Transport and Climate Change: Supporting document to the CfIT report

Transcription

1 Transport and Climate Change: Supporting document to the CfIT report Report prepared for the Climate Change Working Group of the Commission for Integrated Transport September 2007 Jillian Anable 1 and Abigail L. Bristow 2 1 The Centre for Transport Policy, The Robert Gordon University, Aberdeen 2 Transport Studies Group, Department of Civil and Building Engineering, Loughborough University

2 CONTENTS 1. INTRODUCTION... 1 CHAPTER 2: TRANSPORT AND CARBON EMISSIONS: UK GOVERNMENT POLICY AND PROJECTIONS Introduction UK Climate Change targets Carbon emissions from the transport sector The UK Climate Change Programme Transport policies and carbon savings in the CCP Observations on transport and the CCP Projections of carbon emissions from the transport sector Assumptions and problems with the forecasts Creating a with measures baseline Scenario forecasts Markal modelling of the transport sector Conclusions CHAPTER 3: COMPARING THE EFFECTIVENESS OF POLICY MEASURES METHODOLOGICAL CHALLENGES Introduction General observations on the state of the evidence on transport and climate change The principal of cost-effectiveness The challenge of comparing cost-effectiveness estimates Conclusions CHAPTER 4: TECHNOLOGY OPTIONS Introduction Car technology Supplementary vehicle technology Renewable Transport Fuels Changes to the vehicle emissions test cycle Bus technology Rail technology Van and lorry technology Technology Procurement Vehicle technology - conclusions CHAPTER 5: FISCAL MEASURES Introduction Vehicle excise duty (VED) Company car tax and car fuel benefits Purchase tax/ Feebates/ VAT on vehicles Scrappage schemes... 78

3 5.6 Fuel duty Fuel duty differentials National and Local Road User Charging Lorry Road User Charging Surface transport emissions trading Fiscal measures - conclusions CHAPTER 6: BEHAVIOURAL MEASURES Introduction Smarter choices Walking and Cycling Eco-driving Speed Enforcement Car labelling/ awareness campaigns Sustainable Distribution Behaviour change - conclusions CHAPTER 7: COMPARATIVE ANALYSES Introduction UK evidence comparing across sectors and measures Other studies that have compared transport measures Global and European studies that have looked across sectors Future Integrated Transport Strategies Carbon abatement and cost-effectiveness in transport - conclusions CHAPTER 8: POLICY IMPLICATIONS AND CONCLUSIONS Introduction Main policy implications of our findings The value of the integrated approach REFERENCES

4 ACKNOWLEDGEMENTS We would like to thank all the members of CfIT s Climate Change Working Group for many insightful comments regarding the evidence we presented to them over the course of this project. In addition, Dr Anable has drawn upon work undertaken for the UK Energy Research Centre to inform the evidence review carried out for this work. DISCLAIMER Although this report was commissioned by the Commission for Integrated Transport (CfIT), the findings and recommendations are those of the authors and do not necessarily represent the views of CfIT. While CfIT has made every effort to ensure the information in this document is accurate, CfIT does not guarantee the accuracy, completeness or usefulness of that information; and it cannot accept liability for any loss or damages of any kind resulting from reliance on the information or guidance this document contains.

5 1. INTRODUCTION In the summer of 2006, we were commissioned by the Commission for Integrated Transport (CfIT) to provide strategic advice on transport and climate change. The process has involved a comprehensive review of existing studies and the production of number of working papers to CfIT s Climate Change Working Group. Evidence was reviewed on three related aspects of transport and climate change: Government policy and modelling approaches used in forecasting CO 2 emissions from transport and the impact of mitigating measures; Evidence on the cost-effectiveness of measures to reduce CO 2 emissions from transport; Use of the available evidence to estimate the effects and costs of a range of measures to reduce carbon emissions from transport. The review process commenced in the summer of 2006 and continued throughout 2007 to include many publications released during this period. It also draws upon work being carried out for the UK Energy Research Centre (UKERC) which is collating information on these same policies (and others) and is publishing these as IMPACT (Interactive Manual of Policies to Abate Carbon from Transport) available at 1. This document brings together the evidence base developed over the course of the project in the following chapters: Chapter 2 provides an overview of Government policy on transport and climate change, the Climate Change Programme, the Energy White paper and modelling used to inform policy decisions. It also explains how the baseline was calculated against which policy recommendations could be evaluated. Chapter 3 outlines the state of the evidence as regards our understanding of the potential for policy measures and programmes to abate carbon from the transport sector and the cost-effectiveness of various approaches; Chapters 4, 5 and 6 summarise the evidence on carbon savings and costeffectiveness on technological, fiscal and behavioural measures; Chapter 7 brings some of this work together to make comparisons across measures and sectors where feasible and draw some conclusions about costeffectiveness; Chapter 8 draws out the policy implications of this study and brings together calculations undertaken for the measures included in the CfIT recommendations. In this review the greatest attention was paid to measures where the evidence suggests that implementation could deliver in terms of carbon reduction and be cost effective. Albeit wide ranging, this is by no means a fully comprehensive review of all the instruments that could potentially be applied to the transport sector. The review was used to estimate a baseline forecast for carbon emissions from the UK transport sector to 2020 using Government projections and an understanding of the savings estimated from policies included in its Climate Change programme. Potential 1 Available on-line Autumn

6 carbon savings against this baseline were then estimated from a number of policy instruments emphasising those with the greatest potential for cost-effective and deliverable savings within this timescale. Whilst a model was not developed to derive these estimates, new figures were calculated on the basis of assumptions informed by the literature review. The calculations used to derive the carbon savings for the CfIT package are documented under each of the relevant measures. The policies reviewed are divided into three chapters and shown in Table 1.1: Table 1.1: Policies included in this review Chapter 4 Technology 4.2 Car technology 4.3 Supplementary vehicle technology (Gear shift indicators; Incar fuel economy meters; Tyre pressure monitoring systems; Low rolling resistance tyres) 4.4 Biofuels and the renewable transport fuels obligation 4.5 Changes to the vehicle test cycle 4.6 Bus technology 4.7 Rail technology 4.8 Van and lorry technology 4.9 Technology procurement Chapter 5 Fiscal 5.2 Vehicle excise duty 5.3 Company car tax and company car fuel benefits 5.4 Purchase tax / feebates / VAT on cars 5.5 Fuel duty 5.6 Fuel duty differentials 5.7 National and local road user charging 5.8 Lorry road user charging 5.9 Surface transport in emissions trading Chapter 6 Behavioural 6.2 Smarter Choices 6.3 Walking and cycling 6.4 Eco-driving 6.5 Speed enforcement 6.6 Car labelling / awareness campaigning 6.7 Sustainable distribution Where possible, we have organised the material for each policy instrument under the following headings: background; potential carbon savings; cost-effectiveness; calculation of carbon savings for the CfIT package. Finally, it is important to note that this report concentrates on surface passenger transport, with little attention to freight, and no inclusion of instruments for aviation or shipping. This is because separate studies were commissioned by CfIT on these areas. For more detailed account of the aviation and freight sectors, together with various options for emissions trading, it should be read in conjunction with the other supporting documents available at 2

7 McKinnon, A. (2007) CO 2 Emissions from Freight Transport in the UK. London: CfIT. Watters, H. & Tight, M. (2007) The Role of Trading in Carbon Emissions for the Transport Sector. London: CfIT. Dargay, J.; Menaz, B. & Cairns, S. (2006) Public Attitudes towards Aviation and Climate Change: Desktop Research. London: CfIT. Ipsos MORI (2007). Public Attitudes towards Aviation and Climate Change: Survey. London: CfIT. 3

8 CHAPTER 2: TRANSPORT AND CARBON EMISSIONS: UK GOVERNMENT POLICY AND PROJECTIONS 2.1 Introduction Government projections for carbon dioxide from the transport sector and its position relative to other sectors are dependent on a number of assumptions in relation to changes in traffic demand, fuel prices and income growth. They are also crucially dependent on the estimates of carbon savings allocated to a variety of individual policy instruments that it deems to be firm and funded into the future. It is necessary to have an understanding of these estimates before examining the projections for the transport sector in any detail. This chapter reviews the main elements of the Government s approach and identifies the most up-to-date official estimates of carbon savings from the individual transport elements within it. This enables the development of a with measures baseline to 2020 to use as a base for the estimates of potential additional carbon savings outlined in Chapters 4, 5 and UK Climate Change targets The UK s Kyoto target is for a 12.5% cut in greenhouse gas emissions from 1990 levels in the commitment period The UK is on course to meet this target with room to spare 2. The Government has also had a tougher self-imposed target to cut just emissions of carbon dioxide (CO 2 ) by 20% from 1990 levels by This is almost certainly not going to be achieved. This target has now been superseded by new targets in a draft Climate Change Bill (HM Government, 2007) 3. The Bill will enshrine in law an interim target of 26 32% reduction in CO 2 by 2020 as well as the 2050 target of a 60% reduction 4. In order to achieve even the lower end of the Climate Change Bill targets for 2020, the Government admits it will have to achieve the upper end of the policies included in its Energy White Paper, including EU Emissions trading (DTI, 2007a) 5. these policies are reviewed below. The Climate Change Bill proposes a system of carbon budgeting which cap emissions over five-year periods. This is important because the science of climate change, with its focus on the atmospheric concentration of carbon, underlines that it is the total amount of emissions released into the atmosphere between now and the target date that is important. Carbon dioxide produced today will still be contributing towards the greenhouse effect beyond 2100 and delaying action now will require greater action 2 Final estimates for 2005 emissions published in January 2007 show that UK greenhouse gas emissions fell by 15.6% from 1990 levels. However, carbon reductions are currently at around 5% below the base year (Defra, 2007e). 3 It is interesting to note that the 20% target had been translated into a Public Service Agreement shared by the DTI, Defra and DfT. We are unsure of the current status of these PSAs. 4 This was originally recommended by the Royal Commission on Environmental Pollution (RCEP) that the UK should put itself on a path to a reduction in carbon dioxide emissions of some 60% from current levels by about 2050, with an interim target for DTI 2007a, Annex B, Table B2 4

9 later for the same temperature target. Thus the pace of emissions reduction is as important as achieving the 2050 end-point (Buchan 2007; Anderson and Bows 2007). In simple terms in order to have a reasonable chance of staying below 2 o C warming global greenhouse emissions which have been growing steadily need to peak within ten years and then fall. While the UK Government s proposed targets are challenging, a scientific consensus is emerging which argues that even these do not go far enough or quickly enough, and that cuts more in the order of 80% by 2050 will be required, at least in developed countries (HM Treasury, 2006; Tyndall, 2007). It is not Government policy that each sector should contribute equally to any of the emissions targets. The Government believes that carbon targets should be met in the most cost-effective way and this may mean that some sectors contribute more than others. In any case, it is clear even by 2010 this will not be the case as certain sectors will have achieved much more than others. For the longer term, however, it is not clear which sectors would be able to achieve more than a 60% reduction to compensate for any underachievers. 2.3 Carbon emissions from the transport sector. In this report, we will not outline historical trends in transport and carbon emissions in the UK in any detail - Chapter 2 of the main CfIT report includes such a review. However, it is necessary to understand the share of emissions which this sector is responsible for today in order to understand future projections. Unfortunately, this is not entirely straightforward. Different Government departments use different models and accounting methods to present sectoral emissions (see Anable and Boardman, 2005, for a discussion). Different departments calculate emissions using different models and include different things under the category transport (e.g. such as off-road emissions or stationary emissions from railways). Moreover, comparing different forecasts created at different times will lead to discrepancies because of the different models used. Most importantly, the exact share of UK emissions of carbon dioxide currently accounted for by the transport sector depends both on the way in which emissions are apportioned across the sectors in the economy, and what is included in the figures. Firstly it is necessary to understand the difference between end user and source emissions. End-user figures include an estimated share of upstream emissions from power stations and refineries allocated back to the sectors using the electricity or fuel (sometimes referred to as well to wheel ). Source figures allocate emissions according to where the fuel (e.g. coal, gas, oil, petrol etc.) is consumed and so do not attribute emissions arising from fuel refining or electricity generation to the transport sector but to the energy sector. Total UK emissions in both cases are the same (151.7 MtC in 2005, not including international aviation and shipping), but the difference for individual sectors can be substantial. Using figures from Defra, transport sector figures increase from 35.2 to 41.6 MtC in 2005, with the sectoral share of the total rising from 23% to 27%, once upstream emissions are reallocated as shown in Table 2.1 (Defra, 2007b). The second distinction is between domestic and international emissions. Government targets, projections and modelling usually exclude emissions from international aviation and shipping, as there is no agreed convention on how to allocate these emissions to individual countries. For instance, the UK s Kyoto target does not include emissions 5

10 from these sectors. Thus a truer picture of the UK s emissions would include at least some emissions from these international movements. Using a method of calculating aviation and shipping emissions based on fuel used in international bunkers, this would add 11 MtC to the normally-reported figures, increasing transport s share to 28% (46.3 MtC, as source) or 32% (52.7 MtC, as end user) of an expanded UK total for carbon emissions. It would mean that air traffic would account for approximately 6% (9.5 MtC) of total emissions by source. These figures do not include additional effect of other greenhouse gases and atmospheric effects including those caused by air travel at high altitudes (see Dargay and Cairns, 2007 for further discussion). Table 2.1: Transport sector emissions as a proportion of UK emissions various categorisations Transport Sector Emissions 2005 (MtC) Excluding international aviation and shipping Including international aviation and shipping Source 1 End user 2 Source 3 End user 1 MtC Total UK % of total UK 23% 27% 28% 32% Figures are from Defra (2007b). However, there are no end use figures available for aviation and shipping. We have used the emissions related to fuels from UK 'international bunkers' as a proxy measure. In 2005, Aviation = 9.5MtC and Shipping = 1.6MtC. Note that these figures do not include radiative forcing of emissions from aviation. Actual MtC are likely to be considerably higher than shown. End-user figures provide the most complete account of the relationship between emissions and transport, but this classification is subject to more uncertainty than source figures, for which data are more accurate and readily available. Carbon savings attributed to policy instruments discussed later in this report are available as source figures, and so hereafter, we refer to source emissions and do not include international movements unless otherwise indicated. In addition, it should be noted that we do not refer to greenhouse gases other than carbon dioxide in this report unless otherwise stated. We express these as Million tonnes of carbon (MtC) 6. Thus, based on the most recent source emissions figures produced by Defra (not including international shipping and aviation) the transport sector accounted for 35MtC in 2005, or 23% of UK emissions of carbon dioxide. By this definition, the transport sector accounts for more than all other sectors except for the energy sector as shown in Figure This refers to the mass of the carbon component of the CO 2 molecule and should be multiplied by 44/12 to give the mass of CO 2. 6

11 Figure 2.1: UK carbon emissions by sector as a share of total emissions (2005) (source figures, without international emissions) 17.7% 38.5% 23.2% Energy Supply Industry Transport Residential Commercial/ Public Sector Agriculture/ Forestry 0.8% 4.8% 15.0% Source: Defra, 2007b Figure 2.2 shows transport sector emissions by source. Road transport is the most significant producer of greenhouse gases in the transport sector, accounting for 93% (about 33 MtC) of domestic transport emissions by source. Cars make up over half of these emissions, with large goods vehicles (lorries) and vans together responsible for just over a third 7. Flights within the UK are currently responsible for 2% of domestic transport emissions, equating to 0.4% of UK total carbon emissions. Including international air travel would increase aviation s share of transport emissions to over one-fifth. 7 However, figures for carbon emissions from freight traffic can vary according to their method of collection. See research undertaken for this study by McKinnon for alternative figures on freight CO 2 emissions (McKinnon, 2007). 7

12 Figure 2.2 UK transport sector carbon emissions by mode 2005 by source (excluding international aviation and shipping) UK Shipping UK Air 3% 2% Railways 2% Buses 3% Other 1% Lorries 22% Cars 54% Vans 13% Source: Defra, 2007b 8 Figure 2.3 shows that although other sectors (e.g. residential) have experienced increases in emissions in recent years, transport is the only sector in which carbon emissions were significantly higher in 2005 than in the Kyoto baseline year of 1990 partially offsetting reductions made elsewhere in the economy. Total UK emissions of CO 2 fell by 6% 9, while transport emissions grew by almost 11% (not including international movements). 8 Note: as this is by source, it excludes the emissions from electricity generation in rail. 9 Note the difference between CO 2 emissions and total greenhouse gas emissions here. The total basket of Kyoto greenhouse gas emissions fell by 15.6% between 1990 and 2005 (Defra, 2007d). However, most recent estimates show carbon emissions rose again during 2006 mainly due to fuel switching from natural gas to coal so that the level is currently only around 5% below the base year (Defra, 2007e). 8

13 Figure 2.3 Carbon emissions by sector: 1970 to 2005 (source) Million tonnes carbon (MtC) Source: Defra,2007b Energy Supply Industry Transport Residential Commercial/ Public Sector Agriculture/ Forestry Within transport as a whole, emission trends since 1990 have differed for individual modes (Figure 2.4, which unlike Figure 2.3 includes international transport). While cars are the most significant mode, their emissions have stabilised at roughly 1990 levels, despite an 18% increase in car traffic over this period (DfT, 2006a). Public transport emissions have fallen by 9% 10 since 1990 though this has had marginal impact overall, given public transport s small share of the market 11. Aviation emissions have grown fastest of all. Since 1990, domestic aviation has seen emissions growth of nearly 100%; international air travel emissions have grown by 123% (based on figures for fuel used in international bunkers and calculating the emissions related to the burning of this fuel). According to Defra statistics, use of vans has resulted in steep growth in emissions, up nearly half since 1990 so that they now account for 13% of domestic transport emissions. Lorries currently account for 22% of transport emissions and have grown by almost a third over the same period. However, research carried out for CfIT (McKinnon, 2007) has shown that trend emissions figures for lorries and vans can vary by a factor of 3, 12 depending mainly on whether bottom-up surveys of road freight activity and fuel 10 This is made up of carbon emissions from buses reducing by 23% (despite +13% increase in bus and coach kilometres since 1990 (TSGB)) and railway emissions increasing by 50%. 11 In 2005, 85% of passenger kilometres were undertaken by car, van or taxi, 6% by bus and coach, 6% by rail and the remainder by motorcycle, bicycle and domestic air travel (DfT, 2006a). 12 A recently published Defra document claims that CO 2 emissions from lorries rose by 29% between 1990 and This figure is more than three times higher than the estimate based on the Continuing Survey of Road Goods Transport and National Road Traffic Survey (see McKinnon (2007) for further discussion). 9

14 efficiency or top-down sectoral estimates of fuel purchases are used. The above figures seem to be based on the latter, which may overestimate emissions growth from these modes. Crucially, the Defra figures appear to report increases from the road haulage sector alone, which will have been offset by reductions in transport allocated to other sectors as vehicle fleets were contracted out during this period 13. It is also worth noting the lack of clarity about the proportion of distance travelled by vans that can be considered as freight. McKinnon estimates 14 that freight the collection and/or delivery of goods and associated empty running may be as low as 35% of van kilometres, the remainder being accounted for by commuting and by small businesses such as builders. Figure 2.4 UK transport CO 2 emissions (source) Other International aviation Domestic aviation International shipping Million tonnes Carbon (MtC) Source: Defra, 2007b The UK Climate Change Programme Domestic shipping Public transport Lorries The package of policy measures favoured by the Government aimed at reducing carbon from all sectors is published in its Climate Change Programme (CCP). The UK's Climate Change Programme (CCP) was launched in 2000 (DETR, 2000a). The Programme details how the UK plans to deliver its Kyoto target to cut its greenhouse gas emissions by 12.5%, and move towards its domestic goals. A review of the programme occurred in September 2004 (Defra, 2004) and a revised Climate Change Programme was published in 2006 (Defra, 2006a). Vans Cars 13 In-house fleets operated by retailers or other companies are not counted the transport sector but under the main activity of the company concerned. Thus a move to contracted out fleet operation would appear to increase transport emissions. 14 Using results of the 2004 Survey of Van Activity (DfT, 2004c). 15 Other includes motorcycles and mopeds; LPG emissions; other road vehicles and mobile sources and machinery. International shipping and aviation have been calculated using fuel in international bunkers. 10

15 The CCP is closely related to the Government s energy policy. This was reviewed in 2006 (The Energy Review (DTI, 2006c)) and more recently in 2007 in a new Energy White Paper (EWP, DTI, 2007a). The latter included new analysis on the component policies of the CCP and added some measures albeit some of them still at the speculative stage to give a fresh estimate of carbon reductions to be achieved by Each publication of the recent CCP and the EWP has been accompanied by supporting documentation which included analysis of carbon and cost-effectiveness of individual measures (Defra, 2006b and c; Defra, 2007a; DTI, 2006a and b; DTI, 2007b and c). The frequent re-assessment of policies based on updated assumptions and the inconsistent presentation of these results (i.e. sometimes with and sometimes without ancillary impacts for cost-effectiveness see Chapter 3) can mean that these documents are often confusing, lack transparency, and make comparisons between departments and years difficult. We have attempted to present the most up to date set of figures with some information as to the history of these projections where this sheds light on the Government s approach. 2.5 Transport policies and carbon savings in the CCP The key elements of the Climate Change programme in terms of carbon reduction from transport are listed below, with further detail on each in the subsequent chapters: Voluntary agreements (VAs) since 1997/8 to reduce average sales-weighted new car fuel emissions, between the EC and the European, Japanese and Korean automobile producers. The original target for emissions from the tailpipe for European vehicle manufacturers was 140 g CO 2 /km by Progress has been made, but there is now widespread acknowledgement that the target will not be met; Package of measures (in the UK) to support the VA, comprising of reforms to vehicle excise duty (VED), company car tax (CCT), and labelling on car CO 2 emissions: - For cars registered on or after 1 March 2001, a system of VED bands exists based on the CO 2 emissions rating of the vehicle. Duty ranges from 0 in band A (less than 100 g CO 2 /km) to 300 in band G (over 226 g CO 2 /km). The 2007 Budget reduced the band B rate to 35, removed the diesel differential, increased band G to 300, with a further increase to 400 in 2008, with minor adjustments to other bands; and - Company Car Tax has been based on CO 2 emissions since EU successor to the Voluntary Arrangements. The CCP envisaged a successor to the current agreement that would deliver similar levels of progress as seen under the current VAs (around a 1.5% improvement per year). In the UK, this would equate to reaching a level of 135 g CO 2 /km by Analysis for the Energy White Paper looked at a wider range of scenarios more commensurate with the 130 g CO 2 /km by 2012 recently put forward by the European Commission (CEC, 2007b). The UK Government has expressed its wish to see a long term target set of 100 g CO 2 /km, although no date for this target has yet been defined; 11

16 UK Renewable Transport Fuels Obligation, requiring suppliers to ensure a share of their sales are from biofuels, rising in stages to 5% by Companies who miss this target can buy surplus certificates from those who exceed it, or pay a penalty. Both a duty discount and the RTFO are implemented at the pump, with biofuels receiving a rebate of 20 pence per litre to encourage their take-up and development. The Government wants the level of the obligation to rise above 5% after 2010, conditional on the development of robust carbon and sustainability standards, new fuel quality standards at EU level, and costs to consumers being acceptable (DfT, 2007c); 10 Year Plan (10YP)/Wider transport measures/smarter Choices including a sustainable distribution strategy in England, improvements to local public transport and a range of soft or smart choices such as school travel plans at the level envisaged in the 10 Year Plan (DETR, 2000b); Smarter Choices - In the supporting analysis to the EWP (DTI, 2007b), 0.2 MtC was reallocated to the transport sector from local authority policies. We have clarified these as pertaining to smart measures implemented beyond that included in the 10YP; Sustainable distribution (in Scotland) freight is a minor part of the programme with specific carbon savings allocated to this policy in Scotland and an unspecified element of the savings from wider transport measures; and The Fuel Duty Escalator (FDE) introduced in 1993 at a rate of 3% above inflation, increased to 5% in 1995, and again to 6% in Although scrapped in 2000, as fuel duty remained higher than it would have been had the policy never been implemented, it is still considered to be contributing to carbon reduction targets. The 2007 Budget included an announcement of with inflation increases in duty to 2009 (HM Treasury, 2007). Chapters 4, 5 and 6 have more detailed accounts of these policies, their progress so far, assessments of cost-effectiveness and potential future directions. The potential carbon savings from each policy instrument in the programme are regularly re-estimated by Government as underlying modelling assumptions change in the light of experience and new evidence. Table 2.2 captures the various estimates of each policy instrument to provide an overview of how these have changed. 12

17 Table 2.2: Carbon savings from transport policies estimated in Government documents Start date CCP 2000 a CCP 2006 b+c EWP 2007 d+e Original VA Package 2008 Successor to ? the VA (135g) Wider Transport Measures Sustainable Distribution (Scotland) RTFO (5% gross) 09 Fuel Duty Escalator 2000 Smarter (?) Measures TOTAL Sources: a DETR 2000 (Chapter 9); b DTI 2006b (Annex E); c Defra 2006a (Chapter 10); d DTI 2007a; e DTI 2007b 1 The Defra 2006a and DTI 2006b estimate the VA package to save 2.3MtC in Defra 2006a (p67) says 0.15 of this was from VED. There is however some confusion over the assessment of the company car tax within this. For instance, the Regulatory Impact Assessment of the CCP (Defra 2006c, Annex A, p3) claims 0.6MtC and the Defra Synthesis report (Defra 2006b) estimates 0.5MtC. In addition, the DfT s evidence to the EAC inquiry reports Unfortunately, it is difficult to isolate the impact of these individual policies on vehicle fuel efficiency since all are contributing to the same outcome. Apportioning the resultant carbon savings to individual measures is therefore difficult to achieve with certainty. As a consequence, the work we carried out for CCP2006 evaluated these measures as a package. Our estimate was that this package of measures would generate carbon savings of 2.3MtC in However, as an illustration of the magnitude of likely carbon savings arising from the company car tax, HMRC have provided an indicative range of 0.35 to 0.65MtC saved in (EAC Volume II, p220) 2 However, the DTI document Synthesis of cost benefit analysis (DTI 2006c, p27) says 135g CO 2 /km from an average level of 162g CO 2 /km in 2008 would result in 1.96MtC in 2020 (central oil price scenario). However, the Updated Emissions Projections document supporting the Energy Review (DTI 2006b), p26, provides a figure of 1.5 MtC in 2020 and it is unclear what this is based on. 3 As explained in the footnote below, no figures have been provided for 2010 in the main EWP document against this measure. Savings for interim years to 2020 were not provided in the Appraisal Synthesis document either (DTI 2007c). However, DTI 2007c does provide the targeted grammes per kilometre figure for some interim years upon which its modelling has been based. It also provides these figures for 3 other end-point targets (e.g. different rates of improvement other than 1.5%). We were therefore able to 13

18 calculate the implied savings in each interim year given that the targets were stated to be assumed to be achieved linearly. For more explanation of why we felt we could do this, see Chapter 4. 4 There is a discrepancy in the figures in the main text of the EWP (DTI 2007a, p245) and its supporting UEP document (DTI 2007b, Table G3, p38. The former provides a figure of 1.8 MtC in 2020 with no figure for The latter provides figures of 0.09 MtC in 2010 and 1.7 in An enquiry revealed that the figures in the UEP had been left in by mistake. 5 Defra (2006b p14) says: A thorough evaluation of this policy was not undertaken due to a difficulty in obtaining reliable data. The savings for these measures are estimated using the NTM, whereas others are estimated using the DTI energy model. 6 DTI 2006b says 'estimates of measures beyond 2010 are less certain and have either been assumed to continue at the 2010 level or where penetration of the measure continues beyond 2010 (eg efficient vehicles entering the car stock), the savings have been calculated on this basis. 7 Defra 2006a, p64 says: This figure follows the internationally agreed methodology for allocating emissions to individual states, which prevents global double accounting of emissions. As such it does not take into account the carbon emitted during the production of biofuels produced abroad but consumed in the UK. When this is taken into account the net global reduction in carbon dioxide emissions is 1.0MtC. The level may increase above 5% after 2010, but this has not been accounted for in the figures. 8 New RTFO, these figures are from DTI 2006, Table G2, p38 as it appears that new analysis led to this revised figure. However, the DfT preferred CfIT to continue to use the 1.6 MtC figure as this is from the DfT model as opposed to the DTI Energy model. Hence, in the CCP baseline we revert back to 1.6 MtC, even though it seems unlikely that the full savings would come into effect as early as 2010 when the policy is not due to start until at least This estimate from HMRC. However, Defra 2006c, Annex A, p3 says 1.4 MtC in In the supporting analysis to the EWP (DTI, 2007b), 0.2 MtC was reallocated to the transport sector from local authority policies. We have clarified these as pertaining to smart measures implemented beyond that included in the 10YP. Table 2.2 reveals that there have been some important slippages in delivery against carbon savings that were originally projected and estimates have had to be revised downwards. The most notable is the Voluntary Agreement package which, due to slower than average progress in the average fuel economy of new cars, had been projected to save 4.0MtC annually by 2010, but has now been revised down to 2.3 MtC. Previous estimates were based on average new cars meeting 140g CO 2 /km in It is now estimated that average new cars will emit 162g CO 2 /km in In addition, the 10 Year Plan for transport has also not delivered as expected within the time frame, resulting in a reduced savings estimate from these wider measures. Two new transport measures were introduced in the review of the CCP in 2006 (the RTFO and the new VA). When they were introduced, they were expected to save an additional 1.7MtC in 2010 which essentially offset the growth in emissions expected between 2004 and However, even with the addition of the two new measures in 2006, transport s net annual carbon savings in 2010 was now estimated to be below 14

19 the lower end of Government s original projections made in The Environmental Audit Committee suggests that this betrays a dismal failure of purpose from the DfT 16. Based on Table 2.2, but reverting back to DfT figures for the RTFO 17, Table 2.3 shows the Table used as the total contribution expected from the CCP in the with measures baseline used for the CfIT study. Table 2.3: Expected carbon savings from transport measures in the CCP Voluntary agreements package (includes supporting fiscal measures e.g. VED, CCT) Successor to voluntary agreements (based on a target of 135 g CO 2 /km by 2020) Fuel duty escalator ( ) Renewable Transport Fuels Obligation (gross savings based on 5% of fuel sales by 2010 target) Sustainable distribution in Scotland Year Plan/ Wider transport measures Smarter Choices (low intensity) TOTAL CCP Note: Totals do not sum due to rounding. Table 2.3 shows the savings attributed to each measure, totalling 10 MtC by The figures indicate that, by 2020, 70% of reductions would come from technology policies, 19% from measures associated with carbon pricing 18 and 11% due to policies to promote behaviour change (including sustainable distribution) see also Figure EAC 2006, paragraph The DfT believe their modelling on the RTFO using the national transport model to be more appropriate for assessing carbon savings from this measure. 18 Although the impact of VED and Company car tax is not separately analysed after 2010 and the savings are included in technology instead. 15

20 Figure 2.5: Carbon savings in 2020 from transport policies in the CCP Smarter Choices 2% 10 YP + Wider Measures 8% Sustainable distribution in Scotland 1% Successor to Voluntary Agreements 18% Fuel Duty Escalator ( ) 19% Renewable Transport Fuels Obligation (5% gross) 16% Original Voluntary Agreement package (incl. VED etc) 36% Thus, whilst the Government s policy for transport has elements of technological, fiscal, behavioural and even carbon trading approaches, it is very much reliant on improvements to vehicle technology and alternative fuels. Apart from the successor to the VA, the greatest savings will come from the Fuel Duty Escalator which ran from 1993 to 1999 and has now been abandoned. Therefore, without this policy, the trend seems to be a move away from market mechanisms towards a reliance on regulatory measures such as the VA and the RTFO in this sector. In addition to the emissions savings identified above, further developments have been outlined both within and separate to the Energy White Paper (2007). However, these are not included in the baseline as they are not considered to be firm and funded 19. If aviation were included in the EU Emissions Trading Scheme (EUETS), assuming a cap at 2005 emissions on projected 2020 levels in line with the current Commission proposal, this is projected to save 0.3 MtC by 2020 relating to domestic UK flights only, with a further 4.4 MtC accounted for by international departures (Defra & DfT, 2007). It is anticipated that only a small proportions of these emissions savings will come from reduction measures within the aviation sector itself, as opposed to reductions purchased through credits generated elsewhere. If the RTFO were extended to 10%, this would save an additional 1 MtC by 2020 (DTI); The Energy White Paper also repeated the Government s commitment to pursue the inclusion of shipping and surface transport in the ETS (DTI 2007a); 19 (This is, however, somewhat confusing as the Government attaches carbon savings to the successor the VA even though it could not also not be regarded as firm and funded). 16

21 In 2006 a new communications campaign (Act On CO 2 20 ) was launched, covering eco-driving and purchasing. This highlights to consumers that they can contribute to tackling climate change without compromising on the type of car they drive both by driving in a more fuel-efficient way and by purchasing a lower-carbon vehicle within a given class; A new Low Carbon Vehicle Innovation Platform will provide up to 30 million for UK industry-led demonstration and collaborative Research and Demonstration projects from 2008/09 onwards; and Air passenger duty (APD) was doubled with effect from 1 February 2007 estimated to save around 0.75 MtC per year by (HM Treasury, 2007). The CCP as a whole is set to deliver reductions of around 27 MtC by 2020 excluding the EU Emissions Trading Scheme (EU ETS). Adding in the EUETS (including for aviation) and other policies identified in the EWP by 2020, the package would deliver a cut in UK CO 2 emissions of around 55 MtC to almost 22% below 1990 levels 21. Set against the draft Climate Change Bill s legal framework for the UK to achieve 26-32% reduction in CO 2 against a 1990 baseline, additional measures will still have to be introduced or the UK will have to spend money on overseas credits and allowances to offset this shortfall. The transport policies included in the Climate Change Programme are set to contribute around a quarter of the emissions savings in the original CCP by 2020, and, with the addition of aviation in the EU ETS, around a fifth of the expanded programme outlined in the EWP as shown in Figure / 21 DTI (2007) Updated Energy and Carbon Emissions Projections. The Energy White Paper (May 2007). Table F1 Progress towards climate change goal, p37 17

22 Figure 2.6: Expected contribution in 2020 from each sector and overarching policies in the Energy White Paper Business 15% Residential 26% Agricultural 1% Public Sector 3% Energy Supply 1% Transport 19% EUETS/ CCL/ RO 35% Source: compiled from DTI 2007b, Table D1 and D2, p31 and 32 CCL= Climate Change Levy; RO = Renewables Obligation 2.6 Observations on transport and the CCP From this analysis, it would appear that transport is pulling its weight with respect to the Climate Change Programme and broader energy policy. However, a detailed enquiry by the Environmental Audit Committee (EAC, 2006) predating the Energy White Paper pointed out that the only existing measures which are the direct responsibility of the DfT itself are the wider transport measures (plus the recently added Smarter Choices) which, on the basis of our baseline, amount to around 10.0% of the CCP savings from transport for The two main elements of the Voluntary Agreement Package Company Car Tax and Vehicle Excise Duty - are the preserve of the Treasury, while the Agreements themselves are made by the European Commission and implemented by private car firms. One of the most effective policies in the whole CCP programme, FDE, was also under the jurisdiction of the Treasury. The most recently added policy the Renewable Transport Fuels Obligation also originates from a European directive and the savings allocated to this policy may be less impressive than they first appear as the, gross figure for the RTFO in the Table does not account for the carbon emitted during the production of imported biofuels. If accounted for, the net estimated savings from this measure would be cut to 1.0MtC. The EAC goes on to say: Moreover, other policies are yet to begin operation, while the separately listed Sustainable distribution measures come under devolved authorities Considering that this department has policy responsibility for the worst-performing sector of the economy in terms of carbon emissions, this is not nearly good enough. (EAC 2006, Para. 23). 18

23 In addition to the EACs observations, there are several other notable points about the role of the transport sector in the CCP: Firstly, there appear to be few planks to Government policy on transport within the CCP. Current policy relies on vehicle emissions savings and the policy instruments focus almost exclusively on road transport; with minimal consideration of freight and no consideration of air travel. The wider measures and smarter choices category includes some instruments designed to encourage the shift away from road transport to other modes of transport, but given the scope for mode shift and reducing the need to travel discovered in studies such as that on Smarter Choices (see Chapter 6), and the potential array of policies on offer (as demonstrated in Chapters 4 6), this is somewhat surprising. Secondly, given that overall projections of carbon savings in the 2000 Climate Change Programme have had to be revised downwards in the 2006 version (and to some extent in the Energy White Paper), we should treat these projections with some caution. Thirdly, and perhaps most importantly, even if the estimates are accurate, their value is severely eroded due to the fact they do not take into account emissions from the fastest growing sources of transport emissions: aviation and freight (see CfIT main report for a discussion). None of the existing measures in the Climate Change Programme has any impact on the aviation sector, although the Government is pushing for the inclusion of aviation into the EU ETS. The EAC concluded by characterising the DfT s policy package as: being projected to make some important contributions, but lacking in ambition, and suffering from a stuttering and piecemeal application. (EAC, Volume 1, para.24) 2.7 Projections of carbon emissions from the transport sector Despite what may be overly optimistic assumptions behind the estimated carbon savings, even if fully successful, transport emissions are not expected to fall below 1990 levels by 2020 even after policies in the CCP and recent EWP are taken into account. This is also despite being the only sector with consistently rising emissions in the past decade or more (Defra 2007b), The latest official projections from the Department for Trade and Industry in the Energy White Paper take into account current Government policy in all sectors of the economy and reflect the anticipated impact of factors such as economic growth, increased movement by aircraft, continued reliance on fossil fuel usage and fuel price, and continued growth in personal travel. These figures suggest that continued improvements in vehicle efficiency, the introduction of biofuels, other transport policies and slower traffic growth will allow carbon emissions from transport to at best stabilise at around 2005 levels to This contrasts to falling emissions expected in all the other main sectors, and a total reduction of 26% from 1990 levels (DTI, 2007b). 19

24 Figure 2.7 Historic and Projected CO 2 by sector (Source; MtC) Million Tonnes Carbon (MtC) Energy Supply Transport Industry Residential 10 Services Source: DTI 2007b, based on Table 4.2, p12 By 2020, if the Government s estimates of a 10 MtC saving from the transport measures in the CCP is realised, emissions from domestic transport are projected to stand at around 35.9 MtC in 2020 (DTI 2007b, Table 4.2, p12 22 ), roughly the same as they were in As figure 2.7 shows, the overall effect of the programme of measures will be to stabilise transport emissions at broadly 2005 levels by 2020, as savings in the transport sector are expected to offset the growth that would otherwise occur. Whilst, as EAC observes that this: would represent the first time in years in which the growth in carbon emissions from domestic transport had flattened out and certainly a significant achievement (EAC 2006, paragraph 20), it means transport emissions are still not expected to fall at any time below their 1990 levels. The projected figure of 35.9 MtC in 2020 can be compared to the 1990 baseline for the transport sector of 33.5 MtC (Defra, 2006a, Table 4, p28) in this case, transport sector emissions are still predicted to be 8% above the Kyoto baseline in Indeed, without additional measures, the gap between projected annual emissions and targeted emissions gets progressively larger toward On this basis, the transport sector is not expected to make any substantial progress towards the Climate Change bill targets. However, only including current policies means that this is not unique to the transport sector especially as these figures do not take into account the effect of the European Emissions Trading Scheme (EU ETS) on emissions from other sectors (particularly industry), nor any new policies which may come into force over and above those included in the CCP and the EWP. 22 Not including off-road emissions; central carbon saving; central fossil fuel prices. Not including the inclusion of aviation in emissions trading (0.3 MtC saving). 20

25 Consequently, the Government forecasts state that new measures need to be introduced in all sectors to ensure the UK s progress toward a low-carbon economy by Assumptions and problems with the forecasts Projecting CO 2 emissions from sector to sector is beset with difficulties and uncertainties, especially over long time periods. This uncertainty is compounded by the fact that figures for energy use and emissions are presented differently according to the publication source (i.e. between Government departments) due to their different remits, time periods, geographic scales, models and the assumptions made. In addition, perhaps testimony to the uncertainty that exists, Government projections are continuously reassessed and re-quantified in the light of experience. It can therefore be confusing to compare between forecasts from within the same department as well as between them. The projections outlined above have been continuously and substantially revised to reflect the fact that previous projections had overestimated the future impacts of carbon reduction measures and underestimated total future emissions. This alone is reason to treat them with a certain degree of caution. Given the slippage in delivery experienced with policies to date, there is reason to believe that, unless new measures are introduced into the programme, the projections for carbon emissions from the transport sector will have, yet again, to be revised upwards in time. Assumptions about potential policy savings are not the only factor which causes projections to change from one forecast (or model) to another. The DTI model which forms the basis for the projections made some fundamental changes to its assumptions which altered the UK emissions trajectory even in the six months between the CCP in 2006 and the Energy Review and again between the Energy Review and the Energy White Paper. In summary, the two main changes to the assumptions concerned: (i) Fossil fuel prices for the EWP, revisions to the fossil fuel price assumptions show an increase in expected future fuel prices. Oil prices, in the central scenario, are assumed to be $57/bbl in 2010 ($53/bbl in 2020) in current prices representing an increase of $16/bbl and $6/bbl in 2010 and 2020 respectively on the Energy Review July 2006 projection assumptions (DTI, 2007b, 7). This led to a reduction of carbon from transport of 0.14 MtC in 2020 in the baseline (Table 3.2, p8). (ii) Adjustments to policy assumptions Table 2.2 has already explained how estimates for carbon savings attached to various policies are frequently readjusted. For the EWP, there were two main adjustments: estimates for RTFO were reduced and savings for smarter choices were added in. In the past there have been fundamental discrepancies between the emissions projections made by the DfT and the DTI and it has been difficult to understand how much these differences could be attributed to the assumptions used. The DTI use a different modelling approach to the DfT s own modelling through the National Transport Model (NTM) and so the projections should not be expected to be identical. One important discrepancy in past projections has been the exclusion of the Voluntary Agreement post 2008 by the DTI model and assumptions of steeper traffic growth. 21