02 July 2015
Article by Karen Whitfield. National Assembly for Wales Research Service
The Environment (Wales) Bill 2015 was laid on 11 May by the Minister for Natural Resources, Carl Sargeant. The Bill is extensive and covers eight different and distinct policy areas, one of which is climate change.
The Bill introduces statutory climate change targets for the first time in Wales. Wales’ current climate change targets are non-statutory. The Bill sets a 2050 emissions reduction target of 80% from a baseline of 1990 or 1995, depending on each greenhouse gas to be monitored.
The Bill requires Welsh Ministers to specify interim targets in regulations that are consistent with meeting the 2050 target, though there is no firm timeframe by when these should be set. In order to meet the targets, the Welsh Government will:
- set five-yearly carbon budgets;
- set out policies and proposals showing how each carbon budget will be achieved; and
- report (every five years) on whether each carbon budget has been met
- if a budget is not met, the Welsh Government must set out what action it will take to compensate for excess emissions in a budgetary period.
The Bill also establishes an Advisory Body (likely to be the UK Committee on Climate Change) to advise on setting carbon budgets and report on the Welsh Government’s progress towards meeting its targets.
How Welsh carbon budgets will work
Carbon budgets are to be set in regulations, and the budgetary periods are 2016-2020 and then each succeeding period of five years up until 2050. Welsh Ministers have to set the first two carbon budgets before the end of 2018 and the budgets for the third and later periods at least five years before the start of the period in question.
The Bill establishes a net Welsh emissions account to calculate whether Wales has met each carbon budget. The account will be calculated by:
- determining the net amount of greenhouse gas emissions from Wales for a year (taking account of both emissions and gases removed from the atmosphere due to carbon sinks such as forests or peat bogs);
- subtracting the number of carbon units credited to the account; and
- adding the number of carbon units debited from the account.
Carbon units credited or debited are those that are part of an existing carbon trading scheme. At present, the only scheme operational in the UK and Wales is the EU Emissions Trading Scheme (EU ETS). The EU ETS operates at a company or installation level with each company provided with a certain amount of emissions allowances. Companies must ensure they stay within their allotted limit by buying carbon credits from others if they cannot meet their target themselves. Alternatively, if a company reduces its emissions by more than its allowance it can bank spare credits for future years or it can sell them to companies needing additional carbon credits.
The Welsh Government’s annual Climate Change Report for 2014 notes that EU ETS emissions account for a significant portion of Welsh emissions, 54% in 2012, because of the heavy industry based in Wales and because it is a net energy exporter. This is a greater share of emissions than anywhere else in the UK, and it means that the way in which EU ETS emissions will be counted towards the net Wales emissions account is particularly important.
In addition to the above calculations, the Bill provides that the Welsh Government can take up to 1% from a future carbon budget and bring it back into the current budget period. It can also carry any unused part of a carbon budget forward into the next budgetary period if Wales reduces its emissions for the current period below the budgetary allowance.
Notable differences from UK and Scottish climate change legislation
The new legislation has strong similarities with the UK Climate Change Act 2008 (the UK Act) and also with the Climate Change (Scotland) Act 2009 (the Scotland Act), which have the same 2050 target. It more closely follows the structure of the UK Act, which also sets five-yearly carbon budgets, though the Welsh carbon budgetary periods are not the same as those of the UK. The Scotland Act has annual targets instead. Each annual target has to be at least 3% lower than the previous year.
The Scotland Act includes an interim target to reduce emissions by 42 per cent from the 1990 baseline by 2020. The UK Act doesn’t require interim targets to be set, but it does provide that the 2018-2022 UK carbon budget must be at least 34% lower than 1990 baseline. The Welsh interim target is to be set in regulations.
The UK and Scotland Acts both contain duties that have the purpose of limiting the contribution of carbon trading to meeting a carbon budget, to ensure that the focus is on reducing emissions at home. The Bill gives Welsh Ministers the power to limit the contribution of carbon unit credits to the net emissions account, but this is not a duty. Unlike the UK and Scotland Acts, the Bill includes powers for Welsh Ministers to make regulations that specify that certain types of carbon units do not count towards the limit.
Both the UK and Scotland Acts contain provision for annual reporting on progress against the targets. Wales currently has annual reports that communicate progress on the current non-statutory emissions reduction targets. The Bill would reduce this to five-yearly reporting, though information would still be available at a Wales level via the annual Greenhouse Gas Inventory reports. The UK Act also contains a duty for the Secretary of State to provide ‘indicative annual ranges’ for the net UK carbon account: a range within which the Secretary of State expects the amount of the net UK carbon account for the year to fall.
Why are these new provisions necessary?
As recently reported in the Research Service blog, the latest Greenhouse Gas Inventory figures for Wales show that emissions have increased by 10% between 2012 and 2013, largely driven by factors outside the remit of the current Wales Climate Change Strategy. The Explanatory Memorandum for the Bill states its purpose is ‘to provide a legislative requirement for a clear pathway for decarbonisation’ and for the first time it includes the Welsh traded sector via carbon accounting.
It will be interesting to see if the new provisions provide the necessary step-change for achieving carbon reduction in Wales.