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Climate Change Act
In the Climate Change Act, the UK has set the most ambitious national targets to date: an 80% reduction in carbon dioxide and other greenhouse gas emissions by 2050 as compared with 1990. Future UK governments will be held accountable under the Act for successive five-yearly ‘carbon budgets’, starting with 2008-2012, and can be taken to judicial review if their policies don’t match up.
The Committee on Climate Change is the Government’s official advisory body. The Committee estimates that meeting the target will cost 1-2% of GDP by 2050. It has recommended an interim target of a 21% reduction by 2020 relative to a 2005 baseline, stressing that this should apply before any global deal is agreed. However, it has also recommended an intended target of a 34% reduction by 2020 (again, relative to a 2005 baseline). The Climate Change Committee says the intended target should apply following a global deal on climate change. In April's Budget the Government made the 34% reduction target legally binding.
The next global summit on climate change is in Copenhagen in December 2009.
The Carbon Reduction Commitment (CRC) is a new mandatory emissions trading scheme designed to improve energy efficiency and reduce the amount of carbon dioxide emitted in the UK.
Who does the CRC apply to?
There are two categories within the CRC. It will require full participation from large organisations in both the public and private sector who had in 2008:
1) at least one half hourly meter (HHM) settled on the half hourly market, and
2) an annual electricity consumption through all HHMs of at least 6,000 MWh.
CRC requirements
Organisations that meet the qualification criteria will be obliged to participate in the CRC. They will have to monitor their emissions and buy allowances from the Government for each tonne of CO2 they emit. The more CO2 an organisation emits, the more allowances it has to buy. So there is a direct incentive for these organisations to reduce their emissions.
Organisations which have at least one HHM settled on the half hourly market, but whose annual energy consumption is less than 6,000MWh do not have to participate fully in the Carbon Reduction Commitment. However these organisations do have to disclose information about their emissions.
Benefits of the CRC
Besides reducing overall carbon emissions, the scheme will help organisations save money with greater energy efficiency leading to lower energy bills. These savings should exceed the costs of participating in the scheme.
The better an organisation performs in terms of reducing its emissions, the higher it will appear in the annual performance league table the Government will publish, showing the comparative performance of all participants. This provides a further benefit: all the revenue raised from selling allowances is ‘recycled’ back to participants, and the higher an organisations is in the league table, the more money it will receive.
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