Ahead of an autumn full of heated debate over the 4th Carbon Budget (4CB), what is the emerging view from EEF? To pull the Rip Cord, or not to pull the Rip Cord, that is the question. Our simple answer is that not pulling the Rip Cord (to set a more realistic target) will see the UK out of step with its EU and global competitors. This will lead to UK manufacturers paying more for energy, at a time, when we need to be emerging from recession fighting fit, not dragged down by higher than necessary costs.
When setting the UK Carbon Budgets, the government must take into account the climate objectives that we can afford and achieve. UK objectives and action must contribute to a reduction in global emissions, rather than isolated action. Therefore the 4CB must realistically reflect what other MS and regions have taken on board since the 4CB was agreed, with the ‘Rip Cord' get out clause.
EEF believe that the 1,950mt Budget was based on an assumption that the EU (and corresponding international action) would go further than it has, in terms of ambition. This has not happened and therefore the scenarios upon which the budget was based are no longer correct or competitively robust. It should also be noted that the anticipated progress of the deployment of low carbon generation and abatement technologies has been slower than expected, for example, CCS and new nuclear. Similarly, we have not seen the anticipated reduction in the cost of offshore wind. And with the recently announced Contracts for Difference strike prices to 2018 and 2020 for offshore wind of £135/MWh, significant reductions in costs are looking seriously difficult to achieve by the end of this decade. This will have a significant knock on effect on power generation decarbonisation and the shift to electrification. This also has a negative impact of the affordability of sticking to the tighter 1,950mt target. So rather than the direction of travel moving towards keeping the 1,950mt target, EEF believe that the shift has actually moved the other way, making the 1,950mt target untenable.
Our commitment and ambition must be made with a full understanding and acceptance of the cost and its impact on competitiveness and growth. Without cost effective action, global reductions will not take place, only a shifting of emissions to regions that currently are not subject to a comparable GHG reduction regime.
So the UK must not take a decision in isolation. For example, in 2014 the 2030 EU climate change package will be agreed and until then, the UK should not be committing itself to sticking with unrealistic and costly ambition. The 4CB review must take into account what is agreed within the EU package. If government has committed to make a decision ahead of this climate change package being agreed, then the only option is to pull the Rip Cord.
Like many other stakeholders, EEF will be carrying out its own research and evidence gathering during early autumn, with a view to finalise our position in October.