Agenda 1: Fiscal Challenges & Climate Change

Country: UNITED KINGDOM

The United Kingdom started to pursue policies to reduce greenhouse gas emissions at a
relatively early date and now has a comprehensive set of measures in place. It has set
clear targets for emission reductions consistent with international goals of limiting global
warming and has pioneered statutory underpinning of target-setting. On the international
stage, it has been an active protagonist of a global deal to limit human-induced climate
change. The new Government has endorsed the direction of previous policies in this area
and is introducing further measures, despite heavy fiscal pressures. The United Kingdom
is likely to reduce emissions by more than its near-term domestic targets and its target
under the Kyoto Protocol, outperforming many OECD countries in the latter respect. But
some of the success has been due to one-off factors such as the dash for gas,
reductions in non-CO2 greenhouse gases in the 1990s and the recent recession, rather
than explicit climate-change policies. The pace of decarbonisation of the power sector
has been slow and the spread of renewable energy technologies limited. Implicit carbon
prices vary across sectors, and should be harmonized to increase the cost efficiency of
policy. The unevenness partly reflects the way in which policies have proliferated and
overlap and a simplified structure would be desirable. A stepchange in the pace of
emission reductions is required to put the UK on the path towards its ambitious 2050
target. Given the central role of the EU emissions trading scheme, a key element of the
UK strategy should be to seek tighter quotas within the EU scheme. Preparations to adapt
to climate impacts also need to be stepped up, focusing on the provision of more
information, better risk-assessment frameworks and more advanced metrics for
monitoring and evaluation of adaptation planning.
The main causes of climate change are deforestation and it is caused by forest fires and
the tearing down of trees for profit. The general population needs to be educated on the
disastrous consequences of deforestation. It not only affects the species living around the
forests, but also destroys the regulation of carbon dioxide emissions and affects climate
change. UN Secretary-General Ban Ki-moon states the facts are clear: climate change is
real and accelerating in a dangerous manner, declaring that it not only exacerbates
threats to international peace and security; it is a threat to international peace and
security.
The UK is playing a leading role at a global scale for addressing this issue. We are
working through the European Union, the G8, the Commonwealth and the UN
Framework Convention on Climate Change (UNFCCC), to find ways to reach an
international solution. Stabilizing atmospheric greenhouse gas levels to prevent harmful
climate change, while evolving to the current climate change, is the primary objective.
Along with the European Union (EU), the UK believes global warming should never rise
2C above pre-industrial era to prevent catastrophic consequences. An international
contract must be set in order to accomplish this goal. This plan will be for the years after
2012, when the first set of targets under the Kyoto Protocol expires.
The United Kingdom and the EU are both being proactive in this situation with the UKs
Climate Change Act 2008 and the EUs 2020 package. The UK continues to show its
leadership through the Convention on Biological Diversity (CBD). Those parties
involved in CBD produce a National Biodiversity Strategy and/or Action Plan (NBSAP).
In 1994, the United Kingdom became the first country to produce a national biodiversity
action plan. More recently the UK has introduced a system of carbon budgets setting
legally binding emissions limits over five-year periods. The first four carbon budgets
cover the periods 2008-12, 2013-17, 2018-22 and 2023-27. UK has taken the following
fiscal policies on climate change till 2050 :
adjusting Climate Change Levy rates and hydrocarbon fuel duties to reflect carbon content
(and the content of other pollutants) more closely;
- merging the Levy and Efficiency Scheme into a single levy related to carbon content
(while keeping new reporting requirements);
- ceasing to make Climate Change Agreements that effectively reduce the implied carbon
tax rate;
- raising the VAT rate on domestic energy use from 5% to the standard rate of 20%, while
using more focused payments to help those deemed to be in energy poverty; and
- considering ways of giving firms greater certainty about the trajectory of the carbon price.

References:
http://www.asean.org/archive/documents/ASEAN+3RG/1011/Sum/20.pdf
http://dropbox.curry.com/ShowNotesArchive/2012/06/NA-418-2012-05-
17/Assets/Agenda%2021/IMFclimateBook.pdf
http://sticerd.lse.ac.uk/dps/case/cp/CASEpaper145.pdf