In its first progress report 'Meeting Carbon Budgets – the need for a step change' the Committee on Climate Change calls for a 'fundamental review' of energy and carbon markets, and a rapid acceleration in consents and funding if the UK’s Carbon Budgets are to be met.

The Report raises serious doubts as to the adequacy of the current regulatory and fiscal measures to achieve the Government’s own targets: "Progress in reducing emissions in the five years before the first budget period, both overall and in most sectors, was far slower than now required to meet budget commitments". Current market rules should be reviewed "to mitigate risks that investment continues to flow predominantly to conventional fossil fuel generation". The Report recommends reform of current energy efficiency measures and outlines the scope for emissions reductions through road pricing, increasing the efficiency of the transport system and an integrated approach to land use planning.  And the Committee’s overall conclusion: "a step change in the pace of reduction is essential".

Background

The Committee on Climate Change, established under the Climate Change Act 2008, is responsible for advising the Government on the five yearly carbon budgets required to achieve carbon emissions in the year 2050 which are 80% lower than the level in 1990. It is obliged to report annually on progress made towards meeting the budgets and the overall target, to identify any further progress needed and to indicate whether the budgets and the overall target are likely to be met.

In May 2009, the Government adopted the carbon budgets recommended by the Committee for the periods 2008 to 2022. The Committee released its first progress report on 12 October: http://hmccc.s3.amazonaws.com/21667%20CCC%20Report%20AW%20WEB.pdf. It will release a further report covering aviation later in the year.

Recognising that its ability to assess progress towards achieving carbon budgets, as well as the long term target was hampered by the absence of verified emissions figures for 2008 as well as distortions produced by the recession, the Committee concentrated on defining the framework for further reports; establishing a series of indicators of likely levels of future emissions, including "implementation indicators"; key policy milestones; and high level policy design required to establish appropriate detailed measures.

The Climate Change Act 2008 imposes duties on the Secretary of State to ensure that the 2050 target is realised and to prepare such proposals and policies as he considers will enable the carbon budgets to be met. He is also obliged to report to Parliament on his response to reports from the Committee; the first such response being due in January 2010. In view of the fact that by and large the Climate Change Act 2008 commanded all-party support, the Committee’s reports can be expected to be highly influential in the development of future energy policy.

Extracts from the Morgan Cole summary of the Committee on Climate Change interim report which, are relevant to the property sector, are set out below:-

Commercial Property

The Carbon Reduction Commitment (now renamed the CRC Energy Efficiency Scheme) is reserved for later scrutiny.  But, on the basis that Government and local authorities "cannot be credible leading a programme to reduce emissions without cutting their own emissions", the Committee considers, with an optimism which, given the state of public finances may be somewhat disingenuous, that "all cost-effective emissions reduction potential (e.g. heating controls and energy efficient boilers) in central and local government buildings and public sector buildings covered by the CRC should be realised by 2018". 

The Committee criticises the lack of a policy framework for small and medium enterprises (SMEs) which are currently unaffected by direct emissions caps, and suggests a range of measures such as Display Energy Certificates (which show the actual energy use of buildings and associated CO2 emissions on an annual basis) for all non-residential buildings; a requirement for a minimum Energy Performance Certificate (EPC) rating on the sale or letting of non-residential property; and linking business rates to EPC ratings. The Committee also advocates increased financial support for investment in energy efficiency - interest-free loans, for example.

Domestic Property

According to the Committee, current energy efficiency policy for the residential sector "is not well designed to address the range of barriers to energy efficiency improvement".  Research commissioned by the Committee suggests that less than half of emissions reduction potential through energy efficiency improvement would be achieved if the Carbon Emissions Reduction Target (CERT), a mechanism which requires energy suppliers to promote energy efficiency improvements in the sector, was extended until 2022.

In its Heat and Energy Strategy Consultation published earlier this year, the Government outlined proposals to replace CERT with a scheme that involves consumers taking long-term loans to finance the up-front costs of energy efficiency improvements, rather than these costs being spread across the customer base of energy companies, perhaps with loans being attached to the property. However, the Committee concludes that these proposals fail to meet one of the main criteria for effective policy, namely strengthening financial incentives through subsidies: a number of key measures (for example solid wall insulation) would not result in a net cost-saving in the short to medium-term even with low cost long-term finance; even where net savings could be demonstrated, homeowners and commercial landlords are likely to be unwilling to take on long-term loans for energy efficiency. The Committee advocates retention of some form of financial support under the new arrangements, both in general and specifically targeted at the fuel poor, in order to provide adequate uptake incentives.

Planning

The Committee calls for a new planning strategy to ensure that land use planning decisions fully reflect implications for transport emissions, so as to prioritise urban regeneration over new out-of-town settlements, public transport infrastructure and the development of infrastructure to support electric cars.

For more information, please contact Paul Brennan, Head of our Energy and Environment Team.