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The UK’s 4th carbon budget proposes radical electricity market reforms and a deep 2030 target.
The UK Committee on Climate Change (CCC), an independent advisory body, recommended that the UK should set an emissions reduction target of 60 per cent on 1990 levels by 2030 in its fourth annual carbon budget released on Tuesday.
This target would see the UK’s annual greenhouse gas (GHG) emissions fall from around 574 million tonnes of carbon dioxide equivalent (CO2e) in 2010 to around 310 million tonnes CO2e by 2030, it said.
The brunt of these reductions, the CCC suggested, should be met by power generators.
For instance, emissions from electricity production should not be more than 50 grammes of CO2e per kWh of electricity generated, according to the report.
As current emissions average around 500g CO2e per kWh of electricity produced, this would represent a 90 per cent cut.
The report said in the 10 years from 2020-30 some 40 GW of low-carbon electricity will need to be added to the UK power system, which equates to 25 large power stations, in addition to the 30 GW that will need to be added from 2010-20.
Reforms, carbon floor
Achieving the goals will require radical reforms to the electricity market.
The CCC has outlined plans whereby the government would tender for long-term contracts for low carbon capacity.
This would provide the necessary price security for companies to make long-term investments in low carbon generation projects, such as nuclear power and cleaner coal plants using costly carbon capture and storage (CCS) technology, it said.
“Low carbon (generation) is very capital intensive. Investors are sensitive to risk and so to give them long-term contracts takes away a range of risks in order to entice investors,” David Kennedy, chief executive of the CCC, said in a press briefing before the budget was released.
The CCC has already proposed the UK should have a carbon floor price for the power sector to help facilitate investments in cleaner generation, and the group reckons a floor price could work alongside long-term power contracts.
“The carbon price we are recommending is £27 /tonne CO2 ($42) in 2020, rising through the 2020s,” the report said, arriving at a figure of £70/tCO2 in 2030.
At the briefing, Kennedy also suggested that the carbon floor price could be extended to other sectors, particularly if an EU wide policy, such as a carbon tax, fails to materialise by 2030.
Tougher 2020 targets
The current budget has set a 34 per cent emission reduction target by 2020, but Tuesday’s report said this should be tightened to 37 per cent and raised again to 42 per cent “once the EU has moved to more ambitious climate targets”.
The EU currently has a target to cut emissions 20 per cent under 1990 levels by 2020, but is deliberating whether to increase this to 30 per cent.
Other areas where the CCC sees bigger emissions savings are in the transport and industry sectors.
It estimates that 11 million electric cars will be on UK roads by 2030.
The CCC also calls on industry to halve its emissions by 2030 by being more energy efficient, using CCS technology and using biomass to meet 25 per cent of industrial heat demand.
The government body said the moves proposed are needed to ensure the country meets its 2050 target of an 80 per cent cut in emissions on 1990 levels.
“Our fourth budget recommendations must be seen as the minimum reductions necessary if the 2050 target is to be attainable,” Lord Adair Turner, chair of the climate committee, said in the report.
Although the government is under no obligation to accept the committee’s proposals for the 2022-2027 period, a 4th carbon budget does need to be legislated under the Climate Change Act by summer 2011.
“We know that the status quo will not be enough to cut carbon,” UK Energy and Climate Change Secretary Chris Huhne said Tuesday in response to the budget.
“(This) is why we are planning to undertake a comprehensive review of the electricity market, increase home energy efficiency … and create a green investment bank. We will formally respond to the report in spring next year,” he added.
The proposals by the committee drew a mixed response from environmental and business groups.
Neil Bentley, a director at CBI, the UK’s leading business lobby, welcomed the proposal for a new carbon budget, but pointed out the feasibility of the 60 per cent target “would need to be examined in detail”.
“Investors will only commit to low-carbon projects if they are confident about the policy framework in the long-term. The government’s forthcoming announcements on reform of the electricity market and work to simplify the carbon reduction commitment will be crucial tests,” he said.
Environmental group WWF-UK, meanwhile, urged the government to respond to the committee’s recommendations “with strong policies” to curb energy demand and lower emissions in the power sector.
“Taking action now to achieve the 2030 target will benefit our environment, our energy security, and the UK economy, as well as setting an example to other developed countries,” David Norman, director of campaigns at WWF-UK, said in a statement.
RenewableUK, the country’s renewable energy trade association, said it supports the recommendation of the 60 per cent target, but warned the government against the introduction of tendering for low carbon capacity.
Sceptre Group Limited is a specialist investment firm focused in low carbon financial investments such as sustainable biofuel plantations, agricultural farmland and green technologies. For more information on Biofuel Investments, please visit Sceptre Group’s website at www.sceptreinternational.com.