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DECC

Department of Energy and Climate Change: Consultation on new Climate Change Agreements

ACE have submitted a written response to the Consultation on the form and content of new Climate Change Agreements.

ACE response to the consultation:

1. ACE would like to congratulate Government on the current success of the Climate Change Agreements (CCAs), demonstrated by the predicted annual savings of over 10.5 MtCO2 in 2010. This is a significant amount of carbon to save, and puts into context the relatively low level of ambition Government has shown when setting targets for other programmes (e.g. Carbon Reduction Commitment, 4.4 MtCO2 per year by 2020; Carbon Emission Reduction Target, 5.3 MtCO2 per year by 2011). It has also achieved a reduction that is 13% greater than the 9.1 MtCO2 anticipated for 2010 in the Budget 2000. This illustrates how a programme that was always pitched as being about energy efficiency rather than climate change can deliver significant reductions in carbon emissions.

2. Our main concern with the programme to date is that Government seems so reluctant to take the deserved credit for its success. This inherently simple programme has helped improve the competitiveness of UK industry, improved the security of the UK’s energy supply, and reduced CO2 emissions in absolute terms. It is a striking success. We urge Government to highlight it.

3. The success of this policy highlights the disproportionate impact of programmes that affect personal or organisational taxation. Typically, decisions that affect an organisation’s expenditure on tax will be taken by people who wield significant influence. In contrast, those within an organisation with the responsibility for paying utility bills – i.e. those who could most clearly make the case for energy efficiency investments – are typically in less senior positions, and less able to follow through with the necessary actions. ACE urges Government to make further use of taxation based policies to drive energy efficiency improvements. In the domestic sector, stamp duty rebates for those who improve the energy efficiency of their newly purchased homes (and increases in stamp duty for those who don’t) would be an effective policy for similar reasons.

4. Regarding the proposals put forward in this consultation, ACE does not wish to comment on many of the specifics. However, we wish to make note of the following:

  • we are in favour of the requirement for sectors to make absolute rather than relative savings;
  • we support a move to annual targets;
  • we support the proposal that each target unit should be required to meet its individual target.
  • In addition we would like each sector to differentiate in their returns between the savings achieved in buildings and those achieved in process plant.

5. Finally, we do not believe that the CCA should have a trading mechanism. There is a large administrative cost involved in creating a new trading mechanism specifically for CCA participants. At the same time we strongly oppose the use of the Carbon Reduction Commitment secondary market for the trading of allowances – this newly formed market does not need the distortion that involvement with the CCA participants would bring. Instead, each sector should ensure that it meets its targets, and any sector that fails to do so must purchase EU ETS allowances to cover their shortfall, with a floor price on these allowances of £40/tonne CO2 (the carbon price used by the Committee on Climate Change ). There should be no reward for over-achievement through the selling of allowances; the fuel bill savings and increased levels of productivity that stem from improved energy efficiency should be reward enough to encourage sectors to go beyond their targets.

Click here for the full written response

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