Reducing climate change emissions: inequity across the sectors

In June 2018, the Committee on Climate Change (“CCC”) provided its 2018 progress report to the UK parliament on the UK’s current and projected reductions in (domestic) greenhouse gases (here). As a whole, the UK gets a pat on the back for the continued reduction in national level emissions. However drill down into performance at sector level and the picture is not rosy. Two sectors are essentially shouldering the burden of the UK’s current performance. This reliance on these sectors concerns the CCC in terms of achieving the necessary future reductions.

As the report is 267 pages, we comment below only on some of the aspects raised by the CCC.

UK

The report covers greenhouse gas emissions from activities in the UK including goods and services which the UK exports. It does not cover emissions embedded in goods and services which the UK imports.

UK emissions continued to fall. The reduction was 3% in 2017 (albeit the reduction in emissions intensity remained static at -4%, whereas -5% is required). Looking back over a longer period, the CCC appears to support the argument that emissions can be decoupled from economic growth. Measured from 1990, UK emissions have fallen by 43% (the highest reduction in the G7), whereas the economy grew by over 70%.

This reduction was largely down to a substantial and sustained effort to decarbonise electricity generation (power sector) over the last decade (59% reduction since 2008 and 65% reduction on 1990 levels), with very good performance also in the waste management sector (-48% since 2008). Both sectors have been subjected to clear and focused policy, regulation and economic instruments (e.g. incentives/disincentives). The CCC is concerned that the performance of these sectors is masking a lack of performance in other sectors. The future carbon budgets will not be achieved by the power and waste management sectors alone. Thus the message from the CCC is that the Government and parliament must focus on increasing the performance of the other sectors.

The UK’s fourth carbon budget cycle will be 2023 – 2027, with the fifth being 2028 – 2032. These are legally binding budgets. The CCC’s view is that these will be tougher budgets for the UK to meet and that currently the UK is not on course to meet them. It advises that “A fully fleshed out programme of policy from Government is now required, one that takes the UK decisively into committed emissions reduction programmes in the key sectoral priority areas for the next decade: road transport; land use and agriculture; carbon capture and storage; and improved energy efficiency and low carbon heat in buildings”.

Power (electricity generation)

The CCC calls power, the “stalwarts”. It was this sector with its 12% reduction on 2016 levels which again propped up the 3% UK reduction in 2017. The CCC holds out this sector as the example of how reduction can be achieved, when policy and law is early signposted, focused and sustained. Looking forward, the CCC sees further low cost opportunities (onshore wind and solar) but stresses the need for a strategy (expected in 2018) for the deployment of carbon capture and storage in this sector (at scale in the 2030s) but also as an enabler for a wider roll out (e.g. in the industrial sector).

Of course, the other sectors rely on power. Indeed the expectation is that there will be increasing reliance on electrification, particularly transport and real estate (heating). There is therefore an overlap with measures required in other sectors (see below).

Waste management

This is a small sector in terms of national emissions. It accounted for approximately 4% of the UK emissions in 2016. It has been a very strong performer with a 70% reduction since 1990. However. in 2016 this sector went into reverse with a 5% increase.

Emissions are dominated by methane from biodegradable waste in landfills. Reduced emissions have been brought about largely by two mechanisms. One has been better controls and capture of landfill gas to generate electricity. The other is the increasing diversion of biodegradable waste from landfill. The CCC encourages more such diversion. Such diversion is in any event a longstanding waste management principle brought into further focus recently with the EU’s Circular Economy package (here).

Transport

This is now the largest emitting sector in the UK, accounting for 28% of the UK’s emissions. It would not surprise anyone that the CCC sees this as a key sector for radical reform in terms of emissions reduction. In terms of land surface transport it is not surprising that the report raises many comments in relation to the electrification of transport and addressing increase in consumer drift to larger and higher emitting road vehicles. At the time of its report, the Government’s Road to Zero Strategy had not been published and hence the CCC could not comment on this. Our recent article (here) sets out the key aspects of this strategy.

Real estate and construction

The CCC is highly critical of the lack of effective measures in this poorly performing sector. Temperature adjusted emissions increased by 1% in 2017 (the same was the case in 2016). There has been only a 1% drop in emissions since 2009.

The CCC calls for more and stronger measures. In particular, it stressed the lost opportunities from the continued fall in home insulation rates: greater take up of low carbon heat sources/networks (heat pumps and district heating from low carbon rather than gas CHP); a need to make strategic decisions (in the early 2020’s) on the current reliance on natural gas, which it says is incompatible with long-term decarbonisation; a need to first recognise and then address a lack of current compliance and bring in enforcement with heavy penalties; the danger of the gap between energy design performance and real-world performance; a shift to operational savings and reporting of the same for public and commercial buildings; inadequate future proofing on new builds (“buildings built now are not fit for 2050”): and a need to address questions around the current balance of tax and regulatory costs across fuels, which it says currently weakens the private economic case for electrification.

Industry

Annual emissions reduced on average by 3% annually between 2009 –2016 and halved in the period since 1990. However in 2017 emissions increased by 1% and this was largely attributed to emissions from oil and gas production (overall industrial output grew by circa 3%).

The CCC recognises Government ambitions to decarbonise this sector, in particular in relation to industrial carbon capture and storage and a 20% energy efficiency target, but criticises the lack of policy detail and in particular in relation to the timing and implementation of policy. The CCC says it is uncertain over the extent to which ESOS (the Energy Savings Opportunity Scheme) will lead to uptake of the most cost-effective energy measures.

Agriculture and land use

Emissions from agriculture have not changed from 2015 but because of reductions elsewhere, agriculture’s emissions mean that its share of UK emissions has increased from 7% in 1990 to 10% in 2017.

Two main criticisms made by the CCC are a lack of importance attached to this by farmers and inaction in afforestation levels. The CCC suggests that the proposed post-CAP framework should link financial support to agricultural emissions reduction and carbon sequestration via afforestation. Likewise the Industrial Strategy Challenge Fund aimed at transforming food production, should be allocated to projects that deliver emissions reduction.

F-gases

Fluorinated gases (F-gases – which are mainly used as refrigerants) accounted for around 3% of the total UK greenhouse gas emissions in 2016. In 2016 there was a 4% reduction in emissions. This was 2% shortof the targeted 6% cost effective reduction. The thrust of the CCC reporting highlights the potential to reduce F-gases emissions further and faster than the current EU F-gas Regulation. This potential lies in deploying equipment that can use low global warming potential refrigerants and further reducing leakage rates. The CCC advocates the creation of policy to achieve this.

Comment

Reports of the CCC are influential per se and all the more so because they are linked to the legal requirements concerning the UK’s carbon budgets. To this extent they provide signposting of the thinking of this influential body. Very big directional changes were made in the power and waste management sectors over the last 10 – 15 years and these have led to significant reductions in emissions from these sectors. The CCC holds this out as argument that well focused and implemented policies work. We appear to be on the verge of potentially huge changes in the road transport sector which could result in that sector making significant reductions. Taking all this together, there is an uneasy sense that industry, real estate and construction, and agriculture will be particularly exposed over the next decade or so.

Those involved in the supply of (and/or related services and infrastructure) heat networks, heat pumps, electric vehicles and carbon capture and storage, will no doubt be pleased by the CCC’s commentary.