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The task of rebalancing the UK economy away from carbon is well-progressed and is set to result in greater energy security and the development of new innovative technologies, the Government's Carbon Plan showed yesterday. 

Emissions in the UK must by law be cut by at least 80% on 1990 levels by 2050.  The UK was first to set its ambition in law, with binding carbon budgets spanning successive Parliaments to give the necessary certainty to investors.   The Carbon Plan sets out progress to date and assesses cost-effective next steps.  It shows:

• that UK emissions have already been cut by more than 25% on 1990 levels.
• that with the policies already in place the economy will significantly exceed the 34% target set for the first 15 years under the Climate Change Act, and would have done so even if the recession had not occurred. 
• that meeting the fourth carbon budget of a 50% cut in emissions by the mid-2020s will not have any additional cost implications during this Parliament, but beyond that will require a decade of mass deployment of key technologies.

Energy and Climate Change Secretary Chris Huhne said:
 
"Publishing the Carbon Plan sends two crucial messages.
 
"To the negotiators in Durban working this week and next to make progress on a global agreement on climate change, the Carbon Plan shows the UK is walking the walk, demonstrating that it can be done and living up to our promise to show climate leadership.
 
"To the public and businesses at home, rightly worried about the cost of living and state of the economy, the Carbon Plan shows that the gradual rebalancing of our economy away from carbon is achievable and, in the long run, highly desirable.
 
"Every bit of progress we make is one more step away from import dependency, away from price volatility and from the emissions that threaten our way of life.  Our national economic interest is to be found in a cost-effective transition to low carbon, to an economy that is more resilient, innovative and efficient.”

The Carbon Plan plots out a number of plausible future scenarios.  It takes a pragmatic, ‘no regrets’ approach to sequencing the transition to low carbon, keeping as many technologies in play as possible and exploiting normal replacement cycles to avoid infrastructure or equipment becoming prematurely obsolete. 

Current decade

The task already in hand for the current decade is to complete the ‘easy wins’ insulating the remaining cavity walls and lofts through the Green Deal, improving the fuel efficiency of new cars by around a third and replacing older coal plant, primarily with gas-fired power stations and renewables.  The package of measures already in place will benefit householders - we expect bills on average to be 7% lower in 2020 than they would be if we were not pursuing energy and climate policies.  Some energy intensive industries which face international competition are being assisted by a package of specific support as set out by the Chancellor in his Autumn statement.

2020s

The Carbon Plan focuses in on viable ways of meeting the fourth carbon budget – getting to a 50% cut in emissions by the mid-2020s.  The 2020s will be the decade of mass deployment of key technologies:

• making our buildings lower carbon – up to around a half of the heat used in our buildings will need to be low carbon by 2030.
• reducing emissions from transport including through ultra-low emission vehicles – the average emissions of new cars will need to fall by at least a half by 2030.
• Decarbonising our power supply through 40-70 GW of new low carbon generating capacity including the equivalent of 3 to 5 twin reactor stations of the type recently applied for at Hinkley Point C, 3-5 times as much renewable power than currently installed and CCS technology on up to 10GW of fossil fuel plant, equivalent to fitting capture technology to generation capacity that is two and a half times the size of the UK’s largest coal-fired power station.

There are inevitable uncertainties looking at costs decades into the future, both in terms of the likely costs of low carbon technologies and the potential for fossil fuel prices to vary significantly over time.  Work is already under way to develop and demonstrate many of the necessary technologies to ensure costs can start to fall.  Based on likely scenarios and central fossil fuel price projections, our current best estimate is that the cost to the economy of meeting the fourth Carbon Budget is likely to range from a net benefit of £1 billion to a net cost of £20 billion, over the lifetime of the measures (many of which extend out well beyond the fourth carbon budget period).

2050

The Carbon Plan also considers the cost of meeting the UK’s 80% target by 2050.  A revised online 2050 Calculator allows users to compare the cost of their chosen future energy system compared to doing nothing, or to other low carbon pathways.
 
The Calculator filetype:XLSX filesize: 4702.69Kb introduces the concept of energy system cost, averaged over the 4 decades up to 2050, measured for illustrative purposes in pounds per person per year.  The energy system cost should not be confused simply with what households or businesses pay for their gas and electricity, it is the total costs associated with powering the entire economy.  It includes the costs of the infrastructure and technologies required across all sectors (everything from family cars, to gas boilers to power stations), the costs of financing that infrastructure investment over time, and the costs of fuel and maintenance to keep those infrastructure and technologies running.   

The Calculator tells us:

• that the energy system currently costs £3,700 per person per year.
• that in all scenarios - high and low carbon - costs are set to increase substantially.  If the UK decided not to do anything to tackle climate change, the energy system is likely to cost £4,682 per person per year on average through to 2050, reflecting the costs associated with remaining fossil fuel dependent. 
• that the costs of meeting the 80% carbon target could be similar to doing nothing and may be cheaper.  The cost-optimal 'MARKAL' pathway is £84/person/year cheaper and would result in a balanced electricity generation mix in 2050 with 33GW of nuclear, 45GW of renewables and 28GW of fossil fuels with CCS.  Energy use per person would be half today’s levels, around three quarters of this is due to uptake of more efficient technologies.  High fossil fuel prices would further increase the chances of making relative savings.
• that if the UK did nothing to tackle climate change, the proportion of our energy we get from imported fossil fuels will rise from around 23% in 2007 to 53% in 2020 and 88% in 2050, meaning that our spending on net imported fossil fuels would rise from around £10bn today to £32bn in 2020 to £86bn in 2050. This would leave the UK more vulnerable to fossil fuel shortages and price spikes.  However, if we meet our 80% target, then by 2050 imported fossil fuels could account for only 7-30% of our energy, at a cost of £8-24bn.

Notes for Editors

• Carbon Plan documents published today are available on the Carbon Plan webpage.
• The 2050 Calculator is available from the 2050 webpage.
• Direct link for the 2050 Excel Calculator filetype:XLSX filesize: 4702.69Kb.
• Direct link for 2050 Webtool Calculator