Committee on Climate Change

The Committee has identified a number of areas where new policies are required to ensure that carbon budgets are met and to lay foundations for further progress:

New policies to deliver the first three budgets:

• Progress in reducing emissions during the first budget period has so far primarily reflected the recessionary effect. This is confirmed in the June 2011 progress report, which notes that there has been a downward shift in emissions due to the recession, but that there is no evidence of a change in the underlying pace of emissions reduction. It remains essential to achieve the step change of  pace previously called for in both the October 2009 and June 2010 progress reports. New policies to drive the step change include approaches to energy efficiency improvement in residential and non-residential buildings, promotion of consumer behaviour change in transport through Smarter Choices type measures, and more widespread use of carbon-efficient practices on farms.

Policies to lay the foundations for subsequent budgets:

• Electricity market reform. Our analysis suggests the need to decarbonise the power sector through the 2020s by adding 30-40GW of low-carbon plant. This would reduce average emissions from current levels around 500 gCO₂/kWh to around 50 gCO₂/kWh by 2030. Existing electricity market arrangements are not well designed to ensure this progress occurs in a cost-effective fashion. The Government is committed to reform and we have recommended that new arrangements based on long-term contracts (e.g. Contracts for Differences) should be announced in the forthcoming (July 2011) White Paper. 
• Carbon price underpin. Given carbon price volatility and the current low carbon price, a carbon price underpin would complement electricity market reforms. It could also strengthen incentives for investment in low-carbon technologies in other sectors, subject to competitiveness and affordability concerns being addressed. The Government has announced that an underpin will be implemented through reform of the Climate Change Levy. It has announced a broadly appropriate trajectory for the underpin with a target carbon price to reach £30/tCO₂ in 2020 , rising to £70/tCO₂ in 2030.
• Funding and policies to support development of technologies. Key technologies which should be demonstrated now for deployment in the 2020s include CCS in power generation and industry and electric heat pumps. Comprehensive programmes in each of these areas should be developed as a matter of urgency to ensure timely disbursement of funds committed in the 2010 Spending Review, with further funding committed as appropriate and as fiscal constraints ease.
• Development of a market for electric cars and vans. To allow widespread roll-out of electric vehicles in the 2020s, it will be necessary to promote the development of the market now - to bring down costs, build consumer acceptance and develop the infrastructure. The Government is providing £400 million funding, including a subsidy of £5,000 towards low-carbon vehicle purchase costs. This will require extension.
• Further new policies subject to the resolution of uncertainties. There are a number of promising but uncertain options for cutting emissions in the 2020s. These include district heating, and abatement options in agriculture and industry. The evidence base should be developed in these areas, with new policies introduced as appropriate.