UK Climate Change Bill

UK Climate Change Bill – emissions reporting requirements and inclusion of aviation and shipping

On 28 October 2008, the UK's House of Commons approved the Climate Change Bill, with some late amendments to include in the scope of the Bill emissions from the aviation and shipping sectors that are deemed to be from UK sources by the end of 2012. Whilst the latest wording of the Bill is still emerging, the Bill commits the UK to an 80% reduction in greenhouse gas (GHG) emissions by 2050, compared with 1990 levels.

This latest development occurs a few weeks ahead of the United Nations’ negotiations in Poznan on a successor treaty to the Kyoto Protocol, and will be of interest both to participants in the UK energy sector as well as to large and medium-sized UK businesses in other industry sectors that will be affected by the corporate reporting requirements and GHG emission reduction targets set out in the Bill.

Key points

The Bill has a number of significant features. In particular, it:

• provides powers to establish trading schemes for the purpose of limiting GHGs;
• confers powers to create waste reduction pilot schemes;
• amends the provisions of the Energy Act 2004 on renewable transport fuel obligations;
• includes six of the main GHGs, not only carbon dioxide;
• requires the Government to publish five yearly carbon budgets as from 2008;
• creates a Committee on Climate Change, which is to advise the Government on the levels of carbon budgets to be set, the balance between domestic emissions reductions and the use of carbon credits from clean energy projects, and whether the 2050 target should be increased; and
• places a duty on the Government to assess the risk to the UK from the impacts of climate change.

Aviation and shipping Emissions

The Bill also envisages that GHG emissions from the shipping and aviation industry that can be allocated to UK sources will be “taken into account” as part of the GHG emission reductions targets covered by the Bill. However, the Government has left the method of measuring “international” emissions from these sectors to be set in coming years. Under the provisions of the Bill, the Government must consider including emissions from these two sectors by 2012, or justify to Parliament why such rules have not been put in place.

This latest amendment is of particular interest as it mirrors the EU Commission’s reform proposals for Phase 3 of the EU Emissions Trading Scheme (2013 onwards), which include broadening the scope of gases and industry sectors covered by the scheme, including the aviation and shipping sectors.

Emissions reporting

The Bill also places new responsibilities on large and medium-sized companies (to be mandatory from 2012 onwards) to disclose their carbon emissions and sets out a process for establishing more rigorous common reporting standards. However, at this stage, the size of company that would fall within the rules remains to be defined.