Fifth carbon budget ‘would not harm UK competitiveness’

The proposed emissions targets for the UK’s fifth carbon budget would not harm business competitiveness. That’s according to a new report from the Grantham Institute and the Centre for Climate […]

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By Priyanka Shrestha

The proposed emissions targets for the UK’s fifth carbon budget would not harm business competitiveness.

That’s according to a new report from the Grantham Institute and the Centre for Climate Change Economic and Policy which claims there is “robust evidence” that current climate policies have not damaged competition.

It states: “Current policies to tackle climate change have not created measurable damage to the competitiveness of businesses. Policies currently in place to meet the UK carbon budgets have not led to any detectable ‘carbon leakage’.

“There is no compelling evidence that investments in the European Union have been cancelled – or production moved – because of the EU ETS or in the UK because of the Climate Change Levy. Carbon prices are likely to rise in the future but evidence from other countries with higher carbon prices than the UK’s shows that they have remained competitive.”

The report argues well-designed climate change policies could offer business opportunities in fast-growing global markets as countries such as the US, China and EU Member States implement even more stringent carbon reduction and energy efficiency policies in the wake of the Paris Agreement.

It states: “The UK is well-positioned to benefit from a global transition to a more resource-efficient and renewable economy, provided flexible structural policies allow it to utilise its comparative advantages. Furthermore, evidence shows that climate change policies generate low carbon innovation and that low carbon innovation has significant economic benefits – greater benefits than innovation in high carbon sectors.”

The news comes as the government is considering setting the fifth carbon budget, which runs from 2028 to 2032.

The Committee on Climate Change recommended setting a target to reduce greenhouse gas emissions to an average of 57% below their 1990 levels between 2028 and 2032.

It has also been backed by the Energy and Climate Change Committee.

The report adds policies to support vulnerable sectors are already in place in the UK in the form of free emissions trading permits and discounts or exemptions from national policies.

“However, there is evidence to suggest that current measures are often too generous and target too many sectors. In some cases they can provide firms with windfall profits. New compensatory measures should therefore be carefully targeted to avoid costly over-compensation and undesirable market distortion,” it states.

A group of Conservative MPs have also called on Prime Minister David Cameron to support the fifth carbon budget.