Government commits to fourth carbon budget in boost for renewable energy investors

The UK government has announced today that its fourth carbon budget – which sets emission reduction targets in the mid 2020s – will remain unchanged despite pressure to the weaken the measures.

The UK has in place a number of targets for reducing greenhouse gas emissions, building towards the ultimate aim of an 80% cut from 1990 levels by 2050.

The budgets were set by the legally binding Climate Change Act, but the government does hold the power to review and alter the targets.

The fourth budget, which covers the period from 2023 to 2027, had been up for review earlier this year and the outcome had been expected this summer.

Finally, energy secretary, Ed Davey confirmed this morning that the government would commit to the fourth budget.

“Having conducted a detailed review, it is clear that the evidence does not support amending the budget,” he said in a written statement.

“Today’s decision cements the UK’s place as a global leader in combating climate change, which will allow us to play a central role in delivering a global deal to combat climate change at the end of 2015,” he added.

This is apparently despite the best efforts of chancellor George Osborne, who tried to weaken the measures, according to media reports. 

The Financial Times says that Osborne feared the budget would threaten his plans to develop 40 new gas-fired power stations over the next 15 years.

In effect, Osborne’s defeat means the UK must cut national emissions by 50% from 1990 levels by 2025. It should also give confidence to investors that renewable energy and energy efficiency projects are a safe bet for the future.

Since its confirmation, the news has been widely welcomed by business groups, industry bodies and campaigners.

“This decision puts independent expertise and long-term thinking ahead of the possible lure of political point scoring,” said Nina Skorupska, chief executive of the Renewable Energy Association. 

“Across renewable power, heating and transport fuels, investors need certainty that when it comes to the low carbon economy, the government is in it for the long-term,” she added. 

Nicola Walker, director for business environment at CBI, the UK’s leading business lobby, added, “It’s sensible to maintain the Fourth Carbon Budget at this point.”

In the months running up to today’s long-awaited announcement, investors, business leaders and even government advisors had urged ministers not to alter the crucial targets.

In November, the Committee on Climate Change (CCC) – set up by the Climate Change Act to advise the government – ruled there would be “no legal or economic basis” for changing the fourth budget.

In fact, a more recent study suggested the strict regulations imposed by the budget could benefit the UK economy, by creating opportunities in the sustainability sector.

The UK is expected to meet its second carbon budget, which covers 2013 to 2017, largely thanks to the decline in economic activity caused by the recession.

However, experts warn significant investment and effective policies will be needed to reach future targets.

Commenting on today’s announcement, David Nussbaum, chief executive of WWF-UK, said, “Looking ahead, we need the next government – of whatever political complexion – to ensure policies are in place to attract the significant investment in low-carbon infrastructure needed in the coming decade to meet the emission cuts set out in the budget.

“All parties must make this a priority in their general election manifestos.”

Photo: thewritingzone via Flickr

Further reading:

Study: climate change policies could have positive effect on UK economy

Business leaders to PM: keep fourth carbon budget to strengthen investor confidence

Reducing carbon budgets would be ‘incredibly short-sighted’

UK carbon budget ‘feasible and economically sensible’

‘No legal or economic basis’ for weakening UK carbon budget