1. Building a Low-Carbon Economy – The UK's Contribution to Tackling Climate Change www.theccc.org.uk

2. UK Climate Change Bill (Nov 2008) Commitment to reduce CO2 emissions by at least 60% (80%) from 1990 levels by 2050 Established system of legally binding “carbon budgets” Established the CCC as an independent body to provide expert advice on budget levels and the policies to reach them

3. Climate Change Committee: Responsibilities 2050 CO 2 target: 60%, 80%, or other First 3 CO 2 budgets: 2008-12, 2013-2017, 2018-2022 (≥26%) How much buy-in of credits allowed Whether & how international aviation & shipping should be included Budgets for CO 2 or all GHGs Competitiveness Security of supply Fuel poverty Fiscal revenues The regions Ancillary environmental effects Recommend Identify implications of proposed budgets for Annual reports on Progress against budgets Extent of borrowing/banking Other?

4. Contents of First CCC Report Pt. I: Setting the target 1. Setting 2. Meeting Pt. II: Setting & meeting the first 3 budgets 3. Summary 4. C markets 5. Decarb elec 6. Building & industry 7. Transport Pt III: Extending the carbon budget framework? 8. International aviation & shipping 9. Non CO 2 GHG Pt IV: Wider economic & social considerations 10 Competitiveness 11. Econ costs & fiscal 12. Fuel poverty 13. Security 14. Nations Pt V: Synthesis & recommendations

5. 1. The 2050 target (i)Required global emissions reduction (ii)Appropriate UK contribution (iii)Technologies for meeting required reductions

6. (i) Required global emissions reduction Required global emissions reduction of 50% 20-24 GtCO 2 e emissions in 2050 8-10 GtCO 2 e in 2100 Required global emissions reduction of 50% 20-24 GtCO 2 e emissions in 2050 8-10 GtCO 2 e in 2100 What’s changed? Advances in science Actual emissions higher than forecast What’s changed? Advances in science Actual emissions higher than forecast Assessment of damage Decision rule keep temperature change close to 2°C and probability of 4°C increase at very low levels Assessment of damage Decision rule keep temperature change close to 2°C and probability of 4°C increase at very low levels Global trajectories considered Early or later peak (2015 vs. 2030) 3%/4% annual emissions reduction Global trajectories considered Early or later peak (2015 vs. 2030) 3%/4% annual emissions reduction

7. Kyoto GHG emissions trajectories designed by the CCC Peak in emissions around 2028 or 2016. Subsequent reductions in CO 2 emissions range from 1.5% to 4% per year. Other Kyoto gas emissions are reduced at consistent rates, with consideration of the ultimate emissions ‘floor’ that might be reasonably reached. Peak 2028 CO 2 emissions reducing at 1.5% or 4%. Peak 2016 CO 2 emissions reducing at 1.5%, 3% or 4%. 2016:3% and 2016:4% were given lower emissions floors

8. Some CCC emission scenarios peaking at 2016 and projections of CO 2 e and T for one case

9. Probability distributions of global mean temperature increase by 2100

10. Preferred trajectories: emissions target for 2050 Emissions trajectory Kyoto gas emissions (GtCO 2 e)2050 emissions cut, from 19902007205019902007 2016:3%36.148.123.934%50% 2016:4%36.148.119.646%59% This is broadly in line with the G8 commitment to halve emissions by 2050.

11. CO 2 abatement from IEA BLUE Map

12. (ii) Appropriate UK contribution 50% global reduction Burden share Alternative methodologies (contract and converge, intensity convergence, triptych etc.) Equal per capita emissions: ̶ 20-24 GtCO 2 e total at global level IN 2050 ̶ Implies 2.1-2.6 tCO 2 e per capita Burden share Alternative methodologies (contract and converge, intensity convergence, triptych etc.) Equal per capita emissions: ̶ 20-24 GtCO 2 e total at global level IN 2050 ̶ Implies 2.1-2.6 tCO 2 e per capita All GHGs Aviation and shipping included 2.1-2.6 CO 2 e per capita gives a UK reduction of at least 80% in 2050

13. (ii) Appropriate UK contribution (cont.): the scale of the challenge 2006 emissions International aviation & shipping* UK non-CO 2 GHGs Other CO 2 Industry (heat & industrial processes) Residential & Commercial heat Domestic transport Electricity Generation * bunker fuels basis 2050 objective 159 Mt CO 2 e 695 Mt CO 2 e 77% cut (= 80% vs. 1990)

14. UK Greenhouse gas emissions 1990-2006

15. UK sectoral CO 2 emissions for 80% reduction at 2050 (MARKAL)

16. (iii) Meeting required reductions Reducing power sector emissions: Renewables (Wind, solar, tidal and marine, biomass), nuclear, CCS Reducing power sector emissions: Renewables (Wind, solar, tidal and marine, biomass), nuclear, CCS Reducing heat emissions: Energy efficiency Lifestyle change Electric heat (e.g. heat pumps, storage heating) Biomass boilers CCS in industry Reducing heat emissions: Energy efficiency Lifestyle change Electric heat (e.g. heat pumps, storage heating) Biomass boilers CCS in industry Reducing transport emissions: Fuel efficiency Electric/plug-in hybrids Bio fuels (first vs. second generation) Reducing transport emissions: Fuel efficiency Electric/plug-in hybrids Bio fuels (first vs. second generation) Application of power to transport and heat

17. Power generation to 2050 (iii)Meeting required reductions (cont.): power sector evolution Emissions intensity to 2050

18. (iii) Meeting required reductions (cont): UK path to an 80% or more reduction in 2050 2050 2008 Wind and nuclear Energy efficiency improvement Renewable heat Electric heat Electric cars/plug in hybrids 2020 1-2% of GDP in 2050 Other renewable and CCS

19. 2. The first three budgets (i)Level of budget (factors we have considered, CCC proposals) (ii)Use of credits to meet budget (iii)Feasible emissions reductions

20. (i) Level of budget: factors considered PROPOSED BUDGETS 2008-12 2013-17 2018-22 The path to 2050 2020 ambition needed to make path to 2050 technically feasible Early action needed as contribution to global emission containment European Union strategies 30% reduction in GHG by 2020 versus 1990 if global deal at Copenhagen 20% unilateral cut Bottom up sector by sector analysis Technical feasibility Costs of achieving reductions Policies in place or needed to drive emissions reductions

21. (i) Level of budget (cont.): CCC proposals Intended budget To apply once a global deal has been agreed Interim budget To apply before there is a global deal Should prepare for the Intended budget Intended budget To apply once a global deal has been agreed Interim budget To apply before there is a global deal Should prepare for the Intended budget Intended: 42% below 1990 in 2020 (31% below 2005) Interim: 34% below 1990 in 2020 (21% below 2005) Intended: 42% below 1990 in 2020 (31% below 2005) Interim: 34% below 1990 in 2020 (21% below 2005)

22. (i) Level of budget (cont.): emissions ceilings (no IAS)

23. (i) Level of budget (cont.): treatment of aviation and shipping Aviation Shipping Precise UK or even European share difficult to define Dangers that European only policies (e.g. inclusion within the EU ETS) could produce carbon leakage Not in EU 20% and 30% targets Not in EU ETS Do not include in formal legal ‘budget’ But allow for in budget setting Committee to monitor progress and policies Global sectoral deal ideal way forward Precise UK or even European share difficult to define Dangers that European only policies (e.g. inclusion within the EU ETS) could produce carbon leakage Not in EU 20% and 30% targets Not in EU ETS Do not include in formal legal ‘budget’ But allow for in budget setting Committee to monitor progress and policies Global sectoral deal ideal way forward European and UK shares of international emissions can be defined No major competitiveness problems with EU only policies In EU 20% and 30% targets, and within UK shares of these targets In EU ETS – capped from 2012 But included in EU ETS on arbitrary “allocation” basis, making reconciliation with national budget inclusion complex Do not include in formal legal ‘budget’ But allow for in budget setting And Committee to monitor progress and policies European and UK shares of international emissions can be defined No major competitiveness problems with EU only policies In EU 20% and 30% targets, and within UK shares of these targets In EU ETS – capped from 2012 But included in EU ETS on arbitrary “allocation” basis, making reconciliation with national budget inclusion complex Do not include in formal legal ‘budget’ But allow for in budget setting And Committee to monitor progress and policies

24. MtCO2e … CCC proposed UK CO 2 e emission targets

25. (ii) Use of credits to meet targets Pros Minimise costs Promise of finance flow may help in global deal negotiations Finance flow helps achieve low carbon developing economies Pros Minimise costs Promise of finance flow may help in global deal negotiations Finance flow helps achieve low carbon developing economies Cons Essential for developed economies to drive domestic emissions reductions and illustrate feasibility of low carbon economy CDM type credits (versus notional BAU) can never be as robust as allowances within cap and trade system Cons Essential for developed economies to drive domestic emissions reductions and illustrate feasibility of low carbon economy CDM type credits (versus notional BAU) can never be as robust as allowances within cap and trade system Committee distinguishes between: European Union Allowances (EUAs) in EU ETS Offset credits (e.g. CDM) Committee distinguishes between: European Union Allowances (EUAs) in EU ETS Offset credits (e.g. CDM) Committee position No restrictions on use of EUAs to meet budget Restrictions on use of offset credits No purchase by government to meet Interim budget Purchase may be appropriate to transition between Interim and Intended budgets This strategy is consistent with meeting 2050 target

26. (iii) Feasible emissions reductions - Power Power Renewable and nuclear Preparation for CCS Required policies ­ EU ETS longer term extension ­ CCS demonstration ­ Price/non-price policies to drive renewables Power Renewable and nuclear Preparation for CCS Required policies ­ EU ETS longer term extension ­ CCS demonstration ­ Price/non-price policies to drive renewables Scenarios 40% emission reduction by 2020 ­ 30% renewables, nuclear in 2020s ­ Less renewables (e.g. 25%) and some nuclear by 2020 Costing 0.2% of GDP Average carbon intensity in 2020 around 300g/kWh, from current 500g/kWh Scenarios 40% emission reduction by 2020 ­ 30% renewables, nuclear in 2020s ­ Less renewables (e.g. 25%) and some nuclear by 2020 Costing 0.2% of GDP Average carbon intensity in 2020 around 300g/kWh, from current 500g/kWh

27. (iii) Feasible emissions reductions – Power (cont.): CCC position on coal generation No role for conventional coal beyond early 2020s CCS not proven at production scale New coal investment only with full expectation of retrofit in early 2020s Policy options: Requirement for retrofit Carbon price underpin Emissions limit Policy options: Requirement for retrofit Carbon price underpin Emissions limit

28. (iii) Feasible emissions reductions – Energy use in buildings and industry Commercial Technical potential over 30 MtCO 2 in energy efficiency and micro-generation Realistic potential 5- 11MtCO 2. 50% covered by caps Need for wider policy coverage Commercial Technical potential over 30 MtCO 2 in energy efficiency and micro-generation Realistic potential 5- 11MtCO 2. 50% covered by caps Need for wider policy coverage Our approach Technical potential Cost effective potential Realistically achievable potential Our approach Technical potential Cost effective potential Realistically achievable potential Residential Technical potential over 100 MtCO 2 Realistic potential ­ Energy efficiency potential 22 MtCO 2 ­ Renewable heat potential 10 MtCO 2 Policy ­ Supplier Obligation ­ EPCs ­ Appliance standards ­ Renewable heat Residential Technical potential over 100 MtCO 2 Realistic potential ­ Energy efficiency potential 22 MtCO 2 ­ Renewable heat potential 10 MtCO 2 Policy ­ Supplier Obligation ­ EPCs ­ Appliance standards ­ Renewable heat Industrial Technical potential 7 MtCO 2 Realistic potential 4-6 MtCO 2 95% covered by caps Industrial Technical potential 7 MtCO 2 Realistic potential 4-6 MtCO 2 95% covered by caps

29. (iii) Feasible emissions reductions – Transport Improved carbon efficiency of vehicles Cars: Improved fuel efficiency, electric/plug in hybrids offer potential for 12 MtCO 2 emission reduction Vans : Fuel efficiency improvement, electric/plug in hybrids offer potential for at least 3 MtCO 2 in 2020 HGVs: Fuel efficiency improvement offers potential for at least1 MtCO 2 in 2020 Need ambitious EU targets and domestic implementing mechanisms( information, fiscal levers) Demand side measures Eco driving: 3 MtCO 2 in 2020 Journey planning and modal shift: 3 MtCO 2 in 2020 Journey planning and modal shift: 3 MtCO 2 in 2020 Demand Management: Eddington Review Demand Management: Eddington Review Information and encouragement. Response is inherently uncertain

30. (iii) Feasible emissions reductions – Transport (cont.): path to 100 g/km emissions by 2020 for new cars in UK

31. (iii) Feasible emissions reductions – Agriculture 8% of all UK GHG emissions: 44 MtCO 2 e Preliminary cost curve analysis suggests technical potential of 15 MtCO2e: some controversial, some not No policies currently in place to drive emissions reductions; no reductions included in budget calculations Further work needed to: - Indentify realistic potential - Design policies

32. (iii) Feasible emissions reductions - Emissions reduction scenarios Criteria: Cost per tonne of carbon saved Measures required on the path to 80% in 2050 Practical given constraints on deliverability Criteria: Cost per tonne of carbon saved Measures required on the path to 80% in 2050 Practical given constraints on deliverability Current detailed policies plus 30% renewable power generation Existing policies plus in policy intent Includes measures where there is no current policy or commitment Extended Ambition delivers Interim budget Intended budget measures either credit purchase or some Stretch Ambition actions Current Ambition Extended Ambition Stretch Ambition

33. (iii) Feasible emissions reductions – resource cost of meeting the Intended budget

34. 3. Wider social and economic impacts of budgets Competitiveness Risk in specific sectors accounting for less than 1% of UK GDP and employment Risk can be mitigated by appropriate policy e.g. free allowance allocation, border carbon price adjustments, sectoral agreements Fuel Poverty 1.7 million increase in fuel poverty numbers but mitigation possible at manageable cost Technical: supply intermittency manageable Geopolitical and economic volatility: positive impact of reduced dependence on imported oil and gases Security of supply Fiscal Positive impacts from auctioning (£9 bn p.a.) Negative VED and fuel duty effect (£4 bn p.a.) £500 m p.a. to offset fuel poverty effects Regional Significant difference in pattern of opportunities and challenges: important role for devolved administrations

35. Conclusion 80% cut in GHG emission by 2050 relative to 1990, all GHGs, aviation and shipping included Unilateral 34% cut in GHGs by 2020 relative to 1990 (21% relative to 2005) 42% cut in GHGs by 2020 relative to 1990 (31% relative to 2005) after global deal is achieved 34% cut predominately through domestic emissions reduction 42% through domestic emissions reduction and credit purchase 2020 cost less than 1% of GDP 80% cut in GHG emission by 2050 relative to 1990, all GHGs, aviation and shipping included Unilateral 34% cut in GHGs by 2020 relative to 1990 (21% relative to 2005) 42% cut in GHGs by 2020 relative to 1990 (31% relative to 2005) after global deal is achieved 34% cut predominately through domestic emissions reduction 42% through domestic emissions reduction and credit purchase 2020 cost less than 1% of GDP

36. MtCO2e … CCC proposed UK CO 2 e emission targets