www.decc.gov.uk CLIMATE CHANGE ACT 2008 IMPACT ASSESSMENT March 2009 Contents Impact Assessment of the Climate Change Act Page 3 2008 Annex A: Glossary of Terms and Abbreviations Page 62 Annex B: Carbon Reduction Commitment Page 64 Information Gathering Powers in the Climate Change Act Annex C: Impact Assessment of Adaptation measures in the Page 65 Climate Change Act Annex D: Impact Assessment of powers to pilot local Page 79 authority incentives for household waste minimisation and recycling Annex E: Partial Impact Assessment of powers to require Page 10 0 charges for single4use carrier bags Anne( 6 Impac Assessmen for .T67 provisions in he Page 11 2 Clima e Change ac Anne( G Par ial Impac Assessmen of powers o oblige Page 11 0 elec rici y genera ors and energy suppliers o deliver carbon emission reduc ion arge s Anne( H Social Cos s of Carbon for differen s abilisa ion Page 12 0 ra8ec ories Anne( I Commen s on he Carbon 9alua ion Me hodology Page 12 , used in he IA by Simon 1ie : 2 Summary: Intervention & Options Department /Agency: Title: Department of Energy and Impact Assessment of the Climate Change Act Climate Change Stage: Final – Royal Assent. Version: Final Date: 9 March 2009 Related Publications: MARKAL Macro analysis of long run costs of climate change mitigation targets available from http://www.defra.gov.uk/environment/climatechange/research/pdf/markal,analysis,cc, targets.pdf Available to view or download at: http://www.decc.gov.uk/en/content/cms/legislation/cc_act_08/cc_act_08.aspx Contact for en-uiries: Stephen Elderkin Telep one 020 7238 1229 What is the problem under consideration? Why is government intervention necessary? Climate change is caused by the emission of greenhouse gases into the atmosphere. An externality exists as those who emit do not have to bear directly the full cost of their actions. The global causes and consequences of climate change, coupled with the long term and persistent nature of the impacts, highlights the need for government intervention. In addition, there may be barriers to optimal adaptation caused by, for example, uncertainty and lack of information about the impacts of climate change. The Act creates a framework which enables the UK to meet its domestic targets as well as ensuring the UK can meet its existing and future international commitments for emissions reductions. It also sets a framework for domestic action on adapting to the impacts of climate change. What are the policy objectives and the intended effects? 1. To avoid dangerous climate change in an economically sound way. In particular by: • Demonstrating the UK's leadership in tackling climate change 5 to increase the chances of a binding international e issions reduction agree ent that would stabili6e concentrations of greenhouse gases at a level that would avoid dangerous cli ate change7 • Establishing an econo ically credible e issions reduction pathway to 20807 and • Providing greater clarity and predictability for /0 industry to plan effectively for, and invest in, a low5carbon econo y. 2. To put in place a fra ework that co its the :overn ent to assess and address cli atic i pacts so that the /0 is better able to respond to the unavoidable i pacts of cli ate change. 3 What policy options have been considered( Please 1ustify any preferred option. The previous syste of non5statutory targets does not provide sufficient predictability to households and fir s about the level and ti ing of e issions reductions re,uired to eet the /04s co it ents to tackle cli ate change. The Act establishes a new fra ework for supporting e issions reductions. Provisions in the Act balance the need to provide greater predictability for households and fir s to invest in a low5carbon technology, while retaining the flexibility to allow for unexpected events and inherent uncertainty that ay increase or reduce the cost of reducing greenhouse gases. There was also no previous re,uire ent for :overn ent to regularly assess all the i pacts fro cli ate change holistically or to draw up a single progra e to address the . The Act gives the Secretary of State a duty to establish a progra e but it does not specify policy interventions, so as to allow flexibility in the long5ter . The Act also creates a nu ber of powers, for which i pact assess ents are included in the annexes. The i pact assess ents are final for the powers the selves but are interi assess ents with regard to specific policies i ple enting the powers. Any detailed policy proposal relating to these powers will be sub1ect to a separate and final i pact assess ent. The powers are: A power that allows the :overn ent to ask for adaptation reports fro public authorities and statutory undertakers, infor ation gathering powers for the Carbon Reduction Co it ent, powers to pilot local authority incentives for household waste ini isation, powers to re,uire charges for single use carrier bags and powers to oblige electricity generators and energy suppliers to deliver carbon e ission reduction targets. When will the policy be reviewed to establish the actual costs and benefits and the achieve ent of the desired effects( Statutory annual reports will evaluate the /0’s progress in eeting its targets and carbon reduction budgets. The risk report and adaptation progra e will be updated every 8 years. A id5ter review of the adaptation progra e will also be conducted. Ministerial Sign,off For final . pact Assess ent: I have read the Impact Assessment and I am satisfied that, given the available evidence, it represents a reasonable view of the likely costs, benefits and impact of the leading options. Signed by the responsible Minister 3ate: 9 March 2009 . Summary: Analysis & Evidence Policy Option: Description: Statutory targets and carbon budgets for emissions reductions. 0ormation of t e Committee on Climate C ange to advise on budgets. A112AL COSTS 3escription and scale of key monetised costs by < ain affected groups Figures presented are a partial easure of the long run One,off ATransition) 3rs costs of tackling cli ate change and are based on esti ates of 4 0 C3 the reduction in :3P over the period to 2080. Long5ter odelling suggests that the costs will be in the range esti ated by Average Annual Cost the Stern Review of 1% ?/5 3% of :3P. Aexcluding one5off) 41..7 to 18.3 billion Total Cost APD) 432. 9 .0. billion COSTS COSTS Ether key non,monetised costs by < ain affected groups’ Figures above do not include the full range of costs, in particular the short5ter transition costs. Therefore, overall costs could be higher than those esti ated by the long5ter odelling. Everall the costs will depend on the specific policies put in place to i ple ent the carbon budgets. Costs of non5CE2 :F: abate ent are not included. A112AL :E1E0ITS 3escription and scale of key monetised benefits by < ain affected groups’ The onetised benefits include avoided da ages One,off 3rs fro reduced :F: e issions AGC0C to 96C billion) and i proved 4 0 C3 air ,uality benefits AG32 billion). Average Annual :enefit 420.7 9 .6.2 billion Total :enefit APD) 4 .57 1 9 1020 billion :E1E0ITS :E1E0ITS Ether key non,monetised benefits by < ain affected groups’ The contribution of action now to reducing abate ent costs after 2080 is not ,uantified. The fra ework will provide greater predictability for households and fir s to plan for and invest in a low5carbon econo y. proved energy security for the /0 and the benefits of non5CE2 :F: abate ent are not included. 0ey Assu ptions/Sensitivities/Risks Figures presented are indicative esti ates of the i pact of achieving the statutory 2080 target, not of achieving specific carbon budgets. The precise costs will depend on: fossil fuel prices7 the cost and availability of low5carbon technologies7 degree of ulti5 lateral action7 choice of policies7 and, when abate ent occurs. There are significant uncertainties over the avoided da age costs associated with reduced greenhouse gas e issions. Price Iase Ti e Period 1et :enefit Range ANPD) 1ET :E1E0IT ANPD Iest esti ate) Year 2008 Years C3 4 53 9 696 billion 4 6.1 billion What is the geographic coverage of the policy/option( /nited 0ingdo En what date will the policy be i ple ented( 2008 onwards Which organisationAs) will enforce the policy( Parlia ent/courts What is the total annual cost of enforce ent for these organisations( G N/A 3oes enforce ent co ply with Fa pton principles( Yes Will i ple entation go beyond ini u E/ re,uire ents( N/A What is the value of the proposed offsetting easure per year( G N/A What is the value of changes in greenhouse gas e issions( G988billion Will the proposal have a significant i pact on co petition( No Annual cost AG5G) per organisation Micro S all Mediu Large Aexcluding one5off) Are any of these organisations exe pt( No No N/A N/A Impact on Admin :urdens :aseline A2008 Prices A.ncrease 5 3ecrease) 1 Lower value reflects the scenario where the /0 takes action but the rest of the world does not. .n this case the benefits would be distributed across the globe, whereas all the costs would be borne by the /0 and the /0 would not receive any benefits fro reciprocal action by other nations. 5 .ncrease of G N/A 3ecrease of G N/A 1et Impact 4 N/A 0ey: Annual costs and benefits: Constant Prices (1et) Present Value 6 Summary of Costs and :enefits of t e Climate C ange Act S1.