Theresa May has announced that the UK will ratify the Paris Agreement by the end of 2016 and possibly within a matter of weeks. This follows ratification this month by the world’s highest emitting countries, China and the US, which are jointly responsible for 38% of global emissions.
In order for the Paris Agreement to enter into force, there is a requirement that it is signed by 55 countries, representing 55% of emissions. A tranche of 30 countries signed the agreement last week while attending the UN General Assembly in New York, taking the current status to 60 countries, representing 47.76% of global emissions, having signed. The ongoing status can be followed here.
There had been speculation that because the UK had originally committed to an emissions reduction target as part of a wider EU commitment, the Brexit vote would mean that the target had to be renegotiated. However, the recent announcement by the Prime Minister demonstrates that the government plans to press ahead regardless. The UK government is still due to publish a carbon reduction plan that will meet its own domestic targets, set in the fifth carbon budget. The new carbon plan was originally planned for the autumn but Environment Secretary Nick Hurd has said it could well be delayed until 2017.
The decision to proceed with the nuclear power station at Hinkley acts as the starting point for the UK’s energy policy and emissions reductions plans, to be developed by the newly formed BEIS (Department of Business, Energy and Industrial Strategy).
A positive signal has been given to the offshore wind industry by BEIS when it recently extended Contracts for Differences (CFD) by six years to cover wind projects for delivery out to March 2026. The CFD scheme guarantees a fixed income, known as a strike price for each kWh generated. In the Netherlands and Denmark, offshore wind is now being costed at levels below the strike price for Hinkley Point of £92.50/MWh and is forecast to be below £70/MWh by 2025. As the cost of the support scheme is passed through to end consumers, a reduction in the strike price is welcome news for electricity buyers. The recent autumn CFD round was delayed but is expected to take place early in 2017.
According to the Global Wind Energy Council (GWEC), global wind capacity is set to nearly double over the next five years, from 435GW in 2015 to a predicted 792 GW in 2020. Last year saw annual growth of 22% with China, despite a slowing economy. China is reportedly building an average of two wind turbines an hour this year and is meeting all of their new energy requirements via wind. However, in many cases, this has not resulted in a reduction in coal generation due to the return required from coal-fired power stations, which have to continue operating.
It is expected that the Paris Agreement will enter into force by the end of the year and will act as the base on which to build global emission reduction strategies. However, data shows that it has already provided a positive signal for investment in renewables. Mark Carney, the Governor of the Bank of England has this week called for green financing to flow from advanced economies to emerging economies as a means of reducing climate change risks while also providing high returns.