The UK 5th Carbon Budget

In amongst the excitement created by the Brexit vote, on 30th June 2016 the UK Government met its statutory requirement and announced the details of the 5th Carbon Budget which covers the period 2028-2032. The Government followed the recommendation of the Climate Change Committee and advised that the carbon budget for the 2028–2032 budgetary period is 1,725,000,000 tonnes of carbon dioxide equivalent. This assumes 590 MtCO2e covered by the EU ETS and subject to its carbon price and a nontraded share of 1,135 MtCO2e (excluding international shipping emissions). The overall budget represents a reduction of 56.9% below the 1990 baseline.

The UK is unique in the world with its carbon budget approach. This is the result of far reaching legislation enacted back in 2008 in the form of the Climate Change Act which requires the UK Government to establish a specific carbon budget for successive future periods. To date the UK is on track towards meeting the 2nd Carbon budget, as described in a recently released summary of greenhouse gas emissions which covers the period up to the end of 2014. But the journey has been relatively easy so far. With the continued shift to natural gas and away from coal, the arrival of wind and to a lesser extent solar, the 2008-2009 recession and the higher cost of oil and gas in recent years driving real efficiency and demand reduction, UK emissions have fallen.

UK GHG Emissions to 2014

In 1990 UK CO2 emissions per kWhr of electricity generation were 672 grams, whereas today they are around 450 grams. As a result, emissions from power generation have fallen, even with current electricity demand higher than the 1990 level. By contrast, road transport emissions have remained about flat for 25 years although there has been a marked shift from gasoline to diesel. Another significant reduction has come from industry, but much of this is due to an overall reduction in heavy industry (steel making, refineries), in favour of services (media and finance) and high technology industry (e.g. aerospace).

With a large natural gas base and a diminished heavy industry sector, has the UK now reached an interim floor in terms of national greenhouse gas emissions? While there are still gains to be made in the electricity sector, future progress towards the goals of the 3rd, 4th and 5th Carbon Budgets will require additional action in other parts of the economy.

UK Emissions Progress

The 5th Carbon Budget requires nearly another 200 Mt per annum of reductions across the UK, compared to the 2nd Carbon Budget period that we are currently in. Even with Hinkley Point nuclear and an ambitious renewables programme (which is reported as being off track ), it is unlikely that power generation emissions would fall more than 100 MT per annum. A 200-250 gram per KWh goal by 2030, equivalent to about 50% natural gas and 50% nuclear/renewables would mean a fall of about 70 Mt. There may also be upward pressure on the sector as transport electrifies.

The above implies that the emission reduction focus will have to expand more rapidly into the transport and residential areas in particular. While the residential sector has been an area of action for some time with a focus on boiler efficiency and home insulation, the rate determining step here is turnover in housing stock or at least housing refurbishment, which can be very slow.

UK transport emissions have hardly budged over many years, although there has been some redistribution within the sector. A sharp single step reduction came during the 2008-2009 recession, but that fall has not been continued. Data since the late 2014 price fall in crude oil is not available yet, but that may put upward pressure on transport emissions. Between now and 2030 there is the opportunity for a single turnover of the vehicle fleet, but EV sales are still only very modest in the UK. In March 2016 there were some 67,000 registered plug-in cars in the UK, less than 0.2% of the fleet. During January to March 2016, some 11,750 new ultra low emission vehicles (ULEVs) were registered in the UK. Over the year to the end of March 2016, ULEVs represented 1.0% of all new registrations, compared with 0.8% over the previous year and 0.2% over the year before that.

The 5th Carbon Budget represents a further landmark step for the UK, but it also means a shift in policy emphasis is required in the near term.