NEWS RELEASE
Date: 24 May 2007
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Government responds on better regulation and Stern
The Government today published its response to the Better Regulation Commission’s (BRC’s) appraisal of the regulatory implications of the Stern Review.
The BRC report, Regulating to mitigate climate change, summarised the key arguments found in the Sir Nicholas Stern’s Review Report on the Economics of Climate Change. It provided an additional six recommendations along with seven tests the BRC feel are required to ensure policy makers meet “the complex challenges of climate change”.
Biodiversity Minister Barry Gardiner said:
“I’m pleased to say that the Government has accepted the recommendations and tests set out by the Better Regulation Commission – a clear sign of our commitment to pursuing further simplification measures when formulating policy in the future.
“The seven tests outlined by the Commission will be valuable in helping to tackle climate change, while at the same time assisting the Government in our desire to achieve a low-carbon economy with minimum regulatory requirements.”
The Stern Review, which was published by the Treasury on 30 October 2006, puts forward strong evidence and scientific-based arguments which make an overwhelming case for the existence of climate change. The review looks at the potential economic impact and the costs and opportunities associated with moving to a low carbon economy.
Summary of the Government’s Response:
Recommendation 1
The Government should publish their understanding of the pros and cons of the alternative ways of ensuring carbon emissions are priced to reflect the damage they cause identified in the Stern Review by September 2007.
In response to recommendation 1 the Government agrees that it will set out its strategic approach to selecting appropriate instruments to tackle emissions in different sectors and points in the supply chain by the first quarter of 2008, taking into account EU policy. Government will also identify overlaps, inconsistencies and conflicts between existing regulatory regimes and suggest how these can be resolved.
Recommendation 2
That by September 2007 the UK government should publish an updated view of the appropriate future path of the price of carbon for use in the UK, given the likely path for total global emissions over time based on a broadly acceptable view for the overall stabilisation target.
In response to recommendation 2 the Government agrees that work should be carried out to provide UK businesses with greater certainty about the future carbon pricing framework whilst working towards an international framework for reducing emissions post 2012. The Government is also working closely with European partners to find ways of giving longer term certainty on the price of carbon in the EU Emissions Trading Scheme. There is however a need to distinguish between the social cost of carbon and carbon pricing and the government is currently considering how to update its estimate of the social cost of carbon, with the aim of agreeing and publishing any changes to methodology by summer 2007.
Recommendation 3
That by September 2007 the UK Government should put in place measures to ensure policies to tackle climate change have an agreed methodology to estimate the costs and benefits relating to the damage caused by carbon emissions across the globe today and in the future.
The Government has already fulfilled this recommendation and in the response provides a link to the Greenhouse Gas Policy Evaluation and Appraisal in Government Departments guidance that was agreed by government and published by Defra. The guidance describes the Government’s methodology for measuring climate change costs and benefits for use in the evaluation and appraisal of climate change policies. However, as set out in the response to recommendation 2 the Government is currently considering how to update its estimate of the social cost of carbon, with the aim of agreeing and publishing any changes to methodology by summer 2007.
Recommendation 4
That by end-2007 all UK Government departments and other public sector concerns should have developed and implemented a plan for investing appropriately (that is, to the extent implied by the estimated future path of the price of carbon) in public sector energy conservation. This will set an example to the wider community.
The Government agrees that government departments and the wider public sector should play a leadership role in reducing emissions. It has already put plans in place to reduce emissions from the public sector estate and for arrangements to report on progress. The Government will publish guidance on criteria for energy efficiency and energy savings to be used in competitive tendering for public contracts by Spring 2008.
Recommendation 5
That by the end-2007 all relevant UK Government departments and public sector concerns should cooperate in publishing an assessment of the existing regulatory framework relating to energy efficiency issues and should set in place appropriate regulation and standard-setting given the likely future path for the social cost of carbon.
The Government has already undertaken a fundamental strategic review of all carbon and energy efficiency instruments through its work to review the UK Climate Change Programme and in the preparation of the 2007 Energy White Paper. However, the Government agrees that there is a need for a simplification review of the main climate change instruments aimed at industry and business. This is underway and will look strategically at the scope for reducing overlaps and minimising burdens.
Recommendation 6
That by end-2007 the UK Government publish an assessment of the role it might take in identifying and dealing with market imperfections relating to the three stages of the innovation process (research/invention, development and diffusion) in the light of the likely future path of the price of carbon, with a view to bringing forward a portfolio of low carbon technology.
The Government accepts this recommendation. The Government has published strategies for the low carbon energy technologies it supports through the investment chain, and a strategy for biomass energy is due for publication shortly.
These set out the business case for financial support, together with the policies and actions that are proposed to overcome market failure. The Government will publish an overarching assessment of its role in supporting the low carbon energy innovation process that brings together these aspects.
The seven tests for better climate change regulation
In BRC’s report they set out seven test which set the basic standards that they believe policy makers should use when considering climate change regulation. These tests are:
- Ensure climate policy is consistent with a healthy UK economy
- Government must develop and act consistently with a climate change strategy; avoiding piecemeal announcements
- Test policy against a carbon price benchmark
- Carbon policy choices must be efficient; don’t do things twice
- Keep administrative costs to a minimum
- Do not use climate change as a justification for other policy goals
- If it isn’t working, change it
The Government agrees with all of these tests and the response is positive on how, if it is not already happening, the government will take each test forward. However the government is only able to agree in principle to test four (‘Carbon Policy choices must be efficient; don’t do things twice’) because it may sometimes be necessary for several instruments to operate within one particular sector. However, they need to be proportionate, and inter-linkages should not over-burden any one sector. For example, there may be benefits in having energy efficiency policies in order to encourage a prompt response to carbon price signals, and so as to secure climate change and security of supply objectives together.
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Page published: 24 May 2007