1. 1 Meeting carbon budgets – 4th Progress Report to Parliament Committee on Climate Change, June 2012 www.theccc.org.uk

2. 2 Contents 1.Context: Fourth budget and previous progress reports 2.Key messages of today’s report 3.Emissions and their drivers in 2011 4.Emissions in the non-traded sector 5.Emissions in the traded sector 6.Sectors a)Power b)Buildings c)Industry d)Transport e)Agriculture f)Waste

3. 3 Legislated and Intended budgets Source: CCC (2010) The Fourth Carbon Budget 1,950

4. 4 Context: Our fourth report on progress towards carbon budgets First application of indicator framework: Large emissions fall due to recession Indicators roughly as expected New policies needed to drive the step change First application of indicator framework: Large emissions fall due to recession Indicators roughly as expected New policies needed to drive the step change A framework of indicators consistent with budgets: Emissions trajectories Indicators for implementation of abatement measures Forward indicators of investments in the project cycle Policy milestones A framework of indicators consistent with budgets: Emissions trajectories Indicators for implementation of abatement measures Forward indicators of investments in the project cycle Policy milestones The need for a step change Aims: Report latest data Assess current progress Monitor against indicators Aims: Report latest data Assess current progress Monitor against indicators First (2009) 2010 Now (2012) First assessment of underlying progress: Emissions increased due to cold weather Underlying progress basically flat Still need for a step-change First assessment of underlying progress: Emissions increased due to cold weather Underlying progress basically flat Still need for a step-change 2011

5. 5 Contents 1.Context: Fourth budget and previous progress reports 2.Key messages of today’s report 3.Emissions and their drivers in 2011 4.Emissions in the non-traded sector 5.Emissions in the traded sector 6.Sectors a)Power b)Buildings c)Industry d)Transport e)Agriculture f)Waste

6. 6 Today’s report - Key messages Underlying trend not enough to meet future carbon budgets – urgently need four-fold increase in pace of underlying emissions reductions New policies key: Electricity Market Reform, Green Deal, support for renewable heat Economy-wide emissions fell 7% – due mainly to mild winter weather, falling real income and rising fuel prices Whereas we envisaged a lead time for development of polices to drive emissions reductions, this has now elapsed.

7. 7 Contents 1.Context: Fourth budget and previous progress reports 2.Key messages of today’s report 3.Emissions and their drivers in 2011 4.Emissions in the non-traded sector 5.Emissions in the traded sector 6.Sectors a)Power b)Buildings c)Industry d)Transport e)Agriculture f)Waste

8. 8 CO 2 emissions fell sharply in the context of mild winter weather, high fuel prices and falling income

9. 9 With biggest falls from energy used to heat buildings Note: ‘Other’ category includes agriculture CO 2 and emissions from land use, land use change and forestry (LULUCF) (% change 2010-2011)

10. 10 Contents 1.Context: Fourth budget and previous progress reports 2.Key messages of today’s report 3.Emissions and their drivers in 2011 4.Emissions in the non-traded sector 5.Emissions in the traded sector 6.Sectors a)Power b)Buildings c)Industry d)Transport e)Agriculture f)Waste

11. 11 Non-traded sector emissions are below the current budget level, even after adjusting for weather effects * As proposed in our 2008 report, the Intended budget (2008-2022) corresponds to the UK share of an EU 30% 2020 target. We recommended it should be enacted in the context of a global deal to reduce emissions. Non-traded sector emissions v. future budgets

12. 12 Progress implementing measures in the non-traded sector reduced emissions by only around 0.8% Rising prices, falling incomes etc Efficient boilers, loft and cavity wall insulation, renewable heat, new car CO 2

13. 13 Continuing progress at the 2011 rate would not be enough to meet future budgets Non-traded sector emissions v. future budgets

14. 14 But successfully implementing policy measures would lead to an outperformance of second and third legislated budgets, and prepare for the fourth budget Government non-traded sector emissions projections v. future budgets *As proposed in our 2008 report, the Intended budget (2008-2022) corresponds to the UK share of an EU 30% 2020 target. We recommended it should be enacted in the context of a global deal to reduce emissions. Trajectory has been smoothed. Continued outperformance is required to meet 4 th budget therefore outperformance should not be banked

15. 15 Contents 1.Context: Fourth budget and previous progress reports 2.Key messages of today’s report 3.Emissions and their drivers in 2011 4.Emissions in the non-traded sector 5.Emissions in the traded sector 6.Sectors a)Power b)Buildings c)Industry d)Transport e)Agriculture f)Waste

16. 16 Traded sector emissions fell, leaving them well below the UK cap * As proposed in our 2008 report, the Intended budget (2008-2022) corresponds to the UK share of an EU 30% 2020 target. We recommended it should be enacted in the context of a global deal to reduce emissions.

17. 17 EU traded sector emissions fell, leaving even more headroom under the current cap. Carbon price remains low.

18. 18 Measures that increase EU ambition to 2020 and drive up the EU ETS price will put the EU on a more cost-effective path to achieving its 2050 target Also constructive in international context, where progress has been made but significant risks remain Durban Platform – timetable for global deal Domestic climate actions – China, Australia, South Korea, Mexico, California, Quebec IEA – significant risk of missing climate objective UK should strongly support measures that increase EU ambition and ETS price Tightening of the existing EU ETS cap to 2020 Underpinning the EU ETS carbon price Agreeing ambitious EU emissions reduction targets for 2030

19. 19 Contents 1.Context: Fourth budget and previous progress reports 2.Key messages of today’s report 3.Emissions and their drivers in 2011 4.Emissions in the non-traded sector 5.Emissions in the traded sector 6.Sectors a)Power b)Buildings c)Industry d)Transport e)Agriculture f)Waste

20. 20 7% fall in power emissions driven mainly by short- term factors Decrease in emissions intensity by 2% due to increased renewable generation and fewer nuclear outages 4% decrease in energy demand (2% decrease after adjusting for temperature)

21. 21 Additions of wind capacity broadly on track, but acceleration required in mid-2010s Healthy project pipeline enough to cover build to 2020 for onshore, 2017 for offshore BUT  Current bottleneck planning approval rates down 50% (onshore) determination periods still long projects moving slowly from approval to construction Healthy project pipeline enough to cover build to 2020 for onshore, 2017 for offshore BUT  Current bottleneck planning approval rates down 50% (onshore) determination periods still long projects moving slowly from approval to construction Need to address uncertainties over support mechanisms (RO, EMR) other barriers (decision framework for onshore, finance, radar interference, T&D) Need to address uncertainties over support mechanisms (RO, EMR) other barriers (decision framework for onshore, finance, radar interference, T&D) Forward Indicators

22. 22 Progress on CCS and nuclear Approval of National Policy Statement Submission of planning application for first new plant  Horizon venture stalled (5 GW), credible buyer needed  EMR is key  First competition failed to award funding New process launched, to select 4 projects by end of 2012  Demonstration required urgently  Ideally include a gas CCS project  Provide clarity on support beyond initial projects  Set out strategic approach to CO 2 infrastructure CCSNuclear

23. 23 Progress on Electricity Market Reform but clear carbon objective needed Requires a carbon objective: Reduce carbon intensity to the order of 50g/kWh by 2030 Achieve with a portfolio of technologies include minimum deployment levels for less mature technologies Flexibility over precise path of decarbonisation to be determined as uncertainties are resolved (e.g. costs, build rates, demand) Plus detailed design issues need to be resolved Support provided via long-term contracts New modelling reinforces power sector decarbonisation as appropriate approach across wide range of scenarios Lack of carbon objective undermines investor confidence and risks second ‘dash for gas’ E.g. reference price for intermittent renewables

24. 24 Contents 1.Context: Fourth budget and previous progress reports 2.Key messages of today’s report 3.Emissions and their drivers in 2011 4.Emissions in the non-traded sector 5.Emissions in the traded sector 6.Sectors a)Power b)Buildings c)Industry d)Transport e)Agriculture f)Waste

25. 25 Buildings emissions fell by 12% due to the mild winter weather and decreased carbon intensity of electricity Energy consumption Emissions intensity Emissions

26. 26 Need to accelerate implementation of insulation and renewable heat measures Loft insulation Cavity wall insulation Solid wall insulation Renewable Heat (TOTAL)

27. 27 Success will require strong policy measures Green Deal: Strengthen incentives for loft and cavity wall insulation prior to launch in autumn 2012 Projected uptake higher than (very low levels) in original proposals but still below numbers needed to meet carbon budgets Green Deal: Strengthen incentives for loft and cavity wall insulation prior to launch in autumn 2012 Projected uptake higher than (very low levels) in original proposals but still below numbers needed to meet carbon budgets Renewable Heat: Include residential sector in Renewable Heat Incentive (RHI) from summer 2013 Introduce approaches to address non-financial barriers Resolve uncertainty about RHI beyond 2015 Renewable Heat: Include residential sector in Renewable Heat Incentive (RHI) from summer 2013 Introduce approaches to address non-financial barriers Resolve uncertainty about RHI beyond 2015 Carbon Reduction Commitment: Retain but with reduced administrative burden and redesigned league table Consider scope for rationalisation of policies Carbon Reduction Commitment: Retain but with reduced administrative burden and redesigned league table Consider scope for rationalisation of policies

28. 28 Contents 1.Context: Fourth budget and previous progress reports 2.Key messages of today’s report 3.Emissions and their drivers in 2011 4.Emissions in the non-traded sector 5.Emissions in the traded sector 6.Sectors a)Power b)Buildings c)Industry d)Transport e)Agriculture f)Waste

29. 29 Industry CO 2 emissions Manufacturing output Industry emissions fell 5% despite an increase in manufacturing output Need to develop evidence to understand underlying progress Some evidence of improvement in energy efficiency, though uncertain

30. 30 Contents 1.Context: Fourth budget and previous progress reports 2.Key messages of today’s report 3.Emissions and their drivers in 2011 4.Emissions in the non-traded sector 5.Emissions in the traded sector 6.Sectors a)Power b)Buildings c)Industry d)Transport e)Agriculture f)Waste

31. 31 Surface transport emissions were flat in 2010. Within this, car emissions fell by around 3%. However there are questions over modal estimates.

32. 32 Indicators for 2011 suggest car emissions may have decreased

33. 33 Progress laying foundations for electric vehicle market but limited progress on travel behaviour Electric vehicles Plug-in car grant launched, now extended to vans Around 6,000 publicly and privately provided charge points delivered to the end of March 2012 Uptake still behind trajectory but early days - expect increased uptake in 2012 with more electric models coming to market Plug-in car grant launched, now extended to vans Around 6,000 publicly and privately provided charge points delivered to the end of March 2012 Uptake still behind trajectory but early days - expect increased uptake in 2012 with more electric models coming to market IndicatorOutturn 5,0001,100 Behavioural measures Eco-drivingVery low levels of eco-driving training in 2011 Smarter Choices£560 million Local Sustainable Transport Fund -sufficient to roll out Smarter Choices to 25% of UK by 2015 Speed limitingConsultation on increasing motorway speed limit announced -would significantly increase emissions vs. enforcing current limit

34. 34 Contents 1.Context: Fourth budget and previous progress reports 2.Key messages of today’s report 3.Emissions and their drivers in 2011 4.Emissions in the non-traded sector 5.Emissions in the traded sector 6.Sectors a)Power b)Buildings c)Industry d)Transport e)Agriculture f)Waste

35. 35 Agriculture emissions increased slightly in 2010 due to increase in crop-related N 2 O intensity Priorities remain improvements in the evidence base and consideration of policy options to drive abatement measures Increase in fertiliser use despite decline in crop production Livestock production increased but emissions intensity improved

36. 36 Contents 1.Context: Fourth budget and previous progress reports 2.Key messages of today’s report 3.Emissions and their drivers in 2011 4.Emissions in the non-traded sector 5.Emissions in the traded sector 6.Sectors a)Power b)Buildings c)Industry d)Transport e)Agriculture f)Waste

37. 37 Waste emissions (mostly methane from landfill) fell 3% in 2010 continuing a longer trend where emissions have declined 64% since 1990 Landfill tax (to meet EU Landfill Directive targets) key driver for diverting waste away from landfill Emissions projected to continue to fall in line with targets Greater reductions are possible (and may be desirable given legacy emissions) These should be explored through additional levers (e.g. food and paper/card diversion strategies)

38. 38 Today’s report - Key messages Underlying trend not enough to meet future carbon budgets – urgently need four-fold increase in pace of underlying emissions reductions New policies key: Electricity Market Reform, Green Deal, support for renewable heat Economy-wide emissions fell 7% – due mainly to mild winter weather, falling real income and rising fuel prices Whereas we envisaged a lead time for development of polices to drive emissions reductions, this has now elapsed.