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CCC concludes that there is no basis to change the fourth carbon budget – 11 December 2013

The Committee on Climate Change (CCC) today advised that there has been no change in the circumstances upon which the fourth carbon budget (2023 – 2027) was originally set in 2011 that would justify a lowering of ambition. Therefore the budget should not and cannot be changed under the terms of the Climate Change Act. If anything, changed circumstances point towards a tightening of the budget. However, the Committee advises that it would be premature to do so until uncertainties at the EU level have been resolved.

The CCC’s advice comes as part of an agreement with the Government that the budget would be reviewed in 2014. The Climate Change Act (2008) sets out the basis for the review: it must be based on advice from the CCC and only if there has been significant change in circumstances, demonstrated by evidence and analysis, can the budget be changed.

The report compares a strategy of reducing emissions through the 2020s with one where action is delayed until the 2030s. It shows that there are significant savings associated with early action (e.g. over £100 billion in present value terms under assumptions that the gas price remains at the current level, with much higher savings in a world with a high gas price). The only situation where early action would be more costly is if there were to be a combination of a low carbon price and low fossil fuel prices. This would be counter to UN ambition and to expectations for the oil and gas markets.

The report considers impacts from meeting the budget, concluding that these are small and manageable.

  • Affordability. Low-carbon policies have had limited impact on energy bills to date. In future, these are expected to add around £100 to residential bills in 2020. Beyond that, increases associated with the fourth carbon budget are very small (e.g. up to £20 from 2020 to 2030).
  • Fuel poverty. Low-carbon policies are expected to have a broadly neutral impact on fuel poverty. Further action by the Government is required to reduce currently high levels of fuel poverty, and to address impacts for those households reliant on electricity for heating.
  • Competitiveness. There is no evidence of significant industry off-shoring to date in response to low-carbon policies. Risks of future off-shoring in response to rising electricity prices are mitigated under current Government policies, which exempt electricity intensive companies from costs of power sector decarbonisation. The report also identifies broader benefits associated with meeting the fourth carbon budget, including: improved energy security, improved air quality and reduced noise pollution.

Lord Deben, Chairman of the CCC said: “This report shows the clear economic benefits of acting to cut emissions through the 2020s. This provides insurance against the increased costs and risks of climate-related damage and rising energy bills that would result from an alternative approach to reduce and delay action.  

While it is essential to understand affordability and competitiveness impacts associated with the budget, the evidence suggests that these are relatively small and manageable.   The Government should confirm the budget as a matter of urgency. This would remove the current uncertainly and poor investment climate. It would provide a boost to the wide range of investors who stand ready to invest in low-carbon technologies.”  

This report follows on from Part One of our advice which was published in November 2013, covering climate science, international action, and developments in the EU. That report concluded that the fourth carbon budget embodies the minimum UK contribution to global emissions reductions required to limit risks of very dangerous climate change; that the UK is not acting alone; and that the budget reflects the low end of the range of ambition currently being discussed in Europe.