Whichever party wins the next general election, the Climate Change Act - and its challenging emissions targets - will be staying. So, despite minimal impact from Copenhagen, UK businesses face a challenging future, says Paul Maryan
The Copenhagen summit had been billed as an event that would lead to massive international collaboration to cut carbon emissions. What we got was an outcome described by Ed Miliband as “the most chaotic show on Earth”, with none of the hoped-for agreements reached.
So where does that leave us? More importantly, can we now breathe a sigh of relief that potentially costly new legislation designed to reduce our carbon emissions will be delayed or even avoided?
In truth, the UK was only ever going to see minimal impacts from Copenhagen anyway. This is because we already have the Climate Change Act on the statute books, with legally binding reductions in carbon emissions in place. What’s more, these targets of 34% reductions relative to 1990 by 2022 and 50% by 2050, require rates of decarbonisation far higher than those ever achieved by any large economy to date. So, while a successful Copenhagen outcome could have brought other countries (notably the US and China) into line with the strong stance that our government has already taken on climate change, UK plc would have remained
The issue here, of course, is that while the Government has set this challenge, it will be us who need to deliver the desired outcomes, spurred on no doubt by increasingly stringent legislation designed to guarantee that government targets are met.
What is different post-Copenhagen is that the Government will now face a healthy dose of scepticism in the short term for any new measures that it might impose.
So, against this background, what might we expect to see by way of measures to reduce carbon emissions in the short to medium term and more importantly, what impact might these have on business in the UK?
The first thing to say is that whatever the political colour or make-up of the next government, the Climate Change Act will be staying along with its challenging targets. Despite the fact that the next parliament will take us to within seven years of the point at which we will have had to have delivered a 34% reduction in carbon emissions, no party will want to be seen to be withdrawing support for what has been called the “fight against climate change” – irrespective of the Copenhagen debacle.
Indeed, in the recent past incoming governments have wanted to “out-green” the departing regime, so if anything, more activity not less can be expected in this area in the future.
Exactly what the Government might have in store for us can only be conjecture at this stage, but thinking logically, modifying existing legislation will provide some soft targets and quick wins for incoming ministers.
Things to look out for are therefore extensions of the Climate Change Agreements (CCA), beyond the current governments plans to modify this scheme and which to some outside observers still look a little tame, especially in light of new approaches such as the Carbon Reduction Commitment Energy Efficiency Scheme
(CRC). It is also widely understood that given the current low cost of carbon in this market, the best commercial option for many organisations under the CCA is
often to buy carbon rather than invest in energy efficiency. This is certainly not the intended outcome of the scheme at all and thus a potential prime target for
In addition, it is likely that the CCA might also be given a little more spice by the addition of the same emphasis on league table position as is being proposed under the CRC, with the threat of public sector contracts only going to better performers.
Carbon Reduction Commitment
Talking of the CRC, this has actually had a far more positive impact than the Government had originally hoped as it is genuinely leading to commercially beneficial behaviour change in many affected organisations. It is also the ideal scheme for the cash-strapped Government, being entirely self-funding and providing no burden on the taxpayer. While not cashgenerative as a tax would be, it nevertheless will be unaffected by any slimming down of the Civil Service.
On this basis, what chance is there of the current scheme being extended in scope? Better than evens I would say. This means that those organisations which are currently only disclosing their emissions but who are not formally in the scheme had better plan on their early entry. As for everyone else, I suspect that it might be prudent to assume that all organisations (including SMEs), irrespective of the magnitude of their energy consumption, will be part of the CRC within five years.
Looking further ahead, such has been the success of the energy efficiency version of the CRC, might we expect this model to be extended into other sectors? How about a CRC Road Transport Scheme that sets carbon limits on the transportation of goods or even people?
This is a distinct possibility not least as evidence from the energy efficiency version of the CRC is that it does lead to direct cost savings by driving the implementation of new approaches. How likely is this?
Well, it’s hard to tell, but I suspect that if the Energy Efficiency CRC is expanded in its current form a natural progression could be to simply include and not exclude transport fuel within the scope. Given this simplicity it might be another one of those easy quick-wins beloved of politicians and Civil Servants alike and as such it can’t be ruled out.
However, we must be clear. Cap-andtrade based schemes like the CRC will always create winners and losers as an inevitable consequence of the way that the scheme works. This will create significant market pressure to be a winner even in the public sector where local council taxpayers will demand better performance as a way of avoiding higher taxation.
So, irrespective of the outcome of Copenhagen, in the UK this spells a clear message for all of us that energy efficiency can make the difference between business success and business failure in the coming decades.
Another target for carbon reducing green taxes is likely to include the Landfill Tax Levy where the annual escalator is now looking tame next to key EU targets for landfill diversion, especially in areas such as food waste.
Strangely, in the last Budget, landfill tax levy on inert and aggregate materials was frozen in light of the downturn despite clear evidence that in most cases re-use provides a more cost effective option for this material than landfilling it.
Surely this must identify the whole area as a target for more taxation by government, with even current ministers planning to consult on how to modernise landfill tax legislation in the long-term.
To be clear, however, all of the above is fine but if we are to meet the carbon emission reduction targets that have been set, then renewable energy is an essential element.
This means that government will have to put more pressure on all of us to adopt renewables, be that from large scale bespoke development or smaller scale but more specific on site schemes at the level of the local facility.
To support this, the Government has existing legislation in this area in the form of the Renewables Obligation (RO).
Linked to this and looking further ahead is the provision within the Energy Act 2008 to provide broad enabling powers for the introduction of Feed-In Tariffs (FITs) for small-scale low-carbon electricity generation, up to a maximum limit of five megawatts (MW) capacity – or 50 kilowatts (KW) in the case of fossil fuelled CHP.
If the CRC, Landfill Tax Levy and similar spell bad news for some, renewable energy generation is set to become increasingly lucrative in its own right and more so where it helps to offset the ravages of the CRC. Anyone with a site suitable for wind generation, or a waste or biomass feedstock stream suitable for energy generation should now be planning to exploit this resource, especially as planning regulations are easing and the value of the energy produced is increasing.
Issues around energy security of supply in a country with an ageing fleet of coal fired generators, dwindling oil reserves and an increasing dependence on gas for
electricity and heat production can only add to the value of renewable energy which is already supported through the RO on the large scale and soon on the small scale as well through any FIT.
So, to answer the question as to whether Copenhagen was a climate change cop-out or business as usual, the answer appears clear. In the UK we set out our climate change stall in 2008 with the Climate Change Act. The issue here is how we will meet the targets that have been set for us.
Inherent in all this is the ongoing challenge to make sure that we are winners in the CRC game and that we exploit any renewable energy opportunities that we may have.
This is all going to become pretty much business as usual for all of us going forward, irrespective of Copenhagen or whatever comes after it for that matter.
Paul Maryan is director of sustainability at Hyder Environment
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