We will also consider whether there could be opportunities for additional offshore wind deployment in the 2020s, if this is cost-effective and deliverable. This would mean up to £557 million for further Pot 2 Contract for Difference auctions, with the next one planned for spring 2019. We will work with the Crown Estate and the Crown Estate (Scotland) to understand the potential for deployment of offshore wind in the late 2020s and beyond and it is our current intention that wind projects on the remote islands of Scotland that directly benefit local communities will be eligible for the next Pot 2 auction, subject to obtaining 4. We want to see more people investing in solar without government support and are currently considering options for our approach to small scale low carbon generation beyond 2019, and will provide an update later this year. More nascent technologies such as wave, tidal stream and tidal range, could also have a role in the long-term decarbonisation of the UK, but they will need to demonstrate how they can compete with other forms of generation. 5. We remain committed to carbon pricing to help reduce emissions in the power sector. Further details on carbon prices for the 2020s will be set out in the autumn 2017 Delivering Smarter, More Efficient Energy 6. The Government will ensure that every household is offered a smart meter by their energy supplier by the end of 2020, and we expect energy suppliers to make every effort to provide smart meters to all their 7. The Government, Ofgem and industry will implement the 29 actions set out in the Smart Systems and Flexibility Plan published on 24 July. These will enable technologies such as energy storage and demand side response to compete effectively within the energy market, help integrate more low carbon generation such as solar into our energy system, and deliver secure, smart appliances and smart tariffs to allow consumers to benefit from using energy at times when it is cheaper. Innovations and other steps to increase flexibility could unlock up to £40 billion in energy cost savings up to 2050 258. 258 BEIS and Ofgem (2017) Upgrading our energy smart systems and flexibility plan upgrading-our-energy-system-smart-systems-and-flexibility-plan

Department for Business, Energy and Industrial Strategy 8. We will continue to work with Ofgem and the National Grid to create a more independent system operator which will help to keep household bills low through greater competition, coordination and innovation 9. We will work with Ofgem to ensure the necessary regulatory and market arrangements evolve to support the development of a clean, smart and flexible energy system as outlined in their strategy for regulating the future energy system259. 10. We will work to ensure significant private investment in new electricity interconnectors, which will help keep prices low for consumers, ensure a more secure grid and help integrate clean generation. Project assessments indicate the potential for at least 9.5 gigawatts more interconnection by the early-to-mid 2020s, in addition to the 4 gigawatts today and the 4.4 gigawatts 11. Ofgem’s price control regime will enable up to £26 billion of investment in upgrading and operating our electricity distribution networks from 2015-23262 and we will work closely with industry to capitalise on the opportunities for smart integration of electric vehicles into the electricity system. 12. We confirm that when an installer installs solar panels with a battery in residential accommodation, this can attract a reduced VAT rate of 5 per cent if the installation conditions are met 263. We will keep the tax treatment of technologies such as solar, storage and heat networks under review. 13. The Government has commissioned an independent review into the cost of energy led by Professor Dieter Helm CBE which will recommend ways to deliver the Government’s carbon targets and ensure security of supply at minimum cost to both industry and domestic consumers. Once Ministers have had the opportunity to consider the Helm review’s proposals, the Clean Growth Strategy will incorporate its recommendations into our further policy 14. We are publishing a draft bill to require Ofgem to impose a cap on standard variable and default tariffs across the whole market. 15. The existing Levy Control Framework will be replaced by a new set of controls beyond 2020/21. These will be set out later this year. 16. We are evaluating the results of the Electricity Demand Reduction Pilot, which has offered organisations £5.4 million of funding for projects that could reduce bills and improve security of supply through making energy Government Innovation Investment The Government expects to invest around £900 million 264 of public funds between 2015 and 2021 in research and innovation in the • Power and smart systems : Ensuring that the power system is smart and resilient to new demands and new sources of supply 259 Ofgem (2017) Our strategy for regulating the future energy system our-strategy-regulating-future-energy-system 260 Ofgem 261 Ofgem (2017) Cap and floor Initial Project Assessment of the GridLink, NeuConnect and NorthConnect Interconnectors publications-and-updates/cap-and-floor-regime-initial-project-assessment-gridlink-neuconnect-and-northconnect-interconnectors 262 Ofgem (2017) RIIO ED1 Annual Report 2015-16 263 Each case will be considered on the specific facts. If batteries are sold separately and retrofitted to existing solar systems, VAT will be charged at the standard rate of 20%. 264 All figures are indicative and are subject to competitive bidding processes across sectors and value for money tests. Numbers may not sum due to rounding. will be important for energy security, cost and industrial opportunities. The Government, in partnership with the Research Councils and Innovate UK, expects to invest around £265 million in research, development and deployment in this area which will help to reduce the cost of electricity storage, advance innovative demand response technologies and develop new ways of balancing the grid, for example using EVs. • We need to bring down the costs of nuclear power while maintaining safety by investing in innovation that will help plants to be built to time and budget.
The Government, in partnership with the Research Councils and Innovate UK, expects to invest around £460 million to support work in areas including future nuclear fuels, new nuclear manufacturing techniques, recycling and reprocessing, and advanced reactor design. The Government has asked the Nuclear Innovation and Research Office (NIRO) to convene a new advisory Board, building on the success of the Nuclear Innovation and Research Advisory Board (NIRAB). The Board will provide independent expertise and advice to support and inform the Government’s Nuclear Innovation Programme. The Government is also announcing that it will invest £7 million to further develop the capability and capacity of the nuclear regulators to support the development of advanced technologies. Industry is developing a potential nuclear sector deal as part of the Government’s Industrial Strategy, co-ordinated around the objective of achieving cost reductions. • The UK already has a world leading offshore wind sector and is well placed to benefit from further investment in renewables innovation to accelerate cost reduction. The Government, in partnership with the Research Councils and Innovate UK, expects to invest around £177 million to further reduce the cost of renewables, including innovation in offshore wind turbine blade technology and foundations. New innovation opportunities are likely to arise in a number of areas, including floating offshore wind platforms, and advanced • Carbon capture, usage and CCUS could reduce the cost of meeting our 2050 target by supporting emissions reductions in industry, power, heating and transport265. Our new approach to CCUS is set out in the • Ofgem is making available to GB electricity network companies up to £525 million of regulated expenditure between 2016 and 2021266. The goal is to support smarter, flexible networks, from enabling the integration of clean generation through to customer-focussed energy efficiency measures. This builds on previous network company innovation which delivered 4.5 – 6.5 times more benefits for consumers than 265 BEIS internal analysis of 2050 pathways 267 Poyry and Ricardo Energy & Environment (2016) An independent evaluation of the LCNF

Department for Business, Energy and Industrial Strategy 268 BEIS (2017) Final UK greenhouse gas emissions national 1990-2015 final-uk-greenhouse-gas-emissions-national-statistics 269 Defra (2016) ENV18 - Local authority collected annual results tables env18-local-authority-collected-waste-annual-results-tables 270 BEIS (2017) Energy Renewables The UK is generating more value from the use of our natural resources (covering livestock, crops, trees, land use and waste) while also cutting emissions. We have halved our emissions from these sectors since 1990 and they now only account for 15 per cent of total UK emissions268. During this time emissions from the waste sector have decreased by 73 per cent. This has been driven by taxing waste to landfill, increased recycling and more and better waste infrastructure. We have seen household recycling rates increase from 11 per cent to 44 per cent between 2000/1 and 2015/16 269. At the same time, the UK waste sector has become an important contributor to electricity generation. Waste helped to generate 14 per cent of UK renewable electricity in 2015, enough to power 2.3 million homes270. UK waste emissions UK gross domestic product

271 ONS (2016) Annual and quarterly low level aggregates of UK output gross value added (GVA), datasets/ukgdpolowlevelaggregates/current This shift in resource efficiency has also been seen in agriculture – since 1990 emissions from producing a kilogram of pork have decreased by 30 per cent and by 16 per cent for a litre of milk. Many of our farms are using more efficient agricultural practices, for example improving crop nutrient and crop health management. We want low emission, highly productive land while ensuring we hand our environment on to the next generation in a better state than we found it. As part of this, we want the UK to become a world leader in terms of competitiveness, resource productivity and resource maximising the value we extract from our resources, and minimising the negative environmental and carbon impacts associated with their extraction, use and disposal. We will work toward achieving zero Reducing emissions from natural resources will be important for meeting the 2050 target cost- effectively. Emissions from natural resources could fall by 30 per cent, with tree cover in England increasing by 180,000 hectares from 9.8 per cent to 11 per cent, as they are nurtured from saplings into maturity, providing essential spaces for our communities and enhancing our One possible pathway to 2032 could involve emissions from our natural resources falling by almost two fifths compared to today, and is consistent with meeting the Government’s 2060 aspiration, to increase England’s woodland cover from 10 per cent to 12 per cent. The pathway ramps-up planting in the 2020s recognising the significant contribution trees make to later carbon ONS; BEIS Greenhouse Gas Inventory Statistics Agricultural Emissions Agricultural Output

Department for Business, Energy and Industrial Strategy To achieve this 2032 pathway, we need to ensure that our farmers and land managers have the right incentives to promote environmental improvement while encouraging consumers, businesses and industry to further reduce waste and improve their resource efficiency, resulting in reduced bills. This • Leaving the Common Agricultural Policy and designing a new system of future agricultural support will give us the opportunity to address climate change more directly. We will design a new system to support the future of farming and the countryside, with a strong focus on delivering better environmental outcomes, including tackling climate change. An Agriculture Bill was announced in the Queen’s Speech following the 2017 general election, the details of which will be announced shortly. Emissions from land, waste & F-gases the clean growth pathway, 1990-2050

• Our indicative pathway could involve planting up to 130,000 hectares of new woodland and implement plans for farmers to plant more trees across England, providing not just carbon reduction but recreational space for our growing communities and timber for • We will develop new ambitious plans for the sustainable management of our natural environment including capturing more carbon by our plants and soil.
• Action to divert more food waste than ever before from landfill, to support resource productivity and avoid further emissions by preventing food waste in the first place. The UK has some of the most dynamic and innovative businesses working on using our natural resources more efficiently. Government will work with them to deliver smart and ambitious regulation and targets to help us meet new environmental demands while also driving growth from these sectors. There are clear economic benefits to be gained from driving resource productivity, a more efficient farming sector and developing the UK’s land use sector. Forestry is a growth sector, with forestry and wood processing providing 43,000 jobs in the UK and contributing £2 billion to the economy272. This, in turn, provides an important carbon sink – the doubling of woodland cover over the past century means UK forests currently absorb 20 million tonnes of Analysis from the Waste and Resources Action Programme (WRAP) suggests progress to a more resource efficient economy has the potential to create up to 205,000 jobs 273. Some 54,000 of these jobs could be created in regions and at pay grades where there is spare capacity, making a net contribution to UK 272 Forestry Commission (2016) Forestry Statistics 2016 forestry.gov.uk/pdf/Ch7_Employment_FS2016.pdf/$FILE/Ch7_Employment_FS2016.pdf Estimate of economic value and jobs relates to forestry and primary wood processing; National Atmospheric Emissions Inventory (2017) Projections of emissions and removals from the LULUCF sector to 2050 273 Waste and Resources Action Programme (2015) Employment and the Circular Economy Manchester City of Trees is an urban community partnership focussed on tree planting, woodland management and re- connecting communities to green spaces. The goals of the project are 3 million trees planted, one for every man, woman and child across Greater Manchester, 2,000 hectares of unmanaged woodland brought back into a productive state, and to connect people to the trees and woods around them. Department for Business, Energy and Industrial Strategy The Government’s 25 Year Environment Plan will set out the Government’s approach to improving our natural environment, including reducing both carbon emissions and other dangerous pollutants. In meeting carbon budgets we are committed to policy development that enhances our natural assets, helps prepare for the impacts of climate change and supports Farmers and Rural Businesses Benefit from We want our land and agriculture sectors to play a significant role in low carbon growth, supported through a system of incentives to improve efficiency and improve our natural 1. The Government will introduce a new agri- environment system to support the future of farming and the countryside, with a strong focus on delivering better environmental outcomes, including mitigation of and 2. We aim to support industry in strengthening farm biosecurity to improve productivity, reduce reliance on veterinary medicines and reduce emissions. To begin this, we are developing a scheme to directly tackle endemic diseases in beef and dairy herds. 3. We will work with industry to encourage the use of low-emissions fertiliser. We will review the levels of take up over the next five years using data from the British Fertiliser Practice Survey. This will provide evidence to shape 4. We will work with industry to produce a UK Bioeconomy Strategy that will bring together biological industries, academia and innovators, linking up farmers and land managers with high tech industries. Through a thriving innovation-based bioeconomy, we will develop less carbon intensive products such as bio-based chemicals, plastics and 5. We will develop a new incentive structure to harness the potential for growth in forestry and renewables being supplied from within the UK, including on bioenergy, as part of our ambitions for strengthening the rural economy and encouraging diversification of 6. Funding from the £200 million package of Rural Development Plan for England (RDPE)274 Growth Programme and Countryside Productivity Offers, announced in July 2017, could be used to support renewable energy projects, such as solar panels or small wind turbines linked to 274 Rural Development Programme for England (RDPE), which works to make England’s agriculture and forestry sectors more competitive, to improve the quality of life in rural areas and to diversify rural economies. Making Sure Our Land Plays a Central Role in Capturing Carbon and Enhancing 7. During the 2020s we need to accelerate the rate of tree planting, working towards our 12 per cent tree cover aspiration by 2060. To do this will require investment by the private and charitable sectors, not just government. A number of our policy proposals will create the conditions for that investment to come forward. We will need new skills in forest design, a reliable supply of resilient planting stock, new opportunities for domestic timber, and a new generation of skilled people helping to enhance our towns, cities and countryside. Recently published natural capital accounts by the Office for National Statistics show that Britain’s woodlands provide services of £2.3 billion per year to the economy in terms of recreation, carbon sequestration, timber and air pollutant 8. We will develop a new network of English forests with the right incentives and rules to establish and support new regional and national community woodlands to help reach 12 per cent woodland cover in England by 2060. We have allocated funding to woodland planting to support our commitment to plant 11 million trees276. 9. We will set up a stronger and more attractive domestic carbon offset market that will encourage more businesses to support cost-effective emissions reductions, such as through planting trees. We will also explore how we could extend this market to include 10. We will unlock private finance to invest in forestry by establishing forestry investment zones to offer investors streamlined decision making and more certainty, within shorter 11. We will fund larger-scale woodland and 275 ONS (2017) UK natural ecosystem accounts for freshwater, farmland and woodland uknaturalcapital/landandhabitatecosystemaccounts 276 Forestry Commission and Natural England (2017) Countryside Stewardship opens for 2017 countryside-stewardship-opens-for-2017 What is natural capital?
Natural capital enables us to think about our natural environment and the countryside as a set of valuable assets (for example, forests, clean air, soils, species, freshwaters, oceans and minerals). Like any asset, natural capital, if maintained and invested in, provides flows of services to the economy and society. These include food, energy, carbon sequestration, pollutant removal, flood risk reduction, recreational and educational opportunities, health benefits and many others. Many of these benefits do not have a Why is natural capital relevant for reducing carbon emissions? The Climate Change Act requires that our plan for reducing emissions contribute to sustainability. As part of this work we have looked at how measures and policies could have impacts on our natural assets, including the impact of reducing carbon emissions. Natural capital can also contribute significantly to reducing levels of greenhouse gases through land use and land use change. This is described in the Technical Annex. The Government’s wider work on natural capital will be set out in the 25 Year

Department for Business, Energy and Industrial Strategy forest creation, and we will design woodland creation incentives that attract more landowners and farmers to plant on marginal land, including through agroforestry and bioenergy production, to help diversify land- based businesses and enhance the farmed 12. Peatland, like woodland, forms a key part of the UK’s natural capital, but is widely degraded. We launched a £10 million capital grant scheme for peat restoration in July 2017 to target peatlands in England. Funds are available from April 2018 for three 13. We will work with industry to increase the amount of UK timber used in construction, creating a conveyor belt of locked-in carbon The UK will work towards being a Zero Avoidable Waste economy by 2050 14. Zero avoidable waste equates to eliminating all waste where it is technologically, environmentally and economically practicable to do so and working to support innovation in new materials, products and processes that extend the range of materials covered 15. Working in partnership with business and civil society toward our shared zero avoidable waste ambition, we will support the transition to a highly productive and competitive economy where we unlock the environmental and economic benefits associated with greater resource productivity without imposing negative 16. By working in partnership with industry, we will be able to seek out opportunities to achieve even greater levels of recycling, improve the utilisation of our food and bio- waste and incentivise activities such as reuse, repair and remanufacturing – protecting our environment and strengthening our 17. We will work towards no food waste entering landfill by 2030. Many local authorities have introduced separate collection of food waste and we will work to support more so that the amount of food waste sent to landfill continues to decline. 18. We will set out a new Resources and Waste strategy which seeks to maximise resource productivity, reduce waste in our energy and resource systems, promote well- functioning markets for secondary materials and incentivise producers to design better products. The strategy will focus on three • Maximising resource productivity - through more efficient manufacturing • Maximising the value we get from resources throughout their lifetimes - by designing products more smartly to increase longevity and enable recyclability • Managing materials at end of life – by targeting environmental impacts 277 Defra press release (2017) New £10 million fund to restore peatland

19. We will explore how data can support the development of a network of resource efficiency clusters led by Local Enterprise Partnerships (LEPs), whereby LEPs would develop local level strategies to drive greater resource efficiency, supporting processes such as industrial symbiosis and the development of new disruptive business models that challenge inefficient practice. 20. We will explore how we can better incentivise producers to manage resources more efficiently through producer responsibility 21. We will take action through the Courtauld 2025 Agreement to reduce the amount of food that is wasted in the UK. This could deliver up to £20 billion worth of savings to the UK economy between 2015 and 2025278. We will also divert more food from landfill to support resource productivity and avoid further emissions. 22. We will explore new and innovative ways to manage emissions from landfill, undertaking research and analysis to support new approaches such as optimising surface methane oxidation. We will also investigate accelerating the breakdown of waste in landfill to improve the quantity and quality of landfill gas captured. This research should identify innovation to bring down the costs of low carbon technologies and lay the groundwork for future decisions. Government Innovation Investment The Government expects to invest £99 million out to 2021 on innovation in natural resources. The Government wants the UK to be at the forefront of land-based innovation – ensuring our industry remains at the cutting edge of agricultural and bio-based technology development through the forthcoming bioeconomy strategy and through the existing £160 million Agri-Tech 278 WRAP (2016) The Courtauld Commitment 2025 to transform UK food and drink courtauld-commitment-2025-transform-uk-food-and-drink 279 Defra (2015) Agricultural technologies (agri-tech) strategy Recycling Technologies, based in Swindon, has developed a new process that can recycle mixed plastic waste, which normally goes to landfill or is incinerated, into a clean fuel. With the support of an Energy Entrepreneurs Fund grant of around £700,000, testing has shown that this product can be used in industrial burners or marine engines. As an alternative, the product could be distilled and used as feedstock to make more new plastics, paints, polishes or lubricants.
Recycling Technologies recently raised £5 million in private investment and are now actively on the lookout for further

Department for Business, Energy and Industrial Strategy • Innovative The Government has supported research on innovative technologies in agriculture via the Agri-Tech Catalyst, to accelerate the translation of research into practical solutions to improve agricultural productivity, whilst reducing the environmental impact of agricultural production, some of which has additional • Centres for Agri-tech Four centres have been funded in partnership with industry, academia and • Agrimetrics - £11.8 million for a ‘big- data’ centre of excellence for Agri- metrics to utilise data science and modelling to build a more productive, sustainable and efficient food system. • Agricultural Engineering Precision Innovation Centre (Agri-EPI) - £17.7 million on precision agriculture to help the UK’s agri-food sector develop more productive and sustainable UK agriculture and export markets. • Centre for Crop Health and Protection (CHAP) - £21.3 million to revolutionise how farmers manage crop threats including pests and disease, both in the • Centre for Innovation Excellence in Livestock (CIEL) - £29.1 million to create new livestock technology and products to boost the profitability and productivity To complement this early action on innovation, the Government believes there are further opportunities for innovation linked to natural resources. In determining these we have focused where the Government can add the most value and develop UK opportunities. The main innovation challenges that could be unlocked are below, with detail on opportunities Improving productivity and management skills on farms, coupled with technological innovation, will provide the tools for achieving a step change in the level of carbon savings. • We will develop affordable low carbon fertiliser products to reduce and replace fertilisers; explore the potential for bio-stimulants to improve nutrient use efficiency; and explore the viability of fertiliser production by recovering nutrients from wastes and other organic materials. • Soil health : We will aim to target new sustainable land management techniques to overcome the decline in soil quality in the UK and the impact on productivity. We are already funding UK research into soils to deliver greenhouse gas removals (GGR) and abatement technologies as part of the £8.6 million research on GGRs280. • Crops and livestock genetics : We will explore the mitigation potential of new breeding technologies and any barriers to their deployment to improve agricultural and forestry productivity and resilience. 280 The National Environment Research Council (2017) £8.6 million UK research programme on greenhouse gas removal releases/2017/09-greenhousegas/

• Low emission farming We will reduce the costs of resource use in crop and livestock production improving our understanding of crop soil interactions; explore the potential of robotics and the latest sensor technologies; precision farming technologies more viable on smaller scale farms, investigate the potential of improving soil health and carbon stocks. • Forestry innovation : We need to improve the resilience and productivity of our forests such as through greater understanding of how tree genetics can contribute to GGRs, especially as we approach 2050. Innovate UK will also ensure that future rounds of its health and life science calls encourage bids which directly or indirectly support practices that may have a positive impact on • Anaerobic Digestion . We need to ensure the sector continues to support our carbon and air quality goals, and that best practice is followed when digestate is spread to land to minimise ammonia release and air quality and pollutant impacts. This includes development of improved digestion and ammonia and phosphate extraction technologies while working with the sector to focus on reducing methane emissions. • Resource efficiency . We will encourage the development of business models which encourage resource efficiency, extend product life, conserve resources, and prevent material from becoming waste. Innovate UK’s £15 million Manufacturing and Materials Competition will support the development of more flexible and efficient • Energy recovery processes . We will work with the waste sector to ensure that different waste materials going into energy recovery processes are treated in the best possible way, to minimise environmental impact and maximise their potential as a resource. The National Infrastructure Commission’s work on different pathways for the treatment of waste will feed into this. We will also work with businesses to explore the use of bio- based materials and to promote recyclable packaging so that more is recycled. • Landfill gas capture and management . There is an opportunity to undertake further research to accelerate methane production in the early life of a landfill site to reduce the length of aftercare required. This could help to reduce emissions from landfill further and

Department for Business, Energy and Industrial Strategy 281 IPCC (2007) Climate Change 2007: Working Group The Physical Science Basis assessment_report_wg1_report_the_physical_science_basis.htm 282 BEIS (2017) Energy and Emissions Projections 2016 283 National Institute for Public Health and the Environment – Netherlands (2016) RIVM research basis for historic climate agreement on HFCs Documents_and_publications/Common_and_Present/Newsmessages/2016/RIVM_research_basis_for_historic_climate_agreement_on_HFCs 284 European Parliament and Council (2014) Annex V of Regulation (EU) no 517/2014 of the European Parliament and of the Council of 16 April 2014 on fluorinated greenhouse gases and repealing Regulation (EC) No 842/2006 Fluorinated gases (F-gases) are powerful greenhouse gases with a climate change effect up to 23,000 times greater than carbon dioxide281. Often used as refrigerants, the reduction in F-gas emissions has been a major success story as we decarbonise the economy. UK emissions decreased by 20 per cent between 1995 and 2015. Our current policies will cut UK F-gas emissions from 17 MtCO2e in 2015 (about 3 per cent of total UK emissions) to 9.3 MtCO 2e by 2023, 6.6 MtCO 2e by 2027 and 3.2 MtCO 2e by 2035, representing an 81 per cent cut from The UK led the way in pledging to phase down use of hydrofluorocarbons (HFCs) by 79 per cent by 2030.
Following the UK lead, 197 countries agreed under the United Nations Montreal Protocol to a global phase down of HFCs which will see the UK and other developed countries go even further by delivering an 85 per cent phase down by 2036. It is estimated that this deal will reduce emissions equating to 0.5ºC of avoided temperature change283 by 2100, making a major contribution to the Paris Agreement on climate change and the goal of keeping the global temperature increase well HFC phase down under EU Regulation HFC phase down under UN Montreal Protocol

285 Compared to 2015 levels. Sustainable Development Unit (2016) Sustainable Development in Health and Care Report – Health Check 2016 uk/policy-strategy/reporting/sustainable-development-in-health-and-care-report-2016.aspx 286 Defra (2017) Greening Government Commitments 2015-2016 Annual Report 2015-to-2016-annual-report This includes all end use emissions 287 Salix Public Sector Loan Scheme Since 1990, the public sector – including central and local government, health, education and emergency services – has reduced its emissions by 40 per cent 285 as a result of energy efficiency and rationalisation of the central government estate. Central government and its agencies have led by example through the Greening Government Commitments (GGC), which include a greenhouse gas reduction target. As of 2015/16, we have succeeded in meeting the target by delivering a 27 per cent emissions reduction and £127 million of savings against 2009/10 levels286. The original target was a 25 per cent reduction compared to the 2009/10 baseline so new targets were set in January 2017, with the aim of achieving a 32 per cent Outside central government, energy efficiency has been supported by an interest-free loan scheme, managed by Salix Finance. To date, the loan scheme has funded over 16,000 projects, improving public sector and higher education buildings for its users and is projected to save the sector around £55 million on energy bills this year287. In addition, the programme, managed by Local Partnerships, has helped public sector organisations invest in energy efficiency and energy generation projects by helping them to establish energy service

Department for Business, Energy and Industrial Strategy 288 BEIS (2016) Building Energy and Efficiency Survey We want the public sector to be a leader in reducing carbon emissions; an approach that will also save organisations significant amounts of money. While central government has shown what is possible, we now want the wider public sector to reap the benefits of this approach. The annual energy bill across all public sector buildings in England and Wales is estimated to be around £2 billion 288 and this could be reduced significantly, releasing funds for front line services. The public sector also has a key role to play in demonstrating best practice, promoting transparency over emissions reporting and catalysing markets in energy efficiency by implementing measures at scale. Annual savings, 2017 £ million Public Sector Energy Ef/f_iciency Loan Scheme BEIS model 2004 2006 2008 2010 2012 2014 2016

To meet the UK’s 2050 target, emissions from the buildings and activities of the public sector will need to be near zero. As with homes and commercial property, this means improving energy efficiency and energy management, and decarbonising the heating and cooling of Our pathway to 2032 sees emissions from the public sector falling by around 50 per cent compared to today. To achieve this, the • Set longer term emissions reduction targets across the public sector, and encourage transparent reporting on these. • Address barriers to energy efficiency and low carbon investment, such as supporting organisations to access finance, and make the case for action internally. Ambitious action in the public sector will catalyse further innovation in low carbon products and services, generating new business and employment opportunities, and acting as a springboard for the wider low carbon market in Emissions from the public sector have decreased by 40% since 1990 sector could need to be as low the clean growth pathway, 1990-2050

Department for Business, Energy and Industrial Strategy 289 BEIS (2016) Building Energy Efficiency Survey (BEES) 290 NHS Digital (2017) Hospital Estates and Facilities Statistics 291 Sustainable Development Unit (2016) Carbon Footprint update for NHS in England 292 Sustainable Development Unit (2016) Securing Healthy Returns 293 Sustainable Development Unit (2017) Health Outcomes Travel Tool 294 Sustainable Development Unit (2014) Sustainable Development Strategy 295 Hospital Estates and Facilities Statistics Type=&Foundation=&Site_Type=&PFI=&getReport=Get+Report The NHS is responsible for around a third 289 of public sector carbon emissions and in 2015/16 around £570 million was spent by the NHS Trust on energy 290. Emissions from energy and travel alone have an annual carbon footprint of 7.4 million tonnes 291 demonstrating the important role of the NHS and the health supply chain in reducing the UK’s emissions. Despite the challenges in the sector, over the last ten years the health system has reduced its annual carbon emissions by 3.6 million tonnes and saved almost £2 billion in energy costs 292. Health organisations have in place mandatory Sustainable Development Management Plans which include recommendations on reducing carbon emissions, improving energy efficiency, increasing local energy generation and understanding the health and financial impacts of travel 293. NHS organisations are expected to report annually on carbon reduction with 69 per cent of providers and Clinical Commissioning Groups meeting minimum standards. Health organisations are also strongly encouraged to adopt and report on progress against a carbon reduction target of 34 per cent in line with the Climate Change Act with an NHS baseline of 2007/08 294. Forty one per cent 295 of trusts already report they are on track to meet the 34 per cent target by 2020/21. Dryden School is a secondary special school in Gateshead. They cut their energy bill using a 100 per cent interest free loan of almost £80,000, funded by the Government’s Salix scheme. By installing LED lighting, pipework insulation and improving the Building Energy Management System and hydrotherapy pool ventilation system they cut their bill by £17,000 a year – saving over £342 per pupil, and meaning their loan pays back in just over four years.
Setting Targets and Reporting Against Them 1. Outside central government, some parts of the wider public and higher education sectors have already set emission reduction targets to encourage organisations to focus on cutting carbon and energy bills. However there is no common target that covers the whole sector. Therefore, the Government will introduce a voluntary wider public and higher education sector target of a 30 per cent reduction in greenhouse gases by 2020/21, against a 2009/10 baseline, and will publish a Call for Evidence alongside this document to gain views from the sector on the target and a proportionate reporting framework to underpin this, as well as further policies to realise carbon and cost saving potential. We will review progress against this voluntary target by 2020, with a view to moving to a more ambitious target during the 2020s (such as a 50 per cent reduction by 2030). Once a reporting framework is in place, and there is clear evidence of the impact of voluntary action, a mandatory target could 2. For central government, the Greening Government Commitments (GGCs) have already produced significant emissions savings across departments and agencies. We are currently working with departments to agree higher targets for 2020 and actions to further reduce greenhouse gas emissions beyond this date. We will publish the new 3. In the 2015 Spending Review, the Government announced £295 million of new funding for public sector energy efficiency across the UK. In England, this increased funding is invested in the existing public sector energy efficiency loan scheme, which is available to the wider public and higher education sectors. The loan scheme administrator currently manages £210 million, and this will rise to some £385 million by 2020. This revolving loan scheme will continue to be recycled to at least 2025. Similar schemes run in Scotland and Wales received £40 million of the 2015 spending 4. An Energy Performance Contract provides finance to organisations so that they can invest in cost-effective energy conservation measures, without incurring any upfront capital costs. The Government will continue to support their expansion in the public sector, as they offer a new route to improve energy efficiency, while producing guaranteed savings. To underpin this approach we are continuing support to the FIT programme in 2017/18, alongside

Department for Business, Energy and Industrial Strategy Moving to a productive low carbon economy cannot be achieved by central government alone; it is a shared responsibility across the country. Local areas are best placed to drive emission reductions through their unique position of managing policy on land, buildings, water, waste and transport. They can embed low carbon measures in strategic plans across areas such as health and social The Government recognises the importance of anchoring economic growth in the strengths of local areas. Indeed, each local area will be responsible for coordinating its own local industrial strategy in alignment with the national Industrial Strategy296. Local leaders are already rising to the challenge and putting local carbon targets and strategies in place. Nearly 70 local authorities are signed up to using 100 per cent clean energy by 2050 as part of the UK100 network 297, reflecting the leadership shown by mayors globally on climate change and clean energy. Partnerships across public, private and community sector organisations can unlock powerful integrated local energy The Government is committed to supporting local leadership and has already given additional powers and responsibilities through the Cities and Local Government Devolution Act 2016; many of the Local Devolution deals agreed to date include energy commitments. We work with local areas to support delivery, develop partnerships, and enable access to low carbon procurement frameworks. In 2017, in England we funded 13 Local Enterprise Partnerships (LEPs) to develop local energy strategies and will support the remaining 25 LEPs to produce their own later this year. We will also launch a new Local Energy programme to support local areas in England to play a greater role in decarbonisation. This will increase local capacity and capability across England and provide on the ground practical support and expertise to unlock local energy opportunities. The programme will start to support delivery of the Industrial Strategy and Smart Systems Plan, working with local areas to demonstrate that deep decarbonisation can be achieved through local system change in a way that keeps costs down and maximises economic

Innovation at the local level is also vital. The Energy Innovation Board will ensure that all relevant clean technology innovation funds are accessible to local actors including local authorities, Local Enterprise Partnerships, community sector organisations and others, Government will continue to work with and support local leaders. We will establish a Local Energy Contact Group, building on the valuable work of the previous Community Energy Contact Group, to continue the crucial dialogue between local stakeholders Cornwall hosts a wealth of renewable energy resources including wind, solar, geothermal and marine energy. Cornwall now contributes more than 768 MW of sustainable energy generation to the UK energy mix 296, with approximately 25 per cent in local ownership, including 8 MW of Council-owned solar PV and more than 1MW owned by community groups supported by England’s first community energy revolving fund with £2.5 296 Regen (2016) Renewable a local progress report for England 297 Cornwall Council press release (2017) news-from-march-2017/community-energy-remains-at-the-heart-of-cornwall-council-s-energy-agenda/

This Strategy sets out our plan to meet our future carbon budgets. Chapter 4 sets out the potential each sector and our policies and proposals to unlock the further savings needed. The timeframes for these actions are set out in full In addition to the Emissions Intensity Ratio, we have also developed a set of metrics which will help us assess and understand progress. These metrics are summarised below and set This Strategy is not the end of the process. Our policies and proposals will evolve as we respond to costs coming down, to lessons about what does and does not work, to improved evidence, and to wider trends in the economy, society, technology and innovation.
To keep track of this moving picture and our progress towards carbon budgets, we will be monitoring and reporting against each element From 2018, we will use the Government’s response to the Committee on Climate Change’s annual progress report to bring together reporting against this strategy on the emission intensity ratio, metrics and actions. We will publish our performance against the Emissions Intensity Ratio on an annual basis. We will also update key elements of the Strategy in line with our annual statutory responses to the Committee on Climate Change’s reports on progress, ahead of setting the sixth carbon We welcome views on this Strategy. Comments and suggestions should be sent to CleanGrowthStrategy@beis.gov.uk by the end of December 2017. Government intends that the individual departmental policies and proposals contained within the plan will be consulted on separately, where such consultation has not already taken place. Views received in response to both this Strategy and the detailed policy proposals which will follow it will be considered as we update key elements of our strategy before setting the sixth carbon The Government will also launch an annual week focusing on climate issues across the UK, to showcase our progress and successes on climate action, share the latest climate science, and highlight and promote economic opportunities arising from clean growth around

We will report progress against this framework of economy-wide and sector-level metrics annually. Details of each metric are set out in Annex D Final energy consumption intensity of GDP Total UK conventional woodland Department for Business, Energy and Industrial Strategy

Department for Business, Energy and Industrial Strategy

These following decision pathways policies and proposals set out in this Strategy map over time. development such as publications, consultations, which aim to unlock Government programmes, such as the Industrial Strategy, cut across several sectors and so are not

2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 Department for Business, Energy and Industrial Strategy New, simplified Reporting Framework of energy use and emissions by businesses New policy framework to drive business energy efficiency EU Emissions Trading System (or alternative policy approach post-EU Exit) Minimum standards for new build and existing build Helping businesses off the gas grid to move to cleaner heating options Minimum standards in the private rented sector Industrial Energy Efficiency Scheme 2050 Industrial Decarbonisation Action Plans Carbon capture, usage and storage (CCUS) Energy Efficiency Accelerator Fund Industrial Heat Recovery Scheme Development of policy framework to support the decarbonisation of heavy industry. Consultation on Streamlined Energy and Carbon Reporting Framework Possible consultation on improving requirements Consultation on PRS Min. Standards Develop our ambition of deploying CCUS at scale during the 2030s, subject to costs coming down sufficiently, building on our innovation programme and international collaboration. Consultation on package of measures to increase business energy efficiency Proposed date for introduction of new reporting framework

2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 New build – Building regulations encourage future-proofing new homes for low carbon heat Funding allocated in Spending Review 2015 to support investment in heat networks Transition to sustainable heat networks market Standards in PRS and social housing Consultation PRS Band E minimum standard goes live 2018 Decision on consulting on PRS and Social Housing trajectories Improve boiler standards and heating controls Industry to implement Each Home Count Review recommendations Improve the availability of finance for home energy improvements Regulations come into force in 2020Call for evidence by end 2017 Framework of measures to enable phase out of high carbon fossil fuel heating Possible consultation and review of energy performance standards in Building Regulations Stakeholder event to launch plans Call for Evidence on reform of the Green Deal framework Call for Evidence on additional market based measures Publish action plan on additional market based measures Decision to extend scheme to 2028 Decision about design of ECO for 2022-28 Possible broader consultation of energy performance standards in Building Regulations in Spring 2019

2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 Department for Business, Energy and Industrial Strategy Pathway to Zero Emission Road Transport Strategy Cost-effective Rail electrification and Bi-mode rollout Evidence gathering to enable decisions Investment in walking / cycling Working with Innovate UK and through the Advanced Propulsion Centre (collaborative R&D with industry) and Automotive Council (to determine trade and investment priorities) Publish Cycling and Walking Investment Strategy Final year of ten-year, large trial Expect EU regulation for 2021-30 (UK to set out approach in context of EU exit) approach in context of EU exitNew govt.
2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 Contracts for Difference (CF Ds) Carbon capture, usage and storage (CCUS) – see Business chapter Update on future policy approach Detailed response to consultation Smart System Plan published with 29 actions for Government, Ofgem and industry 4.4GW under construction and 9.5GW more could be in consumers’ interests Distribution Up to £26 billion investment over 2015-23 Legally separate System Operator Close unabated coal generation by 2025 Next Pot 2 CFD round open for applications Progress discussions with developers to secure a competitive price for future projects Offshore wind contracted to build at £57.50 per MWh EDF target commissioning date for Hinkley Point C Scheme closes to all grace period applicants Continued control over policy costs We want to see more people investing without government support

2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 Department for Business, Energy and Industrial Strategy Planting 11 Million more trees Phase down use of hydrofluorocarbons (HFCs) by 79% Montreal Protocol – 85% reduction by 2036 Greenhouse Gas Action Plan (GHGAP) £10 million on Peatland restoration Centres for agri-tech innovation Revised EU legislative proposal on waste (2030 targets currently subject to negotiations / subject to outcome of EU exit negotiations) EU Landfill Directive (currently subject to negotiations and subject to outcome of EU exit) New framework to support agriculture, land use and wider rural economy following EU exit Sector deal(s) support bioeconomy growth New farm woodland Set out concept Identify FIZ’s Set out proposals and consultation Common EU target for 50% re-use and recycling of certain materials from household waste; 70% preparing for re-use, recycling and other recovery of construction and demolition waste Publication of 25 year environment plan Decisions this Parliament about what follows the EU Waste Framework Directive Target to restrict Biodegradable Municipal Waste landfilled to 35% of the 1995 baseline

2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 Review progress of GHG emission reduction targets to 2020 More ambitious 2020 GHG emission reduction targets announced Consider future Government action to reduce GHG emissions beyond 2020 Review the evidence for the introduction of a mandatory target in 2025 Introduce voluntary public sector target in April 2018 Review voluntary target and consult on future targets

Lead department Description Timing Improving Business and Industry Efficiency and Supporting Clean Growth Consult on new and streamlined energy and carbon reporting framework. This will replace some existing schemes, such as the reporting element of the CRC Energy Efficiency Scheme, and align with mandatory annual greenhouse gas reporting by UK BEIS Consult on the design of a new £18 million industrial heat recovery programme. Published alongside Publish joint industrial decarbonisation and energy efficiency action plans with seven of the most energy intensive industrial sectors, building on three years of joint industry- BEIS New Ministerial-led CCUS Council with industry established. From 2017 CCUS Cost Challenge Taskforce established to deliver a plan to reduce the cost of BEIS Establish an Industrial Energy Efficiency scheme. From 2017 BEIS/DCLG Consult on how best to improve the performance of the commercial and private rented sector, through tighter minimum building standards in the Private Rented Sector. 2018 BEIS Deployment pathway for CCUS produced. 2018 BEIS Work with industrial clusters to identify the most appropriate way forward to test the potential for development of CCUS industrial decarbonisation clusters. 2018 BEIS Organise an international CCUS event with international partners. 2018 BEIS Commit to provide further details on CCUS innovation spend. 2018 BEIS Develop and consult on a package of measures to support businesses to improve how productively they use energy. From 2018 BEIS/HMT Ensure incentives for investment in energy efficiency are regularly reviewed, for instance the list of products that qualify for enhanced capital allowances tax relief. On-going BEIS Undertake an evaluation of the Climate Change Agreements to inform any successor Department for Business, Energy and Industrial Strategy This annex sets out actions and milestones that the Government is committing to in this plan, and related publications. Actions will be updated the Government’s response to the annual progress report. Details of the Government’s Innovation Investment

Lead department Description Timing Following the outcome of the independent review of Building Regulations and fire safety, and subject to its conclusions, the Government intends to consult on improving the energy efficiency of new and existing commercial buildings. Beyond support through the RHI, ambition to phase out high fossil fuel heating in businesses off the gas grid during the 2020s. Businesses and industry will be involved BEIS Develop a clear policy framework to support decarbonisation in energy BEIS Publish a call for evidence on additional measures to encourage energy performance, particularly amongst owner occupiers. Publish a call for evidence on how to reform and streamline the Green Deal framework to make the “Pay as You Save” system more accessible to businesses, while ensuring adequate protection for consumers. Work with industry to implement the independent industry led Each Home Counts review to improve quality and standards for all retrofit energy efficiency and renewable Work with mortgage lenders to incorporate energy efficiency into their lending decisions, and look at incentives and other levers that could encourage home-owners to invest in energy efficiency improvements. Explore ways in which we could make it easier for innovative approaches or products to be installed under our consumer-facing schemes such as the Energy For privately rented homes, from April 2018, landlords of the worst performing properties will need to improve those properties to a minimum of EPC E before they can be let; lowering bills for some of the most vulnerable private tenants. We will consult shortly on steps to make these regulations more effective. BEIS Consult on ECO’s operation through to 2022.
2018 BEIS Reform the RHI to focus the scheme towards long-term decarbonisation through greater uptake of technologies such as heat pumps and bio methane (biogas to grid). 2017 BEIS Continue to work with suppliers to ensure that people are provided with tailored advice when a smart meter is installed. 2017 Alongside this Strategy, the Government has published Boiler Plus, improving standards for the 1.2 million new boilers installed in England every year and ensuring control devices are included with every installation so people can control comfort in their own homes for less from April 2018. Replace the existing, telephone-only Energy Saving Advice Service with a digitally led- service working closely with the Each Home Counts implementation, offering tailored advice on improving the energy performance of people’s homes. Issue a Call for Evidence seeking views on further triggers points for Energy Performance Certificates (EPCs) to be updated, as well as wider views on how EPCs could be further improved, in light of new sources of data and capabilities

Lead department Description Timing The Government will look at a long term trajectory for energy performance standards across the private rented sector, with the aim of as many private rented homes as possible being upgraded to EPC C by 2030 where practical, cost-effective The Government will also look at introducing similar energy performance standards across the social housing sector, where practical, cost-effective and affordable. This will need to take account of the findings of the independent public inquiry into the fire at Grenfell Tower and the Government’s separate work looking at wider social housing Following recommendations from the review of Building Regulations and fire safety currently underway explore innovative solutions to energy performance improvements not performing as well as predicted, including potential actions on compliance and enforcement of energy performance. BEIS Continue smart meter roll out. Roll out complete by BEIS Funding allocated in the Spending Review 2015 to grow the UK’s heat networks market. By 2021 Beyond support through the RHI, ambition to phase out high fossil fuel heating in homes off the gas grid during the 2020s. Consumers and industry will be involved in Accelerating the Shift to Low Carbon Transport DfT Series of consultation papers setting out the Government’s strategic approach to avia- tion, including how to support growth whilst tackling environmental impacts. 2017-2018 DfT Regulation to improve EV charge point provision and consumer access under the Automated and Electric Vehicle Bill. 2017 DfT Deployment of £80 million ULEV infrastructure funding announced in Autumn DfT Consider outcome and next steps in light of SME HGV fleet review pilot. 2017 DfT Pathway to Zero Emission Road Transport Strategy Document. By early March 2018 DfT/Defra Updating Government vehicle buying standards. End 2018 DfT EU HGV CO2 emission reporting and monitoring starts. January 2019 HMT Decision(s) on future fiscal support/tax incentives for ULEVs. Ongoing Department for Business, Energy and Industrial Strategy

Lead department Description Timing DfT Report from Low Emission Freight and Logistics Trial. 2019 DfT Decision on domestic regulatory regime for car/van CO2 regulations in context of HMT Decisions on support for cycling and walking following end of current funding period DfT Decision on next steps in light of platooning and longer semi-trailer trials. 2020 onwards DfT Decision on domestic regulatory regime for freight CO2 regulations in context of DfT Active participation in the IMO to address GHG emissions from shipping. Ongoing BEIS Publish a full response to the consultation on ending unabated coal generation in BEIS Publish independent Cost of Energy Review, undertaken by Professor Dieter Helm CBE. Autumn 2017 HMT Set out further details on carbon prices beyond 2020/21. Autumn 2017 BEIS Work with industry to develop a nuclear Sector Deal as part of the Industrial Strategy, looking at boosting competitiveness and skills across the sector. Autumn 2017 BEIS/HMT Set out new controls to replace the Levy Control Framework beyond 2020/21. End 2017 BEIS Provide an update on our approach for small scale low carbon generation beyond 2019. End 2017 Ofgem Introduce a modified generation license for storage to improve regulatory clarity. Summer 2018 BEIS Continue to work with nuclear developers on their new build proposals, including on Grid Create a legally separate system operator. April 2019 BEIS Planned Pot 2 Contract for Difference auction. Spring 2019 BEIS Continue to work with Ofgem and industry to implement the 29 actions in the Smart Systems and Flexibility Plan. 2020

Lead department Description Timing Enhancing the Benefits and Value of our Natural Resources Set out approach to bring together biological industries, academia and innovators, linking up farmers and land managers with high tech industries to make the most of existing resources and develop advance feed stocks that are essential for the future BEIS New Bioeconomy Strategy. By end of 2017 Set up a stronger and more attractive domestic carbon offset market that will encourage more businesses to support cost-effective emissions reductions such as through planting trees. We will also explore how we could extend this market to include Defra Establish forestry investment zones. 2017 onwards Defra Set out 25 Year Environment Plan. 2017 onwards Defra Government to publish a new Resources and Waste Strategy. 2018 Defra Publish a Clean Air Strategy. 2018 Defra £10 million capital grant scheme for peat restoration. Funds available from Continue working with the Organisation for Economic Co-operation and Development (OECD) on their project to improve the modelling of macroeconomic effects of the transition to a circular economy. Defra Commit to make available up to £200 million to support rural communities over the next two years and set out agroforestry decisions. By end of 2019 Defra Allocated funding to woodland planting to plant 11 million trees. 2020 Defra EU target of at least 50% of household waste being recycled by 2020. 2020 Defra Woodland Carbon £19.2 million to fund larger-scale woodland and forest creation. By 2021 Defra Work with industry to encourage the use of low-emissions fertiliser, and review the levels of take up using data from the British Fertiliser Practice Survey.
Over next 5 years Targets of a 20% reduction in food and drink waste arising in the UK, a 20% reduction in the greenhouse gas intensity of food and drink consumed in the UK, and a reduction in impact associated with water use in the supply chain through delivery of the Defra Work towards no food waste entering landfill by 2030. 2030 Defra UK to phase down use of hydrofluorocarbons (HFCs) by 79% by 2030. 2030 Defra UK to phase down use of HFCs by 85% by 2036 under the United Nations Defra Ambition for the UK to be zero avoidable waste economy by 2050. 2050 Department for Business, Energy and Industrial Strategy

Lead department Description Timing Continue to fund further improvements in the wider public sector with £295 million of funding allocated to the public sector energy efficiency loan scheme, across the UK, in Introduce a voluntary wider public and higher education sector target of 30% reduction in greenhouse gases by 2020/21, against a 2009/10 baseline, and will publish a Call for Evidence. We will review progress against this voluntary target by 2020, with a view to moving to a more ambitious target during the 2020s (e.g. 50% reduction by 2030). Once a reporting framework is in place, and there is clear evidence of the impact of voluntary action, a mandatory target could be considered. Review existing carbon saving policies impacting the public sector to assess whether changes or new policies are needed to realise the carbon and costs savings potential. We will explore this further through a Call for Evidence. Currently assessing how much the current 2020 greenhouse gas emission reduction target under the GGCs could be stretched to be more ambitious yet achievable. We also aim to set an appropriate level of ambition beyond 2020. Continue to support the expansion of Energy Performance Contracts in the public sector which can offer a new route for investment in energy efficiency alongside

Department for Business, Energy and Industrial Strategy action is underpinned by a robust of climate change. In this annex we summarise (i) the scientific evidence that reinforces the need for ambitious action to reduce emissions; (ii) the scientific rationale behind the internationally-agreed global temperature goals; (iii) UK climate action; and (iv) future scientific priorities from a UK 1: Why we are committed to ambitious We are already seeing the impacts of climate change. The global average temperature of the Earth’s surface has risen around 1°C since pre- industrial times298. All but one of the top sixteen warmest years on record have occurred since 2000299, and each of the last three decades has been successively warmer at the Earth’s surface than any preceding decades since 1850300. 2015 and 2016 were the warmest years on record by quite some margin301 -albeit enhanced by the El Niño effect- and the impacts of climate change are already widespread and are affecting many sectors of society302. Arctic sea ice extent has declined by about 4 per cent every decade since records began in 1979 and sea level has risen by about 3 mm a year since the early 1990s303. In addition, increased uptake of carbon dioxide by the oceans has caused the pH of ocean surface water to decrease by 0.1 units since the beginning of the industrial era, corresponding to a 26 per cent increase in acidity 304. Without action to reduce the level of greenhouse gases we emit globally, climate change is set to continue with increasing temperatures on the land and in our oceans. This will result in further increases in sea levels, more frequent and more severe heat waves and a changing rainfall pattern leading to more droughts and floods in some regions; and disruption to some ecosystems305. Without significant reductions in emissions, the world is likely to be on course for 298 Met Office (2016) Indicators of change 2016 299 Met Office press release (2016) 300 World Meteorological Organization press release (2017) 301 World Meteorological Organization press release (2017) 302 IPCC (2014) Summary for Policymakers. Climate Change 2014: Impacts, Adaptation, and Vulnerability, Summary for Policymakers. ch/report/ar5/wg2/. Part Global and Sectoral Aspects. Contribution of Working Group II to the Fifth Assessment Report of the Intergovernmental Panel on Climate 303 IPCC (2014) Climate Change 2014: Synthesis Report Contribution of Working Groups I, II and III to the Fifth Assessment Report of the Intergovernmental Panel on Climate Change 304 IPCC (2014) Climate Change 2014: Synthesis Report Contribution of Working Groups I, II and III to the Fifth Assessment Report of the Intergovernmental Panel on Climate Change 305 IPCC (2014) Climate Change 2014: Synthesis Report Contribution of Working Groups I, II and III to the Fifth Assessment Report of the Intergovernmental Panel on Climate Change 306 IPCC (2014) Climate Change 2014: Synthesis Report Contribution of Working Groups I, II and III to the Fifth Assessment Report of the Intergovernmental Panel on Climate Change

95% confidence interval Temperature difference from 1850-1900 average HadCRUT4, Met Office1850 pre-industrial baseline (1850-1900) from 1850 to 2016 average temperature rise in excess of 2°C above pre-industrial levels, and possibly as much as 5°C for the highest emissions scenarios, by the end of this century 306. Additionally, continuing acidification of the oceans will pose substantial This growing level of global climate instability poses great risks to natural ecosystems, global food production, supply chains and economic development. It is likely to lead to the displacement of vulnerable people and migration, impact water availability globally, and result in greater human, animal and plant disease. Climate change can indirectly increase the risks of violent conflicts by amplifying drivers of conflicts such as poverty and economic shocks. For this reason the UN, Pentagon and UK’s National Security and Strategic Defence Reviews cite climate change as a stress multiplier. The UK is likely to feel the impact of climate change both directly and through impacts in other parts of the world which will affect our food and materials prices, trade, investments and security.
In its recent UK Climate Change Risk Assessment307 the Government endorsed the six key climate change risks for the UK identified in an independent review by the Adaptation flooding and coastal change; shortages in public water supply; risks to health, wellbeing and productivity from high temperatures; risks to natural capital and our ecosystems; risks to food security and trade; 307 HM Government (2017) UK Climate Change Risk Assessment 2017 308 CCC (2017) UK Climate Change Risk Assessment 2017 Evidence Report uk-climate-change-risk-assessment-2017/ccra-chapters/

Department for Business, Energy and Industrial Strategy 2: Global temperature goals and our Scientific evidence shows that increasing magnitudes of warming increase the likelihood of severe, pervasive and irreversible impacts on people and ecosystems 309. These climate change risks increase rapidly above 2°C but some risks are considerable below 2ºC. This is why, as part of the Paris Agreement in 2015, 195 countries committed to hold “the increase in the global average temperature to well below 2°C above pre-industrial levels and to pursue efforts to limit the temperature increase to 1.5°C above pre-industrial levels, recognising that this would significantly reduce the risks and impacts of climate change”. The Agreement recognised that in order to achieve this goal, global emissions of greenhouse gases would need to peak as soon as possible, reduce rapidly thereafter and reach a net zero level in the second half of this century. As part of the Paris Agreement countries also committed to reduce or limit their greenhouse gas emissions. These are contained in their ‘Nationally Determined Contributions’ (NDCs). A number of studies 310 consider how close these commitments bring us to staying below 2°C, and estimate that if they were met we would be on a path to a global temperature rise of 2.7 to 3.7 °C above pre-industrial levels by 2100. It is worth noting that these assessments have different assumptions regarding both the extent to which countries meet their NDCs and, crucially, the actions that will be taken by countries to reduce their emissions after 2030, which will be a key determinant of whether the world will meet the long-term global These assessments show that NDCs represent a significant deviation from the 4 to 5°C temperature rise projected if there were no further policies to reduce emissions beyond those in place or planned today. Action would also provide other co-benefits such as limiting the rate of ocean acidification and improving air quality. Nevertheless it is clear that greater action is needed from all countries if we are to limit global temperature increases to well below 2°C. The UK’s current target is to reduce its greenhouse gas emissions by at least 80 per cent by the year 2050, relative to 1990 levels. This 2050 target was set to be consistent with keeping the global average temperature to around 2°C above pre-industrial levels with a 50 per cent likelihood. In October 2016 the Committee on Climate Change (CCC) said 311 that the Paris Agreement target “is more ambitious than both the ambition underpinning the UK 2050 target and previous international agreements”, but that the UK should not set new UK emissions targets now, as it already has stretching targets and achieving them will be a positive contribution to global climate action. The CCC advised that the UK’s fair contribution to the Paris Agreement should include measures to maintain flexibility to go further on UK targets, the development of options to remove greenhouse gases from the air, and that its targets should be kept under 309 IPCC (2014) Climate Change (2014) Impacts, Adaptation, and Vulnerability, Summary for policymakers Part Global and Sectoral Aspects. Contribution of Working Group II to the Fifth Assessment Report of the Intergovernmental Panel on Climate Change 310 For UNEP (2016) The Emissions Gap Report 2016 311 CCC press release (2016)

There will be an unavoidable level of climate change, regardless of future global emissions, because of the existing accumulation of greenhouse gases in the atmosphere. As a consequence, some level of adaptation will be necessary in the UK. To this end, the UK is already considering climate risks and what actions will be required through its five-yearly policy cycle of a Climate Change Risk Assessment followed by a National Adaptation Programme 312. The scale of the potential investments, the risks associated with failure, and the long lifetimes and lead-times of the infrastructure, together mean that future investments are likely to be highly sensitive to how climate change evolves over the next two to three decades. Actions to mitigate climate change can have wider positive impacts on the economy and the environment, beyond the direct benefits of avoided climate change 313. There is strong evidence that well-designed climate mitigation action can provide substantial co-benefits while minimising any possible adverse side-effects314. For example, co-benefits can include substantial air quality improvements from avoided fuel combustion and health and wellbeing benefits 4: Future scientific priorities and UK In recent years the debate and focus of scientific research has shifted from whether climate change is happening and/or is being caused by human activity, to the severity of the expected impacts and the level of action required to address climate change through a combination of adaptation and mitigation. Our knowledge has increased significantly but many key research priorities remain. As developed and agreed by the Government Chief Scientific Advisers (CSAs) our current science priorities 1. Present weather and climate risks globally 2. Future climate over this century under different emissions scenarios globally and within the UK, including extreme weather 3. Climate risks and impacts from future climate variability and change; 4. Emission pathways compatible with different levels of warming including timing and a consideration of technologies to achieve net 5. Impacts and opportunities of mitigation and 6.
The case for early implications of The UK is a global leader in climate science and will play a key role in addressing these 312 The second UK Climate Change Risk Assessment was completed in 2017 and this is being used to inform the second National Adaptation Programme due for completion in 2018. The third Climate Change Risk Assessment will be delivered in 2022 313 Royal Commission on Environmental Pollution (2007) The Urban Environment 314 IPCC (2014) Climate Change 2014: Mitigation of Climate Change, Summary for Policymakers Contribution of Working Group III to the Fifth Assessment Report of the Intergovernmental Panel on Climate Change 315 For example, this includes a better understanding of climate sensitivity and cloud processes, and improving the ability of global climate models to represent regional

Department for Business, Energy and Industrial Strategy Emissions per capita (tCO2e/person) 14 8 4 Emissions Intensity Ratio, EIR (tCO2e/£ million of GDP) 717 271 107 Final energy consumption intensity of GDP (MWh/£ million) 1,530 872 548 Non-industrial business and public energy use per £ million output Emissions intensity of non-industrial business and public energy Industrial business energy use per £ million output (MWh/£ million) 1,756 1,005 833 Emissions intensity of industrial business energy use (gCO2e/kWh) 488 403 345 Home energy use per household (MWh/household) 21 17 15 Emissions intensity of home energy use (gCO2e/kWh) 169 140 120 Road transport energy use per 1,000 vehicle kilometres (kWh/km) 1,127 941 655 Road transport emissions per vehicle kilometre (gCO2e/km) 260 213 120 Road transport emissions per energy use (gCO2e/kWh) 231 227 183 Emissions from generation (MtCO2e) 204 104 16 Share of electricity supply from clean sources (%) 21% 45% 85% Total UK conventional woodland area (thousand hectares) 2,778 3,155 3,648 Emissions intensity per £m agricultural output (tCO2e/£ million) 5,354 3,841 2,817 Biodegradable waste sent to landfill (MtCO2e) 36217 8 4 Greenhouse gas emissions from landfill (Million Tonnes) 60 12 7 316 Based upon BEIS, Defra, DfT and DCLG analysis. Further information on sources is made available in the technical annex. 317 Covers the period 1995 as the earliest data available each sector that could lead to the emissions reductions set out in our 2032 pathway. It is possible that equivalent emissions savings could be achieved in different ways. Emissions per capita (tCO2e/person) 14 8 4 Emissions Intensity Ratio, EIR (tCO2e/£ million of GDP) 717 271 107 Final energy consumption intensity of GDP (MWh/£ million) 1,530 872 548 Non-industrial business and public energy use per £ million output Emissions intensity of non-industrial business and public energy Industrial business energy use per £ million output (MWh/£ million) 1,756 1,005 833 Emissions intensity of industrial business energy use (gCO2e/kWh) 488 403 345 Home energy use per household (MWh/household) 21 17 15 Emissions intensity of home energy use (gCO2e/kWh) 169 140 120 Road transport energy use per 1,000 vehicle kilometres (kWh/km) 1,127 941 655 Road transport emissions per vehicle kilometre (gCO2e/km) 260 213 120 Road transport emissions per energy use (gCO2e/kWh) 231 227 183 Emissions from generation (MtCO2e) 204 104 16 Share of electricity supply from clean sources (%) 21% 45% 85% Total UK conventional woodland area (thousand hectares) 2,778 3,155 3,648 Emissions intensity per £m agricultural output (tCO2e/£ million) 5,354 3,841 2,817 Biodegradable waste sent to landfill (MtCO2e) 36217 8 4 Greenhouse gas emissions from landfill (Million Tonnes) 60 12 7 Parliament passed the Climate Change Act (the Act) in 2008, establishing the UK’s 2050 target and the supporting framework of carbon budgets. Under the Act, the UK is legally required to reduce greenhouse gas emissions by at least 80 per cent by 2050 on 1990 levels318. In order to put the UK on a pathway to achieving the 2050 target, the Government is obliged to set legally binding five-year caps on emissions – ‘carbon budgets’ – twelve years in advance and then to publish a report setting out the policies and proposals to meet that budget and those budgets previously set. The Committee on Climate Change The Act also established the Committee on Climate Change (CCC), an independent statutory body, to advise the Government and the Devolved Administrations on setting and meeting carbon budgets. The CCC advises on the level of each budget, the respective contributions that different sectors could make and the extent to which carbon budgets could be met through the use of flexibilities. Five carbon budgets have been set to date, covering 2008 to 2032 319. The fourth carbon budget (covering 2023 to 2027) was set in June 2011320. The fifth carbon budget (covering 2028 to 2032) was set in July 2016321. The UK’s performance against its 2050 target and carbon budgets is assessed through the UK’s net carbon account, measured in tonnes of carbon dioxide equivalent (tCO2e)322. The net carbon account 323 comprises greenhouse gas emissions from the UK, emissions which are captured and stored from land use, land-use change and forestry (LULUCF) and net purchases of international carbon units. Carbon units include allowances issued under cap and trade systems, such as the EU Emissions Trading System (EU ETS) and international carbon credits issued under international schemes, such as the Clean 318 The target covers a selection of greenhouse gases in addition to carbon dioxide, namely methane, nitrous oxide, and a range of fluorinated gases (F-gases), specifically hydrofluorocarbons, perfluorocarbons, and sulphur hexafluoride. The 1990 baseline consists of emissions in 1990 for all greenhouse gases except for the F-gases, for which the baseline is 1995. The baseline is revised annually in line with updates made to the UK’s greenhouse gas inventory (the official record of UK greenhouse gas emissions).
BEIS (2017) Final greenhouse gas emissions inventory statistics 1990-2015 final-uk-greenhouse-gas-emissions-national-statistics-1990-2015 319 UK Legislation (2009) The Carbon Budgets 2009 Covering first three carbon budgets 320 UK Legislation (2011) The Carbon Budget Order 2011 321 UK Legislation (2016) The Carbon Budget Order 2016 322 Given the size of the UK economy, we typically describe targets in terms of millions of tonnes of carbon dioxide equivalent (MtCO2e) – so the fifth carbon budget limits UK emissions to 1,725 MtCO2e or 1,725,000,000 tCO2e 323 The Annual Statement of Emissions sets out the net carbon account. BEIS (2017) 324 Clean Development

Department for Business, Energy and Industrial Strategy The net carbon account for each budget is calculated according to rules set out in Carbon Accounting Regulations 325. Under current regulations, the net carbon account reflects the UK’s share of the EU ETS for power, heavy industry and domestic aviation. The EU ETS sets a total cap on the amount of greenhouse gases that can be emitted by heavy industry and power plants in the participating countries. For the “non-traded” sectors which fall outside the EU ETS, the net carbon account reflects the UK’s reported emissions under the United The UK’s 2050 target and carbon budgets currently exclude emissions from international aviation and international shipping, but the Act states that in setting carbon budgets, the Government must take these emissions into account326. The CCC advises that the UK should plan for international aviation and shipping emissions of around 41 MtCO2e in 2050 – this has been incorporated into our scenarios and will be kept under review. Further information is set out in the 2050 pathways section of this The 2015 Paris Agreement under the UN established the goal of keeping the global mean temperature rise to well below two degrees, whilst pursuing efforts to limit the rise to under 1.5°C. The UK is already playing its part, with the CCC confirming that there is presently no need for the UK to change its targets in light of the Paris Agreement (see Annex C on As well as our obligations under Paris, as a current member of the EU, the UK has EU- level targets to 2020. In October 2014, the European Council agreed an EU level target of at least a 40 per cent reduction in EU domestic emissions from 1990 levels by 2030. This target will be split into an EU-wide target for the traded sector, governed by the EU ETS, and member state-level targets for the non-traded sector, set via the Effort Sharing Regulation (ESR). A separate Land Use, Land Use Change and Forestry Regulation will cover emissions from those activities. The EU ETS, ESR and the LULUCF Regulation for the period 2021-2030 are still under negotiation in Brussels, though we anticipate that the emissions reductions under the UK’s domestic Climate Change Act will be more ambitious and challenging than those set by the EU. The EU legislation on greenhouse gas emissions is among the important current arrangements between the UK and EU that will be addressed as part of the UK’s EU exit negotiations. However, whatever the form of the UK’s partnership with the EU, working closely together to address the global challenge of climate change will remain important. 325 For each carbon budget the Government proposes accounting rules for Parliament to agree. Carbon accounting rules for the first and second carbon budget can be found greenhouse-gas-emissions#appendix-4-carbon-budgets 326 Climate Change Section 30

Since establishing the first multi-industry carbon trading scheme in the world in 2002 - the voluntary UK ETS - the UK has had an influential role in establishing the EU Emissions Trading System (EU ETS), the first and largest carbon trading scheme. According to the Institute for Public Policy Research, 93.5 per cent of the global market in carbon exchanges is in London, making it the carbon trading Putting a price on carbon is set to play an increasing role in moving to a global low carbon economy. Carbon markets can help reduce the cost of reducing emissions by enabling the reductions to occur where it is least cost to do so 328. Already 40 national jurisdictions and over 20 cities, states and regions put a price on carbon amounting to 13 per cent of global greenhouse gas emissions 329.With China implementing a national emissions scheme this year, this will rise substantially. The UK supports a number of initiatives to encourage development of carbon markets, such as the Carbon Initiative for Development and the Forest Carbon Partnership Facility Carbon Fund. These deliver development benefits while incentivising high quality, high volume supplies of carbon credits. Looking beyond 2020, the Paris Agreement provides an opportunity to stimulate international co-operation. The agreement includes a framework for carbon trading, currently under development through international negotiations. It also provides incentives to engage the private sector to get more actively involved in the transition to a low carbon future. The opportunity to develop a trade in good quality carbon units is at the heart of the UK Government’s vision for an efficient global carbon market. Projections of UK energy and emissions The Government projects what our energy demand, fuel mix and emissions might look like as a result of our existing policies. These Energy and Emissions Projections (EEP) give us a sense of whether we are on track to meet our carbon budgets. The latest projections were published on 15 March 2017. We are continually working to improve our projections. In 2018 we will share more details of the methodology, enabling further understanding. Our latest projections show the trend of falling emissions while growing our economy is set to continue. They estimate that between 2015 and 2020 we will reduce emissions by 17 per cent, while the OBR forecasts the economy is set to grow by nine per cent (in real terms) over We have met our first carbon budget and current central projections show us exceeding requirements for both the second and third carbon budgets331.
Emissions are projected to continue to fall through the 2020s, but there is an estimated shortfall against the fourth and fifth carbon budgets, based on estimates of emissions reductions from existing policies. 327 IPPR (2017) 328 World Bank Group (2016) State and Trends of Carbon Pricing 2016 329 World Bank & Ecofys (2017) Carbon Pricing Watch 2017 330 OBR (2017) Economic and fiscal outlook – March 2017 331 BEIS (2017) Energy and Emissions Projections 2016

Department for Business, Energy and Industrial Strategy We expect our shortfall against the fifth carbon budget to reduce significantly based on the policies and proposals set out in this Strategy. Initial estimates of these new early stage policies and proposals show an additional potential reduction of up to 30 MtCO2e and 80 MtCO2e over the fourth and fifth carbon budget periods respectively334; these and other policies will be developed building on the proposals outlined in the Strategy. The Climate Change Act permits the Secretary of State, at certain points in budgetary cycles, to decide to “carry forward” our over achievements from previous budgetary periods or credit carbon units to the net carbon account. These flexibilities may be utilised to meet any shortfalls that crystalised335. sufficient projected surplus available to carry forward to meet the fourth carbon budget and some of the fifth carbon budget; any shortfall that persists following any carry forward may be met through the purchase of international credits, subject to the requirements of the Climate Change Act. The current projections are subject to significant uncertainty. For example, we cannot predict exactly what type and scale of global technical innovation will develop over the next decade. Indeed as the past few years have shown we cannot predict our future energy mix since global action can transform the cost and installation of different technologies, driving very different outcomes to those expected. Macroeconomic such as population, public employment, and gas prices. Policy impacts : How society will respond to incentives such as taxes or regulation. Evidence base : Scientific knowledge evolves over time, as does our knowledge of technology Changing Consumer and business behaviour will evolve over time as new priorities This is why we have used “pathways” for each sector rather than specific estimates of emissions reductions from individual policies, to make sure we take an approach that is robust 332 BEIS (2017) Energy and Emissions Projections 2016 333 BEIS initial estimates of a subset of new early stage policies and proposals show an additional potential reduction of up to 30 Mt and 80 Mt over the fourth and fifth carbon budget periods respectively; these and other policies will be developed building on the proposals outlined in the Strategy. 335 Chapter 2 sets out more detail on the Climate Change Act requirements Government will need to follow when taking any decisions on use of flexibilities to meet carbon Budget, cumulative emissions, MtCO2e 3,018 2,782 2,544 1,950 1,725 Average reduction vs 1990 emissions, % -25% -31% -37% -51% -57% Result vs. Budget,% -1.2% -4.7% -3.6% +7.5% +14.3% emissions, MtCO2e -36 -132 -91 +116 +167 Result vs. Budget,% -1.2% -4.7% -3.6% +6.0% +9.7% Cumulative surplus (+) or deficit (-), MtCO2e +132 +223 +107 -60

Business, Industry & Public Sector Cumulative non-traded carbon reductions, 2028-32 (MtCO2e) 55050045040035030025020015010050 Shift from pastoral to arable farming Non-traded cost-effectiveness (£/tonne, 2015 prices) potential (central case, 2028-2032) This section provides further details on the impact of the economy-wide pathway presented in Chapter 4 on UK emissions over the period to 2032. Our latest energy and emissions projections provide the starting point for developing the 2032 pathway set out in Chapter 3, and are based on our existing policies. Emissions reductions beyond our existing policies are then based on the maximum theoretical potential for further abatement identified in the Impact Assessment for the level of the fifth carbon budget 336. In doing so, a marginal abatement cost curve (MACC) was estimated, indicating the extent, cost, and type of potential for available emissions reductions emissions in 2017, 2032 and over the fifth carbon budget period based on a) projected emissions under existing (and past) policies, and b) the 2032 pathway for meeting the fifth carbon budget set out in Chapter 4. 336 DECC (2016) Impact Assessment for the level of the fifth carbon budget Section 3.3.4

Department for Business, Energy and Industrial Strategy MtCO2e338 Current level Current policies339 2032 pathway Non-traded 308 276 1,380 213 1,132 Total UK emissions 459 355 1,787 285 1,509 BEIS, DfT, Defra and DCLG analysis 337 Direct emissions are those produced immediately within the housing sector, and exclude for example emissions from electricity generation. 338 Figures may not sum due to rounding 339 Beyond 2020, the emissions scenario for the power sector provides an illustration only. 340 Increase due to large-scale heat networks 341 Analysis of the power sector 2032 pathway is based on the BEIS (2017) Energy and Emissions Projections Reference scenario, 2016 government/publications/updated-energy-and-emissions-projections-2016. The analysis additionally takes into account changes in electricity demand resulting from actions outlined in the 2032 pathway in energy-consuming sectors (e.g. transport, homes, industry). Furthermore, a number of model updates and improvements have been made regarding the electricity demand profiles of key technologies and how this demand might be shifted, the availability of electricity storage technologies, and assumed system operability requirements. 342 The UK Net Carbon Account is defined by UK Carbon Accounting Regulations. Current regulations require that emissions covered by the EU Emissions Trading System (Traded emissions) are included as being equal to the UK’s allocation of permits under the System, rather than actual UK territorial emissions. When setting the fifth carbon budget, this allocation was estimated to be 590 MtCO2e during the fifth carbon budget period.
343 Net carbon account as published in the BEIS (2016) Energy and Emissions Projections Reference Scenario prior to the additional analysis made on the power sector

Maximum theoretical potential for Business, Industry and public buildings 82 53 Indicative net UK carbon account Upper Bound 382 381 372 363 358 Lower Bound 343 341 331 324 319 BEIS, DfT, Defra and DCLG analysis This evidence was combined with judgements about the barriers to delivering emissions reductions, the rate at which low carbon options could be adopted and the timescales of key decisions set out in the Decision Pathways annex. The pathway is based on our current expectations of the availability and performance of low carbon options, but there is considerable uncertainty about how these will develop, and this is only one of several The maximum theoretical potential for emissions abatement across the UK economy is compared with the emissions reductions in the 2032 pathway (relative to the central Section 12 of the Climate Change Act 2008 requires the Government to publish an indicative annual range for the net UK carbon account for each year over which the levels of carbon budgets are set. An indicative annual range is a range within which the Secretary of State expects the amount of the net UK carbon these ranges for the fifth carbon budget, taking account of the emissions savings implied by the 2032 pathway. The range reflects uncertainty in emissions projections under existing policies. 344 DECC (2016) Impact Assessment for the level of the fifth carbon budget Section 3.3.4

Department for Business, Energy and Industrial Strategy 345 DECC (2016) Impact Assessment for the level of the fifth carbon budget Section 4.1 operating costs The incremental costs of installing and running low carbon technologies Finance costs The real social cost of providing finance for capital investments, which varies between sectors Energy savings ort The value of lower energy use due to improved efficiency of energy consumption, or switching from fossil fuels The benefits associated with reduced emissions. Where emissions are covered by the EU ETS, this benefit will be the avoided financial cost of purchasing EU emissions allowances. Reductions in non-traded emissions are valued using the Government’s non-traded carbon values The benefits associated with lower emissions of NOx, PM2.5 and other air pollutants detrimental to the These include the hassle cost to households for installing measures, benefits of shorter journey times due to lower congestion, less noise pollution and warmer homes from energy efficiency improvements Delivering the 2032 pathway described in this Strategy would result in a wide range of costs and benefits can vary significantly. In particular they will depend on a wide range of social and economic factors such as growth in population and gross domestic product; they will depend on how innovation results in new and lower cost low carbon technologies; and importantly the costs and benefits will also depend on the precise actions that are taken as a result of the Strategy. The extent of these costs and benefits is not fully known at this point in time because they will depend on the final design of the policies and proposals to meet carbon budgets. When setting the fifth carbon budget an indicative set of costs and benefits were estimated and set out in the accompanying impact assessment 345. Overall, it was estimated that meeting the fifth carbon budget through domestic action alone could be achieved with a net benefit to the UK of up to £5.5 billion over the fifth carbon budget period. The impact assessment also set out the sensitivity of these estimates to a range of underlying social and economic factors. These factors in particular included uncertainty around technology costs, energy prices, underlying drivers of UK emissions, and non- As noted, these estimates only provide an illustration of the potential scale of impacts. The 2032 pathway shows what is considered possible through domestic action, although this is only one of several plausible pathways. As Government delivers its Clean Growth Strategy and finalises policies, these will be accompanied with their own impact assessments where appropriate, which will set out the specific costs and benefits of the

Developing our illustrative 2050 pathways To explore the range of opportunities for the UK out to 2050 we have used UK TIMES, a model of the whole UK energy and greenhouse gas system (see further detail below). The model allows us to explore different possible outcomes by considering the availability, performance, feasible build rates, and costs of existing and new technologies, as well as how the future economy might differ from today. This model has been developed by the Government in partnership with University College London (UCL) over a number of years, in consultation with many partners. There are many ways the 2050 target could be met. To illustrate key potential technologies and uncertainties we investigated three pathways in depth. These three have all been deliberately selected to illustrate a wide range of possible pathways; for example, from 100 per cent battery electric cars to 100 per cent hydrogen fuel cell cars. However, different pathways within this range, and beyond this range, are also possible. All three 2050 pathways are consistent with the sector emissions levels in the 2032 pathway presented in this Strategy. They do not represent the most likely or preferred pathways to meeting the 2050 target, but show that the 2032 pathway would leave open a wide range of options for 2050. A detailed overview of the three pathways is given below, together with an explanation of the methodology used to develop these Details of the three 2050 pathways This pathway sees UK electricity generation increasing to around 650 TWh in 2050. All cars and vans are electric and four in five buildings use electric heating. Electricity is also the main low carbon energy source to the industry sector, making up around one-third of fuel demand. Around one in five buildings use a largely low carbon district heat network.
In this pathway carbon capture, usage and storage (CCUS) technologies are not available, which means there are no negative emissions. Hydrogen production is very low and industry sector emissions are higher than in the other This pathway sees a key role for low carbon hydrogen in decarbonising our vehicles and buildings. All cars and vans are fuelled by hydrogen and the majority of buildings use a hydrogen grid. Electricity and district heat still play a role in both residential and commercial/ public buildings. Overall hydrogen production is around 700 TWh in 2050, with Steam Methane Reforming and CCUS being the primary generation method. The role for CCUS in this pathway is greater than the other pathways with over 170 MtCO 2e being captured and stored in 2050. Because hydrogen is the main energy source for heating and transport, electricity demand and therefore generation is lower than the other pathways at around 340 TWh (around the same level as today). This pathway illustrates the role that a negative emissions technology (in this case bio-energy with carbon capture and storage) could play in meeting the 2050 target. Here negative emissions in the electricity sector of around 20 MtCO2e create “headroom” for other sectors such as transport, buildings and agriculture to decarbonise more slowly. In this pathway total electricity generation is around 570 TWh. Around four of every five cars and vans on our roads are electric and three in every five buildings are heated by low carbon electricity. Around one in every five buildings uses a largely low carbon district heat network. Department for Business, Energy and Industrial Strategy 346 Includes domestic and international aviation and shipping, in line with advice from the Committee on Climate Change. CCC (2015) Sectoral scenarios for the fifth carbon budget Share of district heat use in heating (per cent) 17% 24% 18% Share of electricity use heating (per cent) 83% 13% 80% Share of hydrogen use in heating (per cent) 0% 56% 0% Share of electricity use (per cent) 33% 23% 30% Share of hydrogen use (per cent) 0% 32% 28% Share of bioenergy use (per cent) 20% 15% 9% Captured emissions from industrial businesses (MtCO2e) 0 165 37 Share of district heat use in heating (per cent) 17% 17% 17% Share of electricity use in heating (per cent) 76% 14% 60% Share of hydrogen use in heating (per cent) 0% 62% 0% Share of car and van km in battery electric vehicles Share of car and van km in hydrogen fuel cell electric vehicles (per cent) 0% 100% 0% Share of HGV km in zero emission vehicles (per cent) 55% 19% 93% Electricity generation (TWh) 647 339 572 Share of clean electricity generation (per cent) 99% 99% 99% resources Emissions (MtCO2e) 46 46 60 shipping346 Emissions (MtCO2e) 44 44 44 Total Emissions (MtCO2e) 165 165 165

347 For this analysis, model version v1.2.3_d0.6.0_DNP has been used. Overview of the methodology used to The 2050 analysis uses UK TIMES, a model of the whole UK energy and greenhouse gas system covering the period 2010 to 2060 347. The model identifies the least cost technology pathway capable of both producing an assumed set of outputs (e.g. industrial output, space heating, and passenger distances travelled) and an emissions reduction profile. The technology pathway identified by the model will vary according to the input assumptions for technology and resource performance, cost and availability. The model can also be set up to roll out specific technologies in line with a given deployment profile. When the model is used in this way it will take account of the deployment profiles for specific technologies, and identify the least cost mix of remaining The 2050 pathways analysis has two primary First, it examines three substantially different “pathways” of economy-wide decarbonisation to understand the range of possible long-term Through previous modelling, research and external engagement, BEIS has identified the three areas of technology and resource uncertainty likely to have a big impact on the 2050 energy system. The pathways were then developed in consultation with internal sector experts to illustrate potential futures based on contrasting roles for these • The role of electrification; • The role of bioenergy production with CCUS to produce ‘negative emissions’. Second, it confirms all of the pathways are consistent with meeting the 2050 and fifth carbon budget emissions reduction targets. The modelled pathways were constructed in UK TIMES by varying input assumptions • Availability of technologies. For example, CCUS is not available in pathway 1 and negative emissions technologies are only • The extent or speed at which technologies can be rolled out e.g. faster growth in hydrogen production is allowed in pathway 2, whilst expansion of electric heating is • Entering fixed deployment profiles for some technologies e.g. 100 per cent of cars and vans are set to be powered by electricity or hydrogen in pathways 1 and 2 respectively. Other assumptions were kept the same across the pathways. For instance the consumption and output projection assumptions are consistent with current official economic growth and population projections and were the same for each of the modelled 2050 pathways. Technology and resource costs and performance assumptions were also kept the same and sector emissions were aligned to those in the 2032 pathway described in Impact of international aviation and International aviation and shipping emissions are not currently included within the UK’s targets under the Climate Change Act. However, carbon budgets have been set in a way that takes these emissions into account – the UK is on a trajectory that could be consistent with a 2050 target that includes emissions from international aviation and shipping. Department for Business, Energy and Industrial Strategy 348 CCC (2015) Sectoral scenarios for the fifth carbon budget The CCC’s central scenario allows 37.5 MtCO2e for aviation emissions in 2050, of which 36.2 MtCO2e 349 The AC used two scenarios – one called “carbon capped”, and one called “carbon-traded”.
In the “carbon-capped” scenario, the AC’s analysis showed that policies are available to limit UK aviation emissions to the CCC planning assumption of 37.5 MtCO2e in 2050 (domestic and international). In the “carbon traded” scenario, there is a global carbon market allowing reductions to be made where they are most efficient across the global economy resulting in UK aviation emissions of 44 MtCO2e 350 47 MtCO2e total international aviation and shipping emission assumed in this scenario The Government has not reached a final view on the appropriate level of international aviation and shipping emissions in 2050. The CCC in their advice on the fifth carbon budget advised leaving space in the 2050 target of around 41 MtCO 2e. This has been the modelling assumption used throughout this Strategy 348. We have undertaken sensitivity analysis to test the potential impact of higher or lower aviation emissions on how the UK could meet its 2050 target (focusing on aviation emissions as they are greater than shipping emissions). There are a number of policy measures available, both at the domestic and international levels, to address aviation emissions. It is likely that a combination of approaches and policy measures will be required. Examples of action available to countries international level action to tackle aviation emissions (such as through international standards and offsetting schemes) and domestic action to tackle aviation emissions (such as through support for sustainable alternative fuel uptake in aviation or improved operational efficiency). We have explored the feasibility of taking domestic policy action to offset aviation emissions to 2050 above the CCC planning assumption. We have analysed a scenario from the Airports Commission’s (AC) work on aviation capacity. For the case of expansion at Heathrow (a new northwest runway), the AC estimated UK gross aviation emissions in its “carbon traded” scenario to be around 44 This scenario for gross UK aviation emissions above the CCC planning assumption provides a useful basis for a sensitivity test. Our analysis shows that it is possible to meet the 2050 target under the Climate Change Act domestically if aviation emissions are 44 MtCO 2e350 – this is the case for our three pathways to 2050. Further action could be taken after the fifth carbon budget in order to offset these higher aviation emissions through action elsewhere in the UK. The action taken in the remaining UK sectors depends on the wider pathway Consideration of wider circumstances The Climate Change Act requires the Government to take into account a range of factors in developing its plan for meeting carbon budgets. These factors are discussed throughout the Strategy and its annexes. For a number of these factors it is not currently possible to know the full impacts as these will depend on the detailed design of the individual policies that will be developed in the coming years as the Strategy is delivered. Nevertheless, it is possible to estimate the nature of potential impacts and the considerations that will need to be made as policies are developed. In delivering the Strategy, the Government will undertake analysis to inform policy development. Where appropriate, impact assessments supporting the policy design will

Impacts on growth and competitiveness of the UK economy can arise through a number of channels, as a result of actions taken to deliver the Strategy. These arise due • Impacts on the timing and scale of • Impacts on business output resulting from improvements in energy efficiency, and changes in expenditure on capital assets; • Reorientation of consumption patterns away from emissions-intensive products and towards more energy-efficient products; • Impacts from changes to energy prices as a result of energy demand changes, and any changes in the costs of policy delivery mechanisms included in energy bills; • Long-term benefits from innovation, including the development of nascent industries, associated spillover benefits into other sectors, and the increase in exports of knowledge and new technologies; • Indirect effects on growth through changes in exposure to energy price volatility and • Transition costs that could materialise, for example the potential impact of stranded assets and any transitional unemployment; • Multiplier effects associated with the above impacts, including any impacts on The Government has undertaken analysis to assess the likely range of impacts from meeting the range of budgets. This analysis was undertaken in order to inform the setting of the fifth carbon budget and is set out in section 4.1 of the impact assessment. Impacts on taxation, public spending, and public borrowing can arise for a number of • The Government currently provides financial support for the take-up of low carbon technologies. Changes to existing policies or new policies may affect this expenditure; • Impacts on GDP , for the reasons set out above, can affect tax revenues; • Behaviour change can affect revenues relating to environmental taxes (e.g. landfill • Decisions may be taken in the future with regards to the wider tax system to take account of the broader fiscal position. Delivering the Strategy may have impacts on fuel poverty in the UK and its nations. The UK Government has a statutory target to raise as many English fuel poor homes as is reasonably practicable to energy efficiency Band C by 2030, with milestones of Band E by 2020 and Band D by 2025. The Devolved Administrations in Scotland and Wales have separate legal fuel poverty targets. The pathway set out in the Strategy could affect fuel poverty through a number of channels. These include impacts on energy prices, impacts on the energy needs of households through improved building fabric, and changes in the way heat is supplied. We will assess the impact on fuel poverty as part of the implementation of the individual policies

Department for Business, Energy and Industrial Strategy Potential saving (-) or additional consumption (+) in 2032 (TWh/year) Energy policy and energy supplies Energy security is about ensuring secure, reliable, uninterrupted supplies to consumers, and having a system that can effectively and efficiently respond and adapt to changes and shocks.
It is made up of three flexibility, adequacy and resilience. The Government is committed to ensuring there are secure supplies for consumers whatever The energy intensity of the UK economy has fallen significantly since 1990 and this trend is expected to continue. The energy intensity of the UK economy in 1990, as measured through final energy demand, was 1,530 MWh of energy per million pounds of GDP . In comparison, the energy intensity of the UK economy is projected to be around 630 MWh per million pounds of GDP in 2032, under the EEP 2016 reference emissions scenario based on existing policies. In the 2032 pathway, energy intensity could be as low as 548 MWh per million pounds of GDP by 2032. Delivering the 2032 pathway would result in changes in fuel consumption across the whole economy, with estimated impacts set would reduce final consumption by around 13 per cent in 2032 relative to projected energy consumption under existing policies, as a result of further improvements in fuel efficiency. The reduction in fossil fuel consumption will help improve energy security but the pathway is also characterised by a shift from end-user fossil fuel consumption towards biomass and

The capacity mechanism will use competition to find the most cost-effective mix of technologies to ensure we have sufficient reliable capacity to meet electricity demand. The power sector’s response to these changes in demand has been modelled using BEIS’s Dynamic Dispatch Model (DDM) 351. All other things being equal increased electricity consumption results in overall increases in the marginal costs of power supply, due to the need to dispatch more expensive generating technologies to meet consumption. The precise impacts depend on a range of factors, including the technology mix, technology costs, and fossil fuel and carbon prices. While electricity consumption is lower than the reference case projections (existing policies) in the early 2020s, over the fifth carbon budget as a whole 1.5 per cent more electricity is used. This is met through additional supply from clean generation, gas generation and A smarter electricity system reduces the additional capacity and costs from higher electrification of transport and heat through deploying energy storage technologies, and shifting electric vehicle charging and heat pump demand. Smart flexibility and technologies have the effect of reducing electricity consumption at peak times and shifting consumption to times when overall consumption is lower and more low-cost electricity generation capacity is available. Sustainability (including the impact on Section 13(3) of the Climate Change Act 2008 states that proposals and policies for meeting carbon budgets must, when taken as a whole, ‘be such as to contribute to sustainable development’. Tackling climate change is essential for maintaining a healthy, resilient natural environment, and the Government is committed to ensuring that the value of nature is appropriately reflected in all relevant policy decisions. Actions taken to meet our carbon budgets can create both risks and opportunities relating to the quality of our environment. We refer to the stocks of natural assets (e.g., forests, clean air, soils, species, freshwaters, oceans and minerals) that provide flows of natural resource inputs and ecosystem services as natural capital. Government set up the Natural Capital Committee (NCC) in 2012 to advise it on the sustainable use of natural capital, and how the services provided by, and risks to, natural assets can be better accounted for and valued in decision-making. This thinking is informing revisions to the HM Treasury Green Book to ensure a structured and consistent approach to assessing impacts on natural To produce an assessment of natural capital impacts for the Strategy, a screening exercise was conducted to identify which policies and proposals might be expected to have natural capital impacts. For these an assessment framework was designed to ensure that potential impacts on natural capital assets and their services were considered in a consistent way. Assessments prompted consideration of the spatial effects of each measure, the timeframe of these effects and a range of environmental assets that could be affected. 351 DECC (2014) Dynamic Dispatch Model

Department for Business, Energy and Industrial Strategy 352 BEIS (2017) Updated energy and emissions projections 2016 The detail of the assessments showed that impacts can vary depending on the context and policy approach which is important to consider when developing policy. Important risks and opportunities identified • Increasing forestry cover can have a number of benefits to natural capital including creating new habitats for animals and reducing flood risk. Likewise changes to farming practices can reduce the demands placed on natural resources and aid biodiversity. However, context is very important when changing land use. For example, benefits vary by species of tree planted, or the previous use of land converted to produce less emission • Transport sector measures such as the deployment of ULEVs may provide significant opportunities to reduce emissions of harmful air pollutants including Particulate Matter (PM) and nitrous oxides. There are also potential benefits in less pollution running off from road and reduced • Burning biomass for heat or power and biofuels for transport can create some harmful emission including Particulate Matter (PM) and Volatile Organic Compounds (VOCs). More broadly, while there are some risks, there are significant opportunities to both reduce greenhouse gas emissions while also reducing harmful The work also highlighted the need to consider natural capital impacts across groups of policies. These considerations will be taken forward as specific measures are designed and appraised in detail in accordance with The analysis of the 2032 and 2050 pathways are underpinned by a common set of assumptions about future economic and demographic trends, which align with those used for the 2016 Energy and Emissions Projections352. The EEP 2016 Reference scenario, representing future emissions under the UK’s current suite of climate policies, is also used as the reference for GHG emissions and energy consumption in each sector. The analysis uses assumptions about future energy prices, published as part of supplementary Green Book appraisal guidance.
Wherever possible technical assumptions on costs, performance and availability of technologies have been aligned between the UK TIMES model used for the 2050 pathways analysis and the models used to for the 2032 pathway analysis, although due to differences in modelling approaches there are some minor

353 UKERC Energy Data Centre, Industrial Energy 354 DfT (2012) Transport appraisal and modelling tools 355 Sloman et al. (2010) The effects of smarter choice programmes in the sustainable travel research report the-effects-of-smarter-choice-programmes-in-the-sustainable-travel-towns-full-report Commercial and public 2032 pathway analysis was based on the BEIS Non-domestic Building model using evidence from the Digest of UK Energy Statistics, Energy and Emissions Projections, ECUK and the Building Energy Efficiency Survey (BEES) to estimate heating, cooling and ventilation demand to 2032. Technology evidence was taken from BEES; RHI statistics and an interim heat pump performance report; an AECOM report on heat network costs and performance; and cost data from Heat Networks Delivery Unit (HNDU) sponsored projects. The Products Policy model was used for ventilation scenarios. For the 2050 pathways additional assumptions were taken from Carbon Trust; Valuations Office Agency and Poyry. The 2032 pathway was developed using BEIS Industry Pathways Models, split into eight industry sectors. A capital cost uplift of 10 per cent has been applied in the 2032 analysis to reflect potential hidden costs of delivering measures. For iron and steel, paper, cement and a part of chemicals actual production steps are modelled, using evidence from the Usable Energy Database353. The remaining sectors (other chemicals, non-metallic minerals, non-ferrous metals, food and drink and ‘other’ industry) are split into the different energy service demand categories (e.g. high temperature heat, low temperature heat) and generic technologies that produce these types of energy are modelled. Assumptions for these sectors are mainly based on UK MARKAL. Evidence from the Government’s 2050 Industrial Decarbonisation and Energy Efficiency Roadmaps, published in 2015, was incorporated into the modelling; in particular, the timing and extent of technologies deployed in the 2032 pathway analysis. The 2032 pathway was developed using the Department of Transport’s National Transport Model (NTM) 354 for road measures and the Rail Emissions Model for rail measures. The NTM forecasts emissions and traffic accounting for impacts on vehicle fuel efficiency and fuel mix. The ECCo model was used to develop uptake scenarios for Ultra Low Emissions Vehicles. Impacts of sustainable travel measures were based on evidence from the evaluation of the Sustainable Travel Towns355. The NTM covers Great Britain, so an uplift has been applied to account for transport emissions from Northern Ireland. This is the standard approach taken by DfT. For 2050 pathways analysis, nine vehicle groups are represented (e.g. car, bus, lorry), each with different types of vehicle choice (e.g. electric or hydrogen). Car and LGV assumptions were based on Element Energy’s ECCo Cost and Performance Database; HGV assumptions from a Ricardo report to the CCC (A review of the efficiency and cost assumptions for road transport vehicles to 2050); and maximum growth and delivery rate assumptions from DfT/ University College London (UCL). Department for Business, Energy and Industrial Strategy 356 DECC (2014) Dynamic Dispatch Model 357 Forestry Commission (2017) Forestry Statistics Domestic The 2032 pathway for existing buildings covers energy efficiency, heating technologies, heat networks, and behaviour change. The pathway was developed through the BEIS Domestic Buildings Scenario Model. Cost and performance assumptions for energy efficiency and heat measures is based on published analysis for the Renewable Heat Incentive (RHI) and Energy Company Obligation. For new homes, build rate assumptions were taken from the 2015 Housing Standards Review Impact Assessment, and impacts of low carbon heat measures was based on analysis conducted by an AECOM-led consortium. Additional assumptions for the 2050 pathways analysis are taken from UCL, Office of National Statistics (ONS) and Energy The power sector’s response to the changes in demand under the 2032 pathway has been modelled using BEIS’s Dynamic Dispatch Model356. The DDM is a comprehensive fully-integrated power market model covering the market in Great Britain over the medium to long-term. The model enables analysis of electricity dispatch from GB power generators and investment decisions in generating capacity from 2010 through to 2050. It considers electricity demand and supply on a half-hourly basis for sample days. Investment decisions are based on projected revenue and cash flows taking into account policy impacts and changes in the generation mix. The full lifecycle of power generated plant is modelled, from planning through to decommissioning. The modelling accounts for risk and uncertainty involved in investment decisions. UK TIMES 2050 modelling uses the same technology assumptions as the DDM where possible, and also includes additional evidence from UCL, National Grid, EPRI and Carbon Trust. Agriculture and land Evidence has been scaled from England to cover all of the UK Greenhouse Gas Emissions Inventory for England, Scotland, Wales and Northern Ireland (1990-2015). The scaling factor is based on a five-year average of the national contributions to overall agricultural emissions from the national inventory report (the 2014 common reporting format tables). From that data the average English contribution to agricultural GHGs is 63 per cent and estimates are scaled up on this basis. Emissions reductions are projected using an off-line version of the CARBINE carbon accounting model with policy specific mixes of woodland types. Biomass supply from relevant harvest fractions are included in the scenario analysis, but carbon storage and emissions reductions associated with the use of harvested wood products are not. This evidence has been scaled from England to cover all of the UK, based on both the share of current and historical activity357 and afforestation scenarios developed with DA forestry leads through the LULUCF GHG inventory and projections project funded by the BEIS Science team. The 2032 pathway analysis for England uses analysis of the potential GHG savings from different types of peatland restoration. Emission reductions are estimated using preliminary findings from an forthcoming BEIS-funded research project combined with cost data from the peatland code, agri-environment payments and reports for the CCC Adaptation sub-Committee.
In order to cover the UK as a whole the England-only data has been scaled based on estimates of total UK peatland area. Agriculture and land use is represented in the 2050 pathway analysis by applying a fixed emissions profile with a series of mitigation options available. This profile combines components from land use, crops and livestock. 358 BEIS (2016) Fossil Fuel Price Assumptions 2016 359 BEIS (2017) The UK and global bioenergy resource model 360 Dodds PE, Mcdowall, W. (2012) A review of hydrogen production technologies for energy system models The emission saving from waste in the 2032 pathway has been informed by a variety of sources. Food waste prevention savings are based on WRAP analysis associated with the Courtauld Commitment 2025. Landfill diversion was based on Defra’s Routemap. Projections of waste arising are a key input to the model. Landfill gas capture and oxidation assumptions were developed in an expert elicitation exercise with the Environment Agency. Cover the UK as a whole, the England only data has been scaled based on the Greenhouse Gas Emissions Inventory for England, Scotland, Wales and Northern Ireland (1990-2015). Economic growth and demographic The 2032 pathway analysis used the same growth assumptions as the 2016 Energy and Emissions projections. In the UK TIMES model used for 2050 pathway analysis, there are 60-plus growth drivers which are exogenous to the model and based on a variety of assumptions BEIS Energy Demand Model outputs, GDP growth assumption, ONS population growth, Department for Communities and Local Government (DCLG) household projections and Department for Transport (DfT) transport driver Fossil fuel Fossil fuel prices assumptions are based on the BEIS Fossil Fuel Price Carbon The Government’s current approach to carbon valuation was adopted in 2009 based on a “target-consistent” methodology. This is set out here government/collections/carbon-valuation--2. Aviation and Shipping (A&S): The CCC planning assumption is used to set the aviation and shipping “headroom” level in 2050. Domestic aviation and shipping is modelled as part of carbon Bioresource availability is based on the Bioenergy Feedstock Availability Model359. The assumed land area available for energy crops has been limited by excluding a wide range of sensitive sites on both landscape and biodiversity grounds. Domestic and imported bioresource costs are from a range of sources including CCC, E4tech, Carbon Trust and Nix Farm Management. Air Air quality emissions factors are provided by the National Atmospheric Emissions Inventory and Aether. Air quality damage costs are consistent with COMEAP guidance on air pollution. Hydrogen assumptions were developed by University College London 360. The costs are based on the assumption that a new network would need to be built to allow heating to be EU Assumptions for the UK’s share of EU ETS allowances are aligned with the levels assumed at the time of setting the respective budgets. These are 1,078 MtCO2e (second carbon budget); 985 MtCO2e (third); 690 MtCO2e (fourth); and 590 MtCO2e (fifth). Department for Business, Energy and Industrial Strategy Source information for metrics see Annex Changes that illustrate how our pathway could be delivered 361 BEIS (2017) Final GHG Emissions Inventory Statistics, 362 ONS (2017) population and migration statistics, 363 BEIS (2016) Digest of UK Energy Statistics, 364 Office for National Statistics (2017), Gross Domestic chained volume 365 BEIS (2016) Energy and Emissions Projections, 366 ONS (2016) Annual and quarterly low level aggregates of UK output gross value added (GVA), datasets/ukgdpolowlevelaggregates/current 367 BEIS (2017) Energy Consumption in the UK, 368 DfT (2017) Road Traffic Statistics, Emissions estimates for these metrics are taken from the BEIS (2017) GHG emissions statistics361 and 2032 pathway analysis. Population data (historical and projected) are sourced from the Office for National statistics (2017) 362. Energy data are taken from the BEIS (2016) Digest of UK Energy Statistics (DUKES) 363 and 2032 pathway analysis. Gross Domestic Product (GDP) estimates to 2015 are taken from the Office for National Statistics364. Emissions and energy use projections are based upon BEIS (2017) Energy and Emissions Projections 2016 365. GDP projections are taken from the Office for Budget Responsibility (OBR) Economic and Fiscal Business and public Emissions estimates for these metrics are taken from the BEIS (2017) GHG emissions statistics and 2032 pathway analysis. Energy data are taken from the BEIS (2016) Digest of UK Energy Statistics and 2032 pathway analysis. Output gross value added (GVA) estimates for services and industry are sourced from the Office for National Statistics on a constant price basis366. There are no official projections of output GVA; estimated trends have been made consistent with assumptions used in BEIS (2017) Energy and Emissions Projections. Emissions estimates for these metrics are taken from the BEIS (2017) GHG emissions statistics and 2032 pathway analysis. Energy data are taken from the BEIS (2016) Digest of UK Energy Statistics and 2032 pathway analysis. UK Household historical estimates have been taken from BEIS (2017) Energy Consumption in the UK 367 with projections sourced from BEIS (2017) Energy and Emissions Projections 2016, both of which are consistent with DCLG household The road transport metrics cover cars, vans and freight only. Emissions estimates for these metrics are taken from the BEIS (2017) GHG emissions statistics and 2032 pathway analysis. Energy data for road transport are taken from BEIS (2016) Energy Consumption in the UK, consistent with DUKES. Projected energy estimates are taken from the 2032 pathway analysis. Road transport demand estimates (in vehicle kilometres) are taken from DfT (2017)

369 Defra (2017) digest of waste and resource statistics, 370 Forestry Commission (2016) Forestry Statistics, Emissions estimates for these metrics are taken from the BEIS (2017) GHG emissions statistics and 2032 pathway analysis. Low carbon generation data are taken from BEIS (2016) Digest of UK Energy statistics, chapter 5, with projections sourced from 2032 pathway analysis. Natural Emissions estimates for these metrics are taken from the BEIS (2017) GHG emissions statistics and 2032 pathway analysis. Estimates of biodegradable waste to landfill are taken from the Defra (2017) Digest of Waste and Resource statistics 369 and 2032 pathway analysis.
Estimates of total conventional woodland cover are sourced from the Forestry Commission’s (2017) Forestry statistics370 and 2032 pathway analysis. Output gross value added (GVA) estimates for agriculture are sourced from the Office for National Statistics on a constant price basis. There are no official projections of output GVA; Defra analysts have estimated future

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