On economic opportunity: “It would be a real failure to grasp the opportunities, the economic and the commercial opportunities for the future, if we don’t put in place policies at UK level that drive forward the low-carbon economy.”
On the need for carbon capture and storage: “You really need to virtually completely decarbonise your transport sector and completely decarbonise your heating sectors, in order to deliver on the 2050 ambition, without being able to benefit from the CCS.”
On government departments’ attitude to climate: “The economy in 2050 will not be the same as it was in 1950, and the danger is that they’re delivering against an old model, and don’t grasp the opportunities that tackling climate change and delivering against the carbon budgets will offer.”
On fracking: “There’s a very real question about after those mid-2030 periods, does that mean we then have to dismantle a [shale gas] sector that’s been created…or do things like carbon capture and storage come on-stream such that the sector can continue.”
CB: Thanks very much, Matthew. I’d like to start with a question about the letter you sent to Amber Rudd earlier this week. In that letter you said the fifth carbon budget remains sufficient, despite acknowledging that Paris has raised the game at a global level. Could you explain why that is?
MB: So, I think there’s no doubt that the ambition coming out of Paris is more than we anticipated going into it. The question for us then breaks down into three parts of what are the implications for the UK. The ambition in Paris covered the post-2050 period, the idea that the world wants to be carbon neutral post-2050. It covered a sense of where we want to be around 2050, to be consistent with the below 2C, the 1.5C, and that has potential implications for the UK’s path towards 2050. We looked at each of those three components, and we may very well want to say more about the implications post-2050 and for 2050 itself. But our feeling was that the fifth carbon budget, which, the original advice being the 57% reduction on 1990 levels, that that still kept in play the level of ambition that Paris set out for 2050.
CB: Some people have suggested that there’s a little bit of a playoff between trying to secure the action we need to meet the fourth and fifth carbon budget and raising ambition. Was that sort of thinking a consideration?
MB: I think both of those things are equally important. I think the government has been admirably clear about its intention to meet the carbon budgets that exist currently, including the fourth carbon budget. I think legislating the fifth carbon budget at the level we have suggested is the only thing that is consistent with the Climate Change Act, and indeed the Paris agreement. You need to set those targets in order to provide the direction. But that doesn’t then change the fact that you need to actually put policies in place that will be consistent with meeting those targets and that’s where we need a lot more clarity coming from the government before the end of the year. The fact of doing one of those things, of being clear about the desire to meet the targets, doesn’t take away from the need to put policies in place. We signalled in the letter as well, the types of policies we think need to be forthcoming in order for the power sector, transport, heat to meet the level required under the fourth and fifth carbon budgets.
MB: I don’t know that I have any expectations about the process right now. I think, if anything, what was agreed in Paris should help, that should provide greater clarity that the UK is acting very much in concert with the rest of the world. Part of the debate around the fourth carbon budget and the fourth carbon budget review was: is the UK going too fast?; is it going faster than other countries around the world will be going? I think the clear message out of Paris is that everybody is agreed on the ambition and needs to progress to that ambition. There are very clear mechanisms in place around the world for ratcheting up, and being transparent about progress to that ambition, and in that sense there should be much less question about the appropriate level of ambition for the UK. Indeed coming back to your question about policies, and what policies need to deliver, in that case it would be a real failure to grasp the opportunities, the economic and the commercial opportunities for the future, if we don’t put in place policies at UK level that drive forward the low-carbon economy and the ability to meet the carbon budgets.
CB: You mentioned already that you would revisit the 80% by 2050 target, and also look at possible longer-term climate goals. Would you say – looking at the Paris ambition to reach net-zero in the second half of the century – that you’re going to be thinking about what year the UK should be reaching net-zero?
MB: I think we have to understand what the implications are for the UK. I think that includes that post-2050 period. I think it’s too early to say whether we want to come down on a year for when the UK should achieve the new target. But there’s no question that Paris has set that net-zero ambition globally. The UK has to play its part in that, and the work that we’re doing right now is to try to understand what paths are consistent with that kind of ambition, and, therefore, what are the implications both in terms of targets for the UK, and also in terms of timing of that target.
CB: So, previously, the committee’s work has been based around a “likely” chance of staying below 2C. Is that the sort of assumption you’ll need to change in looking at longer-term climate targets?
MB: That’s the kind of thing that needs to change, because that assumption was based on the pre-Paris world, and the post-Paris world is now an ambition to get well below 2C, and trying to pursue efforts around 1.5C. Importantly also, post-2050 carbon neutral target and processes that have been set up. We need to understand what that means in terms of global action. As you will be aware there are a number of initiatives that have been set off as a consequence of Paris. The IPCC [Intergovernmental Panel on Climate Change] has been asked to look at what pathways to 1.5C look like. The European Union has set up a process, the first part of which reports in March, about what the implications are for the EU. It will have subsequent reporting dates, I’m sure, after that. All of that has to feed into our thinking as well, about given these types of global actions, what’s appropriate for the UK. So, we need to understand what everybody else is doing and the evidence base that is emerging around the new ambition of well below 2C and pursuing the 1.5, and then think about the implications for the UK.
CB: So, you mentioned the EU and your letter this week did say that the EU 2030 target is not consistent with the Paris ambition. What kind of EU target do you think would be consistent and what might that mean for the UK?
MB: Well, the types of numbers that we’ve looked at in the past – and we haven’t revisited them, we haven’t had time to revisit them since Paris – the types of numbers that we’ve looked at in the past, and certainly the previous UK governments have suggested, are around 50% emissions reductions from the EU, as opposed to the 40% reduction the EU went in to Paris with. I’m sure the EU will be revisiting that and examining that. Certainly in the context of the letter that we sent, we felt that the fifth carbon budget advice, at the 57% cut for the UK, would still be consistent with the EU increasing its ambition to those types of numbers. As I say, there’s still work to be done to understand whether, post-Paris, 50% for the EU is still the right number and others are doing that work. If you’re in that kind of territory then we still think the fifth carbon budget for the UK is consistent with that, as well as being consistent with the domestic legislation that we have. So, it’s always important to remember that the international developments are an important component, but they’re only one component of the factors that the committee has to examine. The committee is ultimately bound by what is purely a domestic piece of legislation, which is the Climate Change Act, and the range of considerations that we have to take into account, not least of which is the very explicit 80% target for the UK in 2050.
CB: I wanted to move on to talk about UK policy. There have been quite a lot of changes to energy and climate policy since the last election. Would you say those have taken the UK closer to meeting its carbon targets or have they moved it further away?
MB: I think it’s still very much in the balance. I think that the range of policies [inaudible] created a lot more uncertainty than existed before, and the committee sent a letter to that effect to the secretary of state last year. The government, both in response to the progress we tabled to parliament in June last year and since then, have said that they are going to set out in detail by the end of this year, which sets of policies are going, in their view, to meet the fourth carbon budget and the fifth carbon budget. We had a speech from the secretary of state, the so-called reset speech, which provided a little bit of detail, but still was far short of what’s needed in order to understand how the fourth and the fifth carbon budgets will be met. The benchmark that the committee will use is what [new policy] gets produced by the end of this year and is that consistent with meeting the fourth and the fifth carbon budget as it gets legislated. That’s very much in the balance right now. You will have seen in the letter that we sent the other day that there are issues like carbon capture and storage, and like progress in the power sector and on low carbon heat that need to be picked up, given where the policy sits currently. But we have… the government has between now and the end of the year to be clear about how it’s going to do that consistent with the carbon budgets and the current level of 2050 ambition.
Carbon Capture and Storage: Where factories or power stations use technology to capture some of their CO2 and store it underground, reducing emissions.
Carbon Capture and Storage: Where factories or power stations use technology to capture some of their CO2 and store it underground, reducing emissions. Read More
CB: You mentioned carbon capture and storage. Just to pick on that specifically, do you think it was a mistake to cancel the £1bn commercialisation scheme?
MB: Committee’s always been very clear that carbon capture and storage is an integral part of meeting the 2050 target, and it’s an integral part because it opens up a range of options. Generally, as you know, we’re relatively agnostic about different technologies and we’re very clear that the job — our job, and the job of successive governments — is to meet the carbon budgets in the most cost-effective way. There are a range of different ways in which that can be done. The thing with carbon capture and storage is that it opens up a whole range of options, whether it is the continued ability to use gas through the 2030s and the 2040s, whether it is the continued ability of the UK to host heavy industry, energy intensive and carbon intensive industry, whether it is the continued ability to continue to heat, using gas, or to in fact use biomass consistently going forward and how that contributes to carbon budgets. CCS provides an option on all of these things. There’s no guarantee that CCS will actually deliver, but because of its importance in guaranteeing the options, it’s important that we experiment with it, that we do the innovation, the research and the development, in order to see whether CCS can deliver. The importance of the two projects that were still going through the competition a few months ago, is that they were the vehicle by which we were going to understand whether carbon capture and storage can deliver at an acceptable level of cost, to help the UK and indeed the wider world, deliver on its carbon objectives. We don’t have that now, and now the government needs to set out what will be the vehicles and the mechanisms in order to understand whether CCS can deliver and indeed how CCS can deliver.
CB: So, when David Cameron was asked about CCS in front of the liaison committee, he talked about the cost, as you mentioned. Do you think he misunderstood what the point of those projects were, because they are going to be costly for the energy they generate, but they were part of programme to test whether costs can be brought down?
MB: From our point of view, the purpose of pushing forward with the CCS is precisely to follow a similar kind of path to the path we’ve seen, for example, with offshore wind, which is that a combination of innovation, research and development and deployment, helps you to learn and to get the technological innovation that brings down the cost over time, and we’ve clearly seen steadily decreasing costs on offshore wind, and we hope that that continues. The purpose of the CCS programme was precisely the same thing. There’s a range of costs that you want to drive down over time. The first set of projects are going to be more expensive and subsequent ones should be less. There is a key difference between offshore wind and similar things, and CCS, which is the nature of the cost reductions. We expect lots of the cost reduction in CCS to come from, effectively, economies of scale. You’re putting infrastructure into the ground and into the offshore, and the more you can use that infrastructure, the more the cost falls. So, a big part of the cost reductions are economies of scale, as opposed to learning and innovation and the types of things that are driving down the costs in offshore wind and battery technology. The only way to get those economies of scale, is to actually put the infrastructure in place in the UK. You don’t get those by borrowing learning from other countries overseas. That’s why we think it is important that the UK acts on carbon capture and storage and that there’s only a certain benefit that you get from other people acting, and the UK piggybacking off that. There will be some benefit, there will be learning that comes from the capture side of things, and how to do that more efficiently and effectively, but a large part of driving down that cost, which is very important, which the prime minister alluded to, a large part of driving down that cost is based on economies of scale that you get through putting the infrastructure in place in the UK.
CB: Do you think that the UK can meet its fourth, fifth and subsequent carbon budgets, without CCS?
MB: I certainly think that it can meet the fourth and the fifth carbon budget without CCS, and in our scenarios, in our modelling and in the recommendations we made around the fourth and the fifth carbon budgets, CCS was playing a relatively small role, and there were always scenarios that didn’t have CCS that showed it was achievable and affordable to meet those carbon budgets. What does become clear, though, is what happens after the fifth carbon budget, so from the mid-2030s onwards. From the mid-2030s onwards, it becomes very expensive, based on the current evidence base that we have, very expensive to meet subsequent carbon budgets and the 2050 target, without CCS. So, for example, if you don’t have CCS, then you really need to virtually completely decarbonise your transport sector and completely decarbonise your heating sectors, in order to deliver on the 2050 ambition, without being able to benefit from the CCS. You get into very very expensive things, that might have to be done to reduce emissions by that amount. It’s always, as you’d imagine, the last 10, 15% of emissions are the very expensive ones, because they’re the ones that have been left to the end in order to eliminate. The 2050 target, the 80% target, allowed every sector to keep that last 10-15% of emissions, and therefore not do the really really expensive things. But if you don’t have CCS then you’re going to have to ask some of the sectors, actually, to figure out how to eliminate that last incremental bit of emissions, and that becomes very expensive. Those are the options we’re left with if CCS doesn’t [inaudible].
CB: So would you say it’s an example of, what’s the expression, penny-wise, pound foolish?
MB: It’s an example of the very difficult things and the real opportunities that climate change and tackling climate change provide. Tackling climate change requires thinking over a long time period, and there’s always risk, for any government, and always a temptation for any government, to think about very short time periods and the immediate, very real, political and other pressures of the current day. If we’re going to tackle climate change in a cost-effective way, and make sure that both ourselves, and our children, don’t have to pay large amounts of money, but also have the opportunities that tackling climate change will bring, then we have to think over a longer period of time. CCS is an example of a technology, as we’ve seen for other technologies, offshore wind, solar, all of these things have taken decades to develop. It feels like solar is a story that’s happened over the last two or three years, but it’s taken decades to get solar to where it is, it’s taken decades to get offshore wind to where it is, and it will take thinking over the course of decades to get CCS to where we want it to be. You need that kind of thinking over those types of timescales, in order for the UK to grasp the opportunities, that tackling climate change will offer. The opportunities for UK industry, the opportunities for exports and the opportunities to play our part in making sure that we reach the ambition that came out of Paris.
Levy Control Framework: A nominal cap on the support for low-carbon energy which is paid via electricity bills. The cap has been set at £7.6bn in 2020/21. Subsidies may be allowed to temporarily exceed the cap by up to 20% as a result of external factors, such as wholesale energy price fluctuations. Above this headroom, the Department for Energy and Climate Change (DECC) must agree plans to control spending with the Treasury.Close
Levy Control Framework: A nominal cap on the support for low-carbon energy which is paid via electricity bills. The cap has been set at £7.6bn in 2020/21. Subsidies may be allowed to temporarily exceed the… Read More
CB: I want to come back to the UK policy changes that have happened and a lot of those changes have been made because the government says its levy control framework cap for low-carbon support is going to be over-budget later this decade. What do the committee’s calculations show on this?
MB: So I think that’s a very important point. As you say, the debate around the levy control framework, in part, got polarised between debate about are we cutting back on renewables and low-carbon, versus, are we just trying to meet the level of the budget that we always thought was required in order to deliver on the carbon budgets. We’re very clear that the levy control framework needs to be around that £7.5-8bn range in 2020, in order to be consistent with meeting the carbon budgets. The actions that the government has taken, as far as we can understand them, are consistent with meeting that level of ambition. The real question then is what do you put in place post-2020. The real question for the levy control framework and for the government is, what are they going to put in place post-2020 that ensures we continue to support low-carbon generation at a level that is consistent with the carbon budgets and the 2050 target. Certainly in our progress report and other statements we’ve set out the types of levels of funding that we think that requires, funding that increases to the mid-2020s, probably to the £9-10bn range, and then falls from there onward, as the innovation starts to bring forward those technologies at lower and lower costs, and also as the existing contracts get replaced by newer contracts.
Carbon Price Floor: The UK's top-up carbon tax, applied to power stations and designed to supplement inadequate prices on EU markets. When implemented in 2013, the floor was set to rise gradually to £74/tCO2 in 2030. However, it was later frozen at £18/t until 2019/20.Close
Carbon Price Floor: The UK's top-up carbon tax, applied to power stations and designed to supplement inadequate prices on EU markets. When implemented in 2013, the floor was set to rise gradually to £74/tCO2 in… Read More
CB: Some other developments that will affect the required level of support under the levy control framework include recent low energy prices, and also the decision — which may happen in the budget — on the future of the carbon price floor. Can you say a bit about how those trends are going to affect the levy control framework in the 2020s?
MB: So, funnily enough, the thing that affects the levy control framework more than anything else is the performance of low-carbon generation. The big reason we were potentially going to be over-budget was the offshore wind and other low-carbon generators generating more than we thought and, therefore, was demanding and bringing in more government funding than had been anticipated. Actually, the biggest issue going forwards is trying to make sure that we, in a sense, continue to over-deliver on the efficiency and the performance of low-carbon generation, and making sure that the sector does that. So, I think that’s the biggest question for the levy control framework going forwards. There’s no question that as long as we don’t have a proper price of carbon, a price of carbon that reflects the climate change impacts of pollution, that the lower financial cost of energy increases the gap between where low-carbon energy is and where high-carbon sources of energy are. That will have to be met at some point in time. Part of meeting that is getting a more credible price of carbon out there, through the ETS [the EU Emissions Trading System] and through the carbon price floor, and it’s important that we continue to do both of those things. Part of meeting that will be using other mechanisms, like regulatory mechanisms to make sure, for example, that low-carbon heating systems get installed where they are cost-effective, in line with the carbon budgets, and that can be done, potentially, through developing the markets for low-carbon heat in a way that’s not directly reliant on what the price of gas or petrol is on any particular day.
CB: You mentioned low-carbon heat and, obviously, that’s a big part of the UK meeting its 2020 target from the EU, in terms of getting 15% of its energy from renewables. There was a letter leaked, sent by Amber Rudd to some of her cabinet colleagues, that suggested the UK was off-track for that target. What’s the committee’s view?
MB: So, the committee doesn’t monitor that target. The EU target is, in a sense, a separate target that was agreed by the government at EU level. The carbon budgets are distinct from that, the carbon budgets set targets, as you know, for the five-yearly periods. The third carbon budget spans that 2020 period. So far, we think that clearly we’re on-target to meet the third carbon budget period, provided that government policy continues to deliver, and that we see credible government policy coming out at the end of this year, and, as we’ve signalled, there’s a shortfall to that fourth carbon budget in that mid-2020s period. I have no doubt that, if the government meets its EU commitments, that will help it meeting the carbon budget targets, but we don’t directly monitor the EU targets.
CB: That interplay between different government departments that was highlighted by that letter, how well do you think that works in government between, say, DECC [the Department of Energy and Climate Change], the Departments for Transport and local government [Department for Communities and Local Government]?
MB: That’s really, that’s one of the things that we work on a lot. So we spend a lot of time talking to all the government departments, and trying to make sure that there’s a concerted effort across government, because the carbon budgets will only be met, as you say, with a concerted effort across government. We have good engagement will all the government departments. I think one of the things that is important is that government departments which don’t hold the primary responsibility for delivering the carbon budgets, ie all the government departments except for DECC, that they properly internalise the need to meet those carbon budgets, and to meet their contribution, within the decisions that they are primarily responsible for. So, when CLG, the Department of Communities and Local Government, is trying to deliver a very important government policy around housing, and around the need for this country to have more housing, that an integral part of how they deliver that is the carbon budgets and their contribution to the carbon budgets. And, similarly, when DEFRA [Department for Environment, Food and Rural Affairs] is trying to deliver, very real ambition around agriculture and food and farming, an integral part of that is how we do that, in line with the carbon budgets. My concern would be that decisions that are made in those departments don’t sufficiently internalise the carbon budget requirements, and instead focus very much on, this is our direct responsibility, and then you’re left with DECC trying to hold the ring on the carbon budgets, which is its primary responsibility, and not having enough buy-in from the other government departments. I think it’s important that they increasingly… and that it becomes normal in the course of regular business for government, about how, the context of, other policy objectives that we have. How do we make sure that we deliver those and take advantage of the opportunities that climate change provides. You know, they don’t know, I don’t know, nobody knows, what the economy will look like in 2050. The one thing we do know is that the economy in 2050 will not be the same as it was in 1950, and the danger is that they’re delivering against an old model, and don’t grasp the opportunities that tackling climate change and delivering against the carbon budgets will offer.
CB: So, something that’s very much related to that is the National Infrastructure Commission that’s being set up primarily by the Treasury. How are you expecting to be working with that commission and do you have a view on its remit?
MB: So, I’m expecting to be working very closely with the commission. I’ve have very good initial set of meeting with both Lord Adonis [commission chair] and the new chief executive there and the team there. As we said in our progress report in June – so long before sort of the Infrastructure Commission was proposed or set up – there’s a huge opportunity in infrastructure, for infrastructure to help to deliver the carbon budget. An opportunity that we see very directly in terms of the roll-out of infrastructure for low-emission vehicles, in terms of the roll-out of carbon capture and storage, in terms of the roll-out of the infrastructure around smart grids and smart networks, and providing proper demand-side response. There’s a real opportunity for the investment that we make and that we need to make in infrastructure to act as a catalyst to deliver the carbon budgets and the 2050 ambition and beyond that. And I think we’ll be working very closely with the infrastructure commission as it develops its programme of work and as it considers how to assess the costs and benefits of different infrastructure options in that context.
CB: So, would you like that opportunity to be reflected in a clear priority given to low carbon development for the commission?
MB: I want to make sure that that is a part of the commission’s DNA – a part of how they operate and how they think about it in the same way as I was saying before. I want to make sure it’s part of the DNA of how the Department for Communities and Local Government operates, or how DEFRA operates, or how DfT operates. But all of these decisions increasingly and particularly in light of Paris, but also in light of our own legislation, all of these decisions increasingly just need to be… it needs to be a normal course of business that incorporating action to tackle emissions as part of the decision. I’m slightly less… and maybe that’s because I come from the private sector and spent less time in government… I’m slightly less hung up with where that’s written down and how that’s written down, but I want it to be part of their day-to-day normal process of operation in how they tackle thinking about infrastructure in the case of the infrastructure commission.
CB: OK, I’d like to move onto some questions about flooding. Do you think the UK system of flood spending and preparedness and planning is adequate?
MB: So, the committee as part of the progress report that we issued set out a scorecard for the government on how it is doing adapting to all the risks that climate change bring to the UK, and in that scorecard the committee flagged the flood risk as the number one risk to the UK and indeed in the way that scorecard worked we scored all these areas against three different criteria, but we focused in some ways on two criteria, so one was, is there a plan in place? And the second was, is that plan succeeding in reducing the vulnerability to risks? And the residual flood risk to existing properties was the only area that sort of got a red flag in both of those dimensions. So, we very clearly said that the government needs to do more in order to address residual flood risk to properties. And the response that we got from the government in that context was effectively, “We feel that we’re doing enough currently.” And the committee’s view is that more will need to be done, and obviously a lot of action has now been put in train. Unfortunately, it’s a consequence of people’s lives being seriously affected over the Christmas period. A lot of action has now been put in train, and we are certainly following up very closely with that to try and make sure it delivers the kind of strategy and the kind of actions that we think are consistent with a risk that is increasing over time, due to climate change and other factors.
CB: So the government seems to have accepted that its understanding of future flood risks needs to be updated. How would you say it should go about improving that?
MB: There are a number of measures that have to be put in place, but one way of summarising them and trying to bring them together is to think that currently it’s not clear who holds the responsibility at the level of a catchment area, so the flood risk sort of occurs within the catchment area, and catchment areas don’t necessarily nicely coincide with a local authority boundary or a regional government boundary or particular bodies or institutions. It’s not clear who holds the ring at that catchment area and who can make the right trade-offs when it comes to decisions about building or flood defence, or whatever it may be, who can hold the responsibility of saying, “We’re making the right decision here when we trade off those risks.” And a big part, I think, of the thinking going forward has to be how do we make sure at that catchment area level the right costs and benefits are being taken into account when we’re deciding where to build or what defences to put in place or what measures on land use change — planting trees or soft defences, paving over things — are we making the right trade offs such that people don’t end up in the circumstances they were in over Christmas.
CB: But in terms of kind of the science of projecting future flood risks, do you think the government needs to change its approach there as well?
MB: I think we need to look into it in more detail. I don’t know and we haven’t done a lot of detailed analysis around the current sets of models that are used. There’s clearly been a question that’s been raised about are events that were previously one in 100 years, or one in 200 years, are they now one in 50 years or one in 25 years? Are the models keeping up with both climate change and other factors that change the flood risk? That’s work that still has to be done. I think that’s part of the reviews that are taking place and certainly part of the engagement that we’re having with the Environment Agency and others. But I don’t know if we have an answer to that yet, about whether those models are taking the latest evidence sufficiently into account and lots of that evidence is still our ability to model at that very disaggregated level that regional scale, that catchment scale — it just demands a lot of computing power, and it’s just only now that that’s coming online, so we are following up on that and we’re trying to understand the extent to which certainly future policies are properly informed by accurate models.
CB: According to some news reports, Lord Krebs said recently that it’s alright to continue building homes on flood plains, as long as people are made aware of the risks. Do you agree with that?
MB: Lord Krebs didn’t say that [Krebs has written to the Guardian to explain]. Lord Krebs, in response to a question which was about are there trade offs that local authorities need to make between, for example — the specific question was building on the green belt versus building on the floodplains, and is it legitimate for local authorities to make different trade offs? To which his response was, there may be circumstances where local authorities are making those trade offs. Local authorities need to make those trade offs with the clear understanding of the costs of building on the floodplain and a clear understanding of the risks and the costs that we’re building into the system going forwards if we do build on the floodplain. There may be some circumstances in which it’s appropriate to make those trade offs, and that’s for people to judge at local level. But we need to be very clear about what the costs are and the fact that by building in the floodplain we are increasing the costs to future taxpayers, not just people who haven’t been warned but ourselves in future years, of putting in place the defences that will be required given the rising level of flooding.
CB: OK, do you feel like generally the committee gets the balance right between its focus on mitigation and adaptation?
MB: I do think we get the balance right. I do think that’s an increasing area of work and research, in fact, and one of the areas we’re looking into, one of the major publications we have coming up is the UK’s climate change risk assessment, which will set out the risks to the UK from climate change – thinks we’ve been discussing, like flooding, also the risks from higher temperatures, the risks to the natural environment, to soils and to agriculture and to a whole range of economic and personal activity that people take place. It will set that out in the climate change risk assessment in July. And one of the things, that we published some of the research in the lead-up to that, that becomes clear is that there are a series of measures that will have to be taken to adapt to climate change on the order of the 2C temperature or even well below 2C temperature rise ambition that we currently have, and that will still require measures, such as various forms of flood defences which will cost money. If the world ends up at 4C, for example, because our actions on mitigation fail, then it becomes increasingly impossible to actually adapt sufficiently to the implications of temperature rises at that level. So, when you’re asking about the balance, or asking about, well, what, have we got the level right on the mitigation side, such that what we have to do with adaptation is affordable and acceptable and that people can live their lives and the natural environment can continue to perform its function. And at the kind of 2C global level and the ambition set out in Paris, it looks like there are very real actions that will have to be taken on the adaptation front, but that they are possible. If we fail to reach the Paris ambition, then it becomes increasingly sort of incredible the types of actions that will have to be taken in the future and increasingly expensive in terms of people’s lives and the disruption that will be caused.
CB: And do you think that’s the case even in the UK? Because I think often people associate those more extreme climate adaptation needs with developing countries perhaps, like Bangladesh.
MB: What we see in the UK is that the risks from climate change exacerbate the risks for example of the types of floods we saw over Christmas, and so a lot of — it’s an area of increasing research, it’s an area where we monitor the evidence base very closely to try to understand what those risks look like. One of the pieces of evidence that came out is that the types of intense rain storms that we saw over the Christmas period are made 50-75% more likely in a world that’s increased 1C above its industrial level, in other words where we are already. And, so, if we’re getting up to 1.5, and maybe up to something less than 2C, then if we’re increasing the risk of those types of rain storms then the questions we have to ask ourselves are, is that acceptable in the UK? There’s a big question about is it acceptable in Bangladesh and elsewhere in the world, but there’s also a question about whether it’s acceptable in the UK, and what types of actions at what cost will we have to take in order to combat those things. So, there are very real implications for the UK and we will set out the latest evidence on that in the climate change risk assessment in July.
CB: OK. The committee is working on something that came out of the infrastructure act, which is to look at whether fracking for shale gas in the UK and other exploitation of onshore oil and gas could be compatible with UK carbon budgets. Can you say anything about that work at this point?
MB: So, the work as you say is very much ongoing and as we’re the independent advisors to government, to parliament, we’re very much an evidence-based body, and we have to work with the evidence that’s available. And I think, frankly, one of the difficult things about shale gas is that there’s a limited about of evidence available. Most of the evidence we have comes out of the US, there are bits and pieces of evidence elsewhere, and within that context I think we have to say as much as, as far as the evidence can take us, and be very clear where the evidence currently falls short. I think where that leaves us is that in the UK under the carbon budgets there is a demand for gas through to the mid 2030s. There’s a question about where that supply for gas will come from, to the extent that there is evidence that shale gas can be produced at lower carbon costs in the UK compared to the alternative sources of gas that may be available, then it might be compatible with meeting the carbon budgets, and that’s what we’re investigating right now — can it be developed in that way? And then there’s a very real question about after those mid-2030 periods, does that mean we then have to dismantle a sector that’s been created, if it, indeed, has been created, or do things like carbon capture and storage come on-stream such that the sector can continue while not endangering the climate change commitments, and again that’s something we’re looking at now and I’m sure will feature in the advice and the recommendations that we make.
CB: Has the committee thought about what diesel generation in the capacity market might mean for the carbon budgets?
MB: We looked at it after the first round of auctions and I’m sure we’ll look at it again following what comes out of the latest round of auctions. We need to understand how many hours a year that diesel generation is likely to generate, in practice, because that’s what determines the level of emissions. But also whether the capacity auctions are providing the right signals for the type of generation that’s required. I think it’s early days for that and, as far as I understand anyway, the government’s considering the precise rules around the future capacity auctions so we’ll see what they deliver. But right now I think we need to look at in practice how many hours of those diesel generators are going to be generating and, therefore, what emissions do they generate and is that significant in the context of the carbon budgets? Over longer periods of time there’s no question that the power sector has to shift away from certainly that kind of conventional generation and as we’ve seen the government itself say, even away from coal-based generation over the next decade, and that’s wholly consistent with a very different generation mix between now and 2030.
CB: So my understanding was that those types of small diesel generators don’t necessarily have to pay carbon prices; they maybe don’t fall under the EU emissions trading scheme. Do you think that’s something the government might look at in terms of reviewing the capacity market?
MB: As we were alluding to earlier, it’s very important that everybody faces a sensible price of carbon that reflects the costs that they impose on the environment through their impacts on climate change. And the more that we can get the price of carbon to be reflected in the prices of all generation in a level playing field, in the same way as we want the costs of intermittency to be reflected in the costs of low-carbon generation that is intermittent, that everybody plays on a fair playing field whereby all forms of generation face the genuine costs of their production.
Contracts for Difference: The new subsidy scheme to support investments in low-carbon electricity generation. Schemes are paid a fixed "strike price" for each unit of electricity they produce, giving investors the promise of steady returns. If wholesale electricity prices are below the strike price, contracted schemes receive the difference as a top-up payment. If prices rise above the strike price, they must pay back the difference.Close
Contracts for Difference: The new subsidy scheme to support investments in low-carbon electricity generation. Schemes are paid a fixed "strike price" for each unit of electricity they produce, giving investors the promise of steady returns.… Read More
CB: We talked about the carbon price floor a little bit earlier, but what’s your view on the trajectory that that should go on in the 2020s?
MB: The carbon price floor is one component of the overall price of carbon, and the trajectory for the carbon price floor depends very much on what happens to the ETS and it depends very much on what happens to a whole range of other measures, not least of which are regulatory measures around how the power sector functions. As an economist, I want those to work as an efficient signal to allow competition in that market to deliver the right technologies. And the carbon price floor was a very sensible policy in the context where the ETS was not delivering that efficient signal and that’s the decision that government needs to make: are the efforts that it’s making and the EU making to make the ETS deliver a credible signal sufficient or not sufficient to deliver that, and, to the extent that they’re not sufficient, what action domestically needs to be taken? A combination of carbon price floor, regulatory measures, designer markets, competitive capacity markets, CfD [Contracts for Difference] markets and others: what combination of measures is going to deliver that power sector target to get us to something that’s consistent with the carbon budgets, just under 100g per kilowatt hour mark by 2030?
CB: Have you looked at the coal phaseout and how that might fit into the carbon budgets?
MB: We haven’t done an explicit analysis since the government’s announcement, but the scenarios that we published in October leading into the fifth carbon budget advice looked at a range of different scenarios for how you would meet the fifth carbon budget through the power sector and under all of those scenarios coal gets phased out through the course of the 2020s and, indeed, early in the first half of that decade, and so the government announcement was completely in line with the types of scenarios that the committee is looking at and certainly the types of things we think need to be delivered in terms of meeting the carbon budgets.
CB: Maybe just one last question. There’s an amendment on the energy bill which is going through parliament at the moment, which would change emissions accounting rules so that all UK territorial emissions count towards carbon budgets. Does the committee support that kind of change?
MB: The accounting rules are a very complicated area of the budget and of the way the act works, and I wish they were simpler. The simplest way that we have come up with, which is explicitly in the recommendations that we delivered to the government in our fifth carbon budget, is for the regulations to very clearly articulate the millions of tonnes of carbon dioxide that the budget implies in both what’s called the traded and the non-traded sector. And for us to say very explicitly that the fifth carbon budget and all subsequent carbon budgets require this level of ambition delivered through domestic action. That seemed like the simplest way of doing it within the current framework. As you say, there are a range of other proposals out there that we haven’t assessed in depth. The advantage that our proposal has is that it would apply not just to the fifth and subsequent carbon budgets, but it would also apply to the ones that are currently being legislated — the third and fourth carbon budgets. The legislation that’s proposed sort of applies to the fifth and onwards. There are pros and cons to these different approaches, but certainly in our advice we’ve recommended what we think is the simplest fix in a complicated area to try to be clear, which is the overall purpose of the carbon budgets and the only way carbon budgets have real meaning is if they provide a clear focal point for businesses and households and governments themselves to know this is the direction of travel. If the accounting rules obscure that clarity then they’re failing to deliver the intention of the climate change act. And, in what we’ve proposed, we’ve tried to make sure that we keep to the clear intention and spirit of the climate change act, rather than hiding behind the accounting framework and the sort of fiddles that you could do that would obscure the need to have a clear medium term signal which will allow the UK to properly grasp the opportunities that tackling climate change offers.
CB: OK. Well, thanks very much.
MB: Thank you.
The interview was conducted by Simon Evans on 29 January 2015 at the Committee on Climate Change office, 7 Holbein Place, London.