Outlook for Carbon Compliance in 2018 and Beyond

           Carbon and Climate

The year ahead will be an active one in the UK for carbon compliance as companies put their strategies in place for the Energy Savings Opportunity Scheme (ESOS) and a framework is due to be published for the new Streamlined Energy and Carbon Reporting.

The UK Environment Agency is encouraging companies that expect to qualify for ESOS in Phase 2 to start their energy audits now to avoid the problems associated with last-minute compliance. This has the benefit of ensuring a well-planned timetable and will also provide timely energy efficiency advice to help mitigate the effects of rising energy costs.

A consultation on Streamlined Energy and Carbon Reporting was published in 2017, which will essentially be a replacement to the monitoring element of the CRC Energy Efficiency Scheme (CRC). A decision on the new structure will be made this year, which should commence in April 2019. It is expected that, as a minimum, reporting will include electricity, gas, and transport. Several options are suggested as the basis for eligibility, such as the existing “large companies” criteria for ESOS, or the CRC eligibility criteria. It has not been proposed that any changes be made to Climate Change Agreements or ESOS, although ESOS outputs could be included in the new streamlined reports for information purposes only. The proposed alignment with ESOS underlines the government’s commitment to the scheme in the longer term.

Some other areas of environmental policy face uncertainty under Brexit, and any developments will, therefore, be closely watched. For example, it is not yet clear whether the UK will remain part of the EU Emissions Trading System (ETS), the trading scheme for power stations and industrial plants. The UK could leave the EU ETS, seek to replicate it, or not continue with a trading scheme at all. A question also hangs over the UK’s renewable energy target, which, under EU legislation, stands at 15% of energy by 2020.

The UK already has its own legally binding carbon budgets in place, which are set for five-year periods and aimed at reducing emissions by at least 80% by 2050. Since 1990, emissions in the UK have been cut by 42%, and we are on track to outperform the third carbon budget (2018-22). However, further action is required to meet more demanding targets in future years. Last month, the government published improved greenhouse gas (GHG) projections, having revised its outlook to allow for the impact of existing, new, and proposed policies. While the report predicts improved performance, the fourth carbon budget (2023 to 2027) is still forecast to be exceeded by 3%. Renewable electricity has shown good growth in the UK, but it is the heat and transport sectors that require more attention. The central projection shows GHG emissions in the power sector falling by 53% between 2015 and 2020.

The UK Government published its Clean Growth Strategy in October 2017, which promotes resource efficiency and approaches climate change policy as an integral part of economic growth. In future, an Emissions Intensity Ratio (GHG per unit of GDP) will be published annually as a means of measuring clean growth performance.

Nikki Wilson

Nikki joined Alfa Energy in September 2015 as a Carbon Management Consultant where she advises clients on legislation, compliance, and the implementation of carbon management schemes. She is a Practitioner member of IEMA, has a postgraduate diploma in Environmental Decision Making, and has over 15 years’ experience in energy consultancy.