Summary and implications

As part of the UK's programme to bind itself to the ambitious framework to limit greenhouse gas emissions, three new statutory instruments came into force on 31 May 2009. This new legislation enables the Government to implement its policy objectives under the Climate Change Act 2008. Businesses and the public sector are not directly targeted under the new legislation, but to meet the statutory targets outlined, the Government will have to subsequently implement measures (such as the Carbon Reduction Commitment) that will directly affect the business and public sectors.

Although businesses and the public sector are not directly obligated under these statutory instruments, there are a suite of measures either in force or due to come into force which will require parties to cut greenhouse gas emissions. These include the EU Emissions Trading Scheme and the Carbon Reduction Commitment. We will report on the Government's 'proposals and policies' to be released this summer in a subsequent update.

The new legislation

The three statutory instruments consist of

  • the Carbon Budgets Order 2009,
  • the Climate Change Act 2008 (2020 Target, Credit Limit and Definitions) Order 2009 and
  • the Carbon Accounting Regulations 2009.

a) The Carbon Budgets Order 2009

This Order sets the level of the first 3 carbon budgets for the UK from 2008 to 2022. These budgets set limits on the total amount of carbon dioxide that the UK can emit. The budgets will be divided into five-year periods:

  • First carbon budget : 2008-2012
  • Second carbon budget : 2012-2017
  • Third carbon budget : 2017-2022

The carbon budgets are expressed by reference to a percentage reduction from the 1990 levels of carbon emissions. These have been based on the advice of the Climate Change Committee and comprise of interim budgets, to take effect immediately, and more strict intended budgets.

b) The Climate Change Act 2008 (2020 Target, Credit Limit and Definitions) Order 2009

This Order increases the medium term target for reduction of greenhouse gases. The target reduction is now 34% by 2020, having previously been set at 26%.

In addition the definition of emissions has been changed. The previous definition captured only carbon dioxide emissions, the new amendment covers all greenhouse gases.

International shipping and international aviation are currently excluded from the current emissions target. The Secretary of State must incorporate this within the definition by 2012 (or report to Parliament explaining why it has not). However, the EU has recently brought aviation within the EU Emissions Trading Scheme and the Government is consulting on how to implement this within the UK.

c) Carbon Accounting Regulations 2009

These regulations introduce the carbon accounting system used to monitor the Government's compliance with its targets on greenhouse gas emission reduction. The system outlined in the Regulations will calculate the UK's total greenhouse gas emission.

The net UK carbon account is calculated by taking net UK emissions (comprising aggregate gross emissions from sources in the UK, including emissions from land use, land use change and forestry) for a given period and factoring in carbon units which have been brought in from oversees to offset UK emissions (credits) and UK credits which have been disposed of to a third party (debits). It is this net carbon account which must not exceed the carbon budget.

The Order clarifies what types of emissions may be taken into account in calculating the gross and net emissions and also what constitutes a credit and a debit.