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Briefing note (August 2011)
Climate change policy in the United Kingdom
Overview
The Grantham Research Institute for Climate Change and the Environment and the Centre
for Climate Change Economics and Policy have published a policy paper, originally
commissioned as a working paper by the Organisation for Economic Cooperation and
Development, which evaluates UK climate change policy and its impact on domestic
greenhouse gas emissions. The key findings and recommendations are summarised below.
UK climate change policy performance and impact
- The UK has a comprehensive set of climate change policies in place and is likely to
meet comfortably its near-term domestic greenhouse gas emission reduction
targets and targets under the Kyoto Protocol, outperforming many other OECD
countries.
- However, a step change in the pace of emission reductions is required for the UK
to meet medium and long-term emission targets.
- Some of the UK’s success in reducing emissions is due to one-off events including
the ‘dash for gas’ in the 1990s and economic downturn from 2007.
- UK public spending on R&D on clean energy is at the minimum acceptable level
and has lagged behind several other major OECD countries.
- The effective price of carbon varies across sectors of the economy and should be
harmonised to achieve better cost efficiency. The unevenness in effective prices
partly reflects the way policies overlap and means that some consumers and
businesses pay more than they should relative to their carbon footprint, while
others pay less.
- The uneven price of carbon also distorts relative prices of goods and services. This
threatens to undermine public acceptance of future changes to climate policies
because essential attempts to correct distortions could be perceived as unfair.
- Policies to help the UK adapt to climate impacts are developing in the right
direction, but further work is needed.
Recommendations
- The Government should continue to seek a higher, more consistent, less volatile
carbon price at the international level through tighter EU emission quotas (EU ETS)
and the adoption of a binding 30% EU emissions reduction target by 2020.
- The Government should assess more thoroughly how policies interact and overlap,
so that the effective carbon price becomes more uniform. Specifically, it should:
o Adjust the Climate Change Levy (CCL) and hydrocarbon fuel duties to
reflect more closely carbon content and the content of other pollutants.
o Merge the CCL and the CRC Energy Efficiency Scheme and stop making
Climate Change Agreements which reduce the implied carbon tax rate.
o Raise the VAT rate on domestic energy use over time from 5% to the
standard rate of 20% to promote consistency in climate change policies