How is the UK tackling climate change?
The landmark piece of UK legislation is the 2008 Climate Change Act. It commits the government to cut national greenhouse gas emissions by at least 100% of 1990 levels (net zero) by 2050 and agree interim five-year ‘carbon budgets’ that take the country progressively towards that 100% target at the lowest possible cost.
Policy measures largely focus on energy, and especially electricity. Energy is one of the largest sources of UK emissions, and cost-effective low-carbon technologies exist in both energy supply and demand. Like most countries, UK energy policy-making is focused on cutting emissions while ensuring affordability and security of supply.
The Climate Change Act
Britain's Climate Change Act contained the world's first legally binding national commitment to cut greenhouse gas emissions.
It was passed by an overwhelming majority (463 to 3) in 2008.
The headline target was originally an overall cut in emissions of at least 80% by 2050, relative to 1990. However, in 2019 this was amended with a target of achieving net zero emissions (100%) by 2050.
The UK Act requires governments to set legally binding ‘carbon budgets’. Each budget provides a five-year cap on total greenhouse emissions. In order to meet the UK’s emission reduction commitments, caps should not be exceeded.
The Committee on Climate Change, which was established by the Act, proposes the carbon budgets to government. They are set more than a decade ahead, to prepare the required policies and investment. Together, the budgets map out the most economically beneficial route to the 2050 target.
The government can adjust each carbon budget under certain, very limited conditions. Otherwise, it must accept the Committee’s proposed emissions level, and the budget becomes legally binding.
The Committee reports annually to Parliament on the government's progress.
The government has already legislated five carbon budgets, running from 2008 to 2032. The Committee on Climate Change has reported that the first carbon budget (2008-12) and the second (2013-17) have been met and the UK is on track to outperform the third (2018-22). However, it is not on track to meet the fourth (2023-27) or the fifth (2028-32).
Major policies needed in order for the fourth and fifth targets to be met include taking steps to become more energy efficient and making the switch to low-carbon fuels for heating and transport. This means moving away from using coal and gas-fired power to electricity generated from renewables, nuclear power and the roll out of technologies such as carbon capture. The Committee advises that both will be necessary to meet UK carbon targets, along with action to tackle non-energy related emissions in areas like agriculture and waste.
The CCC will advise on the sixth carbon budgetwhich will be the first to bet set in line with the new net zero target. This advice was due to be released in September 2020 however has been pushed back to December 2020 due to the Covid-19 pandemic; the Committee says this will provide additional time to complete the analysis and reflect upon the impacts of the crisis.
UK Climate Action
Action on climate change can be divided between measures to cut carbon emissions and promote cleaner alternatives in energy supply; to support energy efficiency; drive corporate reporting of carbon emissions; and support climate action overseas.
For companies in energy-intensive sectors such as power generation, steel, chemicals and ceramics, the main policy measure for reducing emissions is the European Union Emission Trading Scheme (EU ETS). Membership of the scheme is mandatory for these companies. They receive permits to emit greenhouse gases and can trade them at the market rate (currently less than £5 per tonne). The UK is due to withdraw from the scheme after the Brexit transition period ends on 31 December 2020 however it will remain a full participant until then. The government is expected to bring out a domestic replacement that is at least as ambitious as the EU ETS.
UK companies outside these energy-intensive sectors, and domestic consumers, are covered by a wide range of national policies. (The governments of Scotland and Wales, and the Northern Ireland Assembly, have additional targets and policies, which are covered in a separate ECIU Briefing.)
Energy policy measures that apply over all or most of the UK include:
Carbon pricing penalises emissions from burning fossil fuels.
Britain applies carbon pricing under both national and EU schemes. In addition to the EU ETS, the UK government introduced the Carbon Price Support (CPS) scheme to top up the European carbon price. It requires UK power generators to pay a minimum carbon price, known as the Carbon Price Floor (CPF). The government has capped the Carbon Price Floor at £18 per tonne until 2021.
Meanwhile, in the transport sector, the UK charges car drivers a Fuel Duty tax on the road fuel they burn and is set to bring forward an end to the sale of new petrol and diesel cars and vans to 2035. Separately, in a regulation against fossil fuels, the government will consult on bringing the deadline for ending coal-fired power from 2025 to 2024 but is yet to release details on how this will be achieved.
Low-carbon energy support
Increasing renewable energy production is one fundamental way that will allow the UK to meet its binding net zero target by 2050.
To drive uptake of renewables, the government has focused most support on the electricity sector, where the most cost-effective technologies are available. Progress has already been achieved in this sector. For example, in the third quarter of 2019 renewable electricity overtook fossil fuels in the UK for the first time, accounting for 40% of the total. Research has shown the economic boost available if the government uses renewable energy to pursue a green recovery from the coronavirus pandemic.
In large-scale power generation, Britain replaced the market-based Renewable Obligation with the Contracts for Difference (CfD) scheme, which guarantees a fixed price per unit of low-carbon power generation.
Under the CfD, projects compete against each other for support, in auctions. ‘Established technologies’, defined as onshore wind and solar power, compete in one auction. ‘Less established technologies’, including onshore and offshore wind and tidal, compete in a second.
Meanwhile, small-scale, household renewable power and heat are supported by the Smart Export Guarantee (SEG) which was introduced in January 2020. The SEG tariff provides those households with small-scale low carbon generators, for example solar panels or heat pumps, with payments for the electricity they export to the National Grid.
Britain will no longer be supporting new nuclear projects under the CfD scheme but is instead considering support through the Regulated Asset Base (RAB) model which would allow nuclear developers to receive revenue from the eventual users of the plant – that’s customers via their energy bills – as it is built. The government launched a consultation on the RAB model in 2019 but has yet to report back.
In the domestic sector, Britain’s Energy Company Obligation 3 (ECO3) scheme requires large energy firms to boost the efficiency of homes, especially in disadvantaged areas and for those considered vulnerable. Costs are passed to all consumers via energy bills.
Britain is driving a rollout of smart meters across all UK households, with the aim to help individuals reduce their consumption of energy by increasing the customer’s awareness of how much they are using, and how much it costs. In September 2019, the deadline for all homes to be offered smart meters was extended from 31 December 2020 to the end of 2024. Recently, the government announced a further pushback to 30 June 2025 after difficulties caused by the Covid-19 pandemic.
In the business sector, polluters pay a Climate Change Levy (CCL) per unit of energy consumption. Energy-intensive users can opt out of CCLs, if they agree to a Climate Change Agreement to boost their efficiency.
Corporate emissions reporting
Britain requires large UK companies to report publicly on their UK energy use and emissions within their Directors’ Report under the government’s Streamlined Energy and Carbon Reporting (SECR) policy. SECR impacts companies that exceed at least two of the following three thresholds:
- 250 employees
- £36m annual turnover
- £18m balance sheet total
International climate action
Britain has played an active part in UN negotiations and contributes climate finance to vulnerable nations. In Paris in 2015, Britain joined a group of 20 countries which pledged to double spending on cleantech R&D. And it has increased international climate finance by 50%, to £11.6 billion between 2021/22 to 2025/26. It is also hosting the international climate summit, COP26, in Glasgow in 2021 (see separate ECIU briefing here).