Carbon Matters - Spring / Summer 2016

Environmental Alert


Robust international and national action on climate change looks increasingly likely following the high-profile Paris Agreement signing ceremony at the United Nations in New York in April.

In New York 175 governments including the US , China and India, took a symbolic first step of signing onto the deal, setting a new record for the largest number of countries to sign an international agreement on one day. China, which accounts for 20 percent of global emissions, said it will finalise domestic procedures to join the agreement before the G20 meeting in September. Other major industrialised countries including the US offered similar pledges to pursue the necessary domestic processes towards approval in 2016.

The Paris Agreement will enter into force when countries representing at least 55 percent of total global greenhouse gases formally join the agreement. In New York 34 countries representing 49 percent of global greenhouse gas emissions formally joined the agreement, or committed to joining the agreement as early as possible this year. Under the timeframe agreed in Paris it was expected that the Agreement would not become operational until 2020 but the momentum gained in the run up to the New York signing now means that this may happen as early as late 2016 or early 2017. The US also represents around 20 percent of global greenhouse gas emissions and therefore combined actions by China and the US make up the majority of the necessary commitment to see the Paris Agreement enter into force. Although the US signed the Kyoto Protocol it never ratified the treaty. A number of the Small Island Developing States – amongst the countries most vulnerable to climate change – have already ratified the Paris Agreement, with leadership taken by Fiji and the Maldives.

Governments of almost 200 nations reached agreement in Paris that tackling climate change is imperative and that doing so provides an opportunity to drive economic growth. The United Nations Framework Convention on Climate Change (UNFCCC ) Agreement seeks to avoid catastrophic climate change by limiting global warming to 1.5 °C to 2 °C, which means getting to “net zero emissions” between 2050 and 2100.

The UNFCCC Agreement contains binding obligations for all signatories to set national emission reduction targets and report in a transparent and frequent manner on how they are progressing against those targets. The accompanying reporting and transparency frameworks will be discussed in the run up to this year’s UNFCCC Conference of the Parties (COP ) in Morocco. Implementation processes will be the primary focus for the UNFCCC over the next 18 months and work to strengthen pre-2020 action will also include broader engagement with non-state actors.

Paris is a key milestone in the transition to a low-carbon economy and signifies a major shift in momentum. The New Climate Economy Report, launched by UN Secretary-General Ban Ki-moon before the Paris summit, estimates that a total of US $90 trillion will be invested in infrastructure in the world’s cities, agriculture and energy systems by 2030 and the International Energy Agency estimates that achievement of the pledged national commitments will require public and private sector investment of around US $16.5 trillion.

In the UK Energy minister Andrea Leadsom has said that the Government will enshrine in law a long-term goal of reducing carbon emissions to zero, increasing the current target established under the Climate Change Act. The UK is already legally bound to reduce emissions by 80 percent by 2050. The Committee on Climate Change has recommended that the fifth carbon budget under the Act should stipulate a cut of 57 percent by 2032.

The Department of Energy and Climate Change is currently formulating a variety of new policy responses to support action towards meeting UK requirements under the Act and it is likely that these will be clearer by the time the Chancellor delivers his Autumn statement. The CRC Energy Efficiency Scheme is to be abolished and key issues include the long-term direction for Carbon Price Support rates and the Carbon Price Floor.

Last year was the hottest year on record by a significant margin and also saw atmospheric concentrations of CO2 increase by the highest amount on record. Businesses will increasingly be expected to demonstrate that they are prepared for more stringent emissions policy scenarios and increasing climate impacts. The new G20 Financial Stability Board Taskforce on Climate-related Financial Disclosures, chaired by Michael Bloomberg, is developing reporting guidelines this year to encourage transparency and preparedness on these issues. Going forward it is likely that certain Stock Exchanges will expect listed companies to report on climate risk metrics and management.

In this issue

  • Reforms to business energy efficiency taxation: The end of the CRC
    6 JUL 2016

    On 16 March 2016, as part of his Budget Statement, George Osbourne announced the abolition of the CRC Energy Efficiency Scheme to take effect from the end of the 2018/19 compliance year.

    This was no rabbit out of the Chancellor’s hat, however, as the Government’s intentions had been made fairly clear last year in its consultation in the autumn of 2015 on reforming energy efficiency taxes and reporting.

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  • European court ruling tightens up on free allowances under the EU ETS
    6 JUL 2016

    A multi-jurisdictional challenge to a Commission Decision governing the allocation of free allowances to industrial operators under the European Union Emissions Trading Systems (the EU ETS) has resulted in the Commission Decision being quashed by the Court of Justice of the European Union (CJEU). Free allowances allow operators to match their emissions of carbon without having to purchase the allowances at auction, or buy them from other operators who have  reduced their emissions, or who for other reasons have a surplus of allowances. The result of the court judgment is that the Commission will have to prepare a new Decision so that the amount of future allocations of free allowances under the scheme can be re-calculated.

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  • ESOS registered - so what to do now?
    6 JUL 2016

    The Department of Energy and Climate Change (DECC) has published a guide aimed at assisting organisations in implementing energy savings identified as part of the work they have undertaken to comply with the Energy Savings Opportunity Scheme (ESOS).

    It is understood that over 6,000 organisations have completed the ESOS registration process, an exercise that will have created headaches for facilities and energy managers over the last 18 months. The original registration deadline in December 2015 was extended to the end of January 2016 due to the number of companies known to be scrabbling to complete audits and to produce compliance packs to meet the new regime’s requirements.

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  • Sustainability and climate change services
    6 JUL 2016

    Following the December 2015 Paris Agreement on climate change the level of climate related regulation through national and regional plans ramps up regulatory change related to greenhouse gas emissions. Under the United Nations Framework 195 nations have committed to 5 year reviews to ensure progress towards a stretching global target of limiting global warming to "well under 2 °C".

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