TCFD: 4 key points from the recommendations

The Task Force on Climate-related Disclosures (TCFD) was established in 2015 by the international Financial Stability Board. It is based on the growing consensus that climate change has immediate effects on economic decisions. Investors are growing more aware of climate-related risks and putting more faith in organisations that are planning ahead.

In a recent series of environmental measures from the government, Chancellor Rishi Sunak announced plans to make alignment with the TCFD guidelines mandatory. This will apply to most sectors of the economy by 2025 including listed companies, banks, and large private businesses. This part of the green recovery plan aims to bolster the UK’s position as a global leader for green finance.

“By taking as many equivalence decisions as we can in the absence of clarity from the EU, we’re doing what’s right for the UK and providing firms with certainty and stability.”
– Chancellor Rishi Sunak

Can increased transparency help achieve net zero and a stable green economy? We look at the key points and benefits of the guidelines for the TFCD.

What are climate-related risks?

The Task Force broke down climate-related risks into two major categories:

  • risks related to the transition to a lower-carbon economy, and
  • risks related to the physical impacts of climate change.

Transition risks include shifts in policy and litigation, market, technology and reputation. Organisations are already seeing this impact with climate-related litigation and policy changes rising. Costs of operation, raw materials, and products are all vulnerable to shifts in policy, technology, and markets. And changes in consumer preferences and customer behaviour must also be taken into account.

Physical risks involve the effects of climate change on the natural world. These are broken down into two categories: acute and chronic risk. Acute risk involves extreme weather events such as wildfires or floods. Chronic risk refers to longer-term shifts in climate patterns. These could affect anything from an organisations supply chain to their employees’ safety.

two people working on a white board

What are climate-related opportunities?

In light of the potential risks posed by climate change, the TCFD also recommends several opportunities. These are solutions that can reduce risk and provide organisations with long-term stability.

  • Resource efficiency: Making your buildings and transportation as efficient as possible by integrating intelligent energy management, reducing water usage and consumption, and recycling.
  • Energy source: Implementing the use of clean energy sources through procurement or onsite generation and taking advantage of policy incentives.
  • Products and services: Developing low-emission goods or services and/or innovative climate-related products.
  • Markets: Having access to new markets and assets and use of public-sector incentives.
  • Resilience: Boosting financial and reputational stability by adopting sustainable solutions such as energy efficiency and supporting renewable energy.

What are the recommended disclosures?

There are four recommendations laid out by the task force for disclosures.

  • Governance: Disclosure of the board’s oversight on, and management’s role in, assessing and managing climate-related risks and opportunities.
  • Strategy: Disclosure of the short and long term climate-related risks and opportunities, their impact on the organisation, and the resilience of the strategy in place to manage those risks and opportunities.
  • Risk Management: Disclosure of the organisation’s process for identifying, assessing and managing risks, and how this is integrated into the organisation’s overall risk management.
  • Metrics and Targets: Disclosure of the metrics used to assess risks – Scope 1, Scope 2, and Scope 3 greenhouse gas emissions, the risks they pose, and the targets in place to manage risks and opportunities.

What are the benefits of implementing TCFD?

In the future green economy, disclosures like these will be crucial for a company’s sustainability and resiliency. Implementing TCFDs will help companies to identify and assess the risks posed by climate change. They can then address their structural weaknesses and implement mitigation and adaptation efforts to future-proof their business. Organisations that do this will have a competitive advantage over those that don’t when it comes to future funding and investments.

At EIC we are experienced in helping clients mitigate climate-related risks. Through our unrivalled energy management services and cutting-edge technology, we can help with most of the TCFD’s recommendations. From resource efficiency and clean energy to your carbon compliance, our goal is to simplify your sustainability journey. For more information on future-proofing your organisation, contact us at EIC.

Climate risk disclosure and the new green bond

Earlier this week, Rishi Sunak and the FCA announced that climate risk disclosure would become mandatory for many of the UK’s largest organisations by 2025. As part of the announcement, Sunak also revealed a new green bond designed to stimulate sustainable growth and reinforce Britain’s position as a global green finance centre. We explore what these two developments mean for UK businesses and how best to prepare.

Doubling down

Climate risk disclosure describes a voluntary process whereby large organisations would assess how the effects of global warming could influence their practices and success in the near-midterm future.

The purpose of these disclosures is to better prepare both companies and their investors for unforeseen circumstances due to climate change. On Monday, Rishi Sunak announced a roadmap that would see these disclosures become mandatory for a wide range of organisation types.

This roadmap dictates that the fulfillment of new criteria will arrive gradually over the next five years. The FCA will publish the first set of rules at the end of 2021.

The FCA’s decision most immediately affects financial institutions with a premium listing. It will foster investor confidence as the UK tries to rebuild its economy. Banks, building societies, insurance companies, and occupational pension schemes worth more than £5bn are among the types of organisations affected. They will be expected to provide their reports by late 2022.

The roadmap then stipulates how these requirements will be extended across other sectors leading up to 2025.

The UK is the first G20 country to introduce mandatory climate disclosure and it’s an interesting gambit from the FCA. Obviously, the hope is that investors will recognise the long-term risk of climate change and that the shift will bolster their confidence in UK finance.

If this is the case, the disclosures will advertise the UK as a financing powerhouse despite climate change uncertainties.

“Mandating climate disclosure in alignment with the TCFD recommendations will increase the critical mass of data needed by investors and other stakeholders to accelerate measurement and management of a broad set of environmental issues…”

-Paul Simpson, chief executive of CDP

As climate risk increases, we must prepare to weather the storm

Green funding and future intelligence

Unlike mandatory climate risk disclosure, green bonds are not a new concept. The UK will be following countries like Germany and Sweden in opening this new avenue for green investment.

The bond becomes available in 2021 as a part of the government Covid-19 stimulus package. The announcement came after vocal support from a group of major UK investors. Collectively, the 30 individuals that lent support for a green bond manage over £10 trillion in assets.

Sunak also announced that the UK would deliver a universal framework for determining the sustainability of different economic activities. The intention is to create objective criteria to judge which projects should be deemed appropriate to benefit from the bond.

The takeaway from both these announcements is that the value of data on carbon emissions and usage continues to grow. Current plans for disclosure only include financial institutions. However, the momentum of action on climate change suggests that more and more companies will need to disclose.

Our metering service can help you build interactive reports on energy usage, as well as identify areas for improvement. Our energy management services include procurement expertise as well as guidance on carbon compliance schemes that can maximise the value of any current or future metering technology you may invest in.

Active engagement with your carbon footprint and its reduction demonstrates a commitment to mitigate climate risk to would-be investors. For further information on these services get in touch.

 

 

Carbon Neutral: the newest Climate Change war cry

In 2019 EU leaders endorsed the European Commission’s Green Deal, a strategy through which to achieve climate neutrality by 2050. Since then there’s been a slow but steady rise in legislation around, and investment in, renewable energy, low carbon solutions and, more recently, carbon sequestration and storage. The objective has recently been embraced by other global leaders, with recent 2050 pledges from Japan and South Korea. Even China has announced a net zero commitment by 2060.

We break down what carbon neutral means, why it is crucial in the fight against climate change, and how we can achieve carbon neutrality by 2050.

 

What does carbon neutral mean?

When we hear the word carbon, we often think of something harmful that needs getting rid of, which isn’t entirely accurate. Carbon, after all, is a part of all living things, and there is a natural cycle that balances the carbon emitted with the carbon absorbed by plants and soil.

The problem is that humans have disrupted this balance by emitting more carbon than can be absorbed. Through the use of fossil fuels, the deforestation of rainforests, massive population growth, overfishing, and harmful agricultural developments, we are essentially poisoning our planet.

Carbon neutral means there’s a balance between carbon emissions and absorption, so to achieve this we have to emit less and absorb more. This can be done through the adoption of renewable energy, carbon sequestration, reforestation projects, and regenerative farming practices. This holistic approach to fighting climate change could put us on a path towards a more sustainable future.

What it means for the energy industry

Achieving carbon neutrality will require action from all sectors of the economy, the most important being the energy industry. Energy production and use is currently responsible for 75% of greenhouse gas emissions in the EU. Large-scale policy will play a large part in propelling the necessary transformation across the energy industry in order to cut and even capture carbon emissions. However, it will take action from every sector within the energy industry, from buildings being made more energy efficient to our energy sources themselves.

This will mean more commitments to renewable energy options in the UK, more efficient utility monitoring and management, as well as improved energy storage options. We will have to move towards an integrated, flexible energy system that exploits local resources and reduces our reliance on imported oil and gas. There are also recent advancements in carbon sequestration and storage that can be joined with energy generation itself which can make zero or low carbon energy options carbon negative.

As with any sector, change in the energy industry requires action on the parts of everyone who produces, invests in, or consumes energy. Every building and organisation can make a difference, and EIC can help.

 

How EIC is working towards Carbon Neutral

Major changes have to be made in every sector of the economy, from the food we grow to the way we travel. We at EIC are doing everything we can to support the changes needed within the energy industry. By helping organisations monitor and reduce their carbon footprints, navigating tricky compliance legislation, and advising on green energy procurement options, we are simplifying sustainability for businesses.

The Hydrogen Age

EIC explores the potential of Hydrogen fuel to decarbonise the UK, its domestic supporters and success it has already enjoyed in the EU.

Hydrogen showing carbon the door

In the wake of COVID-19, economic recovery is now a top priority for the UK government. However, Boris Johnson and Rishi Sunak have both staked their flag in making sure it is a ‘green’ economic recovery. As such, industry leaders – particularly within the energy sector – have reopened the conversation on the role of hydrogen in reaching net zero.

The CCC (Committee on Climate Change) published a report in 2018 summarising its recommendations for a UK hydrogen strategy. The hope is to utilise Hydrogen in the UK’s heating systems, specifically by blending it with natural gas, to reduce its carbon footprint.

UK buildings account for 40% of its energy consumption and 70% of industrial building energy is used on space heating and cooling. With these figures in mind, hydrogen’s value is clear to see provided it can get off the ground.

Unfortunately, there are several roadblocks to hydrogen use on a mass scale. The biggest of these is that it would require an infrastructural overall of current heating systems. Blended gas requires plastic pipes while the vast majority of those in the UK are iron.

In addition, the production of hydrogen fuel is highly carbon-intensive. Fortunately, this embedded carbon can be offset by CCS (carbon capture and storage) technology into its production.

However, these are costly caveats to making hydrogen a viable fuel replacement. Naturally, there are concerns that the government may opt for cheaper, quicker progress that, ironically, may prove unsustainable.

 “On the one hand, we need to put money where it has an immediate economic impact and in the most affected sectors. On the other, we need to keep in mind the long-term benefits of making our economy more resilient.”

Kadri Simson, European Commissioner for energy

Forest and low cloudsPrivate sector rescue

The EU Commission announced in June that it would provide €750 billion for its green recovery plan, reserving €1 billion for R&D into green hydrogen. Simson has stated that hydrogen has the potential to capture 10-16% of the EU’s energy market by 2050.

Following the EU’s lead, industry leaders in the UK approached the government and questioned the absence of hydrogen in both the spring budget COVID recovery plan.

Last month, a letter from the chiefs of four major unions implored the government to move forward on hydrogen development. The leaders of GMB, Prospect, Unison and Unite cited, in the letter, the massive reductions this could offer in the heat, transport and heavy industry sectors. Of course, the development of any new technology sector would also create thousands of jobs.

However, the letter was only one component of the “Hydrogen Strategy Now” campaign led by firms like EDF and Siemens. These companies, along with others supporting the campaign, have stated intentions to invest £1.5bn into hydrogen development.

The government must now seize the initiative and provide the necessary funding and support to make hydrogen happen. Firms that desire to adopt a long-term view of their energy and heat use might benefit from EICs services.

EIC’s combined heat and power solution have saved businesses up to 40% on energy costs. EIC can also provide a  carbon management team able to deliver a comprehensive net-zero strategy. Find out more about the services we offer.

 

Success is negative: Carbon negative office spaces

EIC explores the carbon-negative office spaces that are emerging, their role in the green recovery and the technology that make them possible.

Favour the bold

The path to net zero is fraught with obstacles and among these is the carbon intensive nature of the mainstream construction sector. Materials like concrete are extremely resource intensive to produce.

While often offset on a citywide scale, some firms are beginning to focus on the buildings themselves and work sustainability into their initial designs.

Blazing the smoke-free trail are Norwegian architects Snøhetta, who will design exclusively carbon-neutral buildings over the next decade.

The aim is then that from 2030 onwards, Snøhetta will focus on creating carbon-negative designs.

Carbon negative structures either generate more energy than they consume, or sequester more carbon than they produce. The figure includes expenses from initial  construction and materials, as well as operation and decommissioning.

Elusive costs like these are problematic, with 85% of building emissions generated by materials and construction, before the structure is ever used.

“For the next 10 years, we have the ambition of having projects on the table that will become CO2 negative in the cradle-to-cradle definition… This means we have to understand the embodied energies and all the materials used.”

-Snøhetta co-founder Kjetil Thorsen

Balancing the books

Since less intensive materials suited to large scale construction are not yet widely available, balancing through generation will be key.  Solar is central to Snøhettas plans, with structures taking about 60 years to hit carbon negative with embedded generation. The architect recently completed its Powerhouse Brattørkaia project, which boasts an identical timeline for net negative. The Powerhouse also sports a cutting edge ‘wedge’ shape designed to maximise exposure to the sun’s rays.

While this may seem like a life sentence for business leaders, it is refreshing that groups like Snøhetta are beginning to think in terms of multi-generational gains.

Bywater Properties are leading a similar development project aimed to create the lowest-carbon workplace in London. The office, named ‘Paradise’ for the road it occupies: Old Paradise Street. Supermarket, Iceland has already secured the majority of this space, planting a green flag for the brand in the minds of its customers.

My generation

It is no secret that the attraction of short-term gains have significantly contributed to the environmental challenges we now face.

However, vision extending beyond the next board meeting can help transform the UK and global economy to reach net zero. Carbon negative buildings are a part of that vision.

Unfortunately, that can feel exclusionary to firms that have already established their sites and do not have the luxury of completely retrofitting them.

The complex, modular nature of structures does mean that while carbon negative may not be feasible, ‘carbon-light’ might be possible.

Intelligent building control is one of the most effective ways to improve your carbon profile. Primarily because it streamlines the carbon-producing elements of a building, mainly utility consumption, and shrinks carbon footprint as a result.

A holistic ally in carbon reduction is the addition of green spaces to working environments, since these also sequester carbon.

On-site generation further reduces your reliance on the grid and the subsequent sequestered carbon in meeting demand – particularly across long distances.

Other benefits include improved energy supply security, added leverage in procurement talks and a better carbon profile for crucial legislation.

EIC understands that intelligent building design and frugality around resource-use work in hand in glove. As such, EIC offers a comprehensive carbon service combining building management, intelligent procure and compliance acumen.

Marriage of these three pillars means unlocking the full potential of sites, and leveraging for the benefit of all. EIC’s full offering is on its services page.

 

 

 

 

Pause for thought: CCA extension consultation closes

Following the closure of the government’s consultation on reforms and an extension to the Climate Change Agreements (CCA) scheme on Thursday, EIC explores the success of the scheme so far and the opportunity that this extension presents to business leaders.

Laying a foundation

During the Spring Budget announcement, Chancellor Sunak made it clear that while the economy would be strained during and after lockdown, its recovery could not come at the expense of UK climate goals.

Little over a month after the budget announcement, the Department for Business, Energy and Industrial Strategy (BEIS) proposed an extension to the Climate Change Agreements (CCA) scheme.

No doubt, this move was designed to engage with businesses that already fit the criteria of the scheme but were unable to join it previously and in doing so allow them to benefit from the reduced CCL cost and the environment to benefit from reduced carbon emissions.

2017 saw the Government aim its sights at a 20% improvement in commercial and industrial energy efficiency by 2030, this goal has informed the consultation with that target being upheld in regards to the extension.

The popularity and effectiveness of the scheme are undeniable, with recent analyses demonstrating that 80-100% of businesses were participating in most eligible sectors.

A consensus of this magnitude inspires hope for the UK’s climate goals, given that, of the UK’s total greenhouse gas emissions, 25% are business-driven. An evaluation for the 2017 Clean Growth Strategy also showed that up to 22m tonnes of CO2 could be saved through investments in energy efficiency technology.

looking through a gate and seeing horsesAn open forum

The BEIS has made clear that facilities that do meet the current criteria would now be able to join the scheme for the first time since its initial closure in October 2018.

The Target Period being proposed, in addition to remaining in line with periods 1-4 of the scheme (running from the 1st January 2021 until 31st December 2022), will be supported by a variation of the certification period. Initially planned to end in March 2023, it would be pushed back to June of the same year to allow participants to gain certification for CCL discounts between April and June 2023. The added certification period, for which facilities will only be certified having met obligations in Target Period 5, will begin on 1 July 2023 and end on 31 March 2025.

The CCA’s closing in 2018 had shut out new entrants to the scheme; however, businesses fitting the eligibility now have an opportunity to recoup up to 92% on electricity and 83% on gas CCL charges.

Applications to the CCA can be long-winded and complex, however, the return on an initial investment of time is huge. Especially considering that an average energy-intensive business the added certification period, for which facilities will only be certified having met obligations in Target Period 5, will begin on 1 July 2023 and end on 31 March 2025.

Based on these figures, the opportunity presented by Sunak and the BEIS has the potential to dramatically change the landscape of the UK energy industry post-COVID-19. Alongside legislation like ESOS, MEES and SECR, the CCA calls for expertise rather than direct action. EIC oversees the entire CCA application process and subsequent management of the service following approval of the application. We will be able to show the fiscal savings based on individual business’s energy consumption and ROI against our typical fees.

EIC offers a comprehensive range of compliance services as well as ancillary strategies that can help improve your carbon profile while reducing utility costs.

 

The green gold rush: CCA extension proposed

EIC explains the government’s proposed extension to the climate change agreements initiative (CCA), benefits of compliance and how we can ensure you qualify.

CCA: How and why

The climate change agreements initiative was established to incentivise the continued and effective implementation of energy efficiency strategies among the most energy-intensive industrial sectors.

icebergs in the sea

CCA encourages businesses to streamline their energy usage by offering a 93% reduction on electricity, and a 78% reduction on other fuels accrued as a result of the climate change levy (CCL).

Since its inception in 2013, approximately 700,000 tonnes of carbon emissions have been prevented each year, with businesses using up to 2.3 TWh less energy or enough to power 140,000 homes.

The need for such legislation becomes painfully obvious when framed in the context of energy wastage, in the City of London alone businesses are losing £35m each year this way according to a Green Alliance think tank report.

Originally, the initiative was due to conclude in March 2023 however Chancellor of the exchequer Rishi Sunak announced in the spring budget that there would be a consultation on a possible two-year extension to the initiative.

The show goes on

While 9,000 facilities across the UK are already benefiting from the CCA, this extension is estimated to be worth as much as £300m annually in CCL discounts, for the businesses already taking part in the scheme as well as new beneficiaries that would now be able to apply.

It works by encouraging businesses to make improvements to site energy efficiency over an eight-year period. In return, businesses would receive a discount worth as much as £300m annually on CCL bills.

Given the financial uncertainty that COVID-19 continues to inspire, and cooling attitudes towards sustainable development and practices, the news of an extension is welcome on all fronts.

“Extending the Climate Change Agreement scheme will give businesses greater clarity and security at a time when they need it most. This extension will save businesses money while cutting emissions…”

Energy Minister Kwasi Kwarteng

The consultation will cover proposals for the addition of a new Target Period, from 1 January 2021 to 31 December 2022, an extension of certification for reduced rates of CCL for participants 31 March 2025 and finally, to re-open the scheme, allowing eligible facilities not currently participating to apply to join.

Businesses that had previously missed the opportunity to join the scheme now stand a chance of taking advantage of these savings whilst contributing to a greener economy.

However, it should be noted that the criteria of eligibility for the scheme is not under review, rather the extra time will allow businesses to implement strategies that make them eligible in time for the levy discount to bear fruit.

lightbulbs hanging from the ceiling

The new gold rush

The extension proposed, if approved, presents a significant opportunity to both current beneficiaries and newcomers to the scheme, provided they have the reporting mechanisms in place, to adhere to the scheme.

Businesses that wish to take advantage of this opportunity in future will need to ensure that they are fully compliant with the scheme as soon as possible, in order to reap the most benefit.

EIC’s expert team of carbon consultants and data analysts are dedicated to offering your business a comprehensive CCA service from initial assessments through data analysis to actionable strategy.

SECR: Why use EIC?

A brief look into SECR, why it matters, the deadlines and reasoning behind the legislation and how EIC can combine it with ESOS in an economic package suited to your organization’s needs.

The Nuts and Bolts

The UK’s Streamlined Energy and Carbon Reporting Policy (SECR), is a piece of governmental legislation that came into effect April 1st of last year. It seeks to consistently highlight the carbon footprint of companies, whilst encouraging long term strategies that are congruent to UK carbon emissions goals.

To that end, the SECR requires companies to provide a detailed report which includes items such as their carbon emissions and energy efficiency / carbon reduction behaviours implemented to redress their overall carbon footprint.

Established as the Carbon Reduction Commitment (CRC) was ending, last year’s regulations will affect approximately 11,900 companies in the UK, considerably increasing the range of influence that the CRC originally enjoyed.

The scheme affects businesses described as “large organisations” within the Companies House terminology. Therefore businesses which have at least a turnover of £36 million, balance sheet of at least £18 million, or 250 or more employees, will be within this category.

SECR works in cooperation with the pre-existing legislation the Energy Savings Opportunity Scheme (ESOS).

Year 1 – Act Now

Since the SECR came into effect on April 1st 2019, it means that we now sit on the eve of the first regulatory deadline, with the first trench of qualifying businesses financial year ending in March 2020.

For businesses which also qualify for ESOS, the SECR scheme is a useful tool to provide the necessary data sets required for compliance, making the journey smoother.

As such, we felt that the timing was right to remind our readers of the combined ESOS and SECR package that we offer. The fusing of the two services is designed to remove unnecessary stress and inconvenience with the promise of a dedicated Carbon Consultant.

Finally, EIC also offers a 10% discount to any clients that sign up for a 4-year joint service package, our website contains further details on all of our services and we invite you to find out more should they appeal to you.

Please visit our blog here for the latest news regarding SECR.

 

 

 

 

 

 

General Election 2019 – A focus on energy and climate change

As the date of the General Election nears, there is little doubt that the focus is how the results will affect Brexit. However, as shown by polling carried out by YouGov, electoral concern for the environment is at an all-time high. 25% of voters place it as one of their top three issues facing the country today. This is up from 8% before the 2017 general election. A separate poll by Ipsos found 71% of people believe protecting the environment should be a priority, even if it slows economic growth.

This trend has been reflected in the released manifestos. Each party recognises the climate emergency and is dedicating space to energy and the environment.

Conservatives

The Conservative Manifesto

The Conservative party would maintain their current energy tariff cap policy. It also intends to introduce measures to lower energy bills further. In this effect, there would be a £9.2 billion investment in improving the energy efficiency of homes, schools and hospitals. The party would also support the creation of more environmentally friendly homes.

They state that their first Budget would prioritise the environment with investment in decarbonisation schemes, electric vehicle infrastructure and clean energy. They would also consult on the earliest date they believe appropriate to begin phasing out sales of new petrol and diesel cars.

There are aims to increase the capacity of the offshore wind industry from it’s current 8.5GW to 40GW by 2030. They would also help introduce new floating wind farms. Alongside development of renewables, the Conservatives would also support gas for hydrogen production and nuclear energy.

The moratorium on fracking in England would remain in place. This is unless the Conservatives believe there is scientific evidence that the practice can be carried out safely.

Further investment would include a £1 billion fund to develop “affordable and accessible clean energy”. £800 million to build the first fully-deployed carbon capture storage cluster. There would also be £500 million to help energy-intensive industries transition towards low-carbon technologies.

You can read the full manifesto here

Labour

The Labour Manifesto

The Labour party has committed to a ‘Green New Deal’. The aim is to achieve the majority of required emissions reduction by 2030.

Labour would create a Sustainable Investment Board, involving the oversight of the Chancellor, Business Secretary and Bank of England Governor. They would co-ordinate with trade unions and businesses to deliver investment to necessary areas. The Office of Budget Responsibility would be asked to incorporate climate and environmental impacts into its forecasts so as to properly evaluate decisions made.

They would also seek to bring the energy and water systems into public ownership. They believe this would allow the acceleration and co-ordination needed to upgrade networks at the speed and scale needed to transition to a low-carbon economy.

Labour’s plans would see:

  • A new UK National Energy Agency responsible for the national grid infrastructure and the oversight of the country’s decarbonisation targets.
  • Fourteen new Regional Energy Agencies to replace the existing District Network Operators (DNOs) responsible for decarbonising electricity and heat.
  • The supply arms of the ‘Big Six’ energy companies would be brought into public ownership to continue to supply households while helping consumers reduce their energy demands.

As part of Labour’s ‘National Transformation Fund’ £250 billion would be dedicated to investment in renewable and low-carbon energy and transport, biodiversity and environmental restoration.

Labour aims to deliver nearly 90% of electricity and 50% of heat from renewable and low-carbon sources by 2030. To this effect they would build 7,000 new offshore wind turbines, (this equates to around 52GW) 2,000 new onshore turbines, “enough solar panels to cover 22,000 football pitches” (roughly 157km2) and new nuclear power. Labour would also trial and expand on tidal energy and invest in hydrogen production.

The party will aim to upgrade almost all of the UK’s 27 million homes to the highest energy efficiency standards. They state that this would reduce the average household energy bill by £417 per year by 2030. It also aims to tackle fuel poverty. All new homes would be required to meet a zero-carbon homes standard.

The Labour party would introduce a Climate and Environment Emergency Bill to set out new binding standards for decarbonisation and environmental quality. In addition, they would introduce a new Clean Air Act in line with World Health Organisation (WHO) limits for fine particles and nitrous oxides. The party would aim to end new sales of conventional petrol and diesel vehicles by 2030.

You can read the full manifesto here

Liberal Democrats

The Liberal Democrat Manifesto

If elected, the Liberal Democrats would immediately implement a ten-year emergency programme designed to cut emissions substantially. They would then phase out emissions from remaining hard-to-treat sectors by 2045 at the latest.

The party has identified that their first priorities upon entering government would be:

  • An emergency programme to insulate all Britain’s homes by 2030, cutting emissions and fuel bills and ending fuel poverty.
  • Investing in renewable power so that at least 80 per cent of UK electricity is generated from renewables by 2030 – and banning fracking for good.
  • Protecting nature and the countryside, tackling biodiversity loss and planting 60 million trees a year to absorb carbon, protect wildlife and improve health.
  • Investing in public transport, electrifying Britain’s railways and ensuring that all new cars are electric by 2030.

Specifically, they would aim to accelerate the deployment of renewable power, providing more funding and removing the current government’s restrictions on solar and wind and building more interconnectors to improve security of supply. The party aims to reach at least 80% renewable electricity in the UK by 2030.

The Liberal Democrats would also seek to cut energy bills and reduce fuel poverty by providing retrofits for low-income homes to improve energy efficiency standards. They would introduce a zero-carbon standard to all new homes and non-domestic buildings by 2021. The party would also increase minimum energy efficiency standards for rented properties.

There would be a focus on investment in carbon capture and storage facilities and support to companies on cutting emissions. The party would also pass a new Clean Air Act, based on WHO guidelines.

You can read the full manifesto here

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EU temporarily suspend UK carbon permit processes

EU temporarily suspend UK carbon permit processes

The European Commission has implemented a “no-deal” Contingency Action Plan across specific sectors to help mitigate the continued uncertainty in the UK surrounding the ratification of the Withdrawal Agreement.

The main talking point, regarding energy policy, is the Commission’s plans for the UK’s access to the EU Emissions Trading Scheme (EU ETS).

EU carbon allowances, or European Allowances (EUAs) serve as the unit of compliance under the EU ETS. EUAs are auctioned for use by energy-intensive industries that fall under the scheme, namely power generators, oil refiners, and steel companies, entitling them to emit one tonne of CO2.

How does this affect the EU ETS in the UK?

The Commission has adopted a number of actions in the area of EU climate legislation to “ensure that a “no-deal” scenario does not affect the smooth functioning and the environmental integrity of the Emissions Trading System.”

This involves a decision to temporarily suspend the free allocation of emissions allowances, auctioning, and the exchange of international credits for the UK effective from 1 January 2019.

The Commission has also elected to allow an appropriate annual quota allocation to UK companies for accessing the EU27 market, until 31 December 2020. This will be supplemented through regulation to ensure that the reporting by companies differentiates between the EU market and the UK market to allow a correct allocation of quotas in the future.

Read the full Contingency Action Plan.

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Find out more about EIC Market Intelligence and how we keep our clients informed at a frequency to suit them.

What impact will Brexit have on UK climate change targets?

The energy sector in the UK had already seen significant changes with the Energy Act 2011 and various proposals for reform of the electricity market. The potential impacts of Brexit on the UK and global economy could be far-reaching. However, the direct impact on the energy industry is likely to be more muted.

 

How will Brexit impact on the carbon market and the EU ETS?

The Government has published plans for the implementation of a UK carbon tax in the case of a ‘no-deal’ Brexit.

Under a ‘no-deal’ scenario, the UK would be excluded from participating in the EU Emissions Trading Scheme (ETS). This would mean current participants in the EU ETS who are UK operators of installations will no longer take part in the system.

In this instance, the UK Government will initially meet its existing carbon pricing commitments through the tax system. A carbon price would be applied across the UK, with the inclusion of Northern Ireland, starting at £16/tCO2, marginally less than the current EU ETS price, maintaining the level of carbon pricing across the UK economy post-Brexit.

The tax would be applied to the industrial installations and power plants currently participating in the EU ETS from 1 April 2019.

The House of Commons Business, Energy and Industrial Strategy (BEIS) Committee has strongly recommended remaining in the EU ETS at least until the end of Phase III in 2020.

The UK’s 5th carbon budget, adopted in 2016, assumes continued participation in the EU ETS, and will need to be altered if the UK leaves the EU ETS.

 

Will Brexit affect the UK’s climate change targets?

The UK’s climate change targets are expected to continue unaffected by whatever Brexit deal is reached. The Climate Change Act 2008 established that such goals are undertaken on a national level.

However, there are several international issues in this area which will need to be settled. The UK’s emissions reduction target forms part of the EU target under the Paris Agreement and this will need to be withdrawn. The UK would also need to submit its own Nationally Determined Contribution under the United Nations Framework Convention on Climate Change (UNFCCC) processes.

 

What about renewable energy?

After Brexit, the UK will no longer be obligated by renewable energy targets as part of the EU Renewable Energy Directive. Additional freedom from State Aid restrictions has the potential to allow the Government to shape renewable energy support schemes.

The development of large-scale projects may be impacted by the availability of funding from EU institutions such as the European Investment Bank (EIB). However, renewable and low-carbon energy will remain a focal point of UK energy policy post-Brexit, with national and international decarbonisation obligations unaffected by their relationship with the EU.

As part of the European Union (Withdrawal) Act 2018, EU legislation will be initially transposed into UK law from 29 March 2019. For some elements of the EU law, the UK will need to reach an agreement with the EU in order to maintain the status quo.

 

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Autumn Budget light on energy

During the Chancellor’s hour-long speech the overall focus was on tax and spending, with little said about climate change. What energy-related announcements were made?

 

Climate Change Levy

CCL is a tax on energy delivered to non-domestic users within the UK. Businesses participating in Climate Change Agreements (CCAs) can avoid up to 90% of this levy by investing in agreed energy efficiency and emissions reduction measures.

This latest Budget announced upcoming changes to CCL rates. The Government’s ongoing efforts to rebalance the main rates paid for corporate gas and electricity use will see the two prices brought more in line with each other.

The electricity rate will be lowered in 2020-21 and 2021-22, whilst the gas rate will be increased in 2020-21 and 2021-22 so that it reaches 60% of the electricity main rate by 2021-22. Other fuels, such as coal, will continue to be aligned with the gas rate.

 

The impact to your energy bills

The increase in revenue for the Treasury will come as a direct result of higher energy bills for businesses. An increase in the CCL for 2019 was already expected as a result of the closure of the Carbon Reduction Commitment (CRC).

 

Carbon Price

Carbon Price Support (CPS) is applied to the power sector in the UK, with the exclusion of Northern Ireland, and has been a key driver in the reduction of coal usage in the UK fuel mix.

The Government has decided to maintain the UK’s carbon tax at £18 per tonne of CO2, until April 2021. However, the budget provides plans for the Government to reduce the CPS from 2021-22 if the total carbon price remains elevated.

In addition to this, the Government has published plans for the implementation of a UK carbon tax in the case of a ‘no-deal’ Brexit. Under a ‘no-deal’ scenario, the UK would be excluded from participating in the scheme. This would mean current participants in the EU ETS who are UK operators of installations will no longer take part in the system.

In this instance, the Government will initially meet its existing carbon pricing commitments through the tax system. A carbon price would be applied across the UK, with the inclusion of Northern Ireland, starting at £16 per tonne of CO2, marginally less than the current EU ETS price, maintaining the level of carbon pricing across the UK economy post-Brexit. The tax would be applied to the industrial installations and power plants currently participating in the EU ETS from 1 April 2019.

 

A freeze on fuel duty

Already announced ahead of the Budget, the Government has promised that fuel duty will be frozen for the ninth year in a row. This will see the tax on fuel, currently 57.95p per litre of petrol, diesel, biodiesel, and bioethanol, remain fixed over the winter period.

 

Enhanced Capital Allowances

The Budget also included changes to Enhanced Capital Allowances (ECAs), which are designed to encourage UK businesses to invest in high-performance energy efficiency equipment. The Government plans to end ECAs and First Year Tax Credits for technologies on the Energy Technology List and Water Technology List, from April 2020. The Government believe these ECAs add unnecessary complexity to the tax system and that there are more effective ways to support energy efficiency.

There is no new funding in place yet, but savings will be reinvested in an Industrial Energy Transformation Fund, to support significant energy users to cut their energy bills and help transition UK industry to a low carbon future.

The Government will extend ECAs for companies investing in electric vehicle charge points to 31 March 2023. This is part of the Government’s ambition for the UK to become a world-leader in the ultra-low emission vehicle market.

 

What about renewable energy?

Despite the recent landmark ‘1.5C report’ from the Intergovernmental Panel on Climate Change (IPCC), the Budget was very light on details concerning climate change and the environment. There were no announcements within the Budget to encourage new investment in renewable energy in the UK, despite industry calls to support new onshore wind and solar.

Leading renewable developers have previously urged the Government to clear a path for subsidy-free onshore wind farms, allowing developers to compete for clean energy contracts. Cost projections, published by the Department for Business, Energy and Industrial Strategy (BEIS), show that onshore wind is currently the cheapest power source available.

 

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