Constraints can encompass
variables ranging from technological choices to specific policies. MARKAL is also able
to test these pathways against a range of factors that affect energy security.
MARKAL calculates the capital, operating expenditure and fuel costs of the energy
system. It can also calculate welfare costs (such as the loss of comfort associated
with having a colder home or not being able to travel as far). Coverage of the
model is limited to fossil fuel combustion and industrial processes; it does not cover
international aviation and shipping, non-CO2 greenhouse gases (GHGs) and land use,
land use change and forestry (LULUCF).
Data in the model takes the form of point estimates for technology costs rather
than ranges. Learning curves are included and connected to prices, allowing
technology costs to be partially endogenous, i.e. they are determined partly by
learning due to factors within the model, and partly due to factors which are pre-set.
MARKAL is a sophisticated model containing over 500,000 data elements. Even
so, the model necessarily makes a number of important simplifying assumptions.
Perfect foresight is assumed, as if knowledge of future technologies and prices
were fully available. Forward-looking and rational consumers are assumed to
apply this foresight in the context of perfectly competitive markets, meaning that
price distortions do not raise costs.
6
www.decc.gov.uk/assets/decc/11/cutting-emissions/carbon-budgets/2290-pathways-to-2050-key-results.pdf
7
http://downloads.theccc.org.uk.s3.amazonaws.com/4th%20Budget/CCC%20MARKAL%20Final%20Report%20-%20UCL%20Nov10.pdf
8
www.decc.gov.uk/assets/decc/[email protected]@_climatechangeactia.pdf
Annex A: 2050 analytical annex 129
Box A1: MARKAL fact box (continued)
Methodology
(continued)
MARKAL has a number of variants which cover gaps in its central analysis. For
example, stochastic MARKAL introduces uncertainty, and in MARKAL Macro the
model includes the interaction with UK economic growth to model the wider
macroeconomic effects.
For this exercise we have used the MARKAL Elastic Demand model, with model
database version 3.26. This is the same version that was used in analysis supporting
the Impact Assessment of Fourth Carbon Budget Level published in May 2011.9
Box A2: ESME fact box
History
ESME (Energy System Modelling Environment) was developed by the Energy
Technologies Institute (ETI) using technology assumptions supplied by businesses
and industry. Completed in late 2010 and already used by the Department of
Energy and Climate Change, the CCC and the ETI’s industrial members, the key
findings are due to be published in early 2012. The model aims to identify those
technologies likely to be most important for an affordable, secure and sustainable
energy system that meets the 2050 GHG Emissions Reduction Target of 80%.
Methodology
Like MARKAL, ESME back-casts and optimises to find least-cost solutions to
meet energy targets. It optimises technology costs in the form of investment,
operating, fuel and resource costs. It focuses on the engineering system design for
2050, characterising optimal outcomes at the energy system, sector and individual
technology levels. It does not model specific government policies, and learning rates
are exogenously set. Similarly, demand for energy services is prescribed by input
scenarios and is not responsive to prices.
Also like MARKAL, ESME includes the capital, operating and fuel costs of the
energy system to 2050. Unlike MARKAL, ESME does not compute welfare costs.
The ESME model has a wider coverage than MARKAL. In addition to sources
of fossil fuel emissions, it also includes international aviation and shipping and a
valuation for housing stock. But like MARKAL it does not include non-CO2 GHGs
or LULUCF.
The model represents uncertainty of technology costs and other key assumptions
by probability distributions. Perfect foresight is assumed in each run, with the costs
being drawn from these probability distributions. A particular feature of ESME is
the ability to define demands and resources at a UK regional level and show the
geographical location of energy infrastructure solutions.
9
www.decc.gov.uk/assets/decc/what%20we%20do/a%20low%20carbon%20uk/carbon%20budgets/1685-ia-fourth-carbon-budget-level.pdf
130 Annex A: 2050 analytical annex
Box A3: 2050 Calculator fact box
History
The new 2050 Calculator is released alongside this report as a Call for Evidence.
Comments on the cost estimates and assumptions used are requested by 8 March
2012.
The new 2050 Calculator builds on the original 2050 Calculator first released in
July 2010. This tool enabled the public to join in an informed debate on the future
of the UK’s energy system, and to support policymakers in making the best choices
for the long-term.
The 2050 Calculator is an engineering model based on physical and technical
potential which allows users to consider the implications of the pathway for energy
security, land use, electricity demand and other wider impacts. Following a Call for
Evidence, the Government decided to add costs to the 2050 Calculator to allow
users to also compare pathways on this basis. The Government has been working
to develop the analysis needed to update the Calculator, consulting with experts in
industry and academia to develop the strongest evidence base available.
Methodology
The 2050 Calculator includes costs for all activities associated with GHG
emissions. This includes fossil fuel combustion, international aviation and shipping,
industrial processes, agriculture, waste and LULUCF.10 Therefore, the coverage of
the 2050 Calculator is wider than that of MARKAL and ESME.
There are over 100 technologies in the 2050 Calculator and capital, operating
expenditure and fuel costs are included for each of these to 2050. Unlike
MARKAL, the 2050 Calculator excludes welfare costs.
The 2050 Calculator shows the lower, higher and default point estimates for each
technology and fuel in 2050. Since there is considerable uncertainty about costs in
40 years’ time, the Calculator uses cost ranges that are intended to be sufficiently
wide as to capture the views of all credible experts. In particular:
• The lower cost estimate for 2050 is the most optimistic assessment of future
technology costs published by a credible evidence source. It assumes both
technological progress to drive costs down over time and sufficient availability of
skilled staff and materials to build and operate the technology.
• The upper cost estimate for 2050 is the most pessimistic view, assuming minimal
technological progress11 over the next 40 years. In practice this usually means
assuming that technology costs remain frozen at today’s prices.
10
The 2050 Calculator includes all emissions which count towards the UK’s 2050 target. The only exception is international aviation and shipping: the
Government has yet to decide whether this will contribute towards the UK’s 2050 target. However, for illustrative purposes this sector has been included in
the Calculator in the meantime. The 2050 Calculator does not include embedded emissions because these do not count towards the UK’s 2050 target.
11
This assumes incremental improvements in energy efficiency only.
Annex A: 2050 analytical annex 131
Box A3: 2050 Calculator fact box (continued)
Methodology
(continued)
• The default point estimate is a point within the high–low range consistent with
the latest cost assumptions from MARKAL.12 The default fossil fuel price is the
Department of Energy and Climate Change central fossil fuel price assumption
and the default finance cost is 7% for all technologies.
The cost estimates in the 2050 Calculator are drawn from a wide range of
credible, published sources. These include economic and energy models (MARKAL
and ESME), sectoral analysis,13 UK government departments, independent analytical
bodies such as the Committee on Climate Change and, wherever possible, the realworld cost of technologies as reported by financial bodies or the media. The 2050
Calculator includes no new evidence about costs; it simply brings together existing
published assumptions.
Critically, unlike MARKAL and ESME, the 2050 Calculator has no inbuilt
cost-optimisation function; all choices are left up to the user.
Functionality
The 2050 Calculator is designed to be easy to use. Users can quickly design
their own pathway (or select examples) and see a clear description of the cost
implications. The user can compare the cost of their pathway with those from
experts including Friends of the Earth, the ETI, Atkins, the Campaign to Protect
Rural England and the National Grid. The user can see how costs are broken
down by sector and within sector, and can choose to override the default
cost assumptions and test the sensivity of the total cost of their pathway to
alternative assumptions.
The 2050 Calculator is particularly well suited to answering questions such as:
• WhatisthecostofpathwayXrelativetopathwayY?
• WhatarethebiggestcomponentcostsofpathwayX?
• H
owcouldthecostofpathwayXchangeif,say,nuclearcostsarehighandthe
cost of, say, renewables are as low as credible experts believe is possible?
12
MARKAL cost assumptions have been used for approximately half the technologies in the 2050 Calculator where the mapping between both models is
fairly straightforward. This includes power sector technologies, road transport, heat insulation, bioenergy and hydrogen production costs. For those sectors
where it is more problematic to map from MARKAL to the 2050 Calculator (aviation, shipping, heat and industry) and for sectors which MARKAL does
not cover (agriculture and waste), we have used a 35th centile assumption. Finance costs are set at 7% default. Fossil fuel prices for 2050 will default to the
DECC central projection for 2030 ($130/barrel).
13
Including Parsons Brinckerhoff; Mott MacDonald; AEA; and NERA.
132 Annex A: 2050 analytical annex
Box A3: 2050 Calculator fact box (continued)
Methodology
(continued)
Caveats
There are a number of important caveats to bear in mind when interpreting results
from the 2050 Calculator.
Does not represent an impact on energy bills. Results from the 2050 Calculator
are presented as £/person/year, but this should not be interpreted as the effect
on energy bills. The impact on energy bills of, say, building more wind turbines
will depend on how the policy is designed and implemented (e.g. via tax, subsidy,
regulation, etc). Taxes and subsidies are not captured in the 2050 Calculator so we
cannot use the tool to examine these effects. The Government uses other, more
sophisticated models to examine the effect of specific policy interventions on
electricity and energy prices.
Pathway costs should be understood relative to other pathways. The total cost
of pathways is presented in the 2050 Calculator but for these to be meaningful they
should be compared with the costs of another pathway. This is because there is no
‘zero cost’ option (unless the UK were to stop using energy altogether). Not tackling
climate change and remaining fossil fuel dependent would still entail an energy
system and it would still have a cost.
The costs presented exclude energy security impacts, costs arising from the
damaging impacts of climate change, welfare costs and wider macroeconomic
impacts. The damage costs of climate change could be particularly significant –
up to 20% of GDP. Other welfare costs excluded from the analysis include costs
associated with living in cooler buildings, travelling less, changes to landscape, and
air and noise pollution. The 2050 Calculator does not take into account taxes or
subsidies, R&D costs, administrative costs associated with delivering policies, or
wider macroeconomic costs.
Long-term, not short-term analysis. The 2050 Calculator is best suited to longterm analysis of the energy system in 2050 rather than policy implications over the
2010s and 2020s.
User-driven model, not market based. The 2050 Calculator costs the combination
of technologies chosen by the user. Consequently it does not take into account price
interactions between supply and demand. For example, if the cost of electricity
generation increases then the Calculator does not capture any elasticity of demand
response from the electricity user. The cost optimising model MARKAL better
handles such price responses.
Costs are exogenous. Technology costs do not vary depending on the level of
technology roll-out. However, if the user has beliefs about how they would expect
the costs of particular technologies to change in their pathway, they can test the
effect of varying these assumptions.
Annex A: 2050 analytical annex 133
Costs of 2050 futures
A49 We have used MARKAL and ESME to
calculate the aggregate costs of these 2050 futures.
As the two models operate in slightly different
ways, we have used different methodologies
for mapping the futures created using the
2050 Calculator into the more complex cost­
optimising models.
A50 For MARKAL, we used the same baseline
assumptions as those described in the core
MARKAL run. The key elements of each future
are characterised in terms of imposed constraints
on the model. For example, ‘Higher renewables;
more energy efficiency’ assumes large-scale
deployment of wind power. In order to model
this outcome, we introduced constraints to force
a minimum or maximum amount of wind (both
offshore and onshore), nuclear, CCS, solar and
marine technologies onto the system to broadly
match the capacity levels set in the 2050 futures.
We imposed investment or capacity constraints
on the technologies. As back-up gas plant is built
to provide reserve capacity in the MARKAL
model subject to the contributions of intermittent
technologies, the model endogenously determines
its capacity.
A51 On the demand side, we have adopted
the revised estimates of the energy efficiency
savings that can be achieved in the residential
sector, taken from the analysis carried out for the
Fourth Carbon Budget Impact Assessment.14 We
introduced constraints to replicate the figures used
in the Calculator for uptake of heating technologies
and ultra-low emission vehicles.
A52 For ESME, we took a different approach.
Using version 1.2 of the ETI ESME assumption
database, we made the minimum set of changes
to reflect the spirit of the 2050 futures. Where
possible, we changed the cost of different
technologies to see how that influenced
deployment rather than fixing deployment levels.
14
Differences in behaviour change across the three
scenarios were not modelled.
• For ‘Higher renewables; more energy
efficiency’ this meant making lowest cost
assumptions for wind, electric vehicles and
electric heating but upper end cost assumptions
for CCS, nuclear and bioenergy. In each case
‘lowest cost’ means the technology cost was
set at the bottom end of the ETI ESME 1.2
assumption database cost range while ‘upper
end’ means it was set at the top.
• For ‘Higher nuclear; less energy efficiency’
this meant prohibiting CCS; making lowest
cost assumptions for nuclear and bioenergy;
assuming that wind, electric heating and electric
vehicles are at the upper end of predicted costs;
and assuming that bioenergy is more abundant
and nuclear power possible in more locations
than the ESME default.
• For ‘Higher CCS; more bioenergy’ this meant
making lowest cost assumptions for CCS; but
setting costs at the upper end for nuclear, wind
power, electric heating and electric vehicles. It
also assumes that bioenergy is more abundant
than the ESME default.
A53 The technology and fuel cost assumptions
used by MARKAL and ESME are towards the
lower end of the range that credible experts
believe possible by 2050. However, the use of
these relatively optimistic cost assumptions in our
analysis reflects confidence that the UK and other
countries will successfully implement policies that
are effective in stimulating businesses and industry
to innovate to bring down costs down. Annex B
sets out the policies the Government already has
in place to stimulate innovation. If innovation does
not drive technology costs down, the costs of the
pathways would be higher than shown here. The
results for the three 2050 futures are set out in
table A1 overleaf.
HM Government (2011) Impact Assessment of Fourth Carbon Budget Level. Available at: www.decc.gov.uk/assets/decc/what%20we%20do/a%20low%20
carbon%20uk/carbon%20budgets/1685-ia-fourth-carbon-budget-level.pdf
134 Annex A: 2050 analytical annex
Table A1: Cost of pathways to 2050 compared with doing nothing on climate change (£bn in 2050)15
MARKAL core run Higher renewables; Higher nuclear; less Higher CCS; more
more energy
energy efficiency
bioenergy
efficiency
MARKAL
13
36
26
43
ESME
n/a
36
88
33
sensitivity testing the three
futures
major components of costs and where the most
significant uncertainties are in the 2050 futures.
A54 As set out above, we have represented the
three 2050 futures in MARKAL by imposing the
minimum number of constraints on the model.
‘Higher renewables; more energy
efficiency’ future
A55 However, this simple representation does not
capture the different energy demand profiles set
out in the three futures pathways. For example,
the ‘Higher renewables; more energy efficiency’
pathway assumes significant behaviour change: the
average temperature of homes is one and a half
degrees lower than it is today and travel behaviour
is curbed (people travel the same distance as today
and there is a significant shift to public transport).16
A56 We have deliberately not reflected different
energy demand characteristics in the MARKAL
modelling because we sought to maintain
consistency with the MARKAL modelling practice
of keeping demand assumptions the same in the
baseline and the abatement pathway.17
A57 Relaxing this assumption reveals that the
cost of achieving the ‘Higher renewables; more
energy efficiency’ scenario could be significantly
lower. Using a lower demand profile (compared
with a baseline with central demand assumptions),
this pathway actually saves the economy £8 billion
in 2050 compared with taking no action on
climate change.
A58 We have also sensitivity tested these results
using the 2050 Costs Calculator to identify the
A59 Results from MARKAL and ESME suggest
that the aggregate additional investment and
operating cost of the ‘Higher renewables; more
energy efficiency’ scenario could be £36 billion18
in 2050 compared with taking no action on climate
change or energy security (see table A1). It is
worth noting that all figures cited for 2050 costs
are highly sensitive to methodological decisions.
‘Higher nuclear; less energy efficiency’
future
A60 The additional investment and operating cost
of the ‘Higher nuclear; less energy efficiency’
scenario could be perhaps £26–88 billion19 in 2050
compared with taking no action on climate change
or energy security (see table A1). There is a saving
from less use of fossil fuels and an increase in costs
in other sectors (in order of importance: finance
costs, bioenergy and buildings).20
A61 Using the 2050 Calculator, we can see that,
irrespective of the wider benefits of tackling
climate change, the ‘Higher nuclear; less energy
efficiency’ future could be cheaper than the
counterfactual if fossil fuel prices are high
($170/bbl for oil and 100p/therm for gas).
15
This is the annual cost incurred in 2050 over and above doing nothing on climate change. Based on estimates of total undiscounted system costs in 2011
prices from MARKAL and ESME model runs
16
In the 2050 Calculator this is characterised as effort level 4 for domestic transport behaviour and average temperature of homes.
17
The MARKAL results set out in this annex are calculated using central demand assumptions in the baseline and abatement pathway unless stated otherwise.
18
This is the annual cost incurred in 2050 over and above taking no action on climate change. Based on estimates of total undiscounted system costs in 2011
prices from MARKAL and ESME model runs.
19
This is the annual cost incurred in 2050 over and above taking no action on climate change. Based on estimates of total undiscounted system costs in 2011
prices from MARKAL and ESME model runs.
20
Analysis from the 2050 Calculator.
Annex A: 2050 analytical annex 135
‘Higher CCS; more bioenergy’ future
A62 The additional investment and operating
cost of the ‘Higher CCS; more bioenergy’
scenario could be perhaps £33–43 billion21 in 2050
compared with taking no action on climate change
or energy security (see table A1). There is a saving
from less use of fossil fuels and lower transport
costs and an increase in costs in other sectors
(in order of importance: buildings, finance costs
and bioenergy).22
A63 Using the 2050 Calculator, we can see
that, irrespective of the wider benefits of
tackling climate change, the ‘Higher CCS; more
bioenergy’ future could be cheaper than the
counterfactual if:
• fossil fuel prices are high ($170/bbl for oil and
100p/therm for gas);
• the cost of solid wall insulation on a house falls
to around £2,000/household compared with
£7,000 or more today;
• the cost of bioenergy falls (to £20/MWh for
imported solid fuels); and
• cost of finance is 5%.
21
This is the annual cost incurred in 2050 over and above taking no action on climate change. Based on estimates of total undiscounted system costs in 2011
prices from MARKAL and ESME model runs.
22
Analysis from the 2050 Calculator.
137
Annex B: Carbon budgets
analytical annex
Contents
Note on methodology
138
List of charts
139
List of tables
140
B1: Carbon budget levels and the net UK carbon account
141
Legislated carbon budgets
141
Scope of the UK carbon budgets and the net UK carbon account
141
The European Union Emissions Trading System
142
Baseline emissions levels and the 2050 target
143
B2: Meeting carbon budgets
143
Progress against the first three carbon budgets
143
Future projections
144
Uncertainty around projections
146
Annual indicative range
148
Carbon budgets management
148
Policy savings
149
Aggregate costs of the current policy package
151
Changes since the last assessment
155
Policy cost effectiveness
157
B3: Potential for the fourth carbon budget
158
Additional abatement potential
158
Abatement potential in the power sector
162
Overview of abatement potential across the economy
163
Cost effectiveness of abatement potential
165
Scenarios to deliver the fourth carbon budget
168
Costs of delivering the fourth carbon budget
175
138 Annex B: Carbon budgets analytical annex
B4: Wider impacts
181
Impact of energy and climate change policies on UK growth
181
Fiscal impact of energy and climate change policies
181
Impacts on electricity security of supply
182
Sustainability and wider environmental impacts
184
B5: Detailed tables
191
Emissions by sector
191
Emissions savings by policy
192
Fourth carbon budget scenarios marginal abatement cost curves
204
note on methodology
All analysis presented in this annex is consistent with the methodology laid out in Department of Energy
and Climate Change/HM Treasury Green Book guidance on the appraisal of emissions impacts.1
Energy and emissions savings have been valued using an updated set of fossil fuel2 and carbon values3
consistent with the Department of Energy and Climate Change’s Updated Energy and Emissions
Projections baseline,4 all of which were published in October 2011. An interim set of energy prices was
used to value changes in energy use. Further details on the appraisal approach are set out in relevant
sections throughout this annex.
1
DECC (2010) Valuation of Energy Use and Greenhouse Gas Emissions for Policy Appraisal and Evaluation. Available at: www.decc.gov.uk/assets/decc/statistics/
analysis_group/122-valuationenergyuseggemissions.pdf
2
DECC (2011) DECC fossil fuel price projections. Available at: www.decc.gov.uk/en/content/cms/about/ec_social_res/analytic_projs/ff_prices/ff_prices.aspx
3
DECC (2011) Update Short Term Traded Carbon Values for UK Public Policy Appraisal. Available at: www.decc.gov.uk/assets/decc/11/cutting-emissions/carbon­
valuation/3137-update-short-term-traded-carbon-values-uk.pdf
4
DECC (2011) Updated Energy and Emissions Projections 2011. Available at: www.decc.gov.uk/assets/decc/11/about-us/economics-social-research/3134­
updated-energy-and-emissions-projections-october.pdf
Annex B: Carbon budgets analytical annex 139
List of charts
Chart B1:
Historic and projected net UK carbon account, 2008–27 (MtCO2e)
146
Chart B2:
Indicative uncertainty around the net UK carbon account projections, 2008–30
(MtCO2e)
147
Chart B3:
Illustrative reduction in non-traded emissions by sector, 2008–27 (MtCO2e)
151
Chart B4:
Changes to the total net present value of policy, excluding the value of non-traded
emissions, since the Low Carbon Transition Plan (£ million 2011)
156
Chart B5:
Non-traded emissions policy marginal abatement cost curve, 2020
157
Chart B6:
Total potential abatement identified in the non-traded sector, 2023–27 (MtCO2e)
164
Chart B7:
Total potential abatement identified in the traded sector, 2023–27 (MtCO2e)
164
Chart B8:
Marginal abatement cost curve of the total potential abatement identified in the
non-traded sector, 2023–27 (MtCO2e)
165
Chart B9:
Aggregate non-traded emissions under the illustrative scenarios to meet the
fourth carbon budget, 2023–27
169
Chart B10:
Aggregate territorial traded sector emissions under the illustrative traded sector
scenarios, 2023–27
174
Chart B11:
De-rated peak capacity margins under different power sector scenarios
183
Chart B12:
Biomass supply and demand, including heat, power and transport,
2020–30 (petajoules)
189
Charts B13–B16: Abatement included under illustrative Scenarios 1 to 4
204
Charts B17–B18: Abatement included under the illustrative traded sector scenarios (excluding
Electricity Market Reform) under central and high electricity demand
207
140 Annex B: Carbon budgets analytical annex
List of tables
Table B1:
UK’s legislated carbon budgets (MtCO2e)
141
Table B2:
Actual emissions against the first carbon budget (MtCO2e)
144
Table B3:
Projected performance against carbon budgets 1 to 4 (MtCO2e)
147
Table B4:
Indicative annual uncertainty range for the net UK carbon account projections, 2008–27 148
(MtCO2e)
Table B5: Net present value of policy by measure, excluding value of non-traded emissions (£ million 2011)
152
Table B6: Net present value and cost effectiveness of non-traded sector policies by measure (£ million 2011)
154
Table B7:
Range of additional potential abatement in the non-traded sector, 2023–27 (MtCO2e)
161
Table B8: Range of additional potential abatement in the traded sector (excluding power sector, 2023–27) (MtCO2e)
162
Table B9:
Expected activity under illustrative Scenario 1
169
Table B10: Expected activity under illustrative Scenario 2
171
Table B11: Expected activity under illustrative Scenario 3
172
Table B12: Expected activity under illustrative Scenario 4
173
Table B13: Emissions levels and NPV of the illustrative non-traded sector scenarios
176
Table B14: NPV of the illustrative traded sector scenarios, central electricity demand (£ billion 2011)
177
Table B15: NPV of the illustrative traded sector scenarios, high electricity demand (£ billion 2011)
177
Table B16: Cumulative NPV of the illustrative non-traded and traded scenarios (£ billion 2011)
178
Table B17: Sensitivity of the NPV estimates to vehicle battery costs (£ billion 2011)
179
Table B18: Sensitivity of the NPV estimates to improvements in heat pumps’ coefficient of performance
179
Table B19: Sensitivity of the NPV estimates to the fossil fuel price assumptions used for the transport analysis only (£ billion 2011)
179
Table B20: Sensitivity of the NPV estimates to the fossil fuel price assumptions used for the low carbon heat analysis only (£ billion 2011)
180
Table B21: Sensitivity of the NPV estimates to the fossil fuel price assumptions used for the power sector analysis only (£ billion 2011)
180
Table B22: Sensitivity of the NPV estimates to the rebound effect in the transport analysis only (£ billion 2011)
180
Table B23: Risks and opportunities associated with the fourth carbon budget
185
Table B24: Projected net UK carbon account by sector, National Communication basis (MtCO2e)
191
Table B25: Projected non-traded sector emissions savings by policy in the baseline (MtCO2e)
192
Table B26: Projected non-traded sector emissions savings by policy additional to the baseline (MtCO2e) 194
Table B27: Projected traded sector emissions savings by policy included in the baseline (MtCO2e)
199
Table B28: Projected traded sector emissions savings by policy additional to the baseline (MtCO2e)
201
Annex B: Carbon budgets analytical annex 141
B1. Carbon budget levels and
the net Uk carbon account
Legislated carbon budgets
B1.1 The first three legislated carbon budgets
are consistent with the UK’s share of the current
European Union (EU) target to reduce emissions
by 20% below 1990 levels by 2020. There is a
commitment to tighten the second and third
carbon budget levels following an EU move to a
more stringent 2020 emissions target.
B1.2 In June 2011, the Government set in
legislation the fourth carbon budget at the level
recommended by the Committee on Climate
Change (CCC),5 1,950 million tonnes of CO2
equivalent (MtCO2e), equivalent to a 50%
reduction below the 1990 baseline. See the Impact
Assessment accompanying that decision for details
of the evidence base for setting the level of the
fourth carbon budget.6
scope of the uK carbon budgets
and the net uK carbon account
B1.3 The UK’s performance against its legislated
carbon budgets is assessed relative to the net
UK carbon account (section 27 of the Climate
Change Act 20087). The net UK carbon account:
• includes emissions from the UK (not including
Crown Dependencies and UK Overseas
Territories) of the ‘Kyoto basket’ of greenhouses
gases (GHGs) which includes all carbon dioxide
(CO2), methane (CH4), nitrous oxide (N2O),
hydrofluorocarbons (HFCs), perfluorocarbons
(PFCs) and sulphur hexafluoride (SF6) emissions;
• includes net emissions/removals8 from land use,
land use change and forestry (LULUCF); and
• is net of the purchase and sale of international
carbon units. Carbon units include allowances
issued under cap and trade systems, such as the
EU Emissions Trading System (ETS) (see below),
and international carbon units representing
developing country emissions reductions issued
under the Clean Development Mechanism.9
Table B1: UK’s legislated carbon budgets (MtCO2e)
First carbon
budget
(2008–12)
Second carbon
budget
(2013–17)
Third carbon
budget
(2018–22)
Fourth carbon
budget
(2023–27)
Legislated budgets10
3,018
2,782
2,544
1,950
of which traded
1,233
1,078
985
690
of which non-traded
1,785
1,704
1,559
1,260
23%
29%
35%
50%
Average annual percentage
reduction from 199011
5
CCC (2010) The Fourth Carbon Budget: Reducing emissions through the 2020s. Available at: www.theccc.org.uk/reports/fourth-carbon-budget
6
DECC (2011) Impact Assessment of Fourth Carbon Budget Level. Available at: www.decc.gov.uk/assets/decc/what%20we%20do/a%20low%20carbon%20uk/
carbon%20budgets/1685-ia-fourth-carbon-budget-level.pdf
7
www.legislation.gov.uk/ukpga/2008/27/contents
8
In this context, ‘removals’ refers to where emissions are taken out of the atmosphere. See box B1 on page 145 for further details.
9
Under the Clean Development Mechanism, emissions reduction projects in developing countries can earn Certified Emissions Reduction credits. These
credits can be used by countries to meet a part of their emissions reduction targets under the Kyoto Protocol, or to meet targets under domestic legislation.
10
Assumed share for the second and third carbon budgets, based on the best estimate of the UK share of an EU 20% reduction target when the first three
carbon budgets were legislated in 2009.
11
These percentages have changed since 2009 when legislated and quoted in the Low Carbon Transition Plan (DECC (2009) The UK Low Carbon Transition Plan.
Available at: www.decc.gov.uk/en/content/cms/tackling/carbon_plan/lctp/:aspx) owing to an update in the National Greenhouse Gas Inventory which revised
total 1990 baseline UK GHG emissions from 777.4 MtCO2e to 783.1 MtCO2e. This number is the denominator in this calculation, hence while the budget
levels (in MtCO2e) have not changed, the 1990 baseline and percentage reductions have.
142 Annex B: Carbon budgets analytical annex
B1.4 Each carbon budget sets a maximum level for
the total net UK carbon account over a five-year
period, in tonnes of carbon dioxide equivalent
(tCO2e). The first four carbon budgets are set
out in table B1. More information on the net
UK carbon account and carbon accounting rules
can be found on the Department of Energy and
Climate Change website.12
B1.5 The Climate Change Act 2008, and therefore
by definition the net UK carbon account, currently
excludes emissions from international aviation
and shipping. The Act requires the Government,
by the end of 2012, either to make regulations to
specify the circumstances in which, and the extent
to which, emissions from international aviation
or international shipping13 are to be included in
carbon budgets and the 2050 target, or to lay
before Parliament a report explaining why such
regulations have not been made.14 This decision
will need to be considered alongside development
through 2012/13 of the UK’s sustainable aviation
policy framework, which will also consider whether
to adopt the previous administration’s 2050
aviation CO2 target.
The european union emissions
Trading system
B1.6 The EU ETS covers direct emissions from
power generation and heavy industry (and aviation
from 2012) and sets a cap at the EU level for these
emissions. In the UK this represents around 40%15
of emissions (referred to as the traded sector).
For the purposes of calculating the net UK carbon
account, emissions in the traded sector are taken
to be equal to the UK’s share of the EU ETS cap.
While there is volatility in the level of UK territorial
emissions, driven by variables such as the carbon
price and fossil fuel prices, there is near certainty
over the traded sector share of the net UK carbon
account, which derives from the established level
of the EU ETS cap.16
B1.7 The UK share of the EU ETS cap is the
sum of the allowances allocated for free to UK
installations17 covered by the EU ETS and the UK’s
share of auctioned allowances. Once negotiated,
this share of the fixed cap is relatively stable.18 This
certainty over the traded sector component of
the net UK carbon account provides a significant
advantage in managing carbon budgets, and the EU
ETS is an important instrument for guaranteeing
emissions reductions.
B1.8 The overall environmental outcome (total
EU-wide emissions from the traded sector) is
fixed, although the level of territorial emissions in
the UK or any other EU Member State may vary.
• If the UK went further and reduced territorial
emissions below the UK share of the EU
ETS cap, this would not lead to an additional
reduction in global emissions. Going further
would, in the absence of other measures,
result in a net outflow of allowances from the
UK, increasing the availability of allowances to
12
DECC (2009) Guidance on Carbon Accounting and the Net UK Carbon Account. Available at: www.decc.gov.uk/en/content/cms/what_we_do/lc_uk/carbon_
budgets/carbon_budgets.aspx
13
Note that international aviation emissions associated with all flights arriving at and departing from European Economic Area (EEA) airports will be included
in the EU ETS from 2012. The European Commission is also encouraged, by recitals in Directive 2009/29/EC and Decision 406/2009/EC, to introduce
legislation to limit international maritime emissions, in the event that a global agreement has not been reached in the International Maritime Organization or
United Nations Framework Convention on Climate Change by the end of 2011.
14
Climate Change Act 2008, section 30.
15
On average over the first three carbon budgets.
16
The Government has informed UK installations of their provisional levels of free allocation for Phase III (2013–20), although these are not yet finalised.
Exact levels of free allocation for each installation will not be known until the Commission publishes details of the level of the cross-sectoral correction
factor (in 2012). At the same time, we expect the Commission to publish figures on the number of allowances each Member State will receive to auction.
Some uncertainty will remain over the extent to which UK installations have access to the New Entrants’ Reserve or have their free allocation reduced as a
result of closures. The latter will also affect the number of allowances to auction that the UK receives and this uncertainty will not be reduced until the end
of the trading period.
17
For the purposes of carbon budgets, this includes all allowances received by static installations located in the UK along with a proportion of aviation
allowances which correspond to UK domestic aviation.
18
It varies only with small changes to the distribution of allowances resulting from closures and new entrants to the system, and current uncertainty associated
with the level of free allocation each installation is likely to receive. This will not be known until after all Member States have submitted their National
Implementation Measures (NIMs) Plan, which is likely to be in early 2012.
Annex B: Carbon budgets analytical annex 143
installations outside the UK, whose emissions
could increase within the overall EU ETS
cap. The net UK carbon account would be
unchanged because the increased export of
allowances from the UK would cancel out the
reduction in UK territorial emissions.
• Likewise, if UK territorial emissions exceed the
UK share of the cap, then compliance requires
that UK installations covered by the scheme
purchase allowances from other installations
with a surplus in other Member States, or
(subject to strictly defined limits) international
offset credits.
Baseline emissions levels and the
2050 target
B1.9 The baseline level of UK greenhouse gas
(GHG) emissions in 1990 from which the emissions
reduction targets in the Climate Change Act 2008
are referenced is 783.1 MtCO2e. This is referred
to as ‘the 1990 baseline’ and consists of net UK
emissions in 1990 for CO2, methane and nitrous
oxide GHGs, and 1995 for fluorinated gases (as
recorded in the latest GHG emissions inventory19
and calculated according to the latest international
reporting practice as required by the Act).
B2. Meeting carbon budgets
Progress against the first three
carbon budgets
B2.1 The provisional emissions estimates for
201020 published in early 2011 show that the net
UK carbon account (which includes the impact
of emissions trading) increased by 1.8% to 585.6
MtCO2e in 2010 from 575.4 MtCO2e in 2009.21
This increase in emissions resulted primarily from
a rise in residential gas use related to the fact that
2010 was, on average, the coldest year since 1986.
B2.2 The net UK carbon account in 2010 was
25.2% below 1990 levels. The first carbon budget
requires that total UK GHG emissions do not
exceed 3,018 MtCO2e over the five-year period
2008–12, which is approximately 23% below the
1990 level, on average, over the period.
B2.3 Table B2 summarises the UK’s progress
towards meeting the first carbon budget by
comparing the average emissions per annum
required to meet the budget with the average
emissions to date in the first budgetary period.
B1.10 The long-term target set out in the Climate
Change Act, to reduce emissions levels by at least
80% below the 1990 baseline, would therefore
require the net UK carbon account to decline to at
most 156.6 MtCO2e by 2050.
19
DECC (2011) UK Greenhouse Gas Inventory. Available at: www.decc.gov.uk/en/content/cms/statistics/climate_change/gg_emissions/uk_emissions/2009_
final/2009_final.aspx
20
Please note that territorial emissions and the net UK carbon account estimate for 2010 are provisional and may be subject to change. More details on
the provisional emissions figures for 2010 can be found at: www.decc.gov.uk/en/content/cms/statistics/climate_stats/gg_emissions/uk_emissions/2010_
prov/2010_prov.aspx
21
Territorial emissions which exclude the impact of trading within the EU ETS increased by 2.9% to 577.9 MtCO2e from 561.8 MtCO2e in 2009.
144 Annex B: Carbon budgets analytical annex
Table B2: Actual emissions against the first carbon budget (MtCO2e)
First carbon budget
Actual emissions including EU ETS MtCO2e
Total
emissions
(2008–12)
Equivalent
average
emissions
p.a.
2008
2009
2010 (p)
Cumulative
emissions
to date
(2008–10)
Average
emissions
p.a.
(2008–10)
Average
emissions
p.a.
required
in 2011/12
to meet
budget
3,018
604
597
575
586
1,758
586
630
B2.4 Emissions have averaged 586 MtCO2e
over the course of 2008–10, which means that
emissions in the remaining two years would have
to exceed 630 MtCO2e per annum in order
to miss the first budget. The latest emissions
projections suggest that the UK will be comfortably
below this level during the remaining two years.
future projections
B2.5 The Department of Energy and Climate
Change’s Updated Energy and Emissions
Projections,22 published in October 2011, provide
forecasts for UK emissions over the short and
medium term and are an essential tool for tracking
progress and risks towards meeting the carbon
budgets.
Box B1: The Department of Energy and Climate Change’s emissions projections
The Department of Energy and Climate Change’s energy and emissions model projects energy
demand using econometric equations of the interaction between supply and demand for each
sub-sector of the economy, models of the UK energy market, various assumptions on the key
external drivers of energy demand (i.e. expectations of future GDP growth, international fossil fuel
prices, carbon prices and UK population) and the impacts of government policies.
The input data and assumptions in the model are subject to uncertainty. For example:
• the exogenous inputs (GDP, fossil fuel prices and UK population growth) are all subject to their own
assumptions and levels of uncertainty about what the actual level may be in the future;
• expected policy savings are uncertain – numerous factors can affect whether policies will deliver as
expected; and
• the parameters in the model are uncertain, particularly in the longer run. For example, the energy
demand responses to prices and output are estimated from analysis of past data trends.
The model is calibrated to the 2009 UK Greenhouse Gas Inventory and the latest available Digest
of United Kingdom Energy Statistics (DUKES) data, the former is currently based on 2009 levels
(published February 2011, the latest available to carry out this modelling exercise).
22
For full details of these projections, see DECC (2011) Updated Energy and Emissions Projections 2011. Available at: www.decc.gov.uk/assets/decc/11/about­
us/economics-social-research/3134-updated-energy-and-emissions-projections-october.pdf
Annex B: Carbon budgets analytical annex 145
Box B1: The Department of Energy and Climate Change’s emissions projections (continued)
The Department of Energy and Climate Change’s non-CO2 GHG projections use the
methodologies set out in the Greenhouse Gas Inventory report.23 Projections are calculated using
forecast activity statistics, emissions factors and various other sector specific assumptions for each of
the main sources of emissions. GHG emissions projections are calculated by sector and aggregated
to provide an estimate of total projected emissions. The projections system is designed to be
transparent, flexible and easy to update.
The Department of Energy and Climate Change’s LULUCF projections cover CO2 emissions from
forestry, crop and grassland management, and other land uses. It is the only sector where CO2 can be
removed from the atmosphere (through photosynthesis). LULUCF can therefore show net emissions,
net removals or zero change, if emissions and removals are in balance. Projections are estimated by
the Centre for Ecology and Hydrology24 under contract to the Department of Energy and Climate
Change, using methods consistent with the UK Greenhouse Gas Inventory, coupled with projections
of future land use and land use change, based on what has happened historically and possible future
scenarios. The LULUCF projections have recently been revised to reflect the latest survey and
inventory data available.25
Monte Carlo simulation is used in all three areas of emissions projections to take account of the
uncertainty inherent in the range of input assumptions necessary to produce these projections.
B2.6 These projections suggest that the UK is
on track to meet its first three legislated carbon
budgets with current planned policies. By 2020,
the UK is forecast to reduce net UK emissions
by 38% from 1990. Territorial emissions over
the first three carbon budgets are expected to
be 2,877, 2,604 and 2,322 MtCO2e respectively,
while the net UK carbon account is expected to
be 2,922, 2,650 and 2,457 MtCO2e respectively
(see table B3). We therefore expect, on central
projections, to reduce emissions to below the
level of the first three carbon budgets. This means
that the UK is expected to exceed the first three
carbon budgets by 96, 132 and 87 MtCO2e
respectively.
B2.7 In respect of the fourth carbon budget, the
Department of Energy and Climate Change’s
emissions projections set the baseline against which
to assess the level of additional abatement required
to reach the fourth carbon budget. UK territorial
emissions are projected to be 2,207 MtCO2e over
the fourth budget period (average of 441.4 MtCO2e
per annum). This represents a 43.6% emissions
reduction on average over the budget period
relative to 1990 levels.
B2.8 In the traded sector, the UK’s level of
emissions over the fourth budget period will be
dictated by the UK’s share of the EU ETS cap
over the period. However, there is uncertainty
about the level of ambition of the EU ETS, and
the UK’s share of the cap, beyond 2020. Analysis
suggests that the UK’s share of the assumed cap
could be between 590 and 860 MtCO2e over
the period, depending on the level of ambition
to reduce emissions leading up to the period, and
the methodology for determining the UK’s share.
The fourth budget was set assuming that the UK’s
traded sector cap would be at 690 MtCO2e over
the period.26
B2.9 The UK’s net carbon account, assuming a
cap on traded sector emissions of 690 MtCO2e,
is projected to be 2,131 MtCO2e over the fourth
carbon budget (426 MtCO2e per annum). This
represents a reduction in emissions of around 46%
relative to 1990 levels.
23
AEA (2011) National Inventory Report. Available at: http://unfccc.int/national_reports/annex_i_ghg_inventories/national_inventories_submissions/items/5888.php
24
Available at: www.ceh.ac.uk
25
DECC (2011) Non-CO2 Land and Land Use Change and Forestry (LULUCF) GHG emissions projections summary tables. Available at:
www.decc.gov.uk/en/content/cms/about/ec_social_res/analytic_projs/en_emis_projs/en_emis_projs.aspx
26
In line with the CCC’s recommendation. See footnotes 5 and 6.
146 Annex B: Carbon budgets analytical annex
Chart B1: Historic and projected net UK carbon account, 2008–27 (MtCO2e)
700
600
500
Emissions (MtCO2e)
400
300
200
100
27
26
20
24
25
20
20
23
20
22
20
20
21
20
20
19
20
18
20
17
20
16
20
15
20
14
20
13
12
20
20
10
09
11
20
20
20
20
20
08
0
Year
Carbon budgets (indicative annual average)
Net UK carbon account (central projections scenario)
Source: DECC energy model CO2 energy projections, non-CO2 GHG projections and LULUCF projections
B2.10 On a net UK carbon account basis, the
shortfall to the fourth budget of 1,950 MtCO2e
is therefore projected to be around 181 MtCO2e
over the fourth budget period. This incorporates
a significant legacy of impacts from the current
policy package over the fourth carbon budget.
uncertainty around projections
B2.11 Projections of emissions levels are inherently
uncertain as they depend upon projected future
levels of a number of key factors, including
economic and population growth and fossil fuel
27
prices. The Department of Energy and Climate
Change’s emissions projections capture some of
this uncertainty through the use of Monte Carlo
simulations, using assumed distributions of the
levels of the key variables to provide a range of
outcomes. This analysis provides an indication
of the impact of uncertainty in fossil fuel prices,
economic growth, temperature, policy delivery,
power station capital costs, non-CO2 GHG
emissions and LULUCF emissions and removals.27
Chart B2 reflects the range of uncertainty around
net UK carbon account projections.
This does not account for all sources of uncertainty. In particular, uncertainties over the modelling parameters, which will increase over time, are only
partially reflected. The emissions projections also do not attempt to take account of climate science uncertainty.
Annex B: Carbon budgets analytical annex 147
Chart B2: Indicative uncertainty around the net UK carbon account projections, 2008–30 (MtCO2e)28
640
95%
90%
590
Net UK carbon account (MtCO2e)
80%
70%
540
50%
central
490
440
2029
2026
2023
2020
2017
2014
2011
2008
390
Source: DECC energy model CO2 energy projections, non-CO2 GHG projections and LULUCF projections
B2.12 Table B3 below provides the Department
of Energy and Climate Change’s latest emissions
projections for the net UK carbon account for the
first four carbon budgets, and the projected overachievement margins under central, low and high
modelled uncertainty ranges.
Table B3: Projected performance against carbon budgets 1 to 4 (MtCO2e)
Carbon budget 1
(2008–12)
Carbon budget 2
(2013–17)
Carbon budget 3
(2018–22)
Carbon budget 428
(2023–27)
Legislated carbon budgets
3,018
2,782
2,544
1,950
Territorial emissions
2,877
2,604
2,322
2,207
Net UK carbon account
2,922
2,650
2,457
2,131
Projected performance
against carbon budgets
(negative implies
emissions under budget)
−96
−132
−87
181
−73 to −124
−73 to −172
−19 to −142
250 to 117
Uncertainty range
(high to low emissions
projections)
Source: DECC energy model CO2 energy projections, non-CO2 GHG projections and LULUCF projections
28
The projected performance against the fourth carbon budget assumes an EU ETS cap of 690 MtCO2e from 2023.
148 Annex B: Carbon budgets analytical annex
a year is a range within which the Secretary of
State expects the amount of the net UK carbon
account for the year to fall. The annual indicative
range for the first three carbon budgets was
set in July 2009. Table B4 shows these ranges, to
reflect the latest data and updated projections,
along with the annual indicative range for the
fourth carbon budget.
Annual indicative range
B2.13 Section 12 of the Climate Change Act
2008 requires the Government to publish, as
soon as possible after making an Order setting a
carbon budget, an indicative annual range for the
net UK carbon account for each year within the
period. An indicative annual range in relation to
Table B4: Indicative annual uncertainty range for the net UK carbon account projections, 2008–27
(MtCO2e)29
Carbon budget 1
Carbon budget 2
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
Upper bound
599
576
593
596
593
565
557
552
544
535
Central
599
576
593
579
575
545
538
531
523
514
Lower bound
599
576
593
559
558
530
522
514
506
498
Net UK carbon
account projections
(MtCO2e)
Carbon budget 3
Net UK carbon
account projections
(MtCO2e)
Carbon budget 4
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
Upper bound
524
518
506
509
504
449
448
448
447
447
Central
505
495
486
489
483
428
427
426
425
425
Lower bound
487
478
468
469
465
409
409
406
405
405
Source: DECC energy model CO2 energy projections, non-CO2 GHG projections and LULUCF projections
B2.14 The uncertainty inherent in emissions
projections means that the Government cannot
rely on central estimates alone to demonstrate
that the UK is on track to meet carbon budgets.
There are a number of things which the
Government is doing to ensure that the UK
remains on track.
budget accounting purposes, the traded sector
contribution to the net UK carbon account is equal
to the UK’s share of the EU ETS cap (rather than
territorial emissions). On this basis the UK cannot
under- or over-perform on its traded sector share
of the carbon budgets. Given that this represents
around 40% of the UK carbon account, the EU
ETS is an important instrument for guaranteeing
net emissions reductions.
B2.15 First, the EU ETS, which covers emissions
from the power generation and industrial
sectors, effectively eliminates uncertainty in these
sectors as emissions are capped and, for carbon
B2.16 In the remaining non-EU ETS sectors there
are a number of ways in which the Government
is working to increase confidence that the budgets
will be met:
carbon budgets management
29
The tables show the indicative annual uncertainty around the net UK carbon account. For the fourth carbon budget, an EU ETS cap of 690 MtCO2e is
assumed. The upper and lower bounds represent the 95% confidence interval.
Annex B: Carbon budgets analytical annex 149
• the surpluses projected (on the central scenario)
in each budget period provide a contingency
reserve that will offer some resilience to
unexpected events, such as higher than
anticipated emissions driven by fossil fuel prices
that are significantly lower than assumed in our
central scenario;
• the Climate Change Act 2008 provides the
flexibility to bank over-achievement across
carbon budget periods or undertake limited
borrowing (constrained at 1%) from the next
budget. This increases the contingency to cope
with unanticipated increases in emissions;
• the Government is continuing to explore new,
cost effective policy options to further reduce
emissions in a variety of areas over the first
three budget periods, e.g. ways to help small
businesses to save carbon; and
• the Government recognises the importance of
placing the UK on an appropriate pathway to
meet its longer-term carbon targets and it aims
to meet the first four carbon budgets through
domestic action. However, the Government
also recognises the benefits of international
offsets in allowing emissions reductions to occur
where they are least costly and as a mechanism
to help decarbonise developing economies.
Consequently, purchasing international credits
to offset UK emissions remains an option,
although a limit must be set for each budgetary
period. The limits for the first and second
carbon budget periods are zero and 55 MtCO2e
(outside the EU ETS) respectively.
Policy savings
B2.17 The emissions projections take into account
the estimated impact of government policies and
proposals announced to date. Re-evaluations
of policies are made periodically and, where
appropriate, savings are adjusted and reflected in
the emissions projections. See box B2 overleaf for
details on appraisal methodology.
150 Annex B: Carbon budgets analytical annex
Box B2: Greenhouse gas appraisal guidance
Valuing energy use and GHGs is vital to ensure that the Government takes full account of climate
change and energy impacts when appraising and evaluating public policies and projects. In consultation
with analysts across government, the Department of Energy and Climate Change and HM Treasury
have jointly produced supplementary guidance to the HM Treasury Green Book that provides
government analysts with a set of rules for valuing energy use and emissions.30 The guidance helps the
appraisal and evaluation of proposals leading to an increase or reduction in energy use and/or GHG
emissions in the UK. It covers proposals that have a direct impact on energy use and supply and those
with an indirect impact through planning, construction, land use change or the introduction of new
products that use energy.
Moreover, it helps analysts to quantify the carbon impacts of their policies and to value significant
impacts using the revised carbon valuation methodology (July 2009),31 as required by the
revised Impact Assessment guidelines32 of the Better Regulation Executive (BRE). There is also a
complementary spreadsheet calculation ‘toolkit’ designed to convert increases or decreases in energy
consumption into changes in GHG emissions and to value the changes in both emissions and energy
use.33 This spreadsheet also contains the latest assumptions for carbon values, energy prices, long
run variable energy supply costs, emissions factors and air quality damage costs to be used in UK
policy appraisal.
Avoiding double counting of emissions savings
Monitoring overall progress against legislated carbon budgets requires precise and robust projections
of emissions savings from a package of policies and an assessment of their combined, aggregated
effectiveness.
The primary purpose of the aggregation is to show the total costs, benefits and impacts of the
package of policies and proposals to meet the carbon budgets. In this respect, it is important to
avoid the ‘double counting’ of energy and GHG emissions impacts when assessing the combined,
aggregated effectiveness of a package of policies. Emissions savings from policies have been
sequenced with respect to the following criteria: permanency; bindingness; cost effectiveness; timing
of implementation; and pragmatism. This means that emissions impacts vary from those set out
in individual Impact Assessments which analyse policies on a purely chronological basis in order to
identify the marginal impact of their introduction.
30
DECC and HM Treasury (2010) Valuation of Energy Use and Greenhouse Gas Emissions for Policy Appraisal and Valuation. Available at: www.decc.gov.uk/assets/
decc/statistics/analysis_group/122-valuationenergyuseggemissions.pdf
31
DECC (2009) Carbon Valuation in UK Policy Appraisal: A Revised Approach. Available at: www.decc.gov.uk/en/content/cms/emissions/valuation/valuation.aspx
32
See: www.berr.gov.uk/whatwedo/bre/index.html
33
See: www.decc.gov.uk/en/content/cms/about/ec_social_res/iag_guidance/iag_guidance.aspx
Annex B: Carbon budgets analytical annex 151
B2.20 This represents the net present value of the
Government’s current policy package that places
the UK on track to meet its first three carbon
budgets, reducing the UK’s net carbon account by
38% in 2020 versus 1990.
B2.18 As set out above, the Department of
Energy and Climate Change’s Updated Energy
and Emissions Projections indicate that current
policies are projected to over-achieve against the
first three carbon budgets and will continue to
deliver savings over the fourth carbon budget
(see chart B3 below). See tables B25 to B28 for
full details on the emissions savings delivered by
individual policies.
B2.21 In line with HM Treasury Green Book
guidance, the costs are presented as net present
values that reflect discounted societal costs and
benefits over the lifetime of the policy, some of
which may extend over six decades. The resource
costs of low carbon technologies are relative to the
cost of technologies that would have been installed
in the baseline counterfactual, i.e. without legislated
carbon budgets.
Aggregate costs of the current
policy package
B2.19 The total net present lifetime cost of the
current policy package is estimated at £9 billion
(excluding the value of GHG emissions savings
in the non-traded sector). Including the value of
GHG savings in the non-traded sector results in
the package delivering a net benefit, on central
estimates, of £45 billion.
B2.22 Table B5 sets out the net present cost of
delivering the emissions savings over the first three
carbon budgets. It excludes the value attributed to
the GHG emissions themselves.
Chart B3: Illustrative reduction in non-traded emissions by sector, 2008–27 (MtCO2e)34
380
Agriculture
Policy savings modelled from 2010
Industry
360
Commerical and
Public Services
Residential
340
Emissions (MtCO2e)
Transport
320
Non-traded emissions
projections
300
280
260
240
220
2027
2026
2025
2024
2023
2022
2021
2020
2019
2018
2017
2016
2015
2014
2013
2012
2011
2010
2009
2008
200
Year
34
Does not include indirect effects of policies. Only shows impact of non-traded savings additional to the baseline (Low Carbon Transition Plan
and newer policies).
152 Annex B: Carbon budgets analytical annex
Table B5: Net present value of policy by measure, excluding value of non-traded emissions
(£ million 2011)35
Policy
(positive = benefit)
Central fossil
fuel prices
Low fossil
fuel prices
High fossil
fuel prices
EU Emissions Trading
EU Emissions Trading System36
−3,290
n/a
Power and low carbon heat
Carbon Price Floor37
Carbon capture and storage demonstration
Carbon capture readiness
38
Large-scale electricity (Renewables Obligation (RO))40
−620
−6,250
4,260
−8,940
−9,710
−8,510
−6 to −80
n/a
39
−42,820
−67,450
Small-scale electricity Feed-in Tariffs (FiTs)
−3,370
n/a
Renewable Heat Incentive (RHI)41
−6,530
n/a
−62,280 to −62,350
n/a
Total
−33,130
Transport42
8% of transport fuel from renewable sources by 2020
−5
−320
110
10,780
2,510
16,850
−22,010
−35,430
−11,640
EU new van CO2 regulation
180
−2,690
2,060
Low carbon emissions buses
890
310
1,290
−4,060
−5,500
−3,230
Local Sustainable Transport Fund (LSTF)
1,480
1,650
1,580
HGV low rolling resistance tyres
1,100
640
1,300
Industry-led action to improve HGV efficiencies
1,710
910
2,140
Rail electrification
2,310
2,210
2,530
−7,640
−35,710
13,010
EU new car average fuel efficiency standards – CO2
mid-term target (130g CO2/km)
Additional impact of further new car efficiency
improvements to 95g/km
EU new car complementary measures
Total
35
Values have been rounded to the nearest £10 million.
36
The costs of the EU ETS are made up of the costs to UK installations of abatement incentivised by the carbon price, project credits purchased, EUA
allowances purchased, minus the revenues earned from the UK Government and installations selling allowances. The estimates shown in the table reflect
the costs over the period 2008–20 and include all UK (static) installations plus domestic aviation. In estimating these figures, the baseline excludes all policies
in and announced since the Low Carbon Transition Plan (LCTP) (2009). The choice of baseline is critical in determining the costs; use of a baseline which
included recently implemented policies would actually show a negative cost of the EU ETS, as the UK is expected to be a large net seller of allowances once
these policies have been introduced.
37
New policy since the Low Carbon Transition Plan.
38
There are no fossil fuel price sensitivities, as energy savings are not a significant component of the costs and benefits.
39
Range of costs reflects the varying complexities of projects, in particular variations in the cost of land.
40
An approximate adjustment has been made to the large-scale (mainly RO) net present values (NPVs) and costs per tonne of carbon saved to avoid doublecounting with the small-scale renewable electricity data also given in this table. This adjustment was made on the basis of estimated small-scale generation,
and does not take into account the generally higher unit costs of small-scale renewable electricity compared with large-scale renewable electricity. It is
therefore likely to slightly overestimate the large-scale (mainly RO) renewable electricity costs.
41
The RHI figures in this annex have not been updated to reflect the most recent changes to policy, Impact Assessment, including the change of large biomass
tariff as a result of EU ruling, meaning that they differ from the RHI IA published in Q4 2011.
42
Transport costs include technology costs associated with improved fuel efficiency and costs associated with the rebound effect (the additional kilometres
driven as the fuel cost of driving decreases with improved efficiency), including congestion, accidents, noise, infrastructure and air quality. Costs for rail
electrification include operating costs.
Annex B: Carbon budgets analytical annex 153
Table B5: Net present value of policy by measure, excluding value of non-traded emissions
(£ million 2011) (continued)
Policy
Central fossil
fuel prices
Low fossil
fuel prices
High fossil
fuel prices
Energy efficiency policies
Carbon Reduction Commitment
1,690
n/a
0
n/a
110
n/a
Climate Change Agreements (CCAs)
43
Community Energy Saving Programme44
Carbon Emissions Reduction Target (CERT)
12,970
8,780
21,140
CERT extension
6,950
3,960
11,940
Energy Company Obligation (ECO) and Domestic
Green Deal
1,897
−3,658
6,839
Non-Domestic Green Deal
1,320
530
1,900
Building Regulations 2010 Part L45
13,550
Zero Carbon Homes
−2,090
Smart Metering (households)46
−4,510
n/a
Smart Metering (small and medium-sized enterprises
(SMEs))47
−1,820
n/a
−830
n/a
11,080
n/a
Products Policy (Tranche 2)49
5,450
n/a
Carbon Trust
1,040
n/a
48,110
n/a
6,110
(6,410 to 4,890)52
n/a
Energy Performance of Buildings Directive48
Products Policy (Tranche 1)
50
Total
n/a
−2,510
−1,690
Agriculture
Voluntary Action Plan51 (England only)
Total53
−9 billion
−82 billion
45 billion
Source: Consolidation of individual policy cost benefit analysis, drawing on evidence from the Department for Transport, the Department for
Environment, Food and Rural Affairs and the Department for Communities and Local Government
43
Energy intensive business package in LCTP. Net costs have been re-estimated at zero, as CCAs are considered to not incentivise additional abatement
beyond the revised baseline.
44
Not updated since the LCTP.
45
This analysis is from the implementation stage of the Impact Assessment (www.communities.gov.uk/publications/planningandbuilding/partlf2010ia) and was
based on the December 2008 DECC/HMT GHG Appraisal Guidance. While energy and carbon values have been updated using values published in 2009,
these are not consistent with the 2011 values used in most of the policy assessments presented here. The Impact Assessment included benefits in its NPV
calculation from the avoided cost of renewables. This benefit has been removed in the numbers presented here for consistency with other policy NPVs.
46
All Smart Metering (household) figures in this document are based on the latest published Impact Assessment, available at: www.decc.gov.uk/assets/decc/11/
consultation/smart-metering-imp-prog/2549-smart-meter-rollout-domestic-ia-180811.pdf
47
All Smart Metering (SMEs) figures in this document are based on the latest published Impact Assessment, available at: www.decc.gov.uk/assets/decc/11/
consultation/smart-metering-imp-prog/2550-smip-rollout-small-and-med-non-dom.pdf
48
See: www.communities.gov.uk/archived/publications/planningandbuilding/regulatoryimpactenergyperformanc
49
New policy since the LCTP.
50
Carbon Future, Salix and Interest Free loans are not included.
51
No fossil fuel price sensitivities are included as energy savings are not a significant component of net costs.
52
There is sensitivity about non-GHG costs and benefits, given high uncertainties in this area.
53
Where figures from published Impact Assessments have been listed in the table, an adjustment factor has been applied in order to ensure that all policies
are incorporated into the total figure on a consistent basis.
154 Annex B: Carbon budgets analytical annex
B2.23 The full net present value of the policies
delivering emissions reductions in the nontraded sector are shown below – where GHG
reductions in the non-traded sector have been
valued using the Department of Energy and
Climate Change’s non-traded price of carbon, part
of the Government’s revised carbon valuation
methodology published in July 2009.54 Table B6
also shows the cost per tonne of GHG abatement
delivered.
Table B6: Net present value and cost effectiveness of non-traded sector policies by measure
(£ million 2011)55
Policy
(positive = benefit)
Net present value
(£ million)
Cost effectiveness
(£/tCO2e
non-traded)
820
0
14,310
−136
−13,870
118
EU new van CO2 regulations
1,440
−6
Low carbon emissions buses
1,430
−73
−2,380
108
Local Sustainable Transport Fund (LSTF)
1,810
−224
HGV low rolling resistance tyres
1,540
−110
Industry-led action to improve HGV efficiencies
2,330
−122
Rail electrification
2,880
−202
Renewable Heat Incentive (RHI)56
2,450
26
Carbon Reduction Commitment
2,750
−71
Climate Change Agreements (CCAs)57
n/a
n/a
Community Energy Saving Programme
170
−90
16,870
−163
CERT extension
9,830
−118
Energy Company Obligation (ECO) and Domestic Green Deal
6,430
−20
Non-Domestic Green Deal
2,140
−74
20,380
−74
−660
68
5,200
−304
Transport
8% of transport fuel from renewable sources by 2020
EU new car average fuel efficiency standards – CO2 mid-term target
(130gCO2/km)
Additional impact of further new car efficiency improvements to 95g/km
EU new car complementary measures
Energy efficiency policies
Carbon Emissions Reduction Target (CERT)
Building Regulations 2010 Part L
Zero Carbon Homes
Smart Metering (households)
58
54
See: www.decc.gov.uk/en/content/cms/what_we_do/lc_uk/valuation/valuation.aspx 55
Values have been rounded to the nearest £10 million.
56
See footnote 41.
57
See footnote 43.
58
All Smart Metering (household) figures in this document are based on the latest published Impact Assessment, available at: www.decc.gov.uk/assets/decc/11/
consultation/smart-metering-imp-prog/2549-smart-meter-rollout-domestic-ia-180811.pdf
Annex B: Carbon budgets analytical annex 155
Table B6: Net present value and cost effectiveness of non-traded sector policies by measure
(£ million 2011) (continued)
Policy
Net present value
(£ million)
Cost effectiveness
(£/tCO2e
non-traded)
Smart Metering (SMEs)59
2,280
−211
Energy Performance of Buildings Directive
−380
85
Products Policy (Tranche 1)
10,140
n/a
Products Policy (Tranche 2)
5,500
n/a
Carbon Trust60
1,240
−18161
7,570
−181
101 billion
–
Agriculture
Voluntary Action Plan (England only)
Total (non-traded sector only)
62
changes since the last assessment
B2.24 The Low Carbon Transition Plan (LCTP)63
in 2009 estimated the net cost of delivering the
first three carbon budgets at £28–34 billion (£2011
prices),64 significantly higher than the updated
estimate of £9 billion presented in this report.
This reduction in net costs is predominantly driven
by the inclusion of new policies since 2009 that
deliver significant net benefits. These include:
• Building Regulations 2010 Part L: The
Building Regulations typically apply at original
point of build, subsequent conversion and
renovation, and on replacement of specified
fixed components and systems. Part L of the
Building Regulations sets requirements for the
conservation of fuel and power on a technologyneutral basis, helping to encourage the take-up
and innovation of more energy efficient and
low carbon technologies. For more details on
Building Regulations, see the Planning Portal
website.65
• Products Policy extension (Tranche 2):
Tranche 2 refers to a number of minimum
energy efficiency standards that are in the
process of being agreed at European level that
will provide a stream of energy and emissions
savings and other related benefits. Examples of
items affected by these measures are household
and non-domestic ICT, household tumble
dryers, commercial refrigeration and nondomestic air conditioning.
• Voluntary Action Plan for agriculture: The
Voluntary Action Plan (VAP) is being taken
forward by the Climate Change Taskforce and is
an industry-led partnership that is working with
sector bodies and farmers to improve the GHG
performance of English agriculture. The VAP is
expected to deliver cost effective abatement
from English agriculture over the third and
fourth carbon budgets.
59
All Smart Metering (SMEs) figures in this document are based on the latest published Impact Assessment, available at: www.decc.gov.uk/assets/decc/11/
consultation/smart-metering-imp-prog/2550-smip-rollout-small-and-med-non-dom.pdf
60
Carbon Future, Salix and Interest Free loans are not included.
61
This refers to the lifetime impact of savings implemented in 2010/11 (latest data available).
62
Where figures from published Impact Assessments have been listed in the table, an adjustment factor has been applied in order to ensure that all policies
are incorporated into the total figure on a consistent basis.
63
DECC (2009) The UK Low Carbon Transition Plan. Available at: www.decc.gov.uk/en/content/cms/tackling/carbon_plan/lctp.aspx
64
A figure of £25–29 billion (£ 2009 prices) was published in the LCTP as the net cost of delivering the first three carbon budgets. The comparable present
value of the same policy package is £28–34 billion. This represents an increase of 14% and reflects two adjustments: a nominal cost increase of 6% from
2009 based on HM Treasury’s GDP deflator; and an uplift from 2009 present values of 7% based on the Green Book discount rate.
65
www.planningportal.gov.uk/buildingregulations/approveddocuments/partl/
156 Annex B: Carbon budgets analytical annex
• Non-Domestic Green Deal: As with the
Domestic Green Deal, this provides a finance
mechanism for investment in energy efficiency
measures with no upfront cost to the
consumer. Measures are paid for by charges
that are attached to energy bills. A supporting
regulation in the non-domestic private rented
sector would require buildings with an Energy
Performance Certificate (EPC) rating of G
or F to install cost effective energy efficiency
measures to move to an EPC rating of E.
B2.26 There have been a number of other
changes to modelling and cost–benefit analysis
that have affected the emissions savings and cost
estimates of policies, namely:
B2.25 The benefits from these policies have the
effect of offsetting increased costs elsewhere.
For example, improvements to the appraisal
methodology used for the Energy Company
Obligation (ECO) and Domestic Green Deal have
led to the inclusion of assessment, financing and
‘hassle’ costs.66 The monetisation of these costs and
new cost estimates for the measures themselves
have pushed up the cost figures. Chart B4 illustrates
some of the key changes to the net cost figures
since the estimates that were provided in the LCTP.
• there have also been revisions to input
assumptions in respect of individual sectors such as
transport. For instance, the analysis assumes that
biofuels will make up 8% of transport energy in
2020, rather than 10% as previously assumed. The
change of assumption is made for purely analytical
reasons and is not intended to pre-empt policy
decisions on biofuel use in road transport fuel
beyond 2014. It is consistent with the Committee
on Climate Change’s recommendation for biofuel
use in 2020. The change in modelling assumption
leads to lower savings from biofuel than have
previously been estimated.
• there have been a number of significant
updates to key input assumptions for policy
cost–benefit analysis (e.g. fossil fuel prices, GDP
growth assumptions) and, where possible, all
policies have been reappraised in line with these
updated assumptions; and
Chart B4: Changes to the total net present value of policy, excluding the value of non-traded
emissions, since the Low Carbon Transition Plan (£ million 2011)
Low Carbon Transition Plan cost range
Products policy (T2)
Building regs
Range due to
differing CCS
cost estimates
New policies
NonAgriculture
Domestic
VAP
Green Deal
Successors to CERT
Hassle costs
Revisions to transport policies
Revisions to other policies
Revised costs
–£30
66
–£20
–£10
£0
£10
£20
£30
£40
Revised methodology based on research commissioned by DECC in 2009 that highlighted the real and substantial time and financial costs associated with
domestic energy efficiency and carbon saving measures. These were excluded from the previous appraisal methodology. See ECOFYS (2009) The hidden
costs and benefits of domestic energy efficiency and carbon saving measures, ECOFYS, May 2009.
Annex B: Carbon budgets analytical annex 157
and measures above the horizontal axis indicate
costs to society.
P
B2.27 The policy marginal abatement cost
(MAC) curve set out in chart B5 provides a static
‘snapshot’ of the potential emissions reductions and
average costs in 2020 of government policies to
deliver the first three carbon budgets in the nontraded sector (each policy being represented by its
own bar).
B2.29 The cost effectiveness figure for each of
the policies represents the cost effectiveness of
the whole policy per tonne of abatement in the
non-traded sector. Where the policy has an impact
in the traded sector, the costs and benefits of
this impact are included in the cost effectiveness
calculation.
B2.28 MAC curves provide a useful tool for
comparing the cost effectiveness of policies by
ranking them in order of cost per tonne of CO2e
saved,67 such that measures below the horizontal
axis indicate negative costs or savings to society
B2.30 It must be remembered that MAC curves
are sensitive to input assumptions and that policies
reflected in them may not monetise all costs and
benefits associated with each policy. This will
inevitably result in the cost effectiveness of policies
changing as input assumptions change.
Chart B5: Non-traded emissions policy marginal abatement cost curve, 2020
120
100
80
60
40
Cost effectiveness (£/tCO2e)
20
MtCO2e
0
–20
0
2
4
6
8
10
12
14
16
18
20
22
24
26
28
30
32
34
36
38
40
42
44
46
–40
–60
–80
–100
–120
–140
–160
–180
–200
–220
–240
Key
0.0 – 0.5
0.5 – 0.7
0.7 – 0.7
0.7 – 3.9
3.9 – 9.4
9.4 – 12.2
12.2 – 12.7
12.7 – 16.7
16.7 – 17.4
17.4 – 17.5
17.5 – 18.3
67
Local Sustainable Transport Fund
Rail electrification
Carbon Trust
Agriculture Voluntary Action Plan
Carbon Emissions Reduction Target (CERT)
EU new car average fuel efficiency standards
(130 gCO2/km)
HGV technology measures
CERT extension
HGV low rolling resistance tyres
Community Energy Savings Programme
Non-Domestic Green Deal
18.3 – 22.2
22.2 – 22.5
22.5 – 23.9
23.9 – 25.1
25.1 – 25.7
25.7 – 30.0
30.0 – 40.0
40.0 – 40.4
40.4 – 40.7
40.7 – 42.2
42.2 – 45.8
Building Regulations 2010 part L
Low carbon emission buses
Carbon Reduction Commitment
Energy Company Obligation (ECO)
and Domestic Green Deal
EU new van CO2 regulation
8% transport fuel from renewable sources by 2020
Renewable Heat Incentive
Zero Carbon Homes
Energy Performance of Buildings Directive
EU new car complementary measures
Further new car efficiency improvements to 95 gCO2/km
Further information on the cost effectiveness methodology is available at: www.decc.gov.uk/en/content/cms/about/ec_social_res/iag_guidance/iag_guidance.aspx
158 Annex B: Carbon budgets analytical annex
B3. Potential for the fourth
carbon budget
Additional abatement potential
B3.1 As indicated above, on a net UK carbon
account basis, the shortfall to the fourth budget
of 1,950 MtCO2e is projected to be around 181
MtCO2e. This shortfall is in the non-traded sector, as
the UK’s traded sector emissions will be determined
by the EU Emissions Trading System cap.
B3.2 This means that additional effort beyond
current policy is required to meet the fourth
carbon budget. An economy-wide UK marginal
abatement cost (MAC) curve evidence base has
been developed to investigate potential sources of
additional abatement. It consolidates information
on abatement potential through various technology
measures over the fourth budget period, and the
associated cost effectiveness of these measures.
See box B3 for further information on the UK
MAC curves evidence base.
B3.3 Abatement opportunities have been
assessed by considering varying levels of abatement
potential over the period for each sector, and do
not consider the policy mechanisms through which
abatement could be delivered. Assumptions about
the feasible roll-out, emissions savings and costs of
these technologies have been made to produce
scenarios of potential abatement.
B3.4 The evidence base includes abatement
opportunities through energy efficiency measures
and low carbon heat technologies in the residential,
services and industry sectors; abatement
technologies in domestic and commercial
transport; and abatement opportunities in
agriculture. Although some consideration has been
given to further abatement potential through
small-scale electricity generation, and through
abatement in the land use, land use change,
forestry and waste sectors, scenarios of abatement
have not been assessed for these measures.
Box B3: UK MAC curves evidence base
The Government’s UK MAC curves evidence base contains information on the abatement potential,
cost and cost effectiveness of measures to reduce emissions over the fourth budget period. This
information was consolidated across a range of models and sources as set out below.
• Residentialenergyefficiencyinexistingbuildings
Scenarios for abatement potential in the domestic housing stock have been modelled in econometric
work supporting the Impact Assessment of the Green Deal consultation. Analysis incorporated
findings from consumer research to differentiate between abatement potential across different
segments of the domestic housing stock, and modelling reflected updated information on the
trajectories of supply capacity and costs.
• Servicesenergyefficiencyinexistingbuildings
Data from the Valuation Office Agency gives the number and rateable value of buildings by sector in
the year 2010, to a substantial level of disaggregation. The scale of abatement potential from Green
Deal eligible measures is estimated using the National Non-Domestic Buildings Energy and Emissions
Model (N-DEEM), together with technology penetration rates as estimated by consultants Element
Energy. This potential is then adjusted for take-up brought about by other, non-Green Deal policies,
based on projected policy savings that are derived from the Department of Energy and Climate
Change energy model. A decision tree is used to determine the process of moving towards a decision
to take out a Green Deal.
Annex B: Carbon budgets analytical annex 159
Box B3: UK MAC curves evidence base (continued)
A review and update of the evidence base on non-domestic energy efficiency is planned. An initial
pilot to determine an appropriate methodology, using the food and mixed retail sector as a test case,
should be complete in spring 2012. A full economy-wide study may be launched shortly afterwards.
• Servicesandresidentialenergyefficiencyinnewbuildings
The cost effectiveness information for new buildings is based on evidence published in the
Implementation Stage Impact Assessment of revisions to Part L of the Building Regulations, published in
March 2010.68
• Industrialprocessefficiencyandcarboncaptureandstorage(CCS)
Abatement potential from industrial processes and further energy efficiency improvements has been
derived from four principal sources:
• The Energy End-Use Simulation Model (ENUSIM) is a technology based, bottom-up industrial
energy end-use simulation model which projects the uptake of energy-saving and/or fuel-switching
technologies taking into account the cost effectiveness of technology options under future carbon
and fossil fuel prices.69
• Further detail on future abatement potential has been derived from work undertaken by AEA
Technology. The major sources of abatement covered within this work focus on six major sectors:
cement, refineries, glass, chemicals, food and drink, and iron and steel.70
• The Department of Energy and Climate Change commissioned further analysis to assess abatement
potential beyond that considered in the AEA work. This project is based on top-down energy and
abatement projections for 17 wider groups of manufacturing.
• In addition, the Department of Energy and Climate Change has undertaken further modelling analysis
to estimate abatement from the uptake of low carbon heat and the initial deployment of CCS.71
• Lowcarbonheatinresidential,servicesandindustry
Scenarios for low carbon heat have been modelled using the detailed cost effectiveness model
developed for the Committee on Climate Change by consultants NERA and AEA. This model looks
at the potential for low carbon heat technologies to replace fossil fuel use up to 2030. The model
has drawn upon and extended the evidence base used for previous low carbon heat modelling in
the Department of Energy and Climate Change, and includes technology assumptions and input data
that have been extended to 2030. Additional technologies have been incorporated to reflect a wider
range of possible future developments (e.g. synthetic biogas from the gasification of biomass, and heat
pumps with heat storage that can shift electricity load profiles).
68
See: www.communities.gov.uk/publications/planningandbuilding/partlf2010ia
69
See: http://downloads.theccc.org.uk/AEAUpdateofUKabatementtCh6.pdf
70
See: www.aeat.com/cms/assets/Documents/Final-Report-CCC.pdf
71
Element Energy (2010) Potential for the Application of CCS to UK Industry and Natural Gas Power Generation, Report for the Committee on Climate Change,
Final Report, Issue 3.
160 Annex B: Carbon budgets analytical annex
Box B3: UK MAC curves evidence base (continued)
• Transport
Scenarios for transport abatement potential in the 2020s have been developed reflecting research
and evidence on possible uptake rates and the costs for new technologies; and through consultation
with industry.
The Department for Transport’s National Transport Model (NTM) has been used to assess the
emissions savings that the measures could deliver, with off-model adjustments made to reflect the
impact of an illustrative technology mix of plug-in vehicles. The NTM also provides the changes in
vehicle kilometres driven; fuel consumption; air quality and congestion associated with the measures
and that are used in the cost–benefit analysis of the measures.
• Agriculture
There is considerable uncertainty over estimates of emissions from the agricultural sector due to the
complex nature of the biological systems that are the source of greenhouse gas emissions from the
sector. External research, based on detailed assessment of on-farm measures, has, however, identified
cost effective abatement potential from the sector – i.e. it reduces farmer costs.72 The voluntary
action plan being taken forward by industry is expected to deliver annual savings of around 3 MtCO2e
from English agriculture by 2020. These are expected to be delivered from measures that improve
crop nutrient, livestock breeding, feeding and manure management practices.
The Department for Environment, Food and Rural Affairs, in collaboration with the Devolved
Administrations, has an extensive research programme that will help to deliver an improved
agricultural inventory. This research will help to reduce the uncertainties over the current inventory
and potentially support identification of further mitigation potential from the sector.
B3.5 To assess potential abatement it is necessary
to project emissions forward, making assumptions
about the level and source of emissions, and
the possible abatement technologies available.
There is significant uncertainty around the level
of emissions and abatement potential available
owing, among other things, to uncertainties
over how technologies may develop, as well as
public acceptance of new technologies. Further
information on uncertainty in the analysis of
marginal abatement costs is set out in the Impact
Assessment of Fourth Carbon Budget Level.73
B3.6 This uncertainty will also affect the anticipated
achievement, costs and cost effectiveness associated
with the measures installed. The analysis in this
report represents a best estimate of the impacts
of measures under central assumptions about
underlying fundamentals, such as fossil fuel prices,
GDP growth and technology cost assumptions.
If these fundamentals change significantly, the
emissions impact, costs and cost effectiveness
associated with abatement measures could be
significantly different.
72
Scottish Agricultural College (2010) Review and Update of UK Marginal Abatement Cost Curves for Agriculture.
73
DECC (2011) Impact Assessment of Fourth Carbon Budget Level. Available at: www.decc.gov.uk/assets/decc/what%20we%20do/a%20low%20carbon%20uk/
carbon%20budgets/1685-ia-fourth-carbon-budget-level.pdf
Annex B: Carbon budgets analytical annex 161
B3.7 The ranges of abatement potential have been
assessed accounting for potential overlaps and
interdependencies between technology measures.
As such, the traded and non-traded sector
scenarios are consistent with one another and with
the Updated Energy and Emissions Projections
baseline published in October 2011.74
B3.8 Tables B7 and B8 below set out the range
of abatement potential identified for the traded
and non-traded sectors (abatement potential
in the power sector is considered separately
below). These ranges are illustrative, and reflect
a judgement on feasible abatement potential
in each sector.
Table B7: Range of additional potential abatement in the non-traded sector, 2023–27 (MtCO2e)
Ambition
2023
2024
2025
2026
2027
Total
Agriculture
–
1.9
3.0
4.0
4.0
4.0
16.9
Residential new build
–
0.4
0.4
0.5
0.5
0.5
2.4
High
3.2
4.0
4.2
4.2
4.3
19.9
Low
1.2
1.5
1.6
1.6
1.6
7.6
Low carbon heat
(business)
High
1.7
2.2
2.7
3.2
3.7
13.6
Low
0.7
0.9
1.1
1.2
1.4
5.3
Low carbon heat
(industry)
High
3.6
4.6
5.7
6.9
8.0
28.9
Low
1.2
1.6
2.0
4.9
5.5
15.3
Low carbon heat (public)
High
1.0
1.3
1.6
1.9
2.2
8.0
Low
0.5
0.6
0.7
0.9
1.0
3.7
Low carbon heat
(residential)
High
4.2
6.0
8.0
10.1
12.3
40.7
Low
0.8
0.9
1.1
1.2
1.3
5.3
Residential retrofit
High
0.5
1.0
1.4
1.9
2.4
7.2
Low
0.1
0.3
0.4
0.5
0.6
1.9
High
0.1
0.1
0.1
0.1
0.1
0.5
Low
0.1
0.1
0.1
0.1
0.1
0.3
High
1.2
1.1
1.1
1.1
1.2
5.7
Low
0.7
0.6
0.6
0.6
0.7
3.2
High
12.5
14.2
16.1
18.0
20.0
80.8
Low
4.9
5.1
5.6
6.0
6.4
28.0
High
30.2
38.0
45.5
52.0
58.7
224.3
Low
12.5
15.0
17.6
21.5
23.3
89.9
Industrial processes
Services new build
Services retrofit
Transport
Total
74
DECC (2011) Updated Energy and Emissions Projections. Available at: www.decc.gov.uk/assets/decc/11/about-us/economics-social-research/3134-updated­
energy-and-emissions-projections-october.pdf
162 Annex B: Carbon budgets analytical annex
Table B8: Range of additional potential abatement in the traded sector (excluding power sector,
2023–27) (MtCO2e)
Ambition
2023
2024
2025
2026
2027
Total
High
6.0
7.4
7.5
7.7
7.9
36.5
Low
3.9
4.8
4.9
5.2
5.6
24.5
Low carbon heat
(industry)
High
3.5
4.1
4.7
6.7
7.4
26.3
Low
2.3
2.6
2.8
3.2
4.9
15.7
Total
High
9.5
11.5
12.1
14.4
15.3
62.8
Low
6.2
7.4
7.8
8.4
10.5
40.2
Industrial processes
Abatement potential in the power
sector
B3.9 In the power sector, analysis for the fourth
carbon budget is based on the ongoing Electricity
Market Reform (EMR) programme, which aims to
undertake fundamental reforms to the electricity
market. The section on ‘Secure, low carbon
electricity’ in Part 2 of the main report provides
further details on the programme.
B3.10 The quantitative analysis that informed
the EMR White Paper and accompanying Impact
Assessment (IA)75 was undertaken using a dynamic
model of the British electricity market, developed
by consultants Redpoint Energy. This model
simulates how investment decisions are made, and
the results provide an illustrative narrative to the
potential impacts of the options examined.
B3.11 Since the publication of the EMR White
Paper and IA, the Department of Energy and
Climate Change has updated its projections of
fossil fuel and carbon prices, technology costs and
electricity demand. The EMR White Paper analysis
was modelled to meet a decarbonisation ambition
of 100 gCO2/kilowatt hour (kWh) in 2030.
A sensitivity of 50 gCO2/kWh was also examined.
While these aspects remain unchanged, it was
also assumed that renewables would increase to
a 35% share of generation by 2030 to drive the
decarbonisation ambition. The revised approach
does not impose a specific renewables target
but assumes that low carbon technologies are
deployed on the basis of least cost to achieve that
illustrative decarbonisation ambition. In light of the
revisions to input assumptions and methodology,
the analysis underpinning the lead EMR package,
i.e. Feed-in Tariffs with Contracts for Difference
(FiT CfD, or CfD) with a capacity mechanism,
has been updated.
B3.12 The updated analysis shows that a baseline
without the EMR has more new gas-fired power
stations owing to favourable conditions on
profitability for gas-fired compared with coal-fired
generation. In addition, a significant percentage
of existing coal plant retires (around 2020), the
majority of which is also replaced by new gas
plants. Moreover, the modelling suggests that the
first nuclear plant becomes operational in 2027,
with three more new nuclear plants being built
by 2030.76 Renewables capacity to 2030 remains
around a similar level to that presented in the EMR
White Paper. Under this baseline scenario, the
carbon intensity of the power generation sector
is 216.74 gCO2/kWh in 2020, which then falls to
165.96 gCO2/kWh in 2030 as a result of increased
generation from new nuclear, carbon capture and
storage (CCS) and wind.
75
See: www.decc.gov.uk/en/content/cms/legislation/white_papers/emr_wp_2011/emr_wp_2011.aspx
76
The results reported here differ from those reported in the Department of Energy and Climate Change latest published Updated Energy and Emissions
Projections (www.decc.gov.uk/en/content/cms/about/ec_social_res/analytic_projs/en_emis_projs/en_emis_projs.aspx). This is because the Department
of Energy and Climate Change emissions model differs from the Redpoint Energy model in the assumptions about how electricity producers behave. In
the Department of Energy and Climate Change model, producers behave as if they know what future demand and prices will be (i.e. the model assumes
perfect foresight). The model used for EMR analysis takes account of the impact of uncertainty about future returns on decisions made under current
market arrangements.
Annex B: Carbon budgets analytical annex 163
B3.13 As mentioned earlier, the lead EMR
proposal was for a FiT CfD with a capacity
mechanism (strategic reserve (SR) or capacity
market (CM) – the choice to be finalised). The
package is also to be implemented alongside an
Emissions Performance Standard (EPS).
B3.14 Meeting a decarbonisation ambition of
100 gCO2/kWh in 2030 with these mechanisms
results in more low carbon generation than in the
baseline, in the form of new nuclear and biomass,
owing to the levels of financial support provided
through FiT CfDs. Over the fourth carbon budget
period (2023–27) this scenario would reduce UK
territorial emissions by around 120 MtCO2 relative
to the baseline without EMR.
Decarbonisation with 50 gCO2/kWh
ambitions
B3.15 This sensitivity is an update to that in the
EMR White Paper and examines the implications
of following a more stringent decarbonisation
pathway on the CfD with SR package.
B3.16 The results show that a more stringent
decarbonisation pathway would lead to greater
amounts of low carbon generation being
incentivised through the CfD mechanism.
With central electricity demand assumptions,
investment in new nuclear is the same as under
the CfD with SR package and is constrained by
assumptions related to nuclear plant build rates.
However, under this sensitivity there is significant
investment in new CCS capacity as well as greater
investment in wind and biomass. The introduction
of such large quantities of low carbon generation
(towards the mid to late 2020s) allows the carbon
intensity of the power generation sector to drop
to 50 gCO2/kWh in 2030, compared with 223
gCO2/kWh in 2020. Over the fourth carbon
budget period (2023–27) this scenario would
reduce UK territorial emissions by an additional
40 MtCO2 relative to the 100 gCO2/kWh pathway.
overview of abatement potential
across the economy
B3.17 A consolidated assessment of the additional
abatement potential beyond 2022 indicates that
there is sufficient abatement potential to meet the
fourth carbon budget. Charts B6 and B7 reflect
the highest levels of abatement potential identified
in the non-traded and traded sectors.
164 Annex B: Carbon budgets analytical annex
Chart B6: Total potential abatement identified in the non-traded sector, 2023–27 (MtCO2e)
1,447
17
(–1.7%)
49
(–3.4%)
329
50
(–3.5%)
1,260
(–12.6%)*
1,223
(–15.6%)
81
(–5.6%)
28
(–1.9%)
55
279
141
28
92
519
438
45
254
45
Residential
Off road
Services
Land use change
Industry
Total Non-CO2
337
Transport
–3
–3
Baseline
*Percentage reduction from baseline
Final
emissions
Target
Chart B7: Total potential abatement identified in the traded sector, 2023–27 (MtCO2e)
766
690
(–9.9%)*
63
(–8.2%)
354
126
(–16.4%)
578
(–24.6%)
228
92
9
92
9
297
14
Baseline
Power stations
Industry
Refineries
Other transport
Services
Total non-CO2
Industry
*Percentage reduction from baseline
Power stations
234
14
Final emissions
Target
Annex B: Carbon budgets analytical annex 165
B3.19 Chart B8 reflects all the abatement potential
identified in the non-traded sector compared
against the weighted average discounted (WAD)
carbon price of £43/tCO2e. See box B4 for an
explanation of this metric. Chart B8 also shows
the marginal abatement cost (MAC) associated
with the identified abatement measures, but has
several limitations, which are highlighted in box B5.
These limitations have been accounted for in the
development of the carbon budget scenarios.
C
B3.18 The Government’s approach to meeting
the fourth carbon budget aims to ensure that
we can manage the low carbon transition cost
effectively. In order to do so, it has been necessary
to consider a wide range of factors that will
influence the total cost.
Chart B8: Marginal abatement cost curve of the total potential abatement identified in the
non-traded sector, 2023–27 (MtCO2e)
700
600
500
400
Cost-effectiveness (£/tCO2e)
300
200
100
43
0
−100
0
20
40
60
80
100
120
140
160
180
200
220
−200
−300
−400
−500
−600
−2,400
240
MtCO2e
Residential retrofit
Residential new build
Low carbon heat (business)
Transport
Low carbon heat (residential)
Industrial process
Services retrofit
Low carbon heat (public)
Agriculture
Services new build
Low carbon heat (industry)
166 Annex B: Carbon budgets analytical annex
Box B4: Weighted average discounted (WAD) cost of carbon
The WAD cost of carbon is designed to provide a single carbon value that is reflective of the value
of all the greenhouse gas emissions saved by a package of abatement. It is calculated using the
Government’s standard carbon valuation methodology, in which all emissions savings are valued at
the carbon price relevant to the year in which they are realised, and then discounted to get a present
value figure. This aggregate value for the present value of emissions saved is then divided by the total
number of emissions saved to get the relevant WAD cost of carbon. The cost is weighted, because
more weight is effectively given to years in which emissions savings are larger. Consequently, two
abatement measures that save the same amount of emissions, but at different times, will have different
WAD costs of carbon to reflect the different value of carbon when the savings are expected to be
realised. The £43/tCO2e noted above is the WAD cost of carbon in the non-traded sector discounted
to 2011 for each of the non-traded sector scenarios. It can be compared with the cost per tonne
saved in order to determine whether or not the scenario package as a whole is cost effective.
Box B5: Limitations of marginal abatement cost (MAC) analysis
While MAC analysis is a useful tool, it does have a number of limitations and needs to be used
appropriately.
Cost effectiveness estimates may not reflect non-monetised impacts of abatement opportunities, such
as impacts on competitiveness, distributional impacts and impacts on other environmental and social
considerations.
The lack of granularity in the analysis may misrepresent individual increments and measures; for
example, a relatively cost ineffective block of abatement could include a mix of measures that are cost
effective and cost ineffective.
There may be a substantial difference between the costs identified in this analysis, and the policy costs
required to deliver this potential for some measures. For example, negative cost abatement measures
identified in this analysis are not always fully taken up without policy and government intervention.
This may result in costs increasing substantially.
MAC curves are limited in portraying the range of uncertainty surrounding abatement potential
and cost effectiveness. There are considerable uncertainties over the development of technologies
and their associated costs so far into the future, as well as uncertainties around other key factors
such as fossil fuel prices. The estimated abatement potential and cost effectiveness presented in this
document are best estimates and are based on assumptions about technology uptake rates and costs
that may need to be revised in future. While every attempt has been made to be comprehensive in
this analysis, some technical options and savings may be omitted, for example potential opportunities
for emissions abatement through forestry, savings from improved landfill methane capture rates and
demand reduction measures.
Annex B: Carbon budgets analytical annex 167
B3.20 In addition to these limitations, MAC curve
analysis suffers from an inability to account for the
dynamic impact of different abatement options.
The cost of each measure is a single number
and cannot reflect how the cost of different
technologies is likely to evolve with different levels
of take-up over time. It is also limited in reflecting
interdependencies across measures, both within
and across different sectors.
B3.21 MAC curves also fail to account for the
lead-in time necessary to implement various
technologies or measures and so are limited
in informing decisions on the optimal timing
of different abatement options. In considering
levels of action in the period 2023–27 therefore,
government needs to combine information
from static comparisons of cost effectiveness
with a consideration of the dynamic cost
efficiency of different implementation timescales.
Fundamentally, it must consider how the timing
and scale of implementation affects the evolution
of costs, and ensure that sufficient cost effective
abatement is made available in future decades to
meets its 2050 target.
B3.22 Investment in the research, development
and demonstration of emerging low carbon
technologies is likely to be crucial in ensuring the
availability of key technologies, such as carbon
capture and storage. It is also important in
developing new, enabling technologies, such as in
heat and electricity storage, and for bringing down
the costs of low carbon technologies that reach
the deployment stage. As well as incentivising
early-stage investment, market-pull policies can
enable/accelerate deployment and dramatically
bring down the costs of emerging technologies.
This suggests that there is a case for pushing the
development and deployment of technologies
before they are considered statically cost effective
(i.e. cost effective in a given year). The rationale for
this is that by doing so, the costs of the technology
could be reduced in future periods through
77
learning-by-doing or induced innovation, and that
their availability could be increased through the
development of the supply chain.
B3.23 This approach could apply to a range of
critical technologies, for instance heat pumps and
low carbon vehicles. Additionally, although some
relatively low carbon technologies may be useful
for decarbonising over the next few decades, they
may not satisfy longer-term abatement needs in a
least-cost pathway to 2050.
B3.24 Uncertainty over the future structure of
the economy, future technology costs, technical
performance and dynamic interactions within the
economy make it difficult to determine today a
least-cost/maximum-benefit pathway to 2050.
Consequently, it may be beneficial to adopt a
diverse range of measures in order to mitigate
the risk that some of these currently immature
technologies do not work as expected or that
viable alternative/substitute technologies become
available in the future. This approach is advocated
by the Committee on Climate Change and cited
in their recommendations in chapter 3 of their
report,77 where they emphasise the importance
of flexibility and of keeping a range of abatement
scenarios in play. The option value of a diverse
range of measures has to be balanced against the
cost of developing more solutions and the risk
of diverting resources from the right technology
families to the wrong technology families on the
basis of flawed information.
B3.25 In light of these factors, government has
sought to develop options that meet the fourth
carbon budget cost effectively while still leaving
open probable least-cost options to meet the 2050
target. This additional constraint can suggest the
need to use abatement measures that might not
be cost effective considering the fourth carbon
budget target alone, but should nevertheless
support a more efficient transition to the
2050 goal.
Committee on Climate Change (2010) The Fourth Carbon Budget: Reducing emissions through the 2020s. Available at: www.theccc.org.uk/reports/fourth­
carbon-budget
168 Annex B: Carbon budgets analytical annex
scenarios to deliver the fourth
carbon budget
B3.26 Part 3 of the main report set out
illustrative scenarios for how the additional
emissions reductions to meet the fourth carbon
budget could be delivered. These scenarios were
developed using evidence on the abatement
potential and cost effectiveness identified and with
regard to the Government’s desire to encourage a
portfolio of technologies. Consequently, the fourth
carbon budget scenarios have been developed
taking into account a number of factors:
• static cost effectiveness – comparing the
estimated cost of a measure with the forecast
carbon price for the same time period;
• dynamic cost effectiveness – considering what
action needs to be taken in the fourth budget
period to be on track to meet the 2050 target
in the most cost effective way;
• technical feasibility – taking account of likely
technological development and necessary build
rates; and
• practical deliverability and public acceptability –
considering potential barriers to delivery.
B3.27 These illustrative scenarios focus on the
sectors that are key to achieving the 2050 target
in a cost effective way and offer the greatest
potential for emissions reductions over the fourth
carbon budget period, although these scenarios
do not directly link to any specific 2050 future set
out in Part 1. This section provides detail on the
composition of these scenarios in the non-traded
and traded sectors separately before considering
the cross-economy implications and wider impacts
of the different scenarios.
Delivering emissions reductions in the
non-traded sector
B3.28 The four scenarios for the non-traded
sector illustrate different ways in which emissions
could be reduced to 1,260 MtCO2e, the level
of emissions required in the non-traded sector
over the fourth carbon budget period to meet
the overall 1,950 MtCO2e level. Chart B9 shows
greenhouse gas emissions under each scenario and
the contribution from different sectors.
Annex B: Carbon budgets analytical annex 169
Chart B9: Aggregate non-traded emissions under the illustrative scenarios to meet the fourth
carbon budget, 2023–27
1,600
1,400
1,345 territorial
emissions –
85 credit
purchase = 1,260
1,441
1,253
1,248
1,249
Scenario 2
Scenario 3
1,200
MtCO2e
1,000
800
600
400
200
0
−200
Baseline
Scenario 1
Residential
Services
Industry
Road transport
Off-road
Other transport
Credit purchase
Land use change
Target
Agriculture
Other non-CO2
Scenario 1: High abatement in low carbon heat
B3.29 Under this scenario, emissions over the
fourth carbon budget period would be reduced
Scenario 4
to 1,253 MtCO2e in the non-traded sector. The
table below summarises the key components of
this scenario.
Table B9: Expected activity under illustrative Scenario 1
Sector
Expected activity
Buildings
• 3.7 million solid walls insulated over the period 2023–30
• 8.6 million low carbon heat installations in total by 2030, delivering around 165.5 terawatt hours (TWh)
of low carbon heat and a further 38.6 TWh from district heating
Transport
• Average new car emissions = 60 gCO2/km in 2030
• Average new van emissions = 90 gCO2/km in 2030
• 8% biofuel, by energy
• 5% heavy goods vehicle (HGV) efficiency improvement over five years
Industry
• All ‘realistic’ and some further cost effective measures, including whole-refinery optimisation in the
refineries sub-sector, clinker substitution in the cement sector and increased recycling in iron and steel
• Committee on Climate Change’s central scenario of industrial carbon capture and storage
• 44,000 additional low carbon heat installations in industry by 2030, delivering around 95 TWh of low
carbon heat in industry
Agriculture
• On-farm measures such as improved management of nutrients (excluding introducing new species),
improved soil drainage, anaerobic digestion, livestock breeding and livestock diet and health measures
• Woodland creation rates across the UK are assumed to increase, maintaining the sector as a sink and
providing about 1 MtCO2e abatement in the fourth budget period over and above current planting rates
170 Annex B: Carbon budgets analytical annex
Detail
B3.30 This scenario envisages very significant levels
of low carbon heat in buildings and significant
improvements in the thermal efficiency of
buildings. For example, we might need as much
as 166.5 TWh of low carbon heat from more
than 8.6 million low carbon heat installations by
2030 (cumulative total, including low carbon heat
delivered prior to the fourth carbon budget). The
majority of these installations are likely to be heat
pumps, with low carbon heat also coming from
biomass boilers. District heating will contribute a
further 38.6 TWh.
B3.31 In terms of thermal efficiency, this scenario
assumes that most cavity and loft insulations
have been completed by 2020. It also assumes
that a high number of properties with solid walls
(as opposed to cavity walls) are insulated, with
3.7 million insulations being carried out by 2030, in
addition to the up to 1.5 million by 2020 that we
expect from current policy. Elsewhere in buildings,
it is assumed that the zero carbon homes standard
is met in 2016 and 2019 for the residential and
business sectors respectively. In the business sector,
cost effective energy efficiency improvements are
made to buildings. This scenario also envisages
high ambition on low carbon heat in industry,
mostly from biomass boilers and the use of biogas
for combustion.
B3.32 In the transport sector, this scenario
assumes that average new car emissions (including
conventional combustion engine cars as well as
ultra-low emission cars such as battery electric,
plug in hybrid and fuel cell electric vehicles)
improve to 60 gCO2/km by 2030 and average
new van emissions (again, including conventional
vans and ultra-low emission vans) improve to
90 gCO2/km by 2030. This could be delivered
through different mixes of conventional vehicles
and ultra-low emission vehicles, such as electric,
plug-in hybrid and even hydrogen vehicles. The
analysis considers an illustrative technology mix
where emissions from conventional cars and
vans improve to 80 gCO2/km and 120 gCO2/km
78
respectively, and 40% of new cars and vans sold
are battery electric, range extended electric or
plug-in hybrid vehicles in 2030.78
B3.33 This scenario assumes that the proportion
of biofuels by energy in the road transport sector
remains at 8% through the 2020s. This might
reflect a situation where sustainability concerns
are not resolved, or where there is relatively little
innovation in new feedstocks, or where there is
greater uptake of bioenergy in other sectors.
B3.34 Elsewhere in transport, this scenario
assumes continuing improvement in HGV
efficiencies (a cumulative 5% improvement over
each five-year period between 2016 and 2030). It
assumes a 2% reduction in car trips in urban areas
owing to either continued funding of sustainable
travel measures or no diminution of the impacts
of the Local Sustainable Transport Fund, as
assumed in the baseline for the fourth carbon
budget analysis.
B3.35 In addition to the low carbon heat measures
mentioned in the summary table, this scenario
assumes some initial uptake of carbon capture
and storage in industry and energy efficiency
improvements such as clinker substitution in
cement, elimination of flaring in refineries,
reduction in energy consumption during the
melting process in glass furnaces, nitrous oxide
reduction from nitric acid production in the
chemicals sector, increased recycling of steel in the
steel sector, and some additional savings through
switching to electric arc furnaces.
B3.36 In agriculture we have assumed the
take-up of measures such as improved nutrient
management (excluding introducing new species),
improved soil drainage, anaerobic digestion,
improved livestock breeding, and diet and health
measures. In forestry, woodland creation rates
across the UK are assumed to increase, maintaining
the sector as a sink and providing about 1 MtCO2e
abatement in the fourth budget period over and
above current planting rates.
There is currently insufficient evidence to include fuel cell vehicles explicitly in the modelling of the illustrative technology mix.
Annex B: Carbon budgets analytical annex 171
Scenario 2: High abatement in transport
and bioenergy demand
B3.37 Under this scenario, emissions over the
fourth carbon budget period would be reduced to
1,248 MtCO2e in the non-traded sector.
Table B10: Expected activity under illustrative Scenario 2
Sector
Expected activity
Buildings
• 3.7 million solid walls insulated over the period 2023–30
• Around 7.2 million low carbon heat installations in total by 2030, delivering around 138.0 TWh of
low carbon heat and a further 9.6 TWh from district heating
Transport
• Average new car emissions = 50 gCO2/km
• Average new van emissions = 75 gCO2/km
• 10% biofuel, by energy
• 8% HGV efficiency improvement over five years
Industry
As Scenario 1
Agriculture
As Scenario 1
Detail
B3.38 This scenario sees a high uptake of home
insulation (specifically solid wall insulation), owing
to high consumer acceptance (e.g. hassle factors
regarding solid wall insulation are limited), strong
policy drivers (e.g. attractive long-term financing
options for domestic retrofit) and strong
exogenous drivers (e.g. high energy prices). But
this scenario illustrates a situation where specific
barriers to the uptake of low carbon heat
installations are encountered, resulting in a lower
number of heat pumps and lower biomass use
in buildings than in Scenario 1. The high use of
biomass in industry, however, suggests that this is
a cost effective use of bioenergy resource in this
scenario.
B3.39 This scenario assumes around 138 TWh
of low carbon heat from around 7.2 million low
carbon heat installations in buildings by 2030
(cumulative total, including low carbon heat
delivered prior to the fourth carbon budget).
A further 9.6 TWh is provided by district heating.
The same level of ambition in non-domestic
retrofit measures, and domestic and non-domestic
new build, as in Scenario 1 is assumed.
B3.40 To still be able to meet the fourth
carbon budget under this scenario, greater fuel
efficiency improvements in road transport would
be required relative to Scenario 1. Scenario 2
therefore assumes that average new car emmisions
(including conventional combustion engine cars as
well as ultra-low emission cars such as electric and
plug-in hybrid vehicles) improve to 50 gCO2/km,
and average new van emissions (again, including
conventional vans and ultra-low emission vans)
improve to 75 gCO2/km. As in Scenario 1, this
could be delivered through different mixes of
conventional vehicles and ultra-low emission
vehicles such as battery electric, range extended
electric, plug-in hybrid vehicles and even hydrogen
vehicles. The analysis assumes an illustrative
technology mix where the emisssions from
conventional cars and vans fall to 80 gCO2/km and
120 gCO2/km respectively, as in Scenario 1, with
battery electric, range extended electric and plugin hybrid vehicles making up 50% of new car and
van sales (compared with 40% in Scenario 1).
B3.41 This scenario assumes that the proportion
of biofuels by energy in road transport increases
from 8% in 2020 to 10% by 2030. Elsewhere
in transport, this scenario assumes that HGV
172 Annex B: Carbon budgets analytical annex
efficiency improves by a cumulative 8% over each
five-year period between 2016 and 2030. It also
assumes that rail electrification is extended to the
Midland Mainline and the Welsh Valleys. There
is a 5% reduction in urban car trips, which might
be seen if additional funding of sustainable travel
measures leads to, for example, learning benefits
across local authority borders.
B3.42 As this scenario envisages high ambition in
transport biofuels, as well as significant biomass
use in industry, it could be considered as a high
bioenergy demand scenario and gives a sense of
what the maximum demand implications might be.
This might reflect constraints around sustainability
being overcome and technological innovation
that make more advanced feedstocks viable.
See paragraphs B4.42–B4.49 of this annex for an
assessment of the sustainability of bioenergy supply
under the fourth carbon budget scenarios.
Scenario 3: Focus on high electrification
B3.43 Under this scenario, emissions over the
fourth carbon budget period would be reduced to
1,249 MtCO2e in the non-traded sector.
Table B11: Expected activity under illustrative Scenario 3
Sector
Expected activity
Buildings
• 1 million solid walls insulated over the period 2023–30
• 8.6 million low carbon heat installations in total by 2030, delivering around 165.5 TWh of low carbon heat
and a further 38.6 TWh from district heating
Transport
• Average new car emissions = 50 gCO2/km
• Average new van emissions = 75 gCO2/km
• 10% biofuel, by energy
• 8% HGV efficiency improvement over five years
Industry
• All ‘realistic’ and some further cost effective measures, including whole-refinery optimisation in the
refineries sub-sector, clinker substitution in the cement sector and increased recycling in iron and steel
• Committee on Climate Change’s central scenario of industrial carbon capture and storage
• 22 ,000 additional low carbon heat installations in industry by 2030, delivering around 42 TWh of low
carbon heat in industry
Agriculture
As Scenario 1
Annex B: Carbon budgets analytical annex 173
Detail
B3.44 In low carbon heat the level of ambition
in Scenario 1 (8.6 million low carbon heat
installations, delivering 165.5 TWh of low carbon
heat in buildings by 2030) is assumed. In transport
the level of ambition in Scenario 2, 50 gCO2/km
average new car emissions is assumed. Depending
on the mix of conventional and ultra-low emission
cars in the fleet, this could be delivered by up
to 50% of new car and van sales being battery
electric or plug-in hybrids.
B3.45 This scenario assumes a lower level of
ambition on residential sector retrofit (solid wall
insulations) than previous scenarios. This might
reflect specific consumer barriers to taking up
insulation of solid walls, such as a lack of financing
options. It assumes 1 million insulations being
carried out by 2030, in addition to the almost
1.5 million expected by 2020 under current policy.
Scenario 4: Purchase of international
credits
B3.46 Under this scenario, emissions over the
fourth carbon budget period would be reduced
to 1,345 MtCO2e in the non-traded sector. The
Government would therefore need to purchase
around 85 MtCO2e worth of carbon credits. At
the forecast carbon price of £51 tCO2e (£ 2011,
undiscounted) on average over the fourth carbon
budget period, this would cost the Government
£2.7 billion in present value terms. In this scenario,
both transport and low carbon heat are assumed
to deliver levels of emissions reductions that are
at the lower end of the ranges described in Part
2. This will necessitate faster levels of technology
uptake beyond 2030, and more detail is given in
the relevant sections of Part 2.
B3.47 This scenario assumes 3 million solid wall
insulations over the fourth carbon budget period.
The level of ambition in sectors other than
transport and buildings is as in Scenarios 1, 2 and 3.
Table B12: Expected activity under illustrative Scenario 4
Sector
Expected activity
Buildings
• 3 million solid walls insulated over the period 2023–30
• Around 1.6 million low carbon heat installations in total by 2030, delivering around 83.3 TWh of low
carbon heat and a further 9.6 TWh from district heating
Transport
• Average new car emissions = 70 gCO2/km
• Average new van emissions = 105 gCO2/km
• 6% biofuel, by energy
Industry
As Scenario 3
Agriculture
As Scenario 1
Credit
purchase
85 million credits at a cost of £2.7 billion
174 Annex B: Carbon budgets analytical annex
Delivering emissions reductions in the
traded sector
B3.48 The level of emissions reductions in the
traded sector is dictated by the level of the EU
Emissions Trading System (ETS) cap. As set out
in paragraphs B3.1–B3.8 above, the trajectory at
which the EU ETS cap is currently set to shrink
would not be sufficient to deliver the emissions
reductions needed in the power and heavy
industry sectors to meet a fourth carbon budget
of 1,950 MtCO2e. In this respect, the fourth carbon
budget was set on the assumption that the EU ETS
cap will be tightened in the future.
B3.49 This report considers two illustrative
scenarios showing how emissions could be
reduced to 690 MtCO2e, the level of traded
sector emissions required over the fourth carbon
budget period to meet the overall 1,950 MtCO2e
level. Chart B10 below shows by how much
each scenario would reduce emissions and the
contribution from different sectors. Both scenarios
in the traded sector assume that the EU ETS
cap is tightened sufficiently to meet the fourth
carbon budget. Given the assumed level of the
EU ETS cap, however, both scenarios provide an
opportunity for EU Allowances (EUAs) to be sold.
Chart B10: Aggregate territorial traded sector emissions under the illustrative traded sector
scenarios, 2023–27
900
800
766
690
700
592
98
629
596
61
94
626
64
MCO2e
600
500
400
300
200
100
0
Baseline
EU ETS cap
Scenario A
Scenario B
Scenario A
(high demand)
Scenario B
(high demand)
Power stations
Refineries
Services
Industry
Other transport
EU ETS cap
Sale of EU Allowances
EU ETS cap
Annex B: Carbon budgets analytical annex 175
Scenario A: Power sector carbon intensity
of 50 gCO2 /kWh
B3.50 Under this scenario, emissions over the
fourth carbon budget period would fall to either
592 MtCO2e or 596 MtCO2e in the traded sector,
depending on the level of electricity demand
assumed.
B3.51 In this scenario, it is assumed that emissions
in the power and heavy industry sectors are
reduced sufficiently in the UK to deliver the
traded sector component of the fourth carbon
budget. This will require significant decarbonisation
of the power sector, and in Scenario A the
carbon intensity of electricity generation has
been modelled to reach 50 gCO2/kWh by 2030.
The power sector section in Part 2 gives more
details on the potential implications of this for the
generation mix.
B3.52 In the industry sector the same assumptions
as in Scenarios 1–4 have been made.
Scenario B: Power sector carbon intensity
of 100 gCO2 /kWh
B3.53 In this scenario, emissions in the power and
heavy industry sectors are reduced in the UK but
with a lower level of decarbonisation in the power
sector than assumed in Scenario A. This illustrative
scenario assumes that the carbon intensity
of electricity generation falls to 100 gCO2/
kWh by 2030. Emissions in this scenario are
reduced to either 629 MtCO2e or 626 MtCO2e
in the traded sector, depending on the level of
electricity demand.79
B3.54 In the industry sector the same assumptions
as in Scenarios 1–4 have been made.
Combined impacts of traded and
non-traded sector scenarios
Electricity demand implications
B3.55 The high levels of electrification in heat
and transport included in the non-traded sector
scenarios imply increased levels of electricity
79
demand to be met by the power sector.
For instance, Scenario 3 includes significant
electrification of both heat and transport which
is partially offset by increases in energy efficiency
but still implies a level of electricity demand that
is about 10% higher than the current government
assumption of approximately 410 TWh in 2030.
As a result, sensitivities reflecting high electricity
demand have been modelled in both Scenario A
(50 gCO2/kWh) and Scenario B (100 gCO2/kWh).
Bioenergy demand implications
B3.56 Scenarios reflecting increased abatement
in transport, heat and electricity generation imply
increased demand for bioenergy. For instance,
the demand for biofuels in transport, biomass and
biogas for heat and the use of biomass and waste
in electricity generation require a consideration
of whether sufficient, sustainable supplies of
bioenergy will be available. An assessment of
current estimates of sustainable bioenergy supply
compared with the demand trajectories implied
by the fourth carbon budget scenarios is set out in
paragraphs B4.42–B4.49 of this annex.
costs of delivering the fourth
carbon budget
B3.57 Delivering the emissions reductions set out
in the illustrative fourth carbon budget scenarios
will impose costs on the UK economy but will also
deliver benefits well beyond the end of the fourth
carbon budget period. As discussed above, costs
will be determined by the combination of traded
and non-traded sector scenarios. On this basis, the
net discounted costs of meeting the fourth carbon
budget are estimated to range from £26 billion to
£56 billion (excluding the value of greenhouse
gas emissions savings) depending on the choice
of ambition in different sectors and the associated
electricity demand implications. When the benefits
of the carbon savings that will be delivered by the
illustrative scenarios are also taken into account,
the net present value (NPV) ranges from a net
benefit of £1 billion to a net cost of £20 billion.
Emissions are lower under high demand owing to higher assumed low carbon heat in the industrial sector.
176 Annex B: Carbon budgets analytical annex
B3.60 Scenario 4 delivers the fourth carbon
budget at the lowest cost (£27 billion) since the
cost of purchasing international credits is cheaper
than undertaking further territorial abatement.
However, Scenarios 1 and 3 have the highest
net present values because of their additional
emissions savings.
B3.58 These cost and benefit estimates
draw on best available evidence from the UK
marginal abatement cost curves evidence base
and appropriate values for energy resource
costs and carbon benefits as described in the
methodological note that begins this annex. The
costs include technical costs associated with the
abatement measures in each of the scenarios,
energy consumption and wider impacts such as
air quality, congestion and hidden or hassle costs,
where it is possible to monetise these. In the
traded sector, the EUA cost of complying with the
EU Emissions Trading System is also valued. Since
the illustrative scenarios do not include specific
policies, this assessment does not include any policy
costs associated with the delivery of measures. See
charts B13–B18 (pp. 204–207) of this annex for the
abatement and cost effectiveness of the measures
contained in each of the illustrative scenarios.
B3.61 The key driver of the variation in costs
between the scenarios is the level of ambition in
the transport and low carbon heat sectors. The
effects of the different levels of ambition on costs
can be counter-intuitive. For example, district
heating is only included in the higher ambition
scenarios for low carbon heat. District heating
is considered ambitious because of a number
of barriers to deployment that will need to be
addressed. These include planning and consent
from local authorities, identifying and matching
demand for heat with supply, and raising capital for
investment in heat networks. Nevertheless, the
network benefits of district heating mean that it
is relatively cost effective compared with installing
large numbers of heat pumps. For this reason,
Scenario 2, which does not include district heating,
B3.59 Costs will vary between scenarios as each
one comprises different levels of abatement in the
key sectors. Table B13 provides a breakdown of
the overall costs and benefits of each illustrative
scenario in the non-traded sector of the economy.
Table B13: Emissions levels and NPV of the illustrative non-traded sector scenarios
Fourth
carbon
budget
emissions
(MtCO2e)
Scenario Nontraded
Costs (£ billion 2011)
Capital Admin
Other
Benefits (£ billion 2011)
Credit
Energy
purchase savings
EU
Other
Allowances
savings
Nontraded
savings
NPV
Net present
cost
(excluding
the value of
greenhouse
gas
emissions)
1
1,253
−77.6
−1.5
−5.7
–
37.4
−3.0
6.6
41.8
−2.0
−43.8
2
1,248
−79.5
−1.5
−4.6
–
33.0
−2.9
7.3
36.5 −11.7
−48.2
3
1,249
−80.9
−0.5
−0.3
–
37.8
−3.4
5.7
39.3
−2.4
−41.6
4
1,260
(1,345)
−38.2
−1.2
−11.1
−2.7
21.5
−0.1
5.3
19.0
−7.5
−26.5
Annex B: Carbon budgets analytical annex 177
Table B14: NPV of the illustrative traded sector scenarios, central electricity demand (£ billion 2011)
Costs
Scenario
Benefits
Capital
Other
Energy
savings
EU
Allowances
savings
Other
NPV
A (50 gCO2/kWh)
−31.8
−1.4
11.6
17.5
1.7
−2.5
B (100 gCO2/kWh)
−23.2
−1.4
8.8
14.6
1.7
0.5
appears to be relatively costly despite its lower
level of ambition in low carbon heat.
B3.62 In the traded sector of the economy, the
difference in costs between the two illustrative
scenarios is driven by the different levels of
ambition in the power sector. For instance,
decarbonising the power sector to reach a carbon
intensity target of 50 gCO2/kWh by 2030 is
more costly – imposing a net cost – than aiming
for a target of 100 gCO2/kWh by 2030, which
delivers a small net benefit. Table B14 provides a
breakdown of the overall costs and benefits of the
traded sector scenarios under a central electricity
demand scenario.
B3.63 The high levels of electrification in heat
and transport included in the non-traded sector
scenarios imply increased levels of electricity
demand to be met by the power sector.
For instance, Scenario 3 includes significant
electrification of both heat and transport which
is partially offset by increases in energy efficiency
but still implies a level of electricity demand that
is about 10% higher than the current government
assumption of approximately 410 TWh in 2030.
To take account of this impact, sensitivity analysis
of the power sector under both Scenarios A and B
has been conducted.
B3.64 Table B15 provides a breakdown of the
overall costs and benefits of the traded sector
scenarios under a high electricity demand scenario.
The energy savings shown have been adjusted
to avoid the double counting of costs when the
traded and non-traded scenarios are combined.
For this reason, it is not possible to compare costs
of the high electricity demand scenario directly
with those of the central electricity demand
scenario.
Table B15: NPV of the illustrative traded sector scenarios, high electricity demand (£ billion 2011)
Costs
Scenario
Benefits
Capital
Other
Energy
savings*
EU
Allowances
savings
Other
NPV
A (50 gCO2/kWh)
−38.0
−1.7
11.7
18.4
1.7
−7.9
B (100 gCO2/kWh)
−28.7
−1.7
16.1
15.6
1.7
3.0
*Adjusted to allow summation with non-traded scenarios
178 Annex B: Carbon budgets analytical annex
Combined impact of traded and
non–traded sector scenarios
B3.65 Scenarios 1–4 in the non-traded sector
imply different levels of electricity demand.
Consequently, it is important to combine the
non-traded and traded sector scenarios so that
the electricity demand assumptions are consistent
when assessing the whole-economy effects of the
illustrative scenarios. For example, Scenario 3, which
includes high levels of electrification in heat and
transport, has the impact of increasing electricity
demand by about 10% in 2030. This scenario is
only compatible with traded sector Scenarios
A or B under high electricity demand. Levels of
electrification in Scenario 4 suggest that Scenarios
A or B under central demand would be an
appropriate combination. The electricity demand
implications for Scenarios 1 and 2 fall between
the central and high demand levels shown for the
traded sector scenarios and could be consistent
with either of the Government’s central or high
electricity demand assumptions. Consequently,
Scenarios 1 and 2 could potentially be combined
with Scenarios A or B under either central or
high electricity demand. Table B16 reflects the
aggregate costs of the fourth carbon budget
scenarios under the various appropriate traded
and non-traded sector combinations.
Table B16: Cumulative NPV of the illustrative
non-traded and traded scenarios (£ billion 2011)
Net present
cost
(excluding
value of
greenhouse
gas
emissions)
NPV
Scenarios A + 1
−£46bn
−£4bn
Scenarios A + 2
−£51bn
−£14bn
Scenarios A + 4
−£29bn
−£10bn
Scenarios B + 1
−£43bn
−£2bn
Scenarios B + 2
−£48bn
−£11bn
Scenarios B + 4
−£26bn
−£7bn
Scenarios A + 1
−£52bn
−£10bn
Scenarios A + 2
−£56bn
−£20bn
Scenarios A + 3
−£49bn
−£10bn
Scenarios B + 1
−£41bn
+£1bn
Scenarios B + 2
−£45bn
−£9bn
Scenarios B + 3
−£39bn
+£1bn
Central electricity demand
High electricity demand
*The upper and lower bounds in each column have been highlighted
Uncertainty in cost estimates
B3.66 Cost estimates for all the illustrative
scenarios are subject to significant uncertainty
given the range of assumptions included about the
evolution of future economic growth, fossil fuel
prices and technology costs so far into the future.
B3.67 The tables below reflect the results of
some limited sensitivity analysis on fossil fuel prices,
technology costs and the extent of transport
rebound effects and indicate that the overall
costs of delivering the fourth carbon budget could
vary significantly.
Annex B: Carbon budgets analytical annex 179
Technology sensitivities
B3.68 In transport, government’s central
assumption is that battery costs will fall to
$300/kWh by 2030 (from up to $1,000/kWh
reported currently). This contrasts with the
Committee on Climate Change (CCC) analysis,
which assumed that battery costs in 2030 would
be $200/kWh. Table B17 shows how the NPV
of the high transport ambition scenarios would
change under different battery cost assumptions.
Table B17: Sensitivity of the NPV estimates to
vehicle battery costs (£ billion 2011)
High ambition
transport
Low battery
costs
($150/kWh)
High battery
costs
($800/kWh)
Scenario 2
−£12bn NPV
−£3bn
−£45bn
Scenario 3
−£2bn NPV
+£7bn
−£36bn
B3.69 The modelling on the costs and benefits
of low carbon heat shown here assumes that
heat pumps’ coefficient of performance (COP)
improves by 0.7 by 2030. This contrasts with the
CCC’s assumption that the COP will improve
by 1.5 by 2030. Table B18 shows how the NPV
of Scenario 2 would change under different
assumptions. The low improvement sensitivity
assumes that the COP improves by no more than
0.1. The high improvement sensitivity assumes that
the COP improves by 1.5.
Table B18: Sensitivity of the NPV estimates to
improvements in heat pumps’ coefficient of
performance
Central
ambition low
carbon heat
Low
improvements
in heat pump
COP
High
improvements
in heat pump
COP
Scenario 2
−£12bn NPV
−£15bn
−£11bn
Fossil fuel price sensitivities
B3.70 Many of the abatement measures
included in the illustrative scenarios also reduce
the consumption of fossil fuels. This reduction
in energy use is valued as a benefit. Given the
uncertainty around energy prices, the Department
of Energy and Climate Change frequently shows
how costs and benefits would differ under
different energy price assumptions. Table B19
shows how the NPV of the high transport
ambition scenarios would change if different fossil
fuel price assumptions were used for the transport
analysis.80 Note that these changes reflect
changes to the NPV of the transport measures
only. If the effect of different fossil prices were
accounted for in all sectors, the change would be
significantly larger.
Table B19: Sensitivity of the NPV estimates to
the fossil fuel price assumptions used for the
transport analysis only (£ billion 2011)
High ambition
transport
Low fossil fuel
prices
High fossil fuel
prices
Scenario 2
−£12bn NPV
−£20bn
−£6bn
Scenario 3
−£2bn NPV
−£10bn
+£4bn
B3.71 Table B20 shows how the NPV of Scenario 2
would change if different fossil fuel price
assumptions were used for the low carbon heat
analysis. Note that these changes reflect changes to
the NPV of the low carbon heat analysis only.
80
For more information on the Department of Energy and Climate Change’s fossil fuel price assumptions see: www.decc.gov.uk/en/content/cms/about/
ec_social_res/analytic_projs/ff_prices/ff_prices.aspx
180 Annex B: Carbon budgets analytical annex
Table B20: Sensitivity of the NPV estimates to
the fossil fuel price assumptions used for the low
carbon heat analysis only (£ billion 2011)
Central
ambition low
carbon heat
Low fossil fuel
prices
High fossil fuel
prices
Scenario 2
−£12bn NPV
−£12bn
−£11bn
B3.72 Table B21 shows how the NPV of Scenario B
(central demand) would change if different
fossil fuel price assumptions were used for the
power sector analysis. Note that these changes
reflect changes to the NPV of the power sector
analysis only.
Table B21: Sensitivity of the NPV estimates to
the fossil fuel price assumptions used for the
power sector analysis only (£ billion 2011)
Central
ambition power
sector
Low fossil fuel
prices
High fossil fuel
prices
Scenario B
(central demand)
+£1bn NPV
−£8bn
+£6bn
Rebound effect sensitivities
B3.73 Evidence suggests that greater vehicle
efficiency will result in a rebound effect, in
which lower driving costs encourage additional
driving. The costs of this additional driving, such
as increased congestion, are included in the
estimated total costs of the scenarios. Table B22
shows how the NPV of the high transport
ambition scenarios would change if the rebound
effect were omitted, in order to demonstrate
the significance of assumptions on the scale of the
rebound effect.
Table B22: Sensitivity of the NPV estimates to
the rebound effect in the transport analysis only
(£ billion 2011)
High ambition transport
No rebound effect
Scenario 2
−£12bn NPV
−£10bn
Scenario 3
−£2bn NPV
−£0bn
Annex B: Carbon budgets analytical annex 181
B4. Wider impacts
primary (fossil) energy costs and the costs of low
carbon technologies.
impact of energy and climate
change policies on uK growth
B4.3 It should be noted that this modelling does not
reflect all the potential benefits and costs. On the
benefits side, it does not reflect social externalities
such as health benefits from, for example, improved
air quality and lower congestion, innovation benefits
are not fully captured, and the modelling largely
assumes that the UK acts unilaterally, rather than
reflecting action to reduce emissions by other
countries. Importantly, the modelling results also do
not account for the benefit of avoiding significant
risks to future UK growth (particularly in the long
term) from global climate change. On the costs side,
the modelling assumes that policies are implemented
both on time and to cost, and does not take account
of any social costs such as the welfare impacts of any
behaviour change (e.g. reduced travel).
B4.1 Overall, studies indicate that the long-term
growth benefit from avoiding climate change will
exceed the cost of co-ordinated global action
to tackle climate change by helping to avoid the
potentially catastrophic implications of failing to
act.81 In the shorter term, policies to meet the
UK carbon budgets can bring economic benefits
from increased resource and energy efficiency,
innovation in low carbon technologies, and
resilience to the impacts of high fossil fuel prices.
However, there will be transition costs from the
increased costs of energy for some businesses
and households, the investment and innovation
foregone in other areas, and the competitiveness
impact if UK policy is out of step with competitor
countries. Current economic circumstances
highlight the need for climate policy to be cost
effective, to maximise the economic benefits
and growth opportunities and minimise negative
impacts.
B4.2 Most published analysis suggests that current
UK ambition on climate change can be achieved
without large impacts on overall short-term
economic output. The impacts of the policies to
meet the first three carbon budgets and illustrative
measures to meet the fourth budget have been
modelled using the HM Revenue and Customs
Computable General Equilibrium model. Results
indicate that the first three carbon budgets could
be met at an average cost of around 0.4% of GDP
a year over the period 2011–22, and the fourth
carbon budget could be met at an average cost
of around 0.6% of GDP a year over the period
2023–27. The impacts on GDP could be lower or
higher depending on a range of factors, including
81
fiscal impact of energy and
climate change policies
B4.4 Meeting the fourth carbon budget requires
no new policies this Parliament, and thus is
consistent with Government’s deficit reduction
plans as set out in Spending Review 2010, Budget
2011, and the recent Autumn Statement.
B4.5 In the longer term, government will take into
account the fiscal impact, including the impacts on
taxation, public spending and public borrowing,
when deciding upon the mix of policies used to
meet the fourth carbon budget. The technical
abatement characterised in section B3 of this
annex could be accessed by a range of different
policies including voluntary agreements, regulation,
taxation and spending. The fiscal impacts of climate
policy will also depend upon a range of factors
such as technology costs, carbon prices, fossil fuel
prices and policy effectiveness.
The Stern Review (www.hm-treasury.gov.uk/sternreview_index.htm) found that the global costs of climate change could be between 5% and 20%
of GDP per annum if we fail to act, dwarfing the costs of effective international action, estimated at 1–2% of global per capita consumption by 2050.
The lower figure is a minimum. When the model incorporates non-market impacts and more recent scientific findings, the total average cost is 14.4%.
The 20% figure also reflects the disproportionate burden of impacts on poor regions of the world.
182 Annex B: Carbon budgets analytical annex
B4.6 Broadly speaking, the taxable capacity of
the economy is linked to GDP. Within overall
taxable capacity, as noted by the Committee
on Climate Change82 and the Office for Budget
Responsibility,83 the move to a low carbon
economy could increase receipts from some taxes
while putting downward pressure on others,
suggesting that the contribution of different taxes
to revenues is likely to change over the long term.
In the Coalition Agreement,84 the Government
committed to increase the proportion of tax
revenue accounted for by environmental taxes.
impacts on electricity security
of supply
B4.7 There are three different linked challenges
under the general banner of security of electricity
supply:
• diversification of supply: how to ensure that
we are not over-reliant on one energy source
or technology and reduce our exposure to high
and volatile prices;
• operational security: how to ensure that,
moment to moment, supply matches demand,
given unforeseen changes in both; and
• resource adequacy: how to ensure that there is
sufficient reliable capacity to meet demand, for
example during winter anticyclonic conditions
where demand is high and wind generation low
for a number of days.
B4.8 Increasing amounts of inflexible and/or
intermittent low carbon generation should help to
address the first challenge. However, a higher level
of intermittent generation potentially makes the
second and third challenges greater.
B4.9 As part of the Electricity Market Reform
(EMR) programme, the Department of Energy
and Climate Change has concluded that there
are risks to future security of electricity supply.
The analysis and evidence underpinning that
judgement are contained in the EMR White Paper
and the accompanying Impact Assessment.85 In
order to reduce the risks to security of electricity
supply, the Department of Energy and Climate
Change has indicated that a capacity mechanism is
necessary and, as part of the EMR White Paper,
the Government has consulted on the most
appropriate type of capacity mechanism. The
Government will publish its decision on the choice
of capacity mechanism at the turn of the year.
B4.10 The assessment of future security of
electricity supply has been updated to take account
of revised fossil fuel prices, demand assumptions
and carbon values as part of the Carbon Plan.
Evidence from modelling of the electricity system
by consultants Redpoint Energy suggests that in
the absence of a capacity mechanism, margins
could fall to low levels and increase risks to security
of supply. Chart B11 shows de-rated capacity
margins over the period to 2030 under both 100
gCO2/kWh and 50 gCO2/kWh scenarios (i.e. the
percentage by which generation exceeds peak
demand taking into account the probability that
plants of different types will be unavailable). It also
shows that with a capacity mechanism, margins can
be maintained at a higher level.86
B4.11 The years immediately after 2010 are
characterised by increasing capacity margins. This
is a result of a combination of pre-committed
82
Committee on Climate Change (2010) The Fourth Carbon Budget: Reducing emissions through the 2020s. Available at: www.theccc.org.uk/reports/fourth­
carbon-budget
83
Office for Budget Responsibility (2011) Fiscal Sustainability Report. Available at: http://budgetresponsibility.independent.gov.uk/fiscal-sustainability-report­
july-2011/
84
www.cabinetoffice.gov.uk/news/coalition-documents
85
See: www.decc.gov.uk/en/content/cms/legislation/white_papers/emr_wp_2011/emr_wp_2011.aspx
86
Note that the capacity mechanism reflected in this chart is a strategic reserve, but in the modelling, either a strategic reserve or a market-wide mechanism
will have the effect of increasing de-rated capacity margins to around 10% or as close as is possible given the lumpy nature of investment.
Annex B: Carbon budgets analytical annex 183
Chart B11: De-rated peak capacity margins under different power sector scenarios
35%
30%
De-rated capacity margin
25%
20%
15%
10%
5%
0%
2010
2015
Contracts for difference (CfD) with capacity mechanism
gas-fired stations coming online and demand
being lower than expected given the economic
downturn. After 2012, the de-rated capacity
margin falls as old coal stations are scheduled to
retire under the Large Combustion Plant Directive
around the middle of the decade, and nuclear
plants reach the end of their scheduled lifetimes.
Note that demand is not projected to rise to 2020
due to relatively low economic growth forecasts
and improvements in energy efficiency. However,
plant retirements and increasing amounts of
intermittent generation lead the de-rated capacity
margin to fall below 10% in the early 2020s and
reaching 5% in more than one year under both
decarbonisation policies.
B4.12 Note that in the modelling analysis,
following a 100 gCO2/kWh or 50 gCO2/kWh
2020
Year
2025
CfD – 50 gCO2/kWh
2030
CfD – 100 gCO2/kWh
decarbonisation trajectory makes relatively little
difference in terms of capacity margins as the
modelling assumes that retirement and new build
decisions for unabated fossil fuel plant adjust to
the different wholesale price signals under the
two scenarios. In the 100 gCO2/kWh scenario, the
wholesale electricity market provides sufficient
price signals for investment in new gas stations. In
the 50 gCO2/kWh scenario, wholesale electricity
prices fall significantly due to the amount of new
low carbon, low generating cost plant in the
generation mix, thereby reducing the opportunities
for conventional generators to earn a return on
their investment. Consequently, there is no new
investment in gas power stations beyond the
pre-committed gas plant that comes online around
2012. Under both scenarios, a capacity mechanism
reduces the risk of demand not being met.
184 Annex B: Carbon budgets analytical annex
sustainability and wider
environmental impacts
Summary
B4.13 Policies to meet the fourth carbon budget
pose risks and opportunities relating to air quality,
water, noise, biodiversity and landscape and their
associated ecosystem services. Increased use of
bioenergy in particular appears to have the greatest
potential impacts on the wider environment.
B4.14 Scenario 3, which assumes high abatement
from electrification, has the highest potential
benefits for air quality and noise.
B4.17 The White Paper, building on the groundbreaking UK National Ecosystem Assessment
(NEA), uses the concept of ‘natural capital’: nature
represents a stock of assets, which provides
flows of ‘ecosystem services’89 from which society
benefits in numerous although often undervalued
ways. It includes living things in all their diversity,
the landscape and its heritage, wildlife, rivers, lakes
and seas, urban green space, woodland and farmed
land. Natural capital interacts with produced,
human and social capital to support economic
activity and human wellbeing.90
Purpose, scope and approach
B4.18 Monetised estimates of the ecosystem
values at stake are partial and uncertain but
substantial. For instance, one major study
found that optimising climate change policies
to improve air quality could yield benefits of
£24 billion by 2050; the annual value of protecting
marine biodiversity in UK waters is estimated at
£1.7 billion, and the annual benefits of achieving
good ecological status for water bodies are in the
region of £1 billion. The NEA sets out further
evidence on monetised values classified by
ecosystem service type.91
B4.16 This section offers a preliminary and broad
assessment of the wider environmental impacts
of the policy directions and scenarios envisaged
for the fourth carbon budget. Section 13(3) of the
Climate Change Act 2008 states that proposals
and policies for meeting carbon budgets must,
when taken as a whole, ‘be such as to contribute
to sustainable development’. Tackling climate
change is essential for maintaining a healthy,
resilient natural environment, as highlighted in
the Government’s Natural Environment White
Paper,87 published in June 2011. The White Paper
re-committed to ensuring that the value of nature
(which is often hidden) is appropriately reflected in
all relevant policy decisions.88
B4.19 A range of policies at domestic and
European level have been developed to safeguard
and enhance these values, such as air emission
limits, the Water Framework Directive, the
Birds and Habitats Directive, the Environmental
Noise Directive and marine planning. In October
2010 the UK Government played a key role in
concluding the historic global agreement in Nagoya
to protect and enhance biodiversity worldwide,
which led to the England Biodiversity Strategy,
launched in August 2011. The strategy, like the
NEA, emphasises the importance of long-term
planning to achieve a more integrated use of
natural capital that delivers multiple ecosystem
services. The White Paper and the NEA also stress
B4.15 Various mechanisms exist already to limit
extreme impacts on the wider environment from
decarbonisation policies; however, the use of an
ecosystem approach at policy and project level is
needed to achieve a more optimal use of natural
capital that addresses risks and synergies at the
appropriate spatial scale.
87
Defra (2011) The Natural Choice: securing the value of nature. Available from: www.defra.gov.uk/environment/natural/whitepaper/
88
This assessment is intended to also inform the White Paper commitment to ‘establishing a research programme to fill evidence gaps about impacts on the
natural environment of the level of infrastructure needed to meet 2050 [low carbon] objectives’.
89
See: Millennium Ecosystem Assessment and TEEB (2010) The Economics of Ecosystems and Biodiversity. These services have been categorised as: provisioning
(e.g. food, timber); regulating (e.g. water purification, pollination); cultural (e.g. recreation, aesthetic) and supporting (e.g. soil formation, genetic diversity).
90
Defra (2010) A Framework for Understanding the Social Impacts of Policy and their Effects on Wellbeing.
Available from: www.defra.gov.uk/publications/files/pb13467-social-impacts-wellbeing-110403.pdf
91
See: www.defra.gov.uk/publications/files/pb13583-biodiversity-strategy-2020-110817.pdf
Annex B: Carbon budgets analytical annex 185
the need for decision making at appropriate spatial
scales, valuing changes in services where possible
but considering ‘shared social values’ as well as
economic valuations.
B4.20 The Department for Environment, Food
and Rural Affairs (Defra) environmental appraisal
guidance incorporates this ecosystems approach
and the White Paper has also committed to
publishing supplementary HM Treasury Green
Book guidance on valuing the natural environment
in appraisals.92 This guidance has informed
this initial assessment and will be important
to incorporate into policy and project
development.
Assessment of risks and opportunities
B4.21 Table B23 below summarises the most
important risks, synergies and trade-offs that
the fourth carbon budget presents to the wider
environment. The rest of this section provides
a more detailed assessment by type of measure
and sector, and the potential for mitigating risks,
drawing on qualitative and (for air and noise)
quantitative analysis.
B4.22 A high-level assessment of the impacts from
the fourth carbon budget scenarios in the wider
environment is set out in the list on page 186,
followed by more detail on particular technologies
and their wider impacts.
Table B23: Risks and opportunities associated with the fourth carbon budget
Air quality
Risks
Opportunities
• Use of biomass, with an estimated cost of
£48 million in Scenario A and £31 million for
the non-traded Scenario 2
• Clean electricity production (excluding
biomass) has potential benefits of between
£25 million and £72 million for Scenarios A
and B respectively
• Transport – increased fuel efficiency leading
to increased vehicle usage
• Potential long-term impacts from the
conversion of natural habitats to comply
with high bioenergy scenarios (i.e. increased
use of biomass and biofuels from first
generation crops)
• Potential benefits if domestic bioenergy
expansion brings unmanaged woodland into
management and diversifies range of habitats
Landscape
• Potential risks from siting and design of new
electricity generation infrastructure
• Potential benefits where fourth carbon
budget policies incentivise active management
of woodlands (bioenergy)
Noise and
nuisance
• Transport – increased vehicle efficiency
leading to increased vehicle usage
• Impacts of transport measures, including
sustainable travel measures, could reduce
noise, with a net benefit of £61 million in
Scenario 1
Biodiversity
• Noise from some renewable sources may
lead to unwelcome neighbourhood­ level
impacts
• Cleaner power stations could reduce
eutrophication
Marine
• Risk of impacts to marine habitat and noise­
sensitive species from expansion of offshore
activities and tidal energy
• Possible ecological benefits from the artificial
reef provided by foundations to offshore
wind turbines
Water
• Impacts on water availability arising from
abstraction by new power stations, depending
on location and climate
• Fourth carbon budget policies could
incentivise active management of woodlands
(bioenergy)
• Ground-source heating and cooling schemes
impact water quality and ecology
92
• Electrification of transport creates potential
benefits of approximately £102 million (as per
Scenario 1)
See: www.defra.gov.uk/corporate/about/how/policy-guidance/env-impact-guide/
186 Annex B: Carbon budgets analytical annex
• Scenario 1, having a focus on high abatement in
low carbon heat, implies that higher tensions are
expected from noise.
• Scenario 2, which has a focus on high
abatement in transport and bioenergy demand,
is associated with higher tensions in air quality
and biodiversity from increased biomass use,
although there may be some biodiversity and
landscape benefits.
• Scenario 3, which has a focus on high
electrification, has the highest potential benefits
for air quality and noise.
• Scenario 4 and Scenario B allow for the use
of international credits and so the ambition
of domestic climate change mitigation
policies is reduced. As a result, both potential
opportunities and risks could be shifted abroad.
• Scenario A refers to high ambition in the
power sector and presents a wider range of
potential for tensions: air quality, landscape,
noise, water and marine. There is potential for
mixed impacts in biodiversity and waste, but
also some potential opportunities for air quality.
Agricultural measures
B4.23 On-farm voluntary measures contained
in the fourth carbon budget offer both synergies
and tensions between reducing greenhouse gas
emissions and other environmental outcomes,
such as air quality, biodiversity and water pollution.
Broader soil measures to reduce carbon (such
as measures to maintain soil organic matter and
reduction in the horticultural use of peat as
outlined in the Natural Environment White Paper)
could bring carbon and biodiversity benefits. Defra
will be working with stakeholders to minimise
adverse impacts and develop integrated advice
for farmers.
Low carbon heat and bioenergy
expansion
B4.24 One of the fourth carbon budget scenarios
focuses on the expansion of low carbon heat
using technologies such as ground-source heat
pumps and air-source heat pumps (Scenario 1).
There is a need to carefully balance the desire to
see take-up in these technologies with the need
to ensure that local impacts are acceptable. Unless
properly designed, ground-source heat pumps
can pose risks to water ecology. Air-source heat
pumps can also produce unwelcome noise for the
surrounding neighbourhood; poor siting, installation
and maintenance can exacerbate these effects.
Where the fourth carbon budget scenarios focus
on the expansion of biomass use for electricity
and/or low carbon heat (as per Scenario 2 in the
non-traded sector and Scenario A in the traded
sector), this can have unintended environmental
impacts that must also be considered. A largescale move to biomass boilers could emit levels
of harmful particulate matter and nitrous oxide
that impact on air quality. This may in turn
threaten compliance with both ambient air quality
and national emission ceilings directives. The air
quality impacts of the increased use of biomass
under Scenario A are around £48 million and
approximately £31 million for Scenario 2 where
there is low carbon heat ambition but relatively
higher use of biomass compared with Scenarios 1
and 3.
B4.25 Domestically, a change of land management
from arable crops or grassland to biomass or
energy crops brings opportunities as well as risks.
More active and sustainable management of
woodlands for wood fuel could lead to landscape,
recreational and biodiversity gains. Analysis in the
National Ecosystem Assessment (NEA) (using
Wales as a case study) highlights the potential
for major recreational benefits where woodland
is created in lowland urban fringe areas, close
to population centres. It also indicates the dual
risks where the planting of forests in peatland
areas dries out wetlands and can result in net
carbon release rather than storage. There is
strong evidence to support woodland creation
in appropriate locations to achieve water
management and water quality objectives, including
tackling diffuse pollution and regulating water flow.
B4.26 Department of Energy and Climate Change
analysis on the sustainability of bioenergy supply
highlights that certain sectors may need to rely
on imports to meet demand in the near and
longer term (i.e. biofuels for transport, and woody
Annex B: Carbon budgets analytical annex 187
biomass and domestic biogas for heat). This could
lead to land use change abroad, with direct or
indirect loss of natural or near natural habitats/
ecosystems and the services provided to local
populations if adequate sustainability controls are
not in place. See from paragraph B4.42 below for a
discussion on bioenergy supply.
B4.27 Combined heat and power could also have
air quality impacts by moving combustion closer
to residential locations. Some of these negative
impacts may be offset through associated increases
in efficiency and emissions control.
B4.28 Potential to mitigate risks: Air pollution
from the combustion of biomass can be controlled
through strong limits on the levels of emissions
on both large-scale use (through the Industrial
Emissions Directive) and small-scale sources (such
as introducing emissions standards on domestic
boilers). Negative landscape impacts could be
minimised by carefully considering the location
of land use changes and uptake of sustainable
management practices. The ability to reduce site
specific impacts on biodiversity is reinforced by
current requirements to carry out Environmental
Impact Assessments (EIAs) where there are likely
to be significant environmental effects. Through
judicious choice of location, good design and
good management, there will be opportunities to
mitigate and in some places enhance biodiversity
and associated ecosystem services as envisaged in
national biodiversity action plans.
New power plants
B4.29 Virtually all nationally significant energy
infrastructure projects will have effects on the
landscape. Landscape effects depend on the
existing character of the local landscape, how
highly it is valued and its capacity to accommodate
change. Impacts on biodiversity may be reduced
by the construction of cleaner power stations
(coal power stations produce nitrogen oxides that
cause eutrophication and acidification), but there
may also be potential for habitat disturbance from
construction of stations and power lines.
B4.30 Impacts on water availability could occur in
the future if new stations are built in areas where
water or discharge capacities are not adequately
developed. These impacts could exacerbate
future water availability issues as a result of climate
change and population growth. Traditional power
plants tend to have low water loss93 factors, which
vary depending on the generation type and the
method of cooling used, yet volumes of water
abstracted can impact on fish and other aquatic
life. Reduction in river flows due to climate change
could exacerbate this issue. Carbon capture and
storage (CCS) can increase water use. Recent
studies of the extra water demand associated
with CCS indicate that it can increase water use
by 91–100%,94 which may have implications in the
catchments where fossil fuel power stations are
currently clustered. This could make such CCS
power stations more vulnerable at low water
flow times (late summer), with potential to affect
security of electricity supply. Defra is working
closely with the Department of Energy and
Climate Change and the Environment Agency
over the coming year to further understand
these issues.
B4.31 CCS could also have an impact on air
quality as CCS requires more power (in particular
for capture and compression) than conventional
plants. However, it should be noted that plants
fitted with CCS will have to comply with emissions
limits set by the Industrial Emissions Directive.
CCS generation as assumed in Scenario A, where
carbon intensity in the power sector falls to
50 g/kWh by 2030, leads to an estimated air
quality cost of around £69 million relative to a
counterfactual without the Electricity Market
Reform measures. In contrast, Scenario B, with
a carbon intensity of 100 g/kWh by 2030 and a
lower reliance on CCS generation relative to the
same counterfactual, leads to an estimated benefit
of £3 million.
B4.32 Potential to mitigate risks: There are
various ways to minimise the wider environmental
impacts of new power stations, including measures
that can be taken at the planning and design
93
Water that is not returned to the river after being used for cooling (such as water losses produced by evaporation).
94
Zhai, H and Rubin, ES (2010) Performance and cost of wet and dry cooling systems for pulverised coal power plants with and without carbon capture and
storage. Energy Policy 38(6):5653–5660; National Energy Technology Laboratory (2005) Power Plant Water Usage and Loss Study. United States Department
of Energy.
188 Annex B: Carbon budgets analytical annex
stage. The Overarching National Policy Statement
for Energy sets out guidance for considering the
wider impacts of nationally significant energy
developments, including when they are proposed
within a protected area.95
Offshore and onshore wind power
B4.33 Commercial-scale wind turbines by their
nature (typically 125–150 m tall) will have an
impact on the landscape and seascape. There
may also be impacts on areas that are important
for nature and heritage conservation. Large-scale
wind farms, especially offshore, also pose significant
demands for new cable links and substations that
can cover large areas (around 20 ha).
B4.34 The construction of offshore turbines
mainly poses risks for marine biodiversity. Noise
from exploration, construction, operation and
decommissioning of wind power can have a
negative impact on noise-sensitive species. While
new offshore turbine foundations that provide
a hard substrate can increase the diversity of
the immediate environment, they can also act
as stepping stones for invasive species that can
colonise and spread.
B4.35 Potential to mitigate risks: National Policy
Statements (NPSs) for energy infrastructure and
other planning policy steer major and large-scale
commercial development of onshore turbines
away from protected landscapes and internationally
designated sites. For onshore wind turbines that
are likely to have significant environmental effects,
an EIA will be necessary, which should identify
mitigation measures to remove or reduce the
effects to acceptable levels.
B4.36 Larger offshore wind developments will
be covered by NPSs for energy instrastructure,
while wider decisions on offshore development96
will now be taken under the new system of
marine planning and licensing. Regulators will
also require an EIA for any renewable energy
licence applications where there is a likelihood of
significant environmental effects and will identify
mitigation options. There are explicit requirements
under the Marine Strategy Framework Directive
to ensure that permanent alterations to
hydrographical conditions, including underwater
noise, do not adversely affect the marine
environment.
Tidal and wave power generation
B4.37 Tidal energy generation and installation
can affect marine biodiversity through habitat
change and loss, depending upon the type of
device and habitat. Devices with moving parts are
likely to have greater impacts than those without.
Tidal power may also affect the characteristics of
the flow regime in estuaries. There may also be
the potential for direct impacts on species, for
example barrier effects (especially for migratory
species), collisions and noise from installation,
operation and decommissioning.
Transport
B4.38 There are potential synergies and tensions
for air quality in the transport sector that relate to
measures identified in the fourth carbon budget.
The transport measures assumed in Scenario 1
lead to potential improvements in air quality of
around £102 million over the period (2011–27).
This figure only takes into account the direct
impacts on transport emissions, with the additional
power sector impacts accounted for elsewhere.
B4.39 Noise benefits under this scenario would
be approximately £61 million and relate to
sustainable transport measures, which reduce car
kilometres travelled, as well as some additional
benefits from increased electrification.
B4.40 Improvements in average fuel efficiency
that are achieved through increased conventional
car fuel efficiency would have notable noise
impacts. Analysis of the impacts of current policies
that help to meet the first three carbon budgets
reveals significant costs associated with increased
noise and nuisance (approximately £402 million
over the period). This is mainly a consequence
of the increase in kilometres driven in response
95
DECC (2011) Overarching National Policy Statement for Energy (EN-1).
96
This framework also applies to tidal and wave power generation as described in the next section.
Annex B: Carbon budgets analytical annex 189
to greater fuel efficiency and the resultant fall in
driving costs.
bioenergy supply with the bioenergy demand
trajectories forecast for the Carbon Plan.
B4.41 Potential to mitigate impacts: Higher
blends of biofuels than are currently envisaged
for use in the UK vehicle fleet could potentially
increase emissions from vehicles97, whereas
others – such as biomethane – can deliver air
quality benefits. Moving away from diesel vehicles
could also have a positive impact on air quality.
Any actions that encourage the electrification of
the vehicle fleet are expected to improve both
environmental noise by reducing engine noise and
air pollution by reducing emissions.
B4.43 The potential range of bioenergy demand
was derived from the emissions projections and
analysis of the additional abatement measures
described from paragraph B3.26. This consolidated
the demand for biofuels from transport; the
demand for biomass and biogas from low carbon
heat measures; and the use of waste and biomass
in electricity generation. The available supply
of bioenergy was considered drawing on three
scenarios from AEA’s UK and Global Bioenergy
Resource report98 and E4Tech’s99 biofuel supply
projections for the Department for Transport
Modes work.
Sustainability of bioenergy resource
supply
B4.42 A high-level assessment was carried out
to compare current estimates of sustainable
B4.44 The analysis suggests that, when
considering bioenergy as a whole, there should
be sufficient sustainable supply to meet demand
Chart B12: Biomass supply and demand, including heat, power and transport, 2020–30 (petajoules)
2,500
2,000
Petajoules
1,500
1,000
500
0
2020
2021
2022
2023
2024
2025
2026
2027
Year
Supply high
Supply central
Scenario 2
Scenario 4
Supply low
Supply extra low
97
Such as NOx from high strength biodiesel or aldehydes from bioethanol.
98
AEA (2011) ‘UK and Global Bioenergy Resource – Final report’.
99
See: www.e4tech.com/en/consulting-projects.html#Bioenergy
Scenarios 1 & 3
2028
2029
2030
190 Annex B: Carbon budgets analytical annex
trajectories. Chart B12 shows total biomass
supply and demand for the heat, power and
transport sectors.
B4.45 However, considering biomass as a whole
can mask the sustainable supply constraints that
may be felt for certain sectors and technologies.
Although the actual deployment levels are highly
uncertain and will depend on investment decisions
that renewable energy generators choose to
make based on the economics of the technologies,
scenario analysis of the potential pathways indicates
that some tensions between supply and demand
for feedstocks could appear during the 2020s.
B4.46 Although domestic resources will play an
important role in the supply of woody biomass, the
UK is likely to require significant woody biomass
imports in addition to UK resources. To meet the
demand of the potential deployment trajectories
to 2030 would require a greater proportion of
woodland resource to be managed for wood
fuel production, more woody feedstocks to be
harvested and, possibly, the establishment of new
energy forests and short rotation coppice. Higher
demand trajectories might also require a significant
expansion of marginal land devoted to woody
biomass production to meet the demand from
domestic sources. The use of energy crops would
also play an important role in meeting potential
needs. Removing energy crops from supply
estimates in order to test for the uncertainties of
the availability of these resources given potential
land availability and indirect impact constraints
shows that supply could be sufficient to meet
demand in the near term but that tensions could
start appearing from the mid 2020s onwards.
100
B4.47 In addition, demand for biofuels may
also prove constrained in low sustainable supply
scenarios for the fourth carbon budget period,
especially when considering biodiesel feedstocks.
However, testing higher availability scenarios based
on the existing literature shows that sustainable
supply could be sufficient to meet the potential
ranges of demand. Future supply for biodiesel and
bioethanol will largely depend on the sustainability
of first generation feedstocks and the impact of
forthcoming policy on indirect land use change.
B4.48 Finally, the scenario analysis also shows that
the supply of feedstocks for biogas in the heat
sector may prove constrained and potentially
hinder the significant deployment in the sector
over the fourth carbon budget period. In contrast,
supply of biogas to the power sector, which uses
different feedstocks100 than the heat sector, is
expected to surpass demand for the whole period.
B4.49 The analysis highlights that, in future,
different technologies and sectors are likely to
experience different pressures on the availability
of sustainable feedstocks. This will have an impact
on the price at which the UK can access these
feedstocks and will depend not only on the UK’s
ability to successfully exploit domestic resources
but also on the development of international
markets and associated demand. The forthcoming
cross-government Bioenergy Strategy will make
a more thorough assessment of the potential
availability of sustainable feedstocks to 2020
and beyond and the implications of this on the
potential role of bioenergy across electricity, heat
and transport as a way of achieving cost effective
carbon reductions.
This analysis assumes total supply of biogas from: sewage sludge, landfill gas, food waste and livestock manure. It is assumed that the power sector uses only
biogas from sewage sludge and landfill.
B5. Detailed tables
emissions by sector
The table below shows the updated emissions projections (UEP) broken down by the main National Communication sectors.101
Table B24: Projected net UK carbon account by sector, National Communication basis (MtCO2e)
Total greenhouse gas emissions (MtCO2e)
National
Communication
sector breakdown
2008 2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019 2020
2021 2022 2023 2024 2025 2026 2027
195
196
184
185
178
177
166
150
145
131
127
129
124
118
116
115
110
104
100
Business
97
86
94
91
90
90
91
91
89
88
86
84
82
82
81
79
78
78
77
77
Industrial processes
16
10
12
12
12
12
12
12
12
12
12
12
12
12
12
12
12
12
12
12
Transport
128
122
122
118
117
117
116
115
114
113
112
111
109
112
111
111
110
109
108
108
Residential
83
79
88
79
76
72
71
70
69
68
68
67
66
67
67
68
68
69
70
70
9
8
9
10
10
10
10
10
10
9
9
8
8
8
8
8
8
8
8
8
Agriculture
50
49
50
49
49
49
49
49
48
47
47
46
46
45
46
46
46
46
46
46
Land use change
−4
−4
−4
−3
−3
−3
−3
−2
−2
−2
−2
−2
−1
−1
−1
−1
0
0
0
0
Waste management
18
18
18
17
17
16
15
15
15
14
14
13
13
13
12
12
12
12
11
11
618
564
586
557
553
541
538
524
505
495
476
467
463
461
454
450
448
442
436
431
19
−12
−7
−23
−21
−4
1
−6
−17
−19
−29
−28
−22
−27
−29
22
21
16
11
6
599
576
593
579
575
545
538
531
523
514
505
495
486
489
483
428
427
426
425
425
Public
Total
EU ETS allowances
purchased by UK
Net UK carbon
account102
101
See: www.decc.gov.uk/en/consent/cms/about/ec_social_res/analytic_projs/en_emis_projs/en_emis_projs.aspx
102
The net UK carbon account estimates for the fourth carbon budget (2023–27) assume an EU ETS cap of 690 MtCO2e.
Annex B: Carbon budgets analytical annex 191
219
Energy supply
The tables in this section set out the updated policy emissions savings to deliver the first three carbon budgets.103, 104
Table B25: Projected non-traded sector emissions savings by policy in the baseline (MtCO2e)105
Carbon budget period
Carbon budget 1
Carbon budget 2
1
Carbon budget 3
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Residential
Building Regulations Part L (2002
and 2005/06)
2.6
3.2
3.7
4.5
4.9
5.4
5.8
6.2
6.5
−1.2
−1.4
−1.7
−1.8
−1.8
−1.7
−1.4
−1.2
−1.1
Supplier Obligation (EEC1, EEC2,
original CERT)
1.9
2.7
3.9
5.2
5.4
5.4
5.5
5.4
5.4
5.7
5.8
5.8
5.5
5.1
Total
3.3
4.4
5.9
7.8
8.5
9.1
9.8
10.4
10.8
11.5
12.0
12.4
12.5
Carbon Trust measures
1.2
1.1
1.1
0.9
0.7
0.6
0.4
0.3
0.3
0.3
0.2
0.1
Energy Performance of Buildings
Directive106
0.3
0.3
0.3
0.3
0.3
0.3
0.3
0.3
0.3
0.3
0.3
UK Emissions Trading Scheme
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
Building Regulations Part L (2002
and 2005/06)
0.7
0.9
1.0
1.2
1.2
1.3
1.4
1.4
1.4
Total
2.2
2.3
2.4
2.4
2.2
2.2
2.1
2.0
2.1
Warm Front and fuel poverty
measures
6.8
7.1
7.3
7.5
3
2008– 2013– 2018–
12
17
22
6.9
18.8
30.6
36.1
−0.4 −0.2
−7.9
−6.3
−2.7
4.8
19.0
27.4
27.0
12.0
11.6
30.0
51.6
60.5
0.0
0.0
0.0
4.8
2.0
0.5
0.3
0.3
0.3
0.3
1.5
1.5
1.5
0.0
0.0
0.0
0.0
0.0
0.1
0.0
0.0
1.5
1.5
1.5
1.5
1.5
1.4
5.1
7.0
7.5
2.1
2.0
1.9
1.9
1.8
1.7
11.5
10.4
9.4
−0.9 −0.8 −0.7 −0.5
7.3
2
Commercial and public services
103
For detail on how the policy emissions savings have been modelled please see chapter 4 of the latest published Updated Energy and Emissions Projections report available from:
www.decc.gov.uk/en/content/cms/about/ec_social_res/analytic_projs/en_emis_projs/en_emis_projs.aspx
104
Demand reduction through the impact of price uplifts are included in the baseline and have generally not been quantified in these tables. The exceptions are the impact of the EU ETS carbon price and Carbon Price Floor
in the ESI, which are quantified. Such price impacts arise from: CCL fuel duties, the need to purchase CRC allowances and the cost recovery of policy measures undertaken by energy suppliers, this includes supply side
measures such as grid reinforcement, RO and FiTs, as well as CERT/ECO.
105
For the purposes of this table, baseline is akin to the updated emissions projections baseline (pre-Low Carbon Transition Plan policies). The table shows emissions savings from only some of the policies included in the
baseline. It is not possible to quantify the emissions savings from all baseline policies individually. However, it should be noted that this does not impact on either the baseline or any of the newer policy emissions projections
scenarios. Savings in the transport sector from the Renewable Transport Fuels Obligation and EU voluntary agreements on new car emissions have been published previously. These have not been re-estimated for this
publication.
106
The original Energy Performance of Buildings Directive (EPBD) introduced Energy Performance Certificates, Display Energy Certificates and other measures to improve the energy performance of buildings. Carbon
savings given here only reflect the impact of the policy on the small and medium-sized enterprises sector, to avoid overlap with policies in other areas. The numbers relating to the EPBD in this annex are the same as given
in the Low Carbon Transition Plan (DECC, 2009) and so are not consistent with numbers for the other policies here, which use updated energy and carbon assumptions. The EPBD recast currently being developed does not
feature in these numbers owing to overlaps with the savings already accounted for elsewhere.
192 Annex B: Carbon budgets analytical annex
emissions savings by policy
Carbon budget period
Carbon budget 1
Carbon budget 2
1
Carbon budget 3
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Industry
2
3
2008– 2013– 2018–
12
17
22
Carbon Trust measures
0.5
0.5
0.5
0.4
0.3
0.3
0.2
0.2
0.2
0.1
0.1
0.1
0.0
0.0
0.0
2.2
0.9
0.3
UK Emissions Trading Scheme
0.2
0.2
0.2
0.2
0.1
0.1
0.1
0.1
0.1
0.1
0.0
0.0
0.0
0.0
0.0
0.9
0.4
0.1
Building Regulations Part L (2002
and 2005/06)
0.3
0.4
0.4
0.5
0.5
0.6
0.6
0.6
0.6
0.6
0.6
0.6
0.7
0.6
0.6
2.1
3.0
3.2
Total
1.0
1.0
1.1
1.1
1.0
0.9
0.9
0.8
0.8
0.8
0.8
0.7
0.7
0.7
0.6
5.2
4.3
3.5
Overall total
6.5
7.7
9.4
11.2
11.7
12.2
12.8
13.3
13.7
14.4
14.8
15.1
15.1
14.5
13.9
46.6
66.4
73.4
Annex B: Carbon budgets analytical annex 193
Carbon budget period
Carbon budget 1
Carbon budget 2
Carbon budget 3
1
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Residential
2
3
2008– 2013– 2018–
12
17
22
Supplier Obligation (CERT +20%
and CERT extension)
0.0
0.1
0.2
0.4
2.0
4.1
4.1
4.1
4.0
4.0
4.0
4.1
4.0
3.9
3.9
2.7
20.3
19.9
Building Regulations Part L (2010)
0.0
0.0
0.0
0.0
0.4
0.8
1.1
1.5
1.8
2.1
2.4
2.7
3.0
3.2
3.5
0.4
7.4
14.9
Smart Metering108
0.0
0.0
0.0
0.0
0.1
0.1
0.2
0.4
0.6
0.8
0.9
1.0
1.0
1.0
1.0
0.1
2.1
5.0
EU Products policy (Tranche 1,
Legislated)109
0.0
0.0 −0.2 −0.5 −0.7
−1.0
−1.2
−1.4
−1.6
−1.7
−1.9
−2.0
−2.0
−2.0
−1.9
−1.4
−7.0
−9.8
EU Products policy (Tranche 2,
Proposed)110
0.0
0.0
0.0
0.0
−0.1
−0.1
−0.1
0.0
0.1
0.2
0.3
0.4
0.5
0.5
0.5
−0.1
0.0
2.1
Community Energy Saving
Programme
0.0
0.0
0.0
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.3
0.3
Zero Carbon Homes
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.1
0.2
0.3
0.4
0.5
0.6
0.0
0.1
2.0
Energy Company Obligation and
Domestic Green Deal111
0.0
0.0
0.0
0.0
0.0
0.3
0.6
0.9
1.2
1.3
1.4
1.5
1.2
1.4
1.5
0.0
4.4
6.9
Renewable Heat Incentive
0.0
0.0
0.0
0.0
0.1
0.1
0.2
0.3
0.4
0.5
0.6
0.8
0.9
0.9
0.9
0.1
1.6
4.1
Total
0.0
0.1
0.1
0.0
1.8
4.4
5.0
5.8
6.6
7.4
8.1
8.7
9.0
9.5
10.0
1.9
29.2
45.3
107
This table shows non-traded emissions savings additional to the baseline (Low Carbon Transition Plan and newer policies).
108
All Smart Metering emissions savings are based on the latest published Impact Assessment, available at: www.decc.gov.uk/assets/decc/11/consultation/smart-metering-imp-prog/2549-smart-meter-rollout-domestic-ia-180811.pdf
109
Products policy includes legally binding EU minimum standards on energy-related products, which raise the minimum level of efficiency of energy-using products available in the market. It also includes labelling which
encourages manufacturers to go beyond the minimum standards. The first tranche of measures has been delivered; the energy savings are taken from the related Impact Assessments.
110
The second tranche of measures has not been completed and therefore any projected savings are less well understood, as the scope, timing and stringency of these measures has not been finalised. The current modelling
reports projections of energy savings from products policy. These are more uncertain over later years as it becomes less clear whether products policies drive efficiency improvements, or whether this would be driven
regardless by (i) consumers’ future preferences for better products, and/or (ii) forecast energy prices and traded carbon prices that increase at a faster rate post-2020. Tapers are applied post-2020 to signal uncertainties
in the long run on energy savings. For the net present values, further caution still is applied, with the estimates provided only for the savings until the end of the third carbon budget reporting period – given that it is unclear
whether the market will have responded or whether energy efficiency improvements will need to continue to be delivered through products policy in later years.
111
All ECO and Domestic Green Deal emissions savings are based on the latest Impact Assessment. The latest estimates differ from the estimates included in the October 2011 Updated Emissions Projections which are
based on the December 2010 Impact Assessment and include heating measures. Non-traded emissions savings fall in 2020 owing to assumptions about the roll-out of heat systems in fuel poor households. See the Impact
Assessment for further details: www.decc.gov.uk/assets/decc/11/consultation/green-deal/3603-green-deal-eco-ia.pdf
194 Annex B: Carbon budgets analytical annex
Table B26: Projected non-traded sector emissions savings by policy additional to the baseline (MtCO2e)107
Carbon budget period
Carbon budget 1
Carbon budget 2
Carbon budget 3
1
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Commercial and public servicesl
2
3
2008– 2013– 2018–
12
17
22
Building Regulations Part L (2010)
0.0
0.0
0.0
0.0
0.1
0.2
0.3
0.3
0.4
0.5
0.5
0.6
0.7
0.7
0.8
0.1
1.7
3.4
Business Smart Metering
0.0
0.0
0.0
0.0
0.0
0.0
0.1
0.3
0.4
0.6
0.7
0.7
0.8
0.7
0.7
0.0
1.4
3.6
EU Products policy (Tranche 1,
Legislated)
0.0
0.0
0.0
0.0
0.0
−0.1
−0.1
−0.1
−0.1
−0.1
−0.1
−0.1
−0.1
−0.1
−0.1
−0.1
−0.6
−0.7
EU Products policy (Tranche 2,
Proposed)
0.0
0.0
0.0
0.0
0.0
0.0
−0.1
−0.1
−0.1
−0.1
−0.1
−0.1 −0.2 −0.2 −0.2
−0.1
−0.4
−0.7
Small business energy efficiency
interest-free loans
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.1
0.1
0.0
Salix, public sector loans, 10%
commitment for central govt
0.0
0.0
0.1
0.1
0.1
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.3
0.1
0.0
Non-Domestic Green Deal
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.1
0.3
0.4
0.5
0.6
0.6
0.6
0.7
0.0
0.8
3.0
Carbon Reduction Commitment
Energy Efficiency Scheme
0.0
0.0
0.0
0.0
0.1
0.2
0.3
0.3
0.4
0.6
0.7
0.8
0.9
1.0
1.1
0.2
1.8
4.5
Renewable Heat Incentive
0.0
0.0
0.0
0.1
0.2
0.4
0.7
1.2
1.7
2.4
3.2
4.0
4.9
4.9
4.9
0.3
6.4
21.8
Total
0.0
0.0
0.1
0.2
0.5
0.8
1.2
2.1
3.0
4.2
5.4
6.5
7.5
7.7
7.8
0.8
11.3
34.8
Annex B: Carbon budgets analytical annex 195
Carbon budget 2
Carbon budget 3
1
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Industry
2
3
2008– 2013– 2018–
12
17
22
Building Regulations Part L (2010)
0.0
0.0
0.0
0.0
0.0
0.1
0.1
0.1
0.2
0.2
0.2
0.2
0.3
0.3
0.3
0.0
0.6
1.3
EU Products policy (Tranche 1,
Legislated)
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
EU Products policy (Tranche 2,
Proposed)
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
−0.1
Small business energy efficiency
interest-free loans
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.1
0.1
0.0
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Non-Domestic Green Deal
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.1
0.2
0.2
0.2
0.3
0.3
0.3
0.0
0.3
1.2
Carbon Reduction Commitment
Energy Efficiency Scheme
0.0
0.0
0.0
0.0
0.1
0.1
0.1
0.2
0.3
0.3
0.4
0.4
0.5
0.6
0.6
0.1
1.0
2.5
Renewable Heat Incentive
0.0
0.0
0.0
0.1
0.2
0.4
0.5
0.7
1.2
1.7
2.4
3.3
4.2
4.2
4.2
0.4
4.5
18.3
Total
0.0
0.0
0.0
0.2
0.4
0.6
0.8
1.1
1.7
2.4
3.2
4.1
5.2
5.3
5.4
0.6
6.5
23.2
Climate Change Agreements
(2011–18)112
112
CCAs and the Climate Change Levy are estimated to have no additional savings beyond business as usual emissions projections. CCA targets will be set in 2012 following negotiations with industry.
196 Annex B: Carbon budgets analytical annex
Carbon budget period
Carbon budget 1
Carbon budget period
Carbon budget 1
Carbon budget 2
1
Carbon budget 3
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Transport113
2
3
2008– 2013– 2018–
12
17
22
0.0
0.0
0.0
0.1
0.3
0.5
0.7
1.0
1.4
1.7
2.0
2.3
2.6
3.1
3.4
0.4
5.3
13.4
EU new car CO2 long-term
95 gCO2/km in 2020
0.0
0.0
0.0
0.0
0.1
0.1
0.2
0.2
0.2
0.7
1.4
2.3
3.4
5.0
6.1
0.1
1.5
18.2
Renewable Energy Strategy
transport biofuel (8% by energy
in 2020)114
0.0
0.0
0.0
0.0
0.0
0.0
0.5
1.1
1.8
2.4
3.0
3.5
4.1
0.0
0.0
0.0
5.7
10.5
EU new van CO2 regulation
147 gCO2/km in 2020
0.0
0.0
0.0
0.0
0.0
0.1
0.1
0.1
0.2
0.2
0.3
0.3
0.5
0.8
1.0
0.0
0.6
3.0
EU complementary measures
for cars
0.0
0.0
0.0
0.1
0.2
0.3
0.5
0.7
0.9
1.0
1.1
1.3
1.5
1.8
1.9
0.3
3.4
7.7
Low rolling resistance tyres for
HGVs
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.2
0.3
0.4
0.6
0.7
0.7
0.7
0.0
0.5
3.2
Industry-led action to improve
HGV efficiencies
0.0
0.0
0.0
0.1
0.2
0.3
0.4
0.5
0.4
0.5
0.6
0.7
0.4
0.4
0.6
0.3
2.2
2.7
Local Sustainable Transport Fund
0.0
0.0
0.0
0.2
0.4
0.6
0.8
1.0
0.8
0.6
0.5
0.5
0.5
0.4
0.2
0.6
3.7
2.0
Low carbon buses
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.1
0.1
0.1
0.2
0.3
0.3
0.4
0.0
0.2
1.4
Rail electrification
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.1
0.2
0.2
0.2
0.2
0.2
0.0
0.1
1.0
Total
0.0
0.0
0.0
0.6
1.2
2.0
3.3
4.7
5.8
7.6
9.6
12.0
14.2
12.8
14.6
1.8
23.4
63.1
115
113
Transport savings for the EU new car and van regulations and Renewable Energy Strategy biofuel are modelled directly in the Department of Energy and Climate Change’s Energy Model. Other transport savings are
forecast using the Department for Transport’s National Transport Model.
114
Estimates of the savings from Transport biofuels are based on achievement of 8% fuel share by 2020. An assumption of 10% was used in the June 2010 projections. This change is for modelling purposes only and does not
imply any change in policy or in the Government’s commitment to renewables.
115
Electrification of the Great Western Main Line as far as Cardiff, and the North West.
Annex B: Carbon budgets analytical annex 197
EU new car CO2 mid-term target
130 gCO2/km in 2015
Carbon budget 1
Agriculture and waste (non-CO2)
emissions116
Carbon budget 2
Carbon budget 3
1
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
2
3
2008– 2013– 2018–
12
17
22
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.6
1.5
2.2
2.7
3.2
3.4
3.4
0.0
2.1
14.9
Landfill tax
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Defra waste policy
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
0.0
0.1
0.2
0.9
3.8
7.7
10.3
13.7
17.8
23.0
28.4
34.0
39.1
38.7
41.2
5.1
72.5
181.4
Agriculture Action Plan
Overall total
116
Latest projections for waste emissions do not include an explicit estimate of the impact of landfill tax or waste policy: these have been absorbed into a single baseline projection.
198 Annex B: Carbon budgets analytical annex
Carbon budget period
Table B27: Projected traded sector emissions savings by policy included in the baseline (MtCO2e)117
Carbon budget period
Carbon budget 1
Carbon budget 2
1
Carbon budget 3
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Power
2
3
2008– 2013– 2018–
2012 2017 2022
13.0
9.5
7.6
12.2
7.6
5.5
5.2
5.3
4.5
4.9
6.1
7.4
8.2
6.0
5.6
49.8
25.4
33.3
Renewables
8.0
9.3
9.6
11.6
13.6
14.0
14.5
15.0
16.1
17.2
18.6
20.0
21.5
22.0
22.0
52.0
76.9
104.2
Large Combustion Plant Directive
2.8
2.8
2.8
2.8
2.8
2.8
2.8
2.8
0.0
0.0
0.0
0.0
0.0
0.0
0.0
14.0
8.4
0.0
23.8
21.6
20.0
26.6
23.9
22.4
22.5
23.1
20.6
22.2
24.7
27.4
29.8
28.0
27.6
115.8
110.7
137.5
Building Regulation Part L (2002
and 2005/06)
0.1
0.1
0.2
0.2
0.2
0.2
0.2
0.2
0.2
0.2
0.2
0.2
0.2
0.2
0.2
0.8
1.0
1.1
Warm Front and fuel poverty
measures
1.2
1.4
1.7
1.8
1.8
1.7
1.4
1.2
1.0
0.9
0.8
0.7
0.6
0.4
0.2
7.9
6.2
2.7
Supplier Obligation (EEC1, EEC2,
original CERT)
1.4
2.7
3.7
4.2
4.2
4.0
3.8
3.7
3.6
3.0
2.4
1.8
1.8
1.7
1.6
16.2
18.2
9.3
Total
2.7
4.3
5.5
6.2
6.1
5.9
5.5
5.1
4.9
4.1
3.4
2.7
2.6
2.3
2.1
24.9
25.4
13.1
Carbon Trust measures
1.2
1.2
1.2
0.9
0.7
0.6
0.4
0.4
0.4
0.4
0.3
0.1
0.0
0.0
0.0
5.2
2.0
0.5
Energy Performance of Buildings
Directive
0.4
0.4
0.4
0.4
0.4
0.4
0.4
0.4
0.4
0.4
0.4
0.4
0.4
0.4
0.4
2.2
2.2
2.2
UK Emissions Trading Scheme
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.1
0.0
0.0
Building Regulations Part L (2002
and 2005/06)
0.2
0.2
0.3
0.3
0.3
0.3
0.3
0.4
0.4
0.4
0.4
0.4
0.4
0.4
0.4
1.3
1.8
1.9
Total
1.9
1.8
1.9
1.7
1.5
1.3
1.2
1.2
1.2
1.2
1.1
1.0
0.9
0.9
0.8
8.8
6.1
4.7
EU Emissions Trading System
Total
Residential
117
For the purposes of this table, baseline is akin to the updated emissions projections baseline (Pre-Low Carbon Transition Plan policies). The table shows emissions savings from only some of the policies included in the
baseline. It is not possible to quantify the emissions savings from all baseline policies individually. However, it should be noted that this does not impact on either the baseline or any of the newer policy emissions projections
scenarios.
Annex B: Carbon budgets analytical annex 199
Commercial and public services
Carbon budget 1
Carbon budget 2
Carbon budget 3
1
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Industry
2
3
2008– 2013– 2018–
2012 2017 2022
Carbon Trust measures
0.9
0.9
1.0
0.7
0.6
0.5
0.4
0.3
0.3
0.3
0.2
0.1
0.1
0.0
0.0
4.1
1.7
0.5
UK Emissions Trading Scheme
0.5
0.4
0.4
0.4
0.3
0.3
0.2
0.2
0.2
0.1
0.1
0.0
0.0
0.0
0.0
2.0
1.0
0.1
Building Regulations Part L (2002
and 2005/06)
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.5
0.7
0.7
Total
1.5
1.4
1.4
1.2
1.0
0.9
0.7
0.6
0.6
0.6
0.5
0.3
0.2
0.2
0.2
6.6
3.4
1.3
29.8
29.2
28.9
35.7
32.6
30.5
29.9
30.0
27.3
28.0
29.7
31.5
33.4
31.3
30.7
156.0
145.6
156.6
Overall total
200 Annex B: Carbon budgets analytical annex
Carbon budget period
Table B28: Projected traded sector emissions savings by policy additional to the baseline (MtCO2e)118
Carbon budget period
Carbon budget 2
Carbon budget 1
Carbon budget 3
1
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Power
2
3
2008– 2013– 2018–
12
17
22
Industrial Emissions Directive
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.1
0.2
1.3
1.3
0.0
0.0
2.8
Carbon Capture and Storage
Demonstration Programme
0.0
0.0
0.0
0.0
0.0
0.0
1.1
1.5
2.1
2.3
4.4
5.6
5.6
5.6
5.6
0.0
7.0
26.8
Carbon Price Floor
0.0
0.0
0.0
0.0
0.2
5.7
0.9
0.7
0.9
1.8
2.7
1.1
0.3
0.8
5.8
0.2
9.9
10.8
Renewables119
0.0
0.0
0.0
0.0
0.6
3.3
5.8
10.1
14.2
16.3
17.8
19.8
21.1
22.4
23.5
0.6
49.7
104.6
Total
0.0
0.0
0.0
0.0
0.7
9.0
7.8
12.3
17.1
20.4
24.9
26.7
27.1
30.1
36.2
0.8
66.7
145.0
Supplier Obligation (CERT +20%
and CERT extension)
0.0
0.1
0.2
0.3
0.5
0.9
0.8
0.8
0.8
0.8
0.7
0.6
0.6
0.6
0.6
1.2
4.1
3.0
Building Regulations Part L (2010)
0.0
0.0
0.0
0.0
0.1
0.1
0.2
0.3
0.3
0.4
0.4
0.5
0.5
0.6
0.6
0.1
1.3
2.5
Smart Metering
0.0
0.0
0.0
0.0
0.1
0.1
0.2
0.5
0.7
0.9
1.1
1.2
1.2
1.2
1.2
0.1
2.4
5.9
EU Products policy (Tranche 1,
Legislated)
0.0
0.0
0.5
1.4
2.2
3.0
3.7
4.3
4.9
5.3
5.7
6.0
6.2
6.1
5.9
4.1
21.2
29.9
EU Products policy (Tranche 2,
Proposed)
0.0
0.1
0.2
0.3
0.6
1.0
1.4
1.7
2.1
2.4
2.6
2.8
3.1
3.1
3.1
1.2
8.6
14.8
Community Energy Saving
Programme
0.0
0.0
0.0
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.4
0.4
Zero Carbon Homes
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.1
0.1
0.2
0.3
0.3
0.0
0.0
1.0
Energy Company Obligation and
Domestic Green Deal
0.0
0.0
0.0
0.0
0.0
0.3
0.6
1.0
1.3
1.6
1.9
2.2
2.9
2.9
2.9
0.0
4.9
12.8
Renewable Heat Incentive
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.1
0.1
0.2
0.2
0.2
0.0
0.1
0.7
Total
0.0
0.2
0.9
2.1
3.5
5.5
7.1
8.7
10.1
11.4
12.6
13.6
14.9
14.9
14.9
6.7
42.7
70.9
Residential
This table shows traded emissions savings additional to the baseline (Low Carbon Transition Plan and newer policies).
119
Renewables savings include savings from the Renewables Obligation, Electricity Market Reform (Feed-in Tariffs with Contracts for Difference) and small-scale Feed-in Tariffs. Annex B: Carbon budgets analytical annex 201
118
Carbon budget 1
Carbon budget 2
Carbon budget 3
1
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Commercial and public services
2
3
2008– 2013– 2018–
12
17
22
Building Regulations Part L (2010)
0.0
0.0
0.0
0.0
0.2
0.4
0.6
0.8
1.0
1.1
1.3
1.5
1.6
1.8
1.9
0.2
3.9
8.0
Business Smart Metering
0.0
0.0
0.0
0.0
0.0
0.0
0.1
0.1
0.2
0.3
0.3
0.3
0.3
0.3
0.3
0.0
0.6
1.6
EU Products policy (Tranche 1,
Legislated)
0.0
0.0
0.2
0.5
0.9
1.2
1.5
1.6
1.8
2.0
2.2
2.3
2.4
2.4
2.3
1.6
8.2
11.6
EU Products policy (Tranche 2,
Proposed)
0.0
0.0
0.1
0.2
0.3
0.5
0.7
0.9
1.1
1.2
1.4
1.6
2.0
2.1
2.1
0.6
4.4
9.3
Small business energy efficiency
interest-free loans
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.1
0.1
0.0
Salix, public sector loans, 10%
commitment for central govt
0.0
0.0
0.1
0.1
0.1
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.2
0.1
0.0
Non-Domestic Green Deal
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.1
0.3
0.4
0.5
0.6
0.6
0.6
0.6
0.0
0.8
2.9
Carbon Reduction Commitment
Energy Efficiency Scheme
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.1
0.1
0.1
0.1
0.0
0.0
0.4
Renewable Heat Incentive
0.0
0.0
0.0
0.0
0.0
−0.1
−0.1 −0.2 −0.3 −0.5 −0.7
−0.9
−1.0
−1.0
−1.0
0.0
−1.2
−4.6
Total
0.0
0.1
0.4
0.8
1.5
2.1
5.5
6.1
6.2
6.4
2.8
16.9
29.2
2.9
3.4
4.0
4.6
5.1
202 Annex B: Carbon budgets analytical annex
Carbon budget period
Carbon budget period
Carbon budget 1
Carbon budget 2
1
Carbon budget 3
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Industry
2
3
2008– 2013– 2018–
12
17
22
0.0
0.0
0.0
0.0
0.1
0.1
0.2
0.3
0.3
0.4
0.4
0.5
0.5
0.6
0.6
0.1
1.3
2.6
EU Products policy (Tranche 1,
Legislated)
0.0
0.0
0.0
0.1
0.1
0.2
0.2
0.3
0.4
0.5
0.5
0.6
0.7
0.6
0.6
0.2
1.5
3.0
EU Products policy (Tranche 2,
Proposed)
0.0
0.0
0.0
0.0
0.0
0.1
0.1
0.1
0.2
0.2
0.3
0.3
0.4
0.4
0.4
0.1
0.7
1.6
Small business energy efficiency
interest-free loans
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.2
0.1
0.1
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Non-Domestic Green Deal
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.1
0.1
0.2
0.2
0.3
0.3
0.3
0.3
0.0
0.4
1.3
Carbon Reduction Commitment
Energy Efficiency Scheme
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
Renewable Heat Incentive
0.0
0.0
0.0
0.0
0.1
0.2
0.4
0.6
0.8
1.1
1.5
1.9
2.4
2.4
2.4
0.1
3.2
10.6
Total
0.0
0.0
0.1
0.2
0.4
0.7
1.0
1.4
1.8
2.4
2.9
3.6
4.2
4.2
4.2
0.7
7.2
19.2
Rail electrification
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
−0.1
−0.1
−0.1
−0.1
−0.1
−0.1
0.0
−0.1
−0.5
Overall total
0.0
0.3
1.4
3.1
6.1
17.3
18.7
25.8
33.1
38.6
45.4
49.2
52.2
55.4
61.6
10.9
133.4
263.7
Climate Change Agreements
(2011–18)
Transport
Annex B: Carbon budgets analytical annex 203
Building Regulations Part L (2010)
204 Annex B: Carbon budgets analytical annex
F
Charts B13–B16: Abatement included under illustrative Scenarios 1 to 4
The marginal abatement cost (MAC) curves below show the abatement and cost effectiveness of those
measures taken up under the fourth carbon budget scenarios and described in section B3 of this annex.
The abatement covers the five-year fourth carbon budget (2023–27). The cost effectiveness covers
the lifetime of the measure. They do not purport to show all potential abatement, only that abatement
potential that is actually taken up under the scenario.
Scenario 1
700
600
500
Cost effectiveness (£/tCO2e)
400
300
200
100
43
0
–100 0
10
20
30
40
50
60
70
80
90
100
110
120
130
140
150
160
170
180
190
200
MtCO2e
–200
–300
Residential retrofit
Residential new build
Low carbon heat (business)
Transport
Low carbon heat (residential)
Industrial process
–500
Services retrofit
Low carbon heat (public)
Agriculture
–600
Services new build
Low carbon heat (industry)
–400
–2,400
Annex B: Carbon budgets analytical annex 205
Scenario 2
700
600
500
400
Cost effectiveness (£/tCO2e)
300
200
100
43
0
–100
0
110
20
30
40
50
60
70
80
90
100
110
120
130
140
150
160
170
180
190 200
MtCO2e
–200
–300
–400
–500
Residential retrofit
Residential new build
Low carbon heat (business)
Transport
Low carbon heat (residential)
Industrial process
Services retrofit
Low carbon heat (public)
Agriculture
Services new build
Low carbon heat (industry)
–600
–2,400
Scenario 3
700
600
500
400
Cost effectiveness (£/tCO2e)
300
200
100
43
0
–100 0
10
20
30
40
50
60
70
80
90
100
110
120
130
140
150
160
170
180
190
200
MtCO2e
–200
–300
–400
–500
–600
–2,400
Residential retrofit
Residential new build
Low carbon heat (business)
Transport
Low carbon heat (residential)
Industrial process
Services retrofit
Low carbon heat (public)
Agriculture
Services new build
Low carbon heat (industry)
206 Annex B: Carbon budgets analytical annex
Scenario 4
700
600
500
400
Cost effectiveness (£/tCO2e)
300
200
100
43
0
–100
0
10
20
30
40
50
60
70
80
90
100
110
120
130
140
150
160
170
180
190 200
MtCO2e
–200
–300
–400
–500
–600
–2,400
Residential retrofit
Residential new build
Low carbon heat (business)
Transport
Low carbon heat (residential)
Industrial process
Services retrofit
Low carbon heat (public)
Agriculture
Services new build
Low carbon heat (industry)
Annex B: Carbon budgets analytical annex 207
Charts B17–B18: Abatement included under the illustrative traded sector scenarios (excluding
Electricity Market Reform) under central and high electricity demand
Central demand
140
120
100
80
60
Cost effectiveness (£/tCO2e)
40
20
0
–20 0
5
10
1
15
1
20
25
30
35
40
45
50
55
60
65
70
75
MtCO2e
–40
–60
–80
–100
–120
–140
–160
–180
–200
Services retrofit
Low carbon heat (public)
Low carbon heat (business)
Low carbon heat (residential)
Low carbon heat (industry)
Industrial process
–220
High demand
140
120
100
80
60
Cost effectiveness (£/tCO2e)
40
20
0
–20
5
10
15
20
25
30
35
40
45
50
55
60
65
70
75
MtCO2e
–40
–60
–80
–100
–120
–140
–160
–180
–200
–220
Services retrofit
Low carbon heat (public)
Low carbon heat (business)
Low carbon heat (residential)
Low carbon heat (industry)
Industrial process
208
Annex C: Carbon Plan action summary
Area
Start date
End date
Description
Department(s)
responsible
Is action in
Departmental
Business Plan
published
Nov 2010?
Secure, sustainable
low carbon energy
Started
Dec-2011
Publication of refreshed Electricity Networks Strategy Group (ENSG) analysis of
potential transmission network requirements to meet 2020 renewable energy
targets (2020 Vision)
DECC
N
Started
Dec-2011
Set arrangements for the independent assessment of the safety, security and
environmental impact of new reactor designs
DECC
Y(DECC)
Started
Dec-2011
Finalise the framework that will ensure that new nuclear operators have
arrangements in place to meet the full costs of decommissioning and their full
share of waste management costs through publication of statutory Funded
Decommissioning Guidance and a pricing methodology for government taking
ownership of the operator’s waste
DECC
Y(DECC)
Started
Apr-2012
Publish National Planning Policy Framework
DCLG
Y(DCLG)
Started
Apr-2012
Introduce as part of the national planning framework a strong presumption in favour
of sustainable development
DCLG
Y(DCLG)
Started
Apr-2012
Undertake first major review of Feed-in Tariffs for small-scale renewable energy;
consult and implement changes (fast-track consideration of some aspects to be
completed in 2011)
DECC
Y(DECC)
Apr-2012
Apr-2012
Transfer relevant functions from the Infrastructure Planning Commission (IPC) into
the Major Infrastructure Planning Unit
DCLG
Y(DCLG)
Started
May-2012
Deliver Electricity Market Reform (EMR) clauses for inclusion in an early second
session Energy Bill, which will implement: a new Feed-in-Tariff with Contracts
for Difference (FIT CfD) for all low carbon technologies; a Capacity Mechanism
to ensure security of supply; an Emissions Performance Standard (EPS); and the
institutional arrangements necessary to deliver them
DECC
N
Start date
End date
Description
Department(s)
responsible
Is action in
Departmental
Business Plan
published
Nov 2010?
Secure, sustainable
low carbon energy
(continued)
Dec-2012
Dec-2012
Publish, with the nine other nations in the North Seas Countries’ Offshore Grid
Initiative, North Sea grid configuration options and proposals for tackling regulatory,
legal, planning and technical barriers
DECC
Y(DECC)
Started
Apr-2013
Work with the Department for Communities and Local Government to allow
communities that host renewable energy projects to keep the additional business
rates they generate – implement business rate retention for renewable energy
development
DECC
Y(DECC)
Started
Apr-2013
Conduct four-yearly review of Renewables Obligation (RO) Banding (levels of
financial support for different technologies) to ensure that the RO provides the
correct level of support to maintain investment in large-scale renewable energy
generation
DECC
Y(DECC)
May-2012
Apr-2013
Legislation will be brought forward as soon as Parliamentary time allows for the
establishment in statute of an independent Office for Nuclear Regulation
DECC
N
Apr-2013
Apr-2013
New RO Bands implemented (except for offshore wind)
DECC
Y(DECC)
Apr-2014
Apr-2014
New RO Bands implemented for offshore wind
DECC
Y(DECC)
Started
Dec-2011
To set up a new Energy Efficiency Deployment Office (EEDO)
DECC
N
Started
Jun-2012
Review water efficiency advice to be given as part of broader sustainability
information available under the Green Deal
Defra
N
Started
Apr-2012
Improve the content, format and quality of Energy Performance Certificates (EPCs)
to support the Green Deal, and ensure requirements are complied with
DCLG, DECC
N
Started
Jul-2012
Subject to consultation, work with industry to confirm technical specifications and
begin roll-out of Smart Meters across Britain
DECC
Y(DECC)
Started
Oct-2012
Develop policies to increase demand for the Green Deal, alongside core finance offer
DECC
Y(DECC)
Started
Oct-2012
Support Green Deal implementation by providing access to EPC data
DCLG, DECC
N
Saving energy
in homes and
communities
Annex C: Carbon plan action summary 209
Area
Start date
End date
Description
Department(s)
responsible
Is action in
Departmental
Business Plan
published
Nov 2010?
Saving energy
in homes and
communities
(continued)
Started
Oct-2012
Drive Green Deal demand by introducing energy efficiency regulations for private
rented sector housing and commercial rented property from 2018 (conditional on
there being no net or upfront costs to landlords) and consider as part of the Part L
2013 Building Regulations review ways of generating take-up of greater levels of
energy efficiency measures in existing buildings in order to help support demand for
the Green Deal.
DCLG, DECC
N
Started
Oct-2012
Encourage local authorities to become involved in delivering energy efficiency in their
areas and social landlords to take action to improve the energy performance of their
social housing stock, which will also stimulate the Green Deal and provide greater
certainty to suppliers, e.g. through Permissive Guidance to be published by April 2012
DCLG, DECC
N
Started
Jan-2012
Consult on secondary legislation to enable the Green Deal, including the new
obligation on energy companies
DECC
Y(DECC)
Dec-2011
Mar-2012
Consult on revisions to Part L 2013 conservation of fuel and power of the Building
Regulations
DCLG
Y(DCLG)
Jan-2012
Mar-2012
Lay secondary legislation to enable the Green Deal before Parliament
DECC
Y(DECC)
2016
2016
Zero carbon standard comes into effect for new homes
DCLG
N
Started
Dec-2011
Put staff and back office systems in place for the Green Investment Bank, in
preparation for the launch of the incubation phase
BIS
Y(BIS)
Started
Dec-2011
Publish report outlining abatement potential, barriers and opportunities for key
energy intensive sectors
BIS, DECC,
HMT
N
Started
Dec-2011
Continue market testing for the role of the Green Investment Bank beyond the
incubation phase
BIS
Y(BIS)
Started
Jan-2012
Consult on secondary legislation to enable the Green Deal, including the new
obligation on energy companies
DECC
Y(DECC)
Jan-2012
Jan-2012
Lay secondary legislation to enable the Green Deal before Parliament
DECC
Y(DECC)
Dec-2011
Mar-2012
Consult on revisions to Part L 2013 conservation of fuel and power of the Building
Regulations
DCLG
Y(DCLG)
Reducing emissions
from business and
industry
210 Annex C: Carbon plan action summary
Area
Start date
End date
Description
Department(s)
responsible
Is action in
Departmental
Business Plan
published
Nov 2010?
Reducing emissions
from business and
industry (continued)
Started
Jun-2012
Review water efficiency advice to be given as part of broader sustainability
information available under the Green Deal
Defra
N
Sep-2012
Sep-2012
Green Investment Bank operational
BIS
Y(BIS)
Started
Mar-2013
Encourage voluntary take-up of Display Energy Certificates to the commercial sector
DCLG, DECC
N
Started
Oct-2012
Develop policies to enable application of the Green Deal to the commercial sector,
alongside household offer
DECC
N
May-2013
May-2013
First annual data released on the funds in and size of investments made by the Green
Investment Bank
BIS
Y(BIS)
2019
2019
Zero carbon standard comes into effect for new non-domestic buildings
DCLG
N
Dec-2011
Dec-2011
Complete transposition of transport elements of the Renewable Energy Directive
DfT
N
Dec-2011
Dec-2011
Complete transposition of greenhouse gas (GHG) savings requirements of the Fuel
Quality Directive
DfT
N
Started
Jan-2012
Implement the inclusion of aviation within the EU Emissions Trading System
DfT
Y(DfT)
Started
Mar-2012
Review strategy to support transition from early ultra-low emission vehicle market to
mass market
DfT
Y(DfT)
Started
Mar-2012
Push for early EU adoption of electric vehicle infrastructure standards
DfT
Y(DfT)
Dec-2011
May-2012
Establish (a) a National Chargepoint Registry that will allow chargepoint
manufacturers and operators to make information on their infrastructure, including
location, available in one place; and (b) a Central Whitelist that enables users of
chargepoint networks to access chargepoints across the country
DfT
N
May-2012
May-2012
Release details on the second tranche of projects to be supported by the Local
Sustainable Transport Fund
DfT
N
Mar-2012
Jul-2012
Consult on sustainable aviation framework for UK
DfT
Y(DfT)
Mar-2012
Aug-2012
Launch of competition for low carbon trucks demonstration trial.
DfT
N
Jun-2012
Jun-2012
Release details on the large projects to be supported by the Local Sustainable
Transport Fund
DfT
N
Towards low carbon
transport
Annex C: Carbon plan action summary 211
Area
Start date
End date
Description
Department(s)
responsible
Is action in
Departmental
Business Plan
published
Nov 2010?
Towards low
carbon transport
(continued)
Mar-2012
Aug-2012
Launch of competition for public gas refuelling infrastructure projects (for gasfuelled trucks)
Dft
N
Jan-2012
Sep-2012
Review progress from industry-led schemes to reduce fuel consumption and
emissions from the freight sector and reconsider the case for government
intervention
DfT
N
Dec-2012
Dec-2012
Decide whether or not to include international aviation and shipping in UK carbon
budgets and 2050 target
DfT, DECC
N
Started
Jan-2013
Provide input into the European Commission’s ongoing review of the EU’s new car
and van CO2 targets for 2020
DfT
N
Started
Mar-2013
Release second round funding to successful bidders for Plugged-in Places pilots
programme to encourage the establishment of electric vehicle recharging
infrastructure
DfT
Y(DfT)
Mar-2013
Mar-2013
Adopt sustainable aviation framework
DfT
Y(DfT)
Mar-2013
Jun-2013
Provide an update to the Plug-in Vehicle Infrastructure Strategy
DfT
N
Cutting emissions
from waste
Started
May 2015
Implement the set of actions outlined in the Review of Waste Policies in England
Defra
N
Managing land
sustainably
Started
Jun-2012
Conduct a pilot project to develop and trial methods for delivering integrated
environmental advice for farmers (including on reducing GHG emissions)
Defra
Y(Defra)
Apr-2012
Apr-2012
The Independent Panel on Forestry makes recommendations on the future direction
of forestry and woodland policy in England. The Government will respond in due
course.
Defra,
Forestry
Commission
N
Started
Jun-2012
Publication of Sustainable Growing Media Taskforce roadmap
Defra
N
Apr-2012
Nov-2012
Review of progress made towards reducing GHG emissions from agriculture
Defra
Y(Defra)
Jan-2015
Dec-2015
Horticultural Use of Peat policy progress review
Defra
N
Started
2016
Invest £12.6 million to improve the GHG inventory for agriculture, thereby
strengthening our understanding of on-farm emissions
Defra,
Y(Defra)
Devolved
Administrations
May-2012
2017
Initiate a research programme on Sustainable Pathways for Low Carbon Energy
to help understand what a sustainable energy mix would look like in 2050, taking
account of cost, GHG savings and wider impacts
Defra
N
212 Annex C: Carbon plan action summary
Area
Start date
End date
Description
Department(s)
responsible
Is action in
Departmental
Business Plan
published
Nov 2010?
Reducing emissions
in the public sector
Started
Mar-2015
Reduce GHG emissions, waste generated, water consumption and domestic business
air travel and encourage sustainable procurement for the whole central government
estate
CO, All
departments
N
Developing
leadership within the
European Union
Started
Dec-2011
Support the European Commission to publish an energy roadmap to 2050 which
sets out scenarios for how the power industry can be decarbonised and maximise
Member States’ support
DECC
Y(DECC)
Started
Dec-2011
Encourage a strong EU position in the UN Framework Convention on Climate
Change negotiations in Durban, South Africa
FCO, DECC
Y(FCO)
Started
Dec-2011
Agree EU legislation on transparency and integrity of wholesale energy markets
DECC
N
Started
Jun-2012
Agree EU legislation on energy infrastructure to support projects of European
interest and facilitate commercial infrastructure investment needed for security of
supply and low carbon transition
DECC
Y(DECC)
Started
Oct-2012
Support the European Commission in implementing the low carbon roadmap
DECC
N
Started
Dec-2012
Complete review of EU regulation on fluorinated greenhouse gases and conclude
possible negotiations on any proposals
Defra
N
Started
Dec-2012
Work with the EU to agree energy efficiency and labelling standards for remaining
energy using products in residential and tertiary sectors, and some industrial
products
Defra
Y
Started
Dec-2012
Work with international partners to increase take-up of effective product policies
and to move towards harmonised global product standards
Defra
N
Started
Dec-2012
Work with partners in Europe to establish standards for smart grids and Smart
Meters by the end of 2012
DECC
N
Dec-2012
Dec-2012
Complete negotiations on next EU budget spending period (Multiannual Financial
Framework (MFF)) – including agreeing an increase in the share of low carbon
spending within an MFF settlement that increases by no more than inflation overall
HMT
N
Annex C: Carbon plan action summary 213
Area
Start date
End date
Description
Department(s)
responsible
Is action in
Departmental
Business Plan
published
Nov 2010?
Developing
leadership within
the European Union
(continued)
Dec-2012
Dec-2012
Publish proposals for tackling the regulatory, legal, planning and technical barriers to
co-ordinated offshore grid development in the North and Irish Seas
DECC
Y(DECC)
Started
Dec-2014
Develop EU technical codes to improve functioning/integration of EU energy markets
DECC
N
Started
May-2015
Drive efforts within the EU to amend the Emissions Trading Scheme Directive to
deliver full auctioning of allowances
DECC
Y(DECC)
Started
May-2015
Accelerate the global transition to a low carbon climate resilient economy, working
with EU institutions and partners
FCO
Y(FCO)
Started
May-2015
Extend the internal market, energy security and liberalisation; promote global free
trade with a special regard for global poverty alleviation and co-ordinated action to
build a low carbon economy and avoid dangerous climate change; implement the
Energy Third Package effectively
FCO
Y(FCO)
Started
Dec-2011
Subject to funding, UK Climate Security Envoy to have engaged with US, Canada,
Japan, African Union and Australia on national and global security risks of
climate change
FCO, MOD,
DECC
N
Started
Dec-2011
Agree action plan for co-operation with Norway on oil and gas, carbon capture and
storage and renewables
DECC
Y(DECC)
Started
Dec-2011
Support the Government of India in its work to improve industrial energy efficiency,
including through the PAT scheme and building of capacity to enable Indian industry
to take full advantage of the scheme
DECC, DFID
N
Started
Feb-2012
Monitor the carbon impacts of UK consumption of goods and services by obtaining
updated annual estimates of ‘embedded’ carbon emissions
Defra
N
Apr-2012
Apr-2012
UK hosts Clean Energy Ministerial meeting, securing further progress on practical
collaborations on key low carbon technologies
DECC
N
May-2012
May-2012
Secure continued commitment to ambitious action on international climate change
via the G8 summit
DECC, FCO
N
Jun-2012
Jun-2012
Take part in UN Conference on Sustainable Development (Rio+20) discussions on
Green Economy in the context of sustainable development and poverty eradication
and institutional frameworks
Defra
Y(Defra)
Building the case
for global ambition
with key countries
and international
institutions
214 Annex C: Carbon plan action summary
Area
Start date
End date
Description
Department(s)
responsible
Is action in
Departmental
Business Plan
published
Nov 2010?
Building the case
for global ambition
with key countries
and international
institutions
(continued)
Started
Dec-2012
Continued in principle support for phase-down of hydrofluorocarbon production
and use, using the Montreal Protocol
Defra
Y(Defra)
Started
Dec-2012
Work with the Convention on Biological Diversity to improve synergies between
climate change and biodiversity policy, including on biodiversity safeguards in REDD+
strategies to reduce emissions from deforestation
Defra
N
Started
May-2015
Low carbon campaign in priority markets of India, China, Brazil and US West Coast,
in addition to support for low carbon exporters in other markets
UKTI
N
Started
Dec-2011
Agree action plan for co-operation with Norway on oil and gas, carbon capture and
storage (CCS) and renewables
DECC
Y(DECC)
Started
Nov-2012
Continuing to engage bilaterally with key countries and international fora involved in
CCS such as the Carbon Sequestration Leadership Forum, the International Energy
Agency, the Global CCS Institute and European CCS bodies
DECC
N
Nov-2012
Nov-2012
Publish final EU report on fast-start funding
DECC, DFID,
HMT
N
Started
Dec-2012
Encourage governments, through a range of initiatives, to design and deliver low
carbon development
DECC
N
Started
Dec-2012
Establish the Capital Markets Climate Initiative to use private sector expertise to
test new and innovative instruments for leveraging private finance to tackle climate
change in developing countries
DECC, DFID
Y(DECC)
Started
Dec-2012
Deliver £300 million of UK fast start finance to reduce emissions from deforestation
DECC, DFID,
Defra
Y(DECC)
Started
Dec-2013
Roll out Strategic Climate Programme Reviews in all programme countries to ensure
that climate issues are addressed in DFID country business plans
DFID
Y(DFID)
Started
Dec-2014
Support, together with commitments from other donors, the Global Environment
Facility (GEF)
DFID
N
Supporting the
development of
low carbon, climate
resilient economies
Annex C: Carbon plan action summary 215
Area
Start date
End date
Description
Department(s)
responsible
Is action in
Departmental
Business Plan
published
Nov 2010?
Supporting the
development of
low carbon, climate
resilient economies
(continued)
Started
Apr-2015
Support for a range of programmes at country level through DFID’s bilateral
programme to support poor countries to adapt to climate change, protect forests
and support low carbon development
DFID
N
Started
Apr-2015
Support the Climate and Development Knowledge Network (CDKN)
to enable developing countries to access the best climate change knowledge, research
and data to enable them to build resilience to climate change, adopt low carbon
growth and tackle poverty
DFID
N
Started
Apr-2015
Complete the disbursement of £2.9 billion of climate finance
DECC, DFID,
HMT, Defra
N
Started
Dec-2011
Design a new international Green Fund with international partners
DECC
Y(DECC)
Started
Dec-2011
Work for a comprehensive global agreement on climate, including securing significant
progress at the UN Framework Convention on Climate Change (UNFCCC)
negotiations in Durban, South Africa
FCO, DECC
Y(FCO)
Dec-2012
Dec-2012
Work through the UNFCCC negotiations to make progress towards a global deal on
reducing emissions and the provision of climate finance
DECC
N
Sep-2012
Mar-2013
Monitor and evaluate the impact and value for money of the Advocacy Fund to help
the poorest countries take part in international negotiations
DFID
Y(DFID)
Dec-2013
Dec-2013
Negotiations under the International Civil Aviation Organization and the International
Maritime Organization to encourage reduction in emissions from the aviation and
maritime sectors
DfT
N
2013
2015
Support work through the UNFCCC to review progress towards the 2 degree
target and its adequacy in the light of the latest science
DECC
N
Ensuring progress
within international
climate negotiations
216 Annex C: Carbon plan action summary
Area
Start date
End date
Description
Department(s)
responsible
Is action in
Departmental
Business Plan
published
Nov 2010?
Action in Northern
Ireland, Scotland and
Wales
Started
Dec-2011
Achieve emissions reductions from new buildings through a progressive tightening of
thermal standards required under Building Regulations. Department of Finance and
Personnel (DFP) to take this forward in two stages – 2011 and 2013
DFP
n/a
Started
Mar-2012
Consider Planning Policy Statement 1 (Sustainability) which is being undertaken to
take account of, and give support to, planning reform implementation
DOE
n/a
Started
Dec-2012
Achieve renewable electricity target of 12% as part of the Department of Enterprise,
Trade and Investment (DETI) Strategic Energy Framework (SEF)
DETI
n/a
Jan-2013
Mar-2013
Achieve emissions reductions from new buildings through a progressive tightening of
thermal standards required under Building Regulations. DFP to take this forward in
two stages – 2011 and 2013
DFP
n/a
Started
Mar-2014
Deliver Sustainable Development Plan
Office of the
First Minister
and deputy
First Minister
(OFMDFM)
n/a
Started
Mar-2015
Refine agricultural greenhouse gas inventories
DARD
n/a
Jan-2011
2020
Achieve renewable electricity target of 40% as part of the DETI SEF
DETI
n/a
Jan-2011
2020
Achieve heat from renewable sources target of 10% as part of the DETI SEF
DETI
n/a
Dec-2011
Dec-2011
Limit on use of carbon units to be set for 2013–17 (with successive batches at
five-year intervals thereafter)
Scottish
Government
n/a
Dec-2011
Dec-2011
Target to generate 31% of final electricity demand from renewables
Scottish
Government
n/a
Jan-2012
Jan-2012
Report on progress requested from the Committee on Climate Change (and
annually thereafter)
Scottish
Government
n/a
Mar-2012
Mar-2012
Scottish Government response to Committee on Climate Change progress report
(and annually thereafter)
Scottish
Government
n/a
Annex C: Carbon plan action summary 217
Area
Start date
End date
Description
Department(s)
responsible
Is action in
Departmental
Business Plan
published
Nov 2010?
Action in Northern
Ireland, Scotland and
Wales (continued)
Jun-2012
Jun-2012
Report on Proposals and Policies for 2023–27
Scottish
Government
n/a
Oct-2012
Oct-2012
Scottish Government report on whether annual target met (and annually thereafter)
Scottish
Government
n/a
Jan-2013
Jan-2013
Implementation of outcomes of review of new-build domestic energy standards for
2013 – intention of further improvement to achieve a 60% reduction in emissions
compared with 2007
Scottish
Government
n/a
Dec-2013
Dec-2013
50% of waste collected from households to be recycled, composted and prepared
for re-use
Scottish
Government
n/a
Oct-2011
Oct-2011
UK Climate Change Committee advice to Welsh Government on delivery of Climate
Change Strategy and review of actions (and annually thereafter)
Welsh
Government
n/a
Dec-2011
Dec-2011
Climate Change Commission for Wales report on Welsh Government delivery of
Climate Change Strategy (and annually thereafter)
Welsh
Government
n/a
Jan-2012
Mar-2012
Welsh Government report to National Assembly for Wales on delivery of Climate
Change Strategy and refresh of Delivery Plans (and annually thereafter)
Welsh
Government
n/a
Sep-2012
Sep-2012
Final greenhouse gas emissions inventory figures for 2010, enabling confirmation of
2006–10 average emissions baseline (against which the 3% target is measured)
Welsh
Government
n/a
Sep-2013
Sep-2013
Greenhouse gas emissions inventory figures for 2011, enabling accurate reporting of
progress for first year of 3% target (and annually thereafter)
Welsh
Government
n/a
218 Annex C: Carbon plan action summary
Area
Department of Energy and Climate Change
3 Whitehall Place
London SW1A 2AW
www.decc.gov.uk
© Crown copyright 2011
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