UK sets world's first carbon budgets

Chancellor delivers new support for low carbon industries

The UK today became the first country in the world to bind itself into an ambitious long-term framework to limit its greenhouse gas emissions.

Announcing the UK’s first three ‘carbon budgets’ alongside his fiscal Budget, the Chancellor also set out new measures designed to help low carbon industries capitalise on the opportunities presented by the UK’s legally binding target to cut greenhouse gas emissions to at least 80% below 1990 levels by 2050.

The Chancellor today announced:

• Legally binding carbon budgets for the first three five-year periods 2008-2012, 2013-2017 and 2018-2022. 
• A revised target to reduce emissions to at least 34% below 1990 emissions by 2018-22. 
• Aim to meet the carbon budgets announced today through domestic action alone, and consistent with this, setting a zero limit in the non-traded sector on offsetting through international credits for the first budget period. 
• Commitment to tighten the budget after Copenhagen this December, once we have a global climate change agreement.
  

Energy and Climate Change Secretary Ed Miliband said:

“Meeting carbon budgets will require emission reductions across the whole UK economy.  We are on course to meet the first carbon budget, a 22% cut by the end of 2012 compared to 1990.  The package of measures set out by the Chancellor today is good for the environment, good for jobs and good for energy consumers, helping ensure that Britain’s recovery and long term future is low carbon and secure.”

Listen to Ed Miliband talking about the green aspects of the Chancellor's Budget:

The UK’s carbon budgets will be met through collective action across Government. All departments will be involved in delivering the carbon budgets, through formulating policies to reduce emissions and through reducing emissions from the public sector estate.

Key departments and the Devolved Administrations will work with DECC to set out our proposals and policies for meeting these carbon budgets. These will be published in an Energy and Climate Change Strategy this summer.

Investing in Low Carbon Britain

The Chancellor today announced new support for low carbon industries ranging from energy efficiency and renewables through to carbon capture and storage.

Today’s budget provides more than £1.4bn of extra targeted support in the low carbon sector.

These measures together with announcements made since last autumn will enable an additional £10.4bn of low carbon investment over the next three years.

Tomorrow the Government will set this out in “Investing in a Low Carbon Britain”, which will build on Low Carbon Industrial Strategy: A Vision, which was published this March.

Summary of new support announced in the Budget today for new green industries:

CARBON CAPTURE AND STORAGE

Plans to fund up to four Carbon Capture and Storage (CCS) demonstration projects to help drive this technology to commercial viability. This represents the biggest global contribution of any country in developing this technology.

Climate Change and Energy Secretary Ed Miliband will make an oral statement in Parliament tomorrow (Thursday 23 April) outlining in more detail the UK’s plans for CCS technology and coal.

SUPPORT FOR ENERGY COMPANIES THROUGH THE CREDIT CRUNCH

UK renewable and energy projects stand to benefit from up to £4 billion of new capital from the European Investment Bank (EIB) through direct lending to energy projects and intermediated lending to banks. The Government will bring together the EIB, banks and developers, to ensure this new framework lending and other products deliver rapid and sustained investment for UK renewable energy.  The Government believes that this initiative can bring forward £1bn worth of consented small and medium sized UK renewables projects to deployment.

RENEWABLES AND LOW CARBON INDUSTRIES

As required under the Energy Act before any change in ROCs banding, we are launching a review into the support for offshore wind under the Renewables Obligation (RO). If the review confirms the evidence we have been provided with, we propose to provide even more incentive to offshore wind in the form of two renewable obligation certificates (ROCs). This builds on the recent uplift to 1.5 ROCs. The additional support is worth up to £3.5 bn over the lifetime of the projects.

Government is allocating £405m of targeted support for priority sectors. This funding will provide support for close-to-market innovation through, for example, the Environmental Transformation Fund (ETF), and support for mature industry through a range of delivery mechanisms such as the Grant for Business Investment (GBI).

Over the next two years there will be £70 million for decentralised small-scale and community low-carbon energy, including £45 million for small-scale renewable electricity and heat, primarily through the Low Carbon Buildings Programme, and £25 million for at least 10 community heating schemes. This will create jobs and growth now, and develop the low carbon supply chain and industry for the upturn and meet our 2020 renewables targets and energy goals.

ENERGY EFFICIENCY

We will invest an additional £65m over the next year to achieve a step change in the energy efficiency of schools, hospitals and other public sector organisations. All public sector organisations will be eligible to apply for interest-free loans to install energy efficiency technologies as well as some advice to drive projects forward.

There will be an additional £100m of interest-free energy efficiency loans for small and medium businesses over the next two years. This will help save around 140,000 tCO2 and save businesses £23m.

We will seek European Commission approval to extend an exemption from payment of the Climate Change Levy (CCL) for electricity exports from Combined Heat and Power (CHP) out to 2023 (it is currently exempt to 2013). This could help bring forward an additional £2.5bn of investment in CHP.

OIL AND GAS

Oil and gas remain important parts of Britain’s energy mix.

The Government will be introducing a “Field Allowance” for new small and technically-challenged oil and gas fields which should encourage continued investment in the UK Continental Shelf.

The confirmation that cushion gas will be eligible for plant and machinery capital allowances means that a necessary cost of doing business will be recognised in the tax regime. This should remove a material deterrent to investment in additional gas storage capacity and thus improve security of gas supply and result in lower and/or less volatile gas prices.

Notes to Editors

1. The carbon budgets announced today are:

2. Carbon budgets - The Climate Change Act requires the Government to set a limit on the UK’s net greenhouse gas emissions over consecutive five-year periods. The limit is known as a carbon budget. When setting the carbon budgets, the Government must take into account the advice of the Committee on Climate Change. The budgets must also be set with a view to achieving the legally binding long-term target to reduce emissions to at least 80% below 1990 levels by 2050. By setting the pathway to the 2050 target through carbon budgets we’re providing a clear, credible, long-term framework, which gives businesses the certainty to invest in low-carbon products and services, and to invest to reduce their own emissions. The Act sets a legal requirement on Government to put in place policies to ensure we meet these budgets. The commitment to aim to meet carbon budgets through domestic emissions reductions alone applies to those greenhouse gas emissions not covered by the EU Emissions Trading System (EU ETS). Limits already exist for the period 2008-2020 on the use of credits by the large electricity producers and energy intensive industries subject to the EU ETS, which guarantee at least 50% of the emissions reductions will take place in Europe.

For more information visit the DECC: Carbon Budgets web page.

3. International credits – Under the Kyoto agreement countries must meet their targets primarily through national measures, but it also introduced three market-based mechanisms as an additional means of meeting these targets: emissions trading, and two project mechanisms, Joint Implementation (JI) and the Clean Development Mechanism (CDM). The mechanisms are designed to stimulate sustainable development through technology transfer and investment, to help countries with Kyoto commitments to meet their targets by reducing emissions or removing carbon from the atmosphere in other countries in a cost-effective way, and to encourage the private sector and developing countries to contribute to emission reduction efforts. Each unit represents one tonne of CO2 or its equivalent.

4. Renewable Obligation Certificates (ROC) are our main support scheme for renewable electricity. The RO works by placing an obligation on licensed electricity suppliers to source a specific and annually increasing proportion of their electricity sales from renewable sources, or pay a penalty.  For 2008/09 the level of the RO is 9.1% currently rising to 15.4% by 2015/16. Anyone who builds renewable electricity capacity can apply for a ROC and then sell that to electricity suppliers.

5. If the review into the incentives for offshore wind confirms the evidence received to date that more incentive is needed, there will be a consultation on increasing support for projects meeting specified completion criteria (up to an expected maximum of two renewable obligation certificates (ROCs) for every megawatt hour generated).  This builds on the recent uplift to 1.5 ROCs for all offshore wind projects.  Any increase in support will be subject to Parliamentary and State Aid approval. The Electricity Act 1989 (as amended by the Energy Act 2008) requires the Secretary of State to carry out a review and consultation before making any change to banding.

Source:www.decc.gov.uk