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REVIEW OF THE SCOTTISH CLIMATE CHANGE PROGRAMME: A CONSULTATION

SCOTTISH POLICY FRAMEWORK

UN Framework Convention on Climate Change and Kyoto Protocol

32. The UN Framework Convention on Climate Change (UNFCCC), held in Rio de Janeiro in 1992, massively boosted public awareness about climate change. The ultimate objective of the Convention, which entered into force on 24 March 1994, is "to achieve…the stabilization of greenhouse gas concentrations…at a level that would prevent dangerous anthropogenic interference with the climate system." ²¹ The Kyoto Protocol, adopted on 11 December 1997, established a legal framework for delivering emissions reductions, with average reductions of 5.2% being required by Annex I Parties during the first commitment period (2008-2012).

33. The Kyoto Protocol established three ‘flexible mechanisms’, which can be used to contribute to achieving emissions reduction commitments — Joint Implementation (JI), the Clean Development Mechanism (CDM) and International Emissions Trading (IET). Emissions trading enables countries which achieve greater reductions than needed to meet their target to sell the surplus to other countries. JI and the CDM allow countries with targets to receive credit for project-based activities that reduce emissions in other developed or developing countries respectively.

34. The Kyoto Protocol’s entry into force on 16 February 2005 will not be the end of the story — it will merely represent the end of the first phase of negotiations. The Protocol clearly envisages an ongoing international process aimed at delivering the much bigger reductions in emissions that will be needed beyond the 2008-2012 commitment period. The Protocol states that discussions on future targets must start by 2005 at the latest. The UK, supported by the Executive, will continue to play a leading role internationally in trying to secure progress, both by insisting on the need for further emissions reductions and by setting an example through the UK Climate Change Programme.

EU Climate Change Programme

35. The UK’s membership of the European Union has a strong influence on its and the Executive’s response to climate change. Negotiating as a block gives the EU far more influence and impact on negotiations than if individual states were negotiating on their own account. European Directives provide a coordinated response across Member States and these Directives apply equally in Scotland as in the rest of the UK.

36. While action at the Member State level is fundamental to meeting Kyoto targets, some European measures (known as common and coordinated policies and measures) are essential to help Member States deliver their Kyoto targets. Moreover, some measures can be delivered most effectively at Community level. In some sectors, for example, there is a strong, single-market case for European action. Other measures could have little impact if taken at a national level and could harm the competitiveness of the industry in the Member State concerned. European level coordination also gives Member States a valuable opportunity to share experience of and expertise in action to reduce greenhouse gas emissions.

37. A number of measures to reduce greenhouse gas emissions at the Community level — focusing on the energy, transport and industry sectors — have been adopted or are being negotiated. These include:

• a Directive to promote electricity from renewable energy;
• a voluntary commitment by car makers to reduce CO₂ emissions by 25%;
• a Directive on the taxation of energy products;
• a Directive on greenhouse gas emissions trading;
• a Directive on the promotion of biofuels;
• a Directive on combined hear and power (CHP);
• a Directive on the energy performance of buildings; and
• a proposal for a Regulation on fluorinated gases.

EU Emissions Trading Scheme

38. The EU Emissions Trading Scheme (EU ETS)²² is a key component of the EU’s drive to reduce emissions of greenhouse gases. All 25 Member States of the EU will be participating in the scheme. The UK, supported by the Executive, is showing its commitment to the EU ETS as a tool for achieving real emissions reductions by setting a cap on allowances in the first phase (2005-2007) that takes the UK beyond its Kyoto target

39. The EU ETS is a devolved matter. The Executive has worked closely with the UK Government, to an extremely difficult timetable, to have the scheme up and running in an undifferentiated manner across the UK in time for a 1 January 2005 start. This is simpler for business; ensures a level playing field; and is more cost-effective.  The scheme, which will work on a cap and trade basis, will initially cover only carbon dioxide but may be expanded to cover other greenhouse gases and additional sectors in later phases.   Over 1000 UK installations are to be involved (with over 100 of these being based in Scotland) in the first phase, accounting for approximately 46% of UK CO₂ emissions.  How the scheme will work is set out in some detail in the UK consultation paper.

40. The UK approach to the scheme is to balance the achievement of its environmental goals with the requirements of energy security and the needs of ensuring the competitiveness of industry in the international market. The UK National Allocation Plan (NAP) for phase I (2005-2007) demonstrates the UK Government and the Devolved Administrations commitment to delivering the UK Kyoto Protocol target, whilst also taking a common sense and pragmatic approach to the implementation of this new scheme.

41. Emissions reduction targets are going to become more stringent over time. Those that take an innovative approach to reducing emissions now will certainly be well placed in future. By being one of the leaders in Europe in promoting emissions trading and implementing the scheme, the UK is giving industry the best possible starting position — industry now has time to decide on and prepare carbon management strategies so that it can take full advantage of the Europe-wide trading scheme.

42. The UK is already on course to meet its Kyoto target. The number of allowances to be allocated in the first phase of the EU ETS (2005-2007) to industry sectors exposed to international competition will be in line with the projected level of emissions, taking into account the impact of measures in the UK Climate Change Programme. The power generation sector which faces limited international competition and is thought to have relatively large scope for low cost abatement opportunities will be allocated allowances below their projected level of emissions.

Phase I - 2005-2007

43. The UK NAP for the first phase covers installations responsible for about 46 per cent of UK carbon dioxide emissions. The NAP explains the arrangements for distributing the total allocation between installations and the way that new entrants and plant closures will be handled.

44. The European Commission approved the UK NAP for phase I of the scheme on 7 July 2004, subject to further information being provided. We announced on 27 October that we would amend the NAP, subject to EC approval, following the finalisation of work on emissions projections. This resulted in an increase of the cap.

Phase II - 2008-2012

45. The second phase of the EU ETS coincides with the first Kyoto Commitment period; Member States will be required to use the trading scheme to contribute to meeting their commitment and any additional domestic goals. For some Member States this will be a tougher challenge than for others; the current expectation is that there will be a greater scarcity of allowances in phase II compared with phase I as Member States see the potential the EU ETS offers for low cost reductions and the pressure to deliver on their burden sharing targets increases.

46. The UK is in the early stages of developing the approach to phase II of the EU ETS. The two key deadlines for the NAP as defined in the Directive are 30 June 2006 for submission of the NAP to the EC and 31 December 2006 for the final decision on allocations. We are aware that it was not possible to finalise allocations for phase I as early as we would have hoped. The UK Government and the Devolved Administrations, therefore, wish to ensure that decisions relating to phase II of the EU ETS are taken in a timely fashion.

47. The UK Government and the Devolved Administrations are aware that business is keen for early certainty about its plan for implementing phase II of the Scheme. One of the key decisions will be the extent to which phase II is to be used to contribute to the emission reductions necessary to move us towards our national goal. We intend to consider, as part of this review of the Climate Change Programme, the extent to which we can give early certainty about our intentions for phase II. The overall level of allowances to be allocated for phase II will be an important part of this consideration.

48. We also intend to use this consultation as a starting point for development of some of the key principles of allocation for phase II and to ask a number of broad questions of stakeholders and the public. In due course the UK Government and the Devolved Administrations will be consulting with stakeholders in more detail on key issues (e.g. scope and allocation methodology) for phase II of the EU ETS and on a draft National Allocation Plan.

49. In considering the UK approach to phase II, we shall be examining a number of key issues, including:

• Scope of the scheme: The Directive provides an opportunity for the EC to make a proposal to the European Parliament to amend Annex 1 to include other activities and emissions of other greenhouse gases. This would result in community wide expansion of the scheme. The scheme could also be expanded is through unilateral inclusion of installations at Member State level. The UK will consider the relative importance and value of expanding the scheme to new sectors and gases, and the advantages and disadvantages of doing so, and whether there is potential for a collection of Member States to agree a joint approach to expansion of the scheme. It should be noted that the implementation of a trading scheme to cover emissions from intra-EU aviation is being considered separately and the Scottish Executive position is covered in the transport section of this consultation (see also paragraph 64).
• Harmonisation of the scheme: Experience from developing the NAP has identified a number of areas where harmonisation across the European Community is desirable. The UK will be considering with other Member States and the Commission what improvements could be made. Issues which might lend themselves to further harmonisation include the definition of combustion installation, and the treatment of new entrants.
• Determination of the cap: As mentioned above the review of the UK and Scottish Climate Change Programmes will be used to determine the level of ambition phase II of the scheme will be expected to deliver.
• Allocation methodology: The UK Government and the Devolved Administrations will be considering the merits of using alternative approaches to allocation; stakeholders will be consulted on options at a later date.
• Evaluation of phase I: We shall assess the UK and other Member States’ approaches to implementation of phase I, which will assist in the development of a UK NAP for phase II.

Box 3: Consultation questions on the EU ETS

UK Climate Change Programme and review

50. One of the commitments under the UNFCCC is for the UK Government to formulate, implement and regularly update a national programme. The UK Climate Change Programme, of which the Scottish Programme is part, was published in November 2000, and set out the UK Government and the Devolved Administrations’ strategic approach to tackling climate change, including a framework of policies and measures to reduce emissions across all sectors of the economy. As well as outlining the means by which the UK will deliver its Kyoto target, the programme also set out how the UK will meet its domestic goal of reducing carbon dioxide emissions by 20 per cent below 1990 levels by 2010.

51. The Executive is committed to making an equitable contribution to UK climate change commitments. This means we are taking action in the same or similar areas as the UK Government, where we have the devolved powers to do so.

52. The UK Programme — like the Scottish Programme — is currently under review and a consultation exercise on this review will be launched in early December 2004²³.

Sustainable development

53. Our approach to combating human-induced climate change is a key aspect of our policies aimed at promoting sustainable development. Together with the UK Government, the Welsh Assembly, and the Northern Ireland Administration, the Executive is participating in the development of a new UK strategic framework for sustainable development, to be in place by early 2005. The first stage of the process — a consultation exercise, Taking it on: developing UK sustainable development strategy together ²⁴ — closed on 31 July 2004. The new UK strategic framework will set the broad context and direction for taking forward sustainable development in the UK at all levels and will be followed up later in the year by a more detailed sustainable development strategy for Scotland.

54. The revised Scottish Climate Change Programme will be published after — and will take account of — the principles and priorities of the new UK strategic framework and will, in turn, feed into the Scottish sustainable development strategy.

Energy White Paper

55. In the Energy White Paper²⁵, published in February 2003, tackling climate change was identified as one of four key goals of UK energy policy to 2050, all of which were given the full support of Scottish Ministers:

• to put the UK on a path to cut its carbon dioxide emission by some 60% by about 2050, with real progress by 2020 (thereby accepting the recommendation of the Royal Commission on Environmental Pollution²⁶);
• to maintain the reliability of energy supplies;
• to promote competitive markets in the UK and beyond, helping to raise the rate of sustainable economic growth and to improve our productivity; and
• to ensure that every home is adequately and affordably heated.

56. The UK Government and the Devolved Administrations aim to deliver all four goals simultaneously. Measures to reduce emissions of greenhouse gases can impact on fuel poverty and competitiveness by impacting upon energy prices. Similarly, by influencing investment decisions and the energy mix, such measures can also impact upon security of supply.

57. In delivering reductions in carbon dioxide emissions through energy policy, the White Paper makes clear that the UK Government’s priority will be:

• Improvements in energy efficiency. As emissions from power stations (particularly fossil fuels) are directly linked to the demand for electricity, one of the most cost-effective ways of reducing emissions is to reduce the overall amount of electricity used. This also improves energy security and cuts costs for homes and businesses. Measure to improve energy efficiency are discussed elsewhere in this consultation paper.
• Increasing the use of renewable forms of energy, which are ‘carbon neutral’ or produce very low emissions or no emissions at all. Again, increasing the amount of distributed renewable energy can contribute to security of supply.

58. The Energy White Paper did not make any proposals for building new nuclear power stations and recognised that, while nuclear power is currently an important source of carbon-free electricity, its current economics make it an unattractive option for new, carbon-free generating capacity. It also recognised that there are important issues of nuclear waste to be resolved and that before any decision to proceed with the building of new nuclear power stations there would need to be the fullest public consultation and a further white paper setting out proposals. See paragraph 72 for the Executive’s position on nuclear power.

Transport White Paper

59. The Scottish Executive published its Transport White Paper, Scotland’s Transport Future ²⁷in 2004. The paper sets out a vision and key objectives for Scottish transport, and explains the range of initiatives and investments which are being undertaken towards those objectives. The five key objectives, as set out in the white paper, are: economic growth, social inclusion, environment, safety and integration.

60. Further, in July 2000, the UK Government published its 10 Year Plan for transport. This was followed up by the Future of Transport White Paper²⁸ in July 2004. This set out that good transport is central to a prosperous economy, facilitating better access and greater mobility, but also acknowledged that we must balance the increasing demand for travel against our goal of protecting the environment and improving the quality of life for everyone - whether they are travelling or not. The key objectives for Scotland’s Transport Future are to:

• promote economic growth by building, enhancing, managing and maintaining transport services, infrastructure and networks to maximise their efficiency;
• promote social inclusion by connecting remote and disadvantaged communities and increasing the accessibility of the transport network;
• protect our environment and improve health by building and investing in public transport and other types of efficient and sustainable transport which minimise emissions and consumption of resources and energy;
• improve safety of journeys by reducing accidents and enhancing the personal safety of pedestrians, drivers, passengers and staff;
• improve integration by making journey planning and ticketing easier and working to ensure smooth connection between different forms of transport.

61. Most transport emissions count towards the Kyoto Protocol target, including emissions from domestic aviation. Emissions from international aviation, however, do not count and agreement has not been reached on how, or whether, to allocate emissions from these sources to individual countries. Parties to the UNFCCC are required to act to limit or reduce emissions from international services working through the International Civil Aviation Organisation (ICAO).

Air Transport White Paper

62. The Executive is aware of the impact that aviation has on the environment and is striving to strike a balance between the needs of our economy and society, including rural and remote communities, and the need to protect our environment.

63. The Air Transport White Paper²⁹, published in December 2003, acknowledged the increasing impact that aviation emissions are making towards total emissions. Forecasts have suggested that by 2030 carbon dioxide emissions from UK aviation will amount to some 16 to 18 MtC, of which 97% would be from international flights. This could amount to about a quarter of the UK’s total contribution to global warming by that date.

64. The White Paper committed the Government to pursuing the inclusion of intra-EU aviation in the European Union Emissions Trading Scheme (EU ETS) and the UK Government will be making this a priority for the UK EU Presidency in 2005. The Executive is working with the UK Government to explore the scope for the use of the EU ETS and other economic instruments to tackle aviation emissions and is a member of the Inter-departmental Steering Group which is considering this matter.

Air Quality

65. Policies to improve air quality and climate change cannot be considered in isolation from each other, as they can often generate added benefit of additional carbon or air pollutants savings, and vice versa. For example, policies designed to reduce the impact that transport has on air quality can also reduce carbon dioxide emissions. Measures to improve energy efficiency and cut energy demand should also reduce the air pollutants that are produced during electricity generation. There can also be negative trade-offs and therefore the revised Scottish Climate Change Programme will need to consider how its policies impact upon air quality in addition to climate change.

66. The Air Quality Strategy for England, Scotland, Wales and Northern Ireland sets out policies to reduce the levels of the air pollutants that are of most concern. The next Review of the Air Quality Strategy will assess a number of additional measures to bring us closer to the UK Government's and Devolved Administrations’ air quality objectives: the impacts on carbon emission of these measures will be considered as part of the review.

Housing

67. The Scottish Fuel Poverty Statement³⁰ was published in August 2002. This set out details of a number of programmes that the Executive has in place to promote improvements to the housing stock in Scotland, including the Warm Deal and the Central Heating Programme. These programmes are primarily designed to eradicate fuel poverty but also deliver valuable carbon savings. The Home Energy Conservation Act 1995 (HECA), which was introduced into Scotland in December 1996, placed a duty upon all local authorities to devise strategies that would result in significant improvements to the energy efficiency of the housing stock with knock on carbon saving benefits.

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