United Kingdom

The UK began to introduce policies to tackle GHGs emissions in the early 2000s. In 2001, it introduced a Climate Change Levy that applies to electricity, gas, solid fuel and liquefied gases used for lighting, heating and power in the business and public sectors. Complementing the levy, under Climate Change Agreements that took effect in 2001, energy intensive business users are allowed to receive a discount from the levy if they meet energy efficiency or carbon saving targets. This measure was extended in time and sectoral coverage in 2004 and 2007.

In 2006, the Climate Change Programme outlined all policies and programmes to tackle climate change, including several measures relating to energy efficiency. The measures in the 2006 Programme were projected to reduce CO₂ emissions to 15–18% below 1990 levels by 2010 and work towards the longer term goal to reduce CO₂ emissions by 60% by 2050, as set out in the Energy White Paper (2003). In 2006, the Climate Change and Sustainable Energy Act became law, placing an obligation on the Department for Environment, Food and Rural Affairs (Defra) to report to Parliament on GHG emissions and actions taken by government to reduce these emissions. The first report was put to Parliament in 2007. The legislation also estab­lished a scheme to promote national targets for micro-generation and provided for reporting on the energy efficiency of residential accommodation.

These policies, together with the elevation of climate change as a political issue during and after the 2005 G8 Summit, prepared the ground for the UK’s flagship legislation on climate change – the 2008 Climate Change Act. This law, passed with the support of all major political parties puts the UK’s emissions reduction target into legislation (toughened by Parliament to “at least 80% below 1990 levels by 2050”), created five-yearly carbon budgets to help ensure a cost-effective trajectory towards the long-term goal, and set up the independent Committee on Climate Change to advise the government on carbon targets and monitor progress in meeting them. It was the first law in the world to set statutory GHG reduction targets.

The first three five-year carbon budgets (for 2008-2012, 2013-2017 and 2018-2022) were set in law in 2009. In line with the requirements set out in the Climate Change Act, in 2011 the government proposed, and Parliament approved, the level of the fourth carbon budget, from 2023–2027. The level was set at 1,950 Mt CO₂-equivalent over five years, in line with the Committee on Climate Change’s recommendations, putting into law a target of a 50% reduction from 1990 levels by 2027 (consistent with the target to reduce emissions by at least 80% by 2050). These plans were re-affirmed in July 2014. The fifth carbon (2028-2032) budget was set by law  in July 2016. The fifth carbon budget advice recommends an emissions limit of 1,765 MtCO2e over the period 2028-2032 including emissions from international shipping. This is an emissions reduction of 57% on 1990 levels.

In March 2016, the Government released its latest Budget which provides updates and changes to Energy and Environment taxes. Below are some of the key climate-related provisions of the Budget (text directly adapted from the text of the policy paper):

• “Reform of business energy taxes – Following consultation on simplification of the business energy efficiency tax landscape, the budget announces the biggest business energy tax reforms since the taxes were introduced:

  • abolish the administratively burdensome Carbon Reduction Commitment (CRC) energy efficiency scheme with effect from the end of the 2018-19 compliance year
  • increase progressively the main rates of Climate Change Levy (CCL) from 1 April 2017, 2018 and 2019
  • increase the CCL discount for sectors with Climate Change Agreements to compensate equivalently for the increase in CCL main rates. The CCL discount for electricity will increase from 90% to 93%, and the discount for gas will increase from 65% to 78% from 1 April 2019.
  • rebalance the main rates of CCL for different fuel types; in the longer term, the government intends to rebalance rates further to deliver greater energy efficiency savings, to reach a 1:1 ratio of gas and electricity rates by 2025
• Carbon Price Support rates to continue to be capped at £18/tCO2 to 2019-20. For 2020-21, the cap will be maintained in real terms and set at £18/tCO2 plus RPI. The government will set out the long-term direction for CPS rates and the Carbon Price Floor at Autumn Statement 2016. (Finance Bill 2018) (37)
• Enhanced Capital Allowances for energy-saving and water-efficient technologies are kept and updated to promote development of efficient technologies”

Another important backbone of climate policy is the transposition in national legislation of EU Directives. Most notable is the EU Emission Trading Scheme, which covers installations responsible for around 50% of GHG emissions in the EU and puts a price on carbon. Other EU Directives include the Renewables Directive, the Energy Performance of Buildings Directive, the Industrial Emissions Directive and the EU Eco-Design Directive.

The government has introduced a number of laws, policies and measures to support the achievement of the targets contained in the Climate Change Act. The 2011 Carbon Plan (which replaced the 2009 Low Carbon Transition Plan) outlines plans to ensure the UK meets its emission reduction targets and its first four 5-year carbon budgets. In 2012, a Green Investment Bank was launched, with an initial capitalisation of GBP3bn (USD4.7bn).

The 2011 Energy Act has three principal objectives: tackling barriers to investment in energy efficiency (including via the Green Deal that provides up-front finance for investments in energy efficiency in the home; enhancing energy security; and enabling investment in low carbon energy.

The 2013 Energy Act, implements government plans for Electricity Market Reform (EMR). EMR will help incentivise up to GBP110bn (USD180.1bn) of further investments required over the coming decade to the UK’s ageing energy infrastructure with a more diverse and low-carbon energy mix to help ensure that the UK has future security of electricity supply and meets its climate and renewables targets in a way that minimises costs to consumers.  Key elements of the reform package include:

• The introduction of Contracts for Difference (CfDs) to incentivise long-term low-carbon energy investments
• The introduction of a Capacity Market, to ensure security of electricity supply by providing regular payments to capacity providers (both demand and supply), in return for which they must be available to produce energy (or reduce demand) when the system is tight, or face penalties
• An Emissions Performance Standard (EPS) set at 450g CO₂/kWh to reinforce the requirement that no new coal-fired power stations are built without CCS, but also to enable short-term investment in gas

The government monitors the effectiveness of climate change policies through Single Departmental Plans (most recent 2015-2020), annual reports to Parliament and the Committee on Climate Change’s annual review of progress towards meeting carbon budgets and the 2050 targets. The sixth CCC review published in July 2014 notes good progress towards implementing a number of policies and towards the development of new policies – notably improved fuel efficiency of new cars, investment in wind generation, and development of EMR. However, there was limited progress in other areas – such as energy efficiency improvements in the commercial and industrial sectors, uptake of electric vehicles and heat pumps, and demonstration of carbon capture and storage (CCS) – and the underlying pace of emissions is currently insufficient to meet future carbon budgets.

Carbon Pricing

The UK, as a Member State of the European Union, participates in the EU’s flagship policy to reduce GHG emissions and encourage investment in low carbon energy – the EU Emissions Trading System (EU ETS). The legal framework for the EU ETS is set out in the EU ETS Directive and UK GHG Emission Trading Scheme Regulations.

The UK has around 1,000 EU ETS installations, accounting for around 50% of the emissions reductions target between 2013 and 2020. The EU ETS therefore plays a key part in ensuring the UK complies with its legally binding carbon budgets.

In 2013, given the relatively low price of carbon in the EU ETS and the resulting lack of a strong incentive to invest in low carbon technologies, a carbon price floor (announced in the 2011 Budget) was introduced. The price was initially set at GBP16 (USD25) per tonne rising to GBP30 (USD47) per tonne in 2020. The aim is to give investors greater certainty and reduce the risk of low carbon investments. However, in March 2014 it was announced that the price floor will be frozen from April 2016 at GBP18 (USD28) per tonne for the remainder of the decade, which may lessen renewables investment incentives.

Energy Supply

The Renewables Obligation (RO), introduced in 2002, has been the main market-based mechanism for supporting large-scale generation of renewable electricity in the UK. The RO is being replaced by Contracts for Difference (CfDs). The RO system will close to new capacity in March 2017, but facilities built under the RO scheme before that date will continue to be eligible for Renewable Obligation Certificates (ROCs) until the scheme closes in 2037. The RO obliges licensed electricity suppliers to source a specified and annually increasing proportion of their electricity sales from renewable sources, or pay a penalty.

CfDs are long-term contracts to provide stable and predictable incentives for companies to invest in low-carbon electricity generation, including renewables, nuclear and carbon capture and storage. The first early CfDs (in the form of investment contracts) were signed in April 2014, and the first allocation round for CfDs under the enduring regime opened in October 2014, with the round due to end in April 2015. The first capacity auction took place in December 2014, for delivery of capacity in winter 2018-2019 (subject to state aid approval).

The 2004 Energy Act provides the framework for the development of offshore wind and other marine renewable energy sources outside territorial waters. The Act implemented commitments relating to energy efficiency, such as raising building and product standards, and created an Energy Efficiency Action Plan. The 2008 Energy Act strengthened the Renewables Obligation to increase the diversity of the electricity mix and created the Renewable Heat Incentive: allowing the Minister to establish a financial support programme for renewable heat generated anywhere, from large industrial sites to individual households. The Act created regulation that enables private sector investment in CCS projects.

The 2010 Energy Act includes provisions on introducing a new CCS Incentive to support the construction of four commercial-scale CCS demonstration projects in the UK, and the retrofit of additional CCS capacity to these projects should it be required. In August 2014 a scoping paper set out possible next steps for CCS development, including financial support for investments and supporting technical developments. It also requires the government to prepare regular reports on progress on the decarbonisation of electricity generation in Britain.

The UK Renewable Energy Strategy 2009, the UK Renewable Energy Roadmap 2011 and the 2012 and 2013 Roadmap updates outline how the UK will meet its legally binding target to ensure 15% of energy comes from renewable energy sources by 2020. The 2009 Strategy also created an Office for Renewable Energy Deployment (ORED) within DECC. The Renewable Energy Strategy introduced payment schemes to support the production of renewable heat and small-scale clean electricity generation by households, industry, businesses and communities. The Roadmap sets out key actions to support eight renewable technologies, including measures to reduce the cost of offshore wind and financial support for marine energy innovation. Since 2010, feed-in tariffs (FITs) are available for small-scale renewable electricity installed by householders, businesses and communities, even if the electricity is consumed on-site.

Several incentives exist to promote the production of biofuels. The Bio-energy Capital Grants Scheme supports biomass-fuelled heat, and combined heat and power projects in the industrial, commercial and community sectors in England. Additionally, a reduced excise duty rate was introduced for biodiesel in 2002 and bioethanol in 2005, set at GBP0.20 (USD0.31) lower than the rate applicable to diesel and unleaded petrol. The 2008 Renewable Transport Fuels Obligation (RTFO) requires transportation fuel suppliers to ensure a set percentage of their sales are from a renewable source. The Obligation also requires suppliers to publicly report on the carbon savings and sustainable production of biofuels supplied. It aligns with the EU Directive on the promotion of biofuels and renewable fuels for transportation. Regional schemes include the Energy Crop Scheme England introduced in 2000.

The government considers nuclear energy as a key part of the future energy mix with industry setting out plans to develop around 16GW of new nuclear capacity. In 2013 the Minister for Energy and Climate Change gave development planning consent for a new nuclear project in Somerset, paving the way for the construction of the first new nuclear power station for 20 years.

Energy Demand

The UK has extensive legislation and policies addressing energy efficiency and promoting a low carbon energy network. The Energy Saving Trust provides advice, information and incentives for sustainable energy use to the public. In 2001 the Carbon Trust, an independent, not-for-profit company was set up by government to promote energy efficiency in non-domestic sectors. The Energy Efficiency Commitment (EEC) was established in 2002, followed by the Carbon Emissions Reduction Target (CERT) and the Community Energy Saving Programme (CESP) in 2008, which were in turn replaced by the Energy Company Obligation (ECO) and the “Green Deal” in 2013. The ECO and Green Deal schemes work together to promote and support the installation of energy-saving measures – they help households insulate their homes and upgrade their heating systems with low carbon alternatives. The Green Deal helps householders to understand how to use energy more efficiently, and includes the option of borrowing money to help fund the improvements, which they can pay back from savings on their energy bills.

In 2005, the government introduced measures to make all buildings more efficient, in line with the European Directive for the Energy Performance of Buildings (EPBD). The Planning and Energy Act (2008) enables planning authorities in England and Wales to set requirements for energy use and energy efficiency in local plans and to establish their own requirements for a proportion of energy used in development plans to come from renewable sources, to be low carbon or to comply with energy efficiency standards that exceed the requirements of existing building regulations. Several regional schemes also exist, such as the HEES Wales scheme launched in 2000; it provides grants for heating and insulation improvements for owner-occupiers and for tenants.

The CRC Energy Efficiency Scheme (formerly known as the Carbon Reduction Commitment), which started in 2010, aims to improve energy efficiency and cut emissions in large public and private sector organisations. The scheme puts a price on carbon emissions from energy use, incentivising participants to make savings on energy bills through improved energy efficiency. In CRC, organisations buy allowances equal to their annual emissions at a fixed price. In 2014 the government simplified the scheme, and incentivised the uptake of onsite renewable self-supplied electricity.

Additionally, the government approved funding of GBP900,000 (USD1.41m) in 2013-2014 to fund the creation of the Big Energy Saving Network, whereby energy advisers help consumers to reduce their energy costs by switching energy suppliers and taking advantage of energy efficiency offers. The government launched the 2014-2015 Big Energy Saving Network in late 2013, with £1m in funding.

In 2013 the government launched a consultation on the Energy Savings Opportunity Scheme (ESOS) to help large enterprises to identify cost-effective energy efficiency measures. The government is keen to go further to capture greater energy efficiency and published “The Energy Efficiency Opportunity in the UK” in 2012, outlining areas for further work in this area, building on the EU’s Energy Efficiency Directive and existing domestic policies.

REDD+ and LULUCF

Forestry, the largest source of carbon sequestration, is a devolved matter. That is, only English forests are managed by the national government. Elsewhere responsibility rests with the devolved governments of Scotland, Wales and Northern Ireland, each of which has adopted targets and incentive schemes to increase forest cover. Scotland’s Rural Development Programme also includes provisions on peatland restoration. For England, targets on forest cover are contained in the 2013 Government Forestry and Woodland Policy Statement. The main UK-wide policy is the UK Woodland Carbon Code, a voluntary scheme established in 2011.

Internationally, the UK is supporting REDD+ financially as part of its broader commitment to international climate finance through the International Climate Fund.

Transportation

To meet the UK’s carbon budgets, the government supports the deployment of ultra-low emission vehicles (ULEVs). By December 2014 over 7,000 charging points had been provided, with another 5,000 charging points provided nationally by the private sector as of June 2013. The Plug-in-Car Grant Scheme offers a grant of 25% of the vehicle price, up to a value of GBP5,000 – USD 7,834) while the Plug-in-Van Grant Scheme offers a grant of 20% of the vehicle price, up to a value of GBP8,000 (USD12,535). By September 2014 there were over 17,000 grant-funded ULEVs in the UK.

The GBP5,000 car grant incentive will continue until at least 50,000 cars have been sold or until 2017 (whichever is sooner), to be followed by annual reviews. The scope of the Plug-in-Van Grant Scheme may be broadened due to low uptake. The government will also make GBP35m (USD54.8m) available to 2 to 4 cities that are supporting ULEV adoption, GBP20m (USD31m) to incentives local authorities to support the adoption of ULEV taxi fleets, GBP30m (USD47m) to support the expansion of ULEV buses, and GBP32m (USD50m) for expanding charging infrastructure.

Adaptation
The framework for adaptation is contained in the 2008 Climate Change Act. The Act established an Adaptation Sub-Committee to the statutory Committee on Climate Change, made up of experts from the fields of climate change, science and economics, which advises the government on national adaptation matters.

The Act also requires periodic Climate Change Risk Assessments (CCRAs) the first of which was published in 2012. The report assessed the main risks and opportunities facing the UK over the 80 subsequent years, and sets out the main priorities for adaptation. The assessment distilled approximately 700 potential risks down to more than 100 for detailed review and it is due to be repeated every five years.

In 2013 the UK launched its National Adaptation Programme (NAP), a rolling process that formulates the government’s response to the risks identified in the CCRA. The NAP looks at the built environment; infrastructure; healthy and resilient communities; agriculture and forestry; natural environment; business and local government. The NAP is due to be repeated every five years, and the independent Adaptation Sub-Committee is responsible for assessing implementation.

The government has asked organisations primarily in the energy, transport and water sectors to report on the current and future predicted impacts of climate change on their organisations, and on their proposals for adapting to climate change. A first round of reporting was completed in 2012, with over 100 organisations reporting, and a second round of voluntary reporting commenced in 2013 and is due to finish in 2016.

The Water Act 2014, while not explicitly motivated by climate change issues, contains measures that contribute to climate change adaptation. These include measures to increasing resilience of water supplies to natural hazards such as droughts and floods and bringing forward measures to address the availability and affordability of insurance for households at high flood risk. The Act allows for the government to establish regulations that would require insurers to provide coverage against risks arising from flooding.