The UK Government has proposed limiting UK emissions to 1,950 million tonnes of carbon dioxide equivalent (Mt CO2e) during the five-year period from 2023 to 2027. If the quota is spread evenly throughout the five-year period, greenhouse gas (GHG) emissions would amount to 390 Mt CO2e annually. This would equate to cutting emissions by one-third from levels in 2010, estimated at 582 Mt CO2e.
UK emissions have risen by 2.8% since 2009, driven by higher emissions from households, energy supply and business. Trucost data show that companies in the FTSE All-Share Index directly emitted more than 481 million tonnes of CO2e in 2009. More than 60% of Scope 1 emissions from operations were from the Oil & Gas and Basic Resources sectors, and therefore likely to be largely outside of the UK.
If agreed by Parliament, the proposed fourth carbon budget will be set in legislation by the end of June and the Government will outline how it intends to meet the target in October. The proposal from the Department of Energy and Climate Change (DECC) follows recommendations from the Committee on Climate Change, an independent expert body established under the Climate Change Act 2008. The Act provides a legally-binding framework to reduce the UK's GHG emissions by at least 80% by 2050 in order to establish an economically credible emissions reduction pathway to avoid dangerous climate change.
Carbon budgets aim to give a strong signal to investors on the future level of required emissions reductions and increase expected returns for investments in low-carbon infrastructure. "Such investment will be crucial to meet our longer term targets and to lower the cost of technologies required to tackle climate change at a manageable cost," says the proposal's impact assessment.
The assessment provides a "best estimate" that achieving the targets could cost £1.9 billion over the five-year period. Sectors covered by the EU Emission Trading System are expected to incur some £690 million of the costs, with non-traded sectors paying the remaining £1,260 billion. This compares with more than £4 billion spent on internet advertising in 2010.
Net costs include technology/capital and operating costs, as well as benefits from lower energy demand and abatement opportunities that reduce purchases of EU Allowances under the EU ETS. Abatement costs are based on benchmark carbon prices in the Government's Carbon Valuation in UK Policy Appraisal, with central estimates for carbon prices of £43/tCO2e in sectors under the EU ETS and £65/tCO2e in non-traded sectors in 2025. Estimated costs exclude valuations of avoided damages from lower GHG emissions.
The assessment assumes that the EU ETS will have a tighter cap and that the EU will increase its target to reduce emissions by 20% from 1990 levels to 30%, likely to be debated by the EU Environment Council on 21 June
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