Energy & Carbon Update – August 2017

Carbon conversion factor updates

The CRC carbon emissions factors have recently been released by the Environment Agency for reporting year 2017-18 (Defra’s full update is still pending). Gas, which changes little, is up just 0.1% on 2016-17, but the grid electricity factor has fallen by 14.6% in one year. This change is a result of coal generation being phased out, together with a surge in renewable generation.

This comes on top of a 10% fall last year, which followed a fall of 7% the year before. Combined, the carbon intensity of UK grid electricity has fallen by 28% in just three years.

This is good news for CRC participants, as it means lower emissions per MWh, hence lower costs.  2017-18 CRC costs per MWh of electricity, at £6.75, are now only slightly higher than in Phase 1 (£6.49), when carbon was just £12 a tonne (compared to £17.70 in 2017-18) – down from a peak of £8.74 in 2014-15.

The Digest of UK Energy Statistics (DUKES) 2017 has just been published. We would expect the data published within this report to be used to calculate the electricity carbon conversion factor for the final year of CRC reporting (2018-19).

This shows a further sharp fall in coal consumption in 2016, together with a surge in gas generation. Renewable generation plateaued, with an increase in renewable generation capacity cancelled out by less favourable weather conditions. Together, this suggests a possible further fall of the electricity carbon intensity – in the range of 16% to 18% – for the final year of CRC reporting (2018-19).

Climate Change Committee report

The UK’s fifth carbon budget was passed in July 2016 and requires an emissions reduction of 57% by 2030 compared to 1990. However, the Climate Change Committee (CCC) believes that current policies fall short of what is needed to meet the target. Their latest report, published in July, highlights that a number of current carbon reduction policies are coming to an end with no replacement legislation being tabled. The report proposes increasing disclosure of energy and environmental performance, and associated risks, including:

• Retaining a carbon price after leaving the EU, with EUETS (or equivalent) and EU efficiency standards to be preserved
• A stronger policy framework for industrial energy efficiency, including an effective reporting mechanism
• Promoting voluntary disclosure of climate change risks by all companies including supply-chain-based risks
• Continuous tightening of standards for energy performance in buildings, and an overall strategy for long-term industrial decarbonisation
• Using public procurement rules to promote disclosure of climate change risks

Other news

CRC deadline –  31^st July saw the deadline for submission of 2016-17 CRC annual reports. There are only two further reporting years before the CRC scheme finishes and CCL is increased to compensate. This year over two million tonnes of CO₂ emissions were reported by Inenco on behalf of our clients, over 5% of total national CRC emissions. This includes three of the top 20 largest CRC emitters, and the largest emitting NHS Trust.

CCA update –  The 1^st of July marked the deadline for penalty payments for Target Period 2. Companies who have made this payment will be recertified into Target Period 3. New CCA entrants, who are on course to achieve their sector targets, will see their targets tightened going into Target Period 3.

CDP submissions –  The deadline for CDP (Carbon Disclosure Project) report submissions ended in June. These will be assessed and graded, with results to be announced in October.  CDP is placing an increasing focus on the setting of science-based emission reduction targets (SBTs), with 61 companies having an officially approved SBT to date.