The Fourth Carbon Budget Reducing emissions through the 2020s Committee on Climate Change 4th Floor Manning House 22 Carlisle Place London SW1P 1JA Committee on Climate Change www.theccc.org.uk December 2010 Preface Contents The Committee on Climate Change (the Committee) is an independent statutory body Foreword 4 which was established under the Climate Change Act (2008) to advise UK and devolved administration governments on setting and meeting carbon budgets, and preparing for Acknowledgements 7 climate change. The Committee 8 Setting carbon budgets In December 2008 we published our first report, Building‘ a low-carbon economy – the UK’s Executive summary 10 contribution to tackling climate change’, containing our advice on the level of the first three carbon budgets and the 2050 target; this advice was accepted by the Government and Chapter 1: Revisiting the science of climate change 47 legislated by Parliament. Chapter 2: The international context – implications Progress towards meeting carbon budgets for the fourth carbon budget 77 The Climate Change Act requires that we report annually to Parliament on progress meeting carbon budgets; to date we have published two progress reports (October 2009, June 2010) Chapter 3: The Fourth Carbon Budget 99 and will publish our third report in June 2011. Chapter 4: Decarbonising surface transport 149 Advice requested by Government We provide ad hoc advice in response to requests by the Government and the devolved Chapter 5: Reducing emissions from buildings administrations. Under a process set out in the Climate Change Act, we have advised on and industry through the 2020s 195 reducing UK aviation emissions, Scottish emissions reduction targets, UK support for low- carbon technology innovation, and design of the Carbon Reduction Commitment. In Chapter 6: Power sector decarbonisation to 2030 239 September 2010, we published our first report on adaptation, assessing how well prepared the UK is to deal with the impacts of climate change. Chapter 7: Reducing emissions from agriculture and land use, land-use change and forestry 295 Advice on the fourth carbon budget This report sets out our advice on the fourth carbon budget, covering the period 2023-2027, Chapter 8: Wider economic and social considerations and as required under Section 4 of the Climate Change Act; the Government will propose draft differences in national circumstances 331 legislation for the fourth budget in Spring 2011. Future work of the Committee 352 Glossary 354 Abbreviations 368 Figures, Tables and Boxes index 370 We describe in this report specific sectoral actions which would make the budget attainable. Foreword However, it is important not to see this sectoral description as defining necessary sector specific paths: the UK’s carbon targets are appropriately set at national aggregate rather than sectoral level, reflecting the fact that unforeseen developments could result in faster The Climate Change Act requires that Parliament sets ‘carbon budgets’ which define the reductions than anticipated in some sectors, offset by slower reductions in others. maximum level of greenhouse gases which the UK will emit in a series of five-year periods to But the Committee has to satisfy itself that there exists a range of feasible emissions reduction 2050. The Committee on Climate Change is required to recommend the level of these budgets opportunities which, in some combination, are capable of delivering the recommended to government, which in turn must lay a proposed budget before Parliament. budget. We are confident that these opportunities exist. In our first report in 2008, we recommended the level of the first three budgets, covering The pace of reductions which we describe varies significantly by sector. Very significant periods 2008-12, 2013-17, and 2018-22. Parliament subsequently legislated budgets in line with decarbonisation of electricity generation plays a crucial role over the next twenty years, our recommendations. We are now required to make recommendations for the fourth budget, enabling the use of low-carbon electricity in a wider set of applications – in particular surface covering the years 2023-27. This report sets out those recommendations. transport and residential heat. In setting the first three budgets, the feasible pace of emissions reduction was constrained by Conversely there are sectors where rapid early progress seems more difficult to achieve. two factors: first because the budget was set eighteen months after the first budget period In addition to aviation (on which we reported in December 2009) we identify direct emissions had already begun, second because reductions attainable in any year are dependent on from industry and agricultural emissions as particularly difficult challenges. Shipping may also technologies available and policies in place many years before. prove difficult: we will explore this further in our review of shipping emissions in 2011. The further ahead we look, the greater the potential to achieve rapid reductions. Our fourth In the industrial sector, we have identified more scope for reduction than in our 2008 report, budget proposals therefore represent an acceleration of the pace of reduction above that but further work is needed to ensure that all opportunities, in particular in relation to CCS required in the first three budgets. But not only is this acceleration possible, it is also essential: technology, radical production processes such as steel electrolysis and alternative cement the pace of reduction in the first three budgets would not be sufficient to achieve the target technologies, product substitution and material efficiency are identified and pursued. which Parliament has set for 2050 – an emissions reduction of 80% from 1990 levels. In agriculture, our current abatement scenarios do not include several potentially controversial A crucial feature of this report is therefore that we place our fourth budget recommendations measures, nor the use of more forceful policy levers which go beyond the current voluntarist in the context of the required path to 2050. To ensure that this path is feasible, we consider approach. In agriculture as well as in industry, however, further significant progress beyond what emissions will need to be in 2030, halfway between now and 2050. We have then our current assumptions will be essential if emissions from these sectors, along with those of designed our fourth budget recommendations to be consistent both with emissions in the aviation, are not to make the 2050 target unattainable even if other sectors are almost entirely third budget period, and with the required 2030 level. decarbonised. Despite accelerated emissions reductions in the 2020s , further acceleration will be required These ‘difficult to reduce’ sectors are therefore key areas for future analytical focus and policy after 2030, with a total reduction of 62% between 2030 and 2050 , versus 46% between now development. Industry and agriculture are moreover, the two sectors where we need to ensure and 2030. This ‘back-ending’ of the reduction path is unavoidable given constraints on faster that policy measures used do not produce ‘carbon leakage’ – the transfer of production abroad early progress, and acceptable given the wider range of technology options likely to become with no benefit to the global environment even when the UK’s recorded emissions fall. The available over time. But it means that our fourth budget recommendations must be seen as policy levers required to offset this danger are also a key area for future focus. And the related the minimum reductions necessary if the 2050 target is to be attainable. If further analysis issue of whether policy should focus solely on a production-based definition of emissions or suggests that more rapid progress is possible, a subsequent tightening of the fourth budget also on the UK’s consumption of carbon-intensive imports, is one which we believe it would would be appropriate. be useful for the Committee to investigate in detail. 4 The Fourth Carbon Budget | Reducing emissions through the 2020s | Committee on Climate Change Foreword 5 This report extends the horizon of budgets for five years, but comes only two years after the 2008 report, which recommended the first three budgets. This reflects the startup timetable Acknowledgements required by the Act . From now on, budget recommendation reports will be delivered every five years: the next one, covering the fifth budget period will be due in December 2015. The Committee would like to thank: Given the short space of time since our first report, this has inevitably limited our ability but also the need to conduct fundamentally new analysis in some areas. Particularly in relation The team that prepared the analysis for the report. This was led by David Kennedy and to the wider social and economic implications we are required to consider – the impact of included: Owen Bellamy, Russell Bishop, Ute Collier, Aaron Collins, Ben Combes, Kristofer Davies, carbon budgets on fiscal revenue, competitiveness, fuel poverty and devolved administration Amelia Doughty, Adrian Gault, Neil Golborne, Philip Hall, Jonathan Haynes, David Joffe, Alex circumstances – much of the analysis set out in the 2008 report is still relevant. We have not Kazaglis, Swati Khare-Zodgekar, Anna Leatherdale, Eric Ling, Nina Meddings, Laura McNaught, therefore repeated the basic analysis relevant to these considerations, but refer back to the Sarah Naghi, Stephen Smith, Kavita Srinivasan, Jonathan