23 March 2007
Last week's draft Climate Change Bill shows the UK government is serious about tackling global warming. But it needs to go even further, argues Stuart Williams
The fight to protect the planet took a huge stride forward last week when Environment Secretary David Miliband published his draft Climate Change Bill.
This is the first attempt by any government to reduce the carbon footprint of a country through legislation, making Britain a world leader on environmental issues. It will fuel the drive to reduce the UK's emissions of carbon dioxide, the prevalent greenhouse gas, and is a sure sign of the extent to which going green is part of the political mainstream.
The Bill also paves the way for a UK carbon emissions trading scheme that would encompass many public sector bodies, such as local authorities, universities, hospitals and schools.
Miliband's eye-catching package of measures commits the government to legally binding cuts in emissions of 26%32% by 2020, and 60% by 2050. Ministers will also set five-year 'carbon budgets', stipulating overall emissions limits, which will act as staging posts to those targets. An independent Committee on Climate Change will be set up to monitor progress and report to Parliament. It will also have the power to vary the emissions targets and bring other greenhouse gases, such as methane, into the regime. This is a sound framework for progress.
But the government needs to be bolder and go further the 60% target is nowhere near ambitious enough. A long-term emissions target needs to be agreed that is based on scientific, not political, opinion. Recent reviews of climate models suggest that a 60% cut still exposes us to a more than even chance of exceeding the 2º Centigrade warming that could trigger economically and ecologically disastrous 'runaway' climate change. It is to be hoped that the committee will recognise this and set a more robust target: a 90% emissions cut by 2050 is what is needed.
The proposed system of five-year carbon budgets is also too long because it could allow a one-term government off the hook. A three-year system is needed to ensure proper accountability. It would also be sensible for these budgets to plot a course that banks emissions savings sooner rather than later, in case the white knight of new technologies fails to materialise.
With such a framework in place, the government could take the truly radical step of putting in place a carbon emissions trading scheme that would span the entire economy. By today's mix, 55% of carbon allowances would go to industry, 5% would go to public sector organisations, and the remaining 40% would be divided equally between individuals. Each organisation and individual would then have to live within their environmental means, or buy surpluses to meet their needs.
Personal carbon allowances are sure to be politically contentious, but they offer a progressive solution for individuals. Miliband has alluded to them, and they are technically feasible within five years. Whether there is the political will to introduce them remains to be seen. However, the draft Climate Change Bill does show Miliband's willingness to take the 'cap and trade' approach to cutting organisations' carbon emissions.
It contains 'enabling provisions' that will allow the introduction of the Energy Performance Commitment, which will draw public sector organisations into a carbon emissions trading scheme for the first time. The EPC, which the Department for Environment, Food and Rural Affairs has been consulting on, represents the first step towards entrenching the concept of environmental limits in the UK economy.
Currently, only our biggest emitters of carbon dioxide are included in the European Union's Emissions Trading Scheme a similar cap and trade market. Electricity generators, cement factories, steel plants and other heavy industries are regulated by the troubled scheme soon to be joined by aviation. Defra's proposal captures the next major tranche of emitters, the awkwardly entitled 'large non-energy intensive organisations'.
These are high emitters purely by virtue of the sheer size of their estates and energy bills a description that fits hundreds of local authorities, hospitals and other public bodies. It also includes private businesses such as hotels, supermarkets and factories. Under Defra's proposals, participating organisations receive allowances or permits to emit CO2 and a ceiling is set to limit the total number of permits, which declines year on year.
Organisations can free up permits by investing in energy efficiency and renewable technologies. By selling these surplus permits to others who are struggling to make progress, or choose not to, a financial incentive is provided to manage carbon as a resource.
The concept is sound, based as it is on there being a finite limit on emissions in any one year. It is a less blunt instrument than green taxation as, in principle, the reducing cap guarantees falling emissions and removes the guesswork. It appeals both to environmentalists seeking economic frameworks to drive emissions reductions and to free-market proponents, who argue that its trading mechanism allows reductions to be achieved in the most cost-effective way.
But there are two inescapable prerequisites for trading schemes to achieve their goal. First, any scheme must set a meaningful cap one that will decline sufficiently quickly to deliver the reductions that scientific consensus dictates are necessary. Secondly, there must be a fair and transparent mechanism to allocate permits to participants. The existing EU scheme has been accused of failing on both counts, resulting in huge and unearned windfalls in the power sector and a massive missed opportunity.
The proposed EPC neatly tackles the allocation issue by sidestepping protracted negotiations in favour of a simple auction of allowances. Perhaps to defuse opposition, Defra has also drawn up a system that will be revenue-neutral for the Exchequer. On balance, it means cash saving for participants too: the costs of permits will be more than recouped by energy savings and the redistribution of auction revenues. There is also the potential income from the sale of surplus permits.
The EPC is the next logical step in curbing emissions, but the scale of its ambition needs to be increased. Quite rightly, it focuses on large organisations. But its potential impact is blunted because it concentrates solely on the emissions produced by estates ignoring carbon-intensive supply chains. The typical council's own in-house emissions are dwarfed by the impact of its waste, transport and planning services.
As a result of these narrow parameters, the EPC will capture just 15 million of the 160 million tonnes of carbon emissions (MtC) that the UK generates. Of this, the EPC intends to save only 1.2 MtC by its tenth year a mere 8% saving over a decade. This equates to an annual cut of less than 1% of overall emissions, half the rate of savings that the government itself says is necessary.
Consequently, there is a strong argument for a more challenging target, alongside a requirement that the energy savings and the auction revenues generated are reinvested in further efficiency and renewables.
Taking a more adventurous approach would transform climate change from a looming threat to a potential social opportunity that could fundamentally transform our public services. It would encourage innovation in the public sector among organisations that want to ensure their services are sustainable now and in the future. It would also encourage investment in research and development by businesses manoeuvring for a commercial advantage.
Our response to climate change could also revitalise rural communities and the rural economy, reinstating local shops, services and jobs. In this way, local authorities would be empowered to shape their services, infrastructure and communities to enable society and individuals to flourish within our environmental means and achieve a better quality of life.
Miliband should be applauded for the draft Climate Change Bill and encouraged to strengthen it. The UK is among the world's leaders on climate change, but we are still guilty of more talk than action. For our communities and our economy, the consequences of inaction now outweigh the fear of being politically bold.
Stuart Williams is lead adviser on climate change and procurement at Forum for the Future's public sector programme
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