Connecting the Future - Greenpeace UK

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Connecting the Future: the UK’s renewable energy strategy Reducing Energy Intensity: Reducing Demand through Energy Efficiency 30 is intended to last five years, allowing it to be synchronised with the ETS if participants wish to buy additional allowances. Emission allowances will be auctioned in January each year and the revenue generated will be recycled to participants on the basis of their average emissions since the introduction of the CRC. Organisations will also either receive a bonus in addition to the recycled payment, or be penalised by a reduction in this payment, according to their performance against three indicators: the carbon emissions reduction achieved, the carbon emissions reduction relative to their economic performance and action taken to implement energy saving measures. If an organisation fails to comply with the commitment, it will be charged £25/tCO2 during the introductory phase (2010–2013), and then £70/tCO2 in subsequent phases post 2013. In contrast, Defra estimates that CRC allowances will cost £8–16/tCO2. The scheme is yet to be implemented, so it is difficult to draw conclusions about how well it may work. However, the design of the measure is unambitious in view of the potential cost effective emissions savings to be made by reducing energy use in business – the Regulatory Impact Assessment for the CRC puts the present value of benefits in terms of savings on energy bills between £1,437 million and £2,726 million, depending on the type and level of discount rate that is applied (Defra 2007). Overall, moreover, the scheme seems unnecessarily complex: there will be interactions with both the ETS and CCAs that will make it difficult to predict the level of emissions reductions which the CRC will deliver. For example, anything between 0% and 20% of organisations and emissions could be excluded from the scheme because of the interaction with CCAs (DTI 2007d). Finally, it remains to be seen whether the system of self-monitoring and verification of emissions, combined with rewards for compliance, will be sufficiently stringent to act as a driver. 3.1.4 Other measures Other measures to encourage the more efficient use of energy in business include Enhanced Capital Allowances as part of the CCL package, which allow businesses to write off the cost of investing in specified energy saving products against their taxable profits for that financial year. There is also an interest-free loans scheme to enable small and medium-sized enterprises to install energy efficient technologies. The emphasis of government action is clearly on reducing emissions from industrial processes and energy end use, driven by an enthusiasm for carbon pricing and trading, whether in the UK or EU. An area which has been relatively neglected in the business and industrial sectors is the energy performance of buildings, despite extensive action being planned to improve energy performance in both the public and domestic sectors. Commercial buildings are of course subject to building regulations, which provide some impetus towards energy efficiency; but it should be technically and economically possible for new non-domestic buildings to achieve significantly greater emission reductions in the next decade, and for many to be zero carbon with regards
Connecting the future: the UK’s renewable energy strategy Reducing energy intensity: efficiency and demand 31 non-process-related emissions (Defra 2007a). The government has recently announced an ‘ambition’ for new non-domestic buildings to be zero carbon from 2019, although it is yet to set out its strategy for driving such improvements, and has merely committed to developing an action plan at some stage in the future (HM Treasury 2008). This hesitancy is missing an opportunity not just to improve the energy performance of existing commercial and industrial buildings, but to drive a longer-term shift to more sustainable energy production and supply through the provision of zero carbon facilities in both new and existing facilities. 3.2 The domestic sector Domestic properties are responsible for about 27% of the UK’s CO2 emissions. Most domestic energy use (87%) is for space or water heating, with the rest used for lighting and appliances (DTI 2007a). However, energy consumption in lighting and appliances is growing and overall domestic energy demand is expected to grow by an average of 2.5% (0.85 MtC) a year over the next 10 years (Communities and Local Government 2007, Defra 2007a). In the past, increases in domestic demand have been partly offset by increases in energy efficiency (historically, about 1% a year). Defra’s 2007 Energy Efficiency Action Plan states that the policies it outlines should improve the rate of increase in energy efficiency to the point where it will cancel out the growth in domestic energy demand by 2010. However, this is a relatively unambitious target – households could reduce emissions by around 25% using established technologies (Defra 2007a). 3.2.1 Energy Efficiency Commitment and Carbon Emission Reduction Target The Energy Efficiency Commitment (EEC) scheme was run in two phases, 2002–05 and 2005–08. It required energy suppliers to achieve targets for energy efficiency improvements in Britain. Suppliers tended to provide insulation, low-energy lighting and high-efficiency appliances or heating in order to meet their targets, and implemented the measures either with individual householders or through projects with social housing providers. 50% of the suppliers’ energy savings targets had to be implemented in projects involving low-income customers. The EEC has proven to be a very cost effective measure, with the cost of complying with the targets estimated at no more than £9/customer/year (Energy Savings Trust 2007). The Carbon Emission Reduction Target (CERT) is the successor to the EEC, and will run from 2008 to 2011. Unlike the EEC programme, CERT includes microgeneration and other measures aimed at reducing consumption of supplied energy. The Climate Change Programme announced that the carbon reductions target to be met by suppliers under CERT would be roughly double that of the second phase of the EEC, with an aim of achieving emissions savings of 4.2MtC a year by 2011. However, most suppliers have already met the target set for the EEC and excess savings will count towards CERT, so the more stringent target is not as demanding as it might seem.
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Connecting the Future - Greenpeace UK

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