Download Global Carbon Markets Team - March 2010

Implementing climate change
policy in the UK
Neil Johnson, Head of International Mitigation and Global Carbon Markets
Department of Energy & Climate Change, UK
January 2012
The Case for EU and Member State action
•Environmental: UNEP Report makes clear that current pledges will
only deliver, at most, 50% of what is needed to keep global temperature
increases to within 2 degrees
•For the UK, this is an economic as much as an environmental issue:
Cost-effective transition to a low-carbon economy
Global competition for oil and gas
Fast-growing markets for low-carbon goods and services
Certainty to business through the carbon price
Identifying win-wins such as energy efficiency
Growing global demand
Gas demand grows mostly in non OECD
In particular in Asia
NonOECD
OECD
Where are we after Durban?
•Clear signal that we are working towards a legally
binding agreement covering all Parties, including
mitigation commitments from all major economies
•Acknowledgement that the pledges currently on the
table are not consistent with a 2 degree trajectory
•EU agreed to enter a 2nd commitment period of the
Kyoto Protocol: need to submit a QELRO and resolve
issues around surplus AAUs this year. We have a lot of
work to do!
EU 2020 target will play a key role in transition to
a European low carbon economy
An EU 30% emissions reduction target
Provide a higher carbon price
needed to stimulate the
necessary investment in green
technologies and green jobs.
Also give industry certainty
about our low carbon future.
Ensure the trajectory of
emissions reductions is
relatively smooth and done in
the most cost effective
manner. The longer we wait
the more it will cost
Figure 2: New financial investment in
sustainable energy, 2009
Is more consistent
with a 2 degree
trajectory
Ensure the EU can compete
in fast growing markets for
green goods and services
Figure 3: Green investment in stimulus
packages
More immediate benefits of moving to a low
carbon economy
Green growth
Considerable potential for growth – Low carbon goods and services market is
worth over £3 trillion / yr and projected to grow at over 4% for the next 5 years
H
Energy security
Help reduce reliance on fossil fuels and reduce susceptibility to energy price
volatility. A 30% target would reduce the EU’s imports of both gas and oil by
approximately 1% saving €5.5bn in oil imports and €3.6bn in gas imports by 2020
Air quality
Improving health and reducing health care costs through reduced air pollution.
Estimated benefit of €10bn annually by 2020, as a result of reduced mortality and
morbidity resulting from better air quality
EU leadership
Helping to maintain EU leadership in international climate change negotiations
The costs of moving to a 30% target are
significant but manageable and in our own
interest over the long term
Estimate of costs to the EU
Most studies estimate that the macroeconomic costs to meet an EU 30% target relative to no
policies on climate are less than 0.5% of GDP. Commission analysis suggests costs are
€81bn, compared to a move to 20% of €48bn.
But that is not the whole story
•Studies by the Climate Action Group
and Potsdam Institute suggest a net
positive impact on GDP
•And over the longer term cutting
emissions faster earlier is in our
economic interest
The 2050 Low Carbon Roadmap
• Describes the most cost-
effective pathway for the EU to
cut emissions by 80% by 2050
• Shows the cost effective
pathway is 25% in 2020, 40%
in 2030 and 60% in 2040.
• These milestones represent
domestic action only (not EU
targets which may include
international offsets)
100%
100%
Trajectory
with current
policies
80% Power Sector
60%
Residential & Tertiary
80%
60%
Industry
40%
40%
Transport
20%
20%
Agriculture
Other Sectors
0%
1990 2000 2010
2020
2030
2040
0%
2050
“The roadmap shows that Europe’s current 20% target for 2020 isn’t enough or cost effective
and shows that Europe’s already got the policies and the tools to cut emissions by 25% at home.
This makes the case for going to 30% stronger and more urgent..”
Chris Huhne, UK Secretary of State for Energy and Climate Change , 8 March 2011
Where did we start in the UK? 2008 Climate
Change Act
Born from public pressure and political consensus
Requires Government to set binding 5-year carbon budgets
Establishes Committee on Climate Change to advise Ministers on level
of target and report to Parliament on progress
Obligations on Government departments to deliver carbon reduction
policies and assess emissions
UK Policy framework: 2050 Pathway analysis
The UK’s 2050 Pathways work presents a framework for considering the choices and
trade-offs that we will have to make
The work shows there are common themes to many of the plausible pathways to 2050
Ambition reduction in energy demand
A substantial electrification of heating, transport and industry
Electricity supply needs to be decarbonised
Variable renewable generation increases the challenge of balancing the electricity grid
Substantial bioenergy is vital
Emissions cuts needed from agriculture, waste, industrial process and international transport
Fossil fuels continue to play a role, the size will depend on issues such as development of CCS
Carbon budgets – committing government
departments to make reductions
(MtCO2e)
Carbon Budgets – overall level
Percentage reductions on 1990
baseline
CB 1
(2008-2012)
CB 2
(2013-2017)
CB 3(2018-2022)
CB4 (2023 – 2027)
3,018
2,782
2,544
1950
22%
28%
34%
- 50%+
UK emissions have fallen more than 20% since 1990 and will be at least 23.5%
lower than 1990 levels by 2012
All sectors will contribute to savings
Decarbonising the power sector- renewables,
nuclear and carbon capture and storage
Transforming our electricity sector
30% of electricity through
renewables in 2020
Working towards
commercialisation of CCS
New nuclear power
stations under way by
2018
Maintaining secure electricity supplies by creating a supportive climate for timely investment
Why the electricity market needs reform – the
Electricity Market Reform package
WHY?
Weak carbon signals
HOW?
Long term contracts for low
carbon generation
Carbon price support
“Bias to gas”
Security of supply
Scale of finance needed
Emissions performance
standard
Encourage construction of
reserve power plants
Green Deal – some key points
How does it work?
•
•
•
•
Commercial opportunity – no state funding, providers will go to
commercial banks for funding
The customer doesn’t pay a penny up front – they pay back the costs
through the savings on the energy bills
The legal charge is on the home, not the individual
Capped costs so payback is never greater than savings
The green deal customer journey
Marketing and
co-ordination
Survey
Finance
Installation
Repayments
and follow up
Green Investment Bank – what will it do?
Rationale
 Complement other policy instruments: National Infrastructure Plan, changes to
climate change levy, Green Deal, etc.
 Intervene where financing is restricted or unavailable
 Assume risks that the market will not but makes decisions on a commercial basis
It is expected that the focus will be on
mobilising additional capital into a wide range
of “green” infrastructure and deployment of
late-stage technologies.
The bank is being created to mobilise additional
private sector investment . It will initially be
capitalised with £3bn of government funding
and be allowed to borrow from 2015-16.
Questions?