Select Committee on Environmental Audit Second Report


APPENDICES TO THE MINUTES OF EVIDENCE (HC 363)

APPENDIX 1

Memorandum from the Department of the Environment, Transport and the Regions (DETR)

  This memorandum responds to the request for information from the Environmental Audit Committee, following up the evidence provided by the Financial Secretary on 14 March 2001 (Environmental Audit Committee, Minutes of Evidence, HC 333-i, 2000-01). The Committee's questions are shown in italics below.

ROAD BUILDING

1.   The Financial Secretary appeared to be suggesting that the Government could build its way out of congestion (Q5). How can this be reconciled with the recognition in the Government 10 Year Plan (paragraph 6.26) that traffic problems cannot be solved by simply building more roads?

  The 10 Year Plan is a comprehensive spending package designed to reduce congestion and pollution and to provide more choice for people in how they get from A to B. Improving and making better use of our road system is part of this package, but only a part.

  The Financial Secretary was right that approximately £60 billion of the £180 billion 10 Year Plan package is for roads, but this is not all for road building (see appendix 1 for financial summary).

  Over two thirds of this total, or nearly £42 billion, is for maintenance and making better use of the existing road network. Over £30 billion of this figure is targeted at ending the backlog in maintenance of local road carriageways, footways, bridges and street lighting, to restore the local road network to a condition whereby it can be maintained in serviceable condition at minimum whole life costs.

  The balance will be spent in the light of recommendations from multi-modal studies and from regional planning bodies. Only £16 billion (or less than nine per cent of the £180 billion package) is for schemes to widen roads, improve junctions and provide bypasses to improve safety and the capacity of the road network—£10 billion for trunk roads and motorways and £6 billion for local roads. This will fund the 49 schemes in the Targeted Programme of Improvements, up to 100 bypasses to provide much needed relief from congestion and pollution for local communities, and the widening of up 5 per cent (360 miles) of the strategic road network.

  We have also enabled local authorities to introduce congestion charging as an additional means of managing traffic and required local authorities introducing charging to hypothecate the revenue to local transport improvements.

  Our 10 Year Plan represents a balanced strategy that will benefit everyone. Our programme of Multi Modal Studies are playing a key role by looking at the contribution that all modes of transport and traffic management might make to solving problems in the areas worst affected by congestion. And all options are appraised using the New Approach to Appraisal (NATA) to ensure that environmental, social and economic impacts are fully taken into account in identifying cost-effective solutions.

  So we are not seeking to build our way out of congestion. Increasing road capacity will be only one measure in a package that includes:

    —  Providing attractive transport alternatives to the car through increased support for railways, light rail schemes, bus services and better provision for cyclists and pedestrians;

    —  Making better use of existing roads (to the benefit of public transport as well as motorists);

    —  Managing demand in urban areas by working with local authorities who want to introduce local congestion charging schemes or workplace parking levies; and

    —  Reducing the need to travel through better planning.

NEGOTIATED AGREEMENTS AND CARBON SAVINGS

2.   In view of recent reports to the contrary, could the DETR confirm whether negotiated agreements have now been concluded with all energy-intensive sectors covered by IPPC?

  44 eligible sectors approached DETR to negotiate climate change agreements. Of these, 42 agreements have been concluded, with the remaining two (who were late in entering into the negotiations) in the process of completion. A list of the agreements is at the back of annex A.

  Some sectors have not found it cost effective to enter into agreements. In some cases, the savings from the reduction of the levy would not be sufficient to outweigh the costs of administering the agreements and implementing the measures required to achieve the target energy saving.

3.   Please set out for each sectoral agreement:

    (a)  total emissions from that sector in the baseline year

    (b)  the original predictions made by ETSU of (i) all technically feasible savings and (ii) all cost effective savings which could be made

    (c)  the revised predictions made by ETSU as a result of the negotiating process of (i) all technically possible savings; (ii) all economically profitable savings; (iii) all anticipated savings which will arise from the negotiated agreements, and (iv) all savings which would result from the introduction of IPPC alone. [Q20, Q25 also, Q30]

  ETSU initially analysed industry wide energy savings potential for the 10 most energy intensive industries covering over 80 per cent of UK industry energy use (the first wave). Subsequently another 34 sectors (second wave) entered into agreements. Energy savings potential information from the initial analysis was available for only seven of these. Details are provided in Annex A.

  The negotiations began from site specific investigations which estimated the potential energy savings for each sector.

    (a)  The baseline data that forms the basis of the agreements, in most cases relates to energy usage per unit of output. We do not have data on total energy use at a base year, nor, therefore, any estimate of the total emissions from each sector.

    (b)  Three scenarios were developed in the initial industry wide analysis:

      —  Business As Usual (BAU)—what would happen if recent behaviour continues unchanged

      —  All Cost Effective (ACE)—energy savings that would be possible if each industry sector adopted all cost-effective management and technical energy efficiency measures. Like all bottom-up approaches, the scenario places no limit on the overall available management time or capital need for implementing all possible measures, and so is inherently optimistic

      —  All Technically Possible (ATP)—energy saving that would arise if industry uses the most energy-efficient technology available on an industrial scale, regardless of cost.

    For the climate change agreements, the BAU and ACE scenarios were exemplified, in terms of reductions in specific energy consumption, for the specific group of organisations involved in the climate change agreements (which is typically a smaller group than the whole industry information is the initial analysis). The last category (ATP) was not separately calculated for these sectors because it was not considered to be a realistic basis for negotiation.

    Annex A shows information on the ETSU analysis for each sector involved in the negotiations. The table shows, in terms of reductions in specific energy consumption, for each sector for which the initial analysis was completed, the ETSU estimate of the BAU savings by 2010 relative to BAU in 2000, along with the ACE improvement relative to BAU 2000.

    Note that each scenario covers energy use/emissions projections over a period of time; thus it is common to refer to, for example, the BAU prediction at the year 2000 or 2001, or to the difference between BAU and ACE in 2010.

    In the ETSU industry wide analysis, the ACE prediction for carbon emissions by 2010 was around 19 per cent less than BAU. Considering only those components of industry which are eligible for inclusion in Climate Change Levy Agreements, the ETSU analysis predicted a total carbon emissions reduction, in 2010, relative to BAU, of around four MtC (millions of tonnes of carbon) per year. Summed across all agreements, the estimated saving if all targets are met is around 2.7 MtC per year. Thus the Agreements should lead to more than 60 per cent of the BAU—ACE gap being closed by 2010.

    (c)  It is not possible to provide the information in the form requested. However, the third column in the table shows what the negotiations achieved, by expressing sector target in the same terms as the ETSU analysis and showing the extent of the improvement relative to an estimate of BAU 2000 for each sector where that estimate is available. In each case the target results in an estimate which is between the estimated BAU and ACE for 2010. The final column of the table shows the additional carbon savings (measured in 1000s of tonnes of carbon per year) which the agreements are expected to deliver above the estimate of BAU in 2010. The table shows separately the information for the first and second wave of sectors involved in the negotiations.

  It is not possible to estimate the savings which would result from the introduction of IPPC alone. However, IPPC will be phased in over seven years, and for many of the sectors will not be implemented for several years.

4.   The Chemicals Industry Association already had a voluntary agreement. What additionality does the negotiated agreement concluded with that sector contribute?

  A direct comparison is not possible because the voluntary agreement covered by all CIA members while the negotiated agreement covers only those members of the Chemicals sector with IPPC processes.

  The CIA voluntary agreement covered the period 1998 to 2005, while the climate change agreement continues to 2010. Thus the climate change agreement has ensured a longer term commitment. The CIA voluntary agreement targets, when converted to the same basis as the climate change agreement targets from 1998 to 2005 (linear interpolation between 2004 and 2006 milestones), offered a 7.3 per cent saving from 1998 to 2005. The comparable negotiated agreement target is a 15.75 per cent saving. The percentage efficiency increases by a factor of over two.

5.   Can the DETR provide the following information on the staff resources committed to negotiating the agreement: (a) the total number of staff (DETR/other; number/whole-time equivalent)? (b) the period over which negotiations have been conducted? (c) an estimate of total staff time (man-hours) devoted to estimating possible savings and negotiating agreements with each sector? (d) information on the nature of the expertise, and in particular business and contract negotiation experience, which those staff directly involved in negotiations have? [Q20-22, Q25, Q30]

    (a)  The number of staff engaged in negotiating the agreements increased throughout the two years of negotiations. At its peak towards the conclusion of the agreements, nine DETR staff (full time equivalents) were engaged in the negotiations, two DETR staff and approximately 15 temporary staff were engaged in the processing of the agreements, and approximately five full time equivalents at ETSU supported the negotiations.

    (b)  From the announcement in the Budget of 1999 to the introduction of the levy in April 2001—around 24 months.

    (c)  In total, an estimated 15,000 man-hours have been spent in DETR on the negotiations and associated activities—excluding the processing of the agreements. A further 14,000 man-hours have been spent by ETSU.

    (d)  DETR staff in the negotiation terms had a range of relevant skills including technical and scientific, policy, legal and administrative expertise. ETSU provided a technical consultancy and facilitation service during the negotiations.

6.   Can the DETR confirm that emission reduction targets could be revised during the proposed review in 2004, in the event of evidence to show that companies were easily achieving existing targets? [Q25]

  DETR confirms that the targets are subject to review at the second and fourth milestones—in 2004 and in 2008.

7.   Will the monitoring and evaluation procedures the Government is putting in place enable it to analyse at each review and in 2011 how much of the overall emission reduction within each sector can be attributed to IPPC, how much to negotiated agreements, and how much to an Emissions Trading Scheme?

  The monitoring and evaluation procedures will allow the Government to establish how far each sector has met its targets. The monitoring system itself will not establish how much of the overall achievements can be attributed to the individual instruments of IPPC, the Emissions Trading Scheme or the climate change agreements.

EMISSIONS TRADING

8.   Will the Emissions Trading authority be set up on a statutory basis, and if not will it have adequate authority to carry out its role? [Q31]

  The Government published a consultation document entitled "A Greenhouse Gas Emissions Trading Scheme for the UK" in November 2000. One proposal within this document was that an Emissions Trading Authority (ETA) should be established in some form, with responsibility for the day-to-day functioning of the scheme. These day-to-day responsibilities would include: policing compliance with the rules of the scheme, pursuing compliance procedures against those participants in non-compliance, operation of the registry and approval of emission-reduction projects.

  Following on from the consultation period, the Government published in May 2001 the draft framework of rules for the scheme. The draft rules state the Government's proposal that the ETA will initially sit within central Government. However, some of its responsibilities could be contracted out to other organisations outside of Government. The arrangements for the ETA will be confirmed in advance of the first compliance period in April 2002. In the longer term, the Government proposes to establish the ETA as a statutory independent body, Parliamentary time allowing.

CARBON TRUST

9.   Treasury witnesses stated that the Carbon Trust will take over and expand quite dramatically the Energy Efficiency Best Practice Programme. How will this be reflected in its funding? Could the DETR please provide any data for the next three years on planned funding analysed by the different functions the Trust will be performing? [Q83]

10.   The Financial Secretary strongly indicated that the Carbon Trust is going to be a "One-Stop Shop". Is this really the case? Will all the various sources of Government funding available to companies to improve energy efficiency and develop renewable technologies be channelled through it? [Q83]

  The majority of the activities and associated budget for the Energy Efficiency Best Practice Programme, is to be transferred to the Carbon Trust during 2001-02. We [DETR] have been working on the assumption that the work to be transferred will be worth £17 million in the current year. This is in addition to the funding allocated to the Carbon Trust in Budget 2001.

  The Carbon Trust is currently preparing its detailed work programme for 2001-02. The exact level of funding of the Carbon Trust's work—including EEBPP activities—will be determined once it has submitted this work programme for approval by DETR Ministers.

  It is expected that the Carbon Trust will provide an authoritative source of advice and information to companies on how they can improve their energy efficiency. Separate funding will be available for companies to invest in the development of renewable energy technologies. DTI are keen to present Government policies on renewables to business in a simple and user-friendly way and in the longer term will be working with the Carbon Trust in supporting the development and adoption of new low carbon energy technologies such as renewables.

URBAN REGENERATION COMPANIES

11.   The June 2000 report on Urban Regeneration Companies recommended inter alia clarification of central government responsibilities. As part of this, will the DETR ensure that sustainable development is built into the remit of all URCs? [Q77-80]

  The strategy of an Urban Regeneration Company (URC) will be defined by its partners and will depend on local circumstances. The vision for the area defined by the URC will only be realised within a comprehensive regeneration framework agreed by the key stakeholders. The Regional Development Agencies (RDAs) will be key partners in the URCs. The RDAs' statutory purposes include contributing to sustainable development.

  Central government provides endorsement of the local/regional approach, and approves RDA/English Partnerships participation in URCs. Central government will also provide and deliver the overall policy context (as set out in the Urban White Paper); provide guidance on best practice; and consider the longer-term framework for the URC approach—for instance the impact of policy and spending decisions.

  Clarification of the responsibilities of central government are set out in "Urban Regeneration Companies: Development of Guidance and Criteria" (March 2001) on the DETR website.

May 2001

Annex A

1ST WAVE CLIMATE CHANGE LEVY NEGOTIATIONS: COMPARISON OF TARGET WITH ETSU PREDICTIONS AND ESTIMATED CARBON SAVINGS

Sector Association ETSU Original Estimate for Primary Specific Energy Consumption ("Business As Usual"—BAU; "All Cost Effective"—ACE) Effect of Sector Target in Specific Energy Consumption Terms Additional
Carbon Savings
(in 1,000tC)
from agreement
by 2010
Non-Ferrous Alliance—  A BAU improvement by 2010 relative to 2000 BAU of 8 per cent.

—  An ACE improvement by 2010 relative to 2000 BAU of 28 per cent.

The sector target, expressed in equivalent terms, is above BAU and corresponds to a 19 per cent improvement relative to 2000 BAU. 50
Chemical Industries Association—  A BAU improvement by 2010 relative to 2000 BAU of 6 per cent.

—  An ACE improvement by 2010 relative to 2000 BAU of 27 per cent.

The sector target, expressed in equivalent terms, is above BAU and corresponds to an 18 per cent improvement relative to 2000 BAU. 790
Aluminium Federation—  A BAU improvement by 2010 relative to 2000 BAU of 4 per cent.

—  An ACE improvement by 2010 relative to 2000 BAU of 20 per cent.

The sector target, expressed in equivalent terms, is above BAU and corresponds to a 14 per cent improvement relative to 2000 BAU. 150
UK Steel—  A BAU improvement by 2010 relative to 2000 BAU of 5 per cent.

—  An ACE improvement by 2010 relative to 2000 BAU of 13 per cent.

The sector target, expressed in equivalent terms, is above BAU and corresponds to an 8 per cent improvement relative to 2000 BAU. 200
Food and Drink Federation—  A BAU improvement by 2010 relative to 2000 BAU of 1 per cent.

—  An ACE improvement by 2010 relative to 2000 BAU of 14 per cent.

The sector target, expressed in equivalent terms, is above BAU and corresponds to a 13.4 per cent improvement relative to 2000 BAU. 420
Paper Federation of Great Britain—  A BAU improvement by 2010 relative to 2000 BAU of 14 per cent.

—  An ACE improvement by 2010 relative to 2000 BAU of 37 per cent.

The sector target, expressed in equivalent terms, is above BAU and corresponds to a 36 per cent improvement relative to 2000 BAU. 430
British Cement Association—  A BAU improvement by 2010 relative to 2000 BAU of 5 per cent.

—  An ACE improvement by 2010 relative to 2000 BAU of 15 per cent.

The sector target, expressed in equivalent terms, is above BAU and corresponds to an 8 per cent improvement relative to 2000 BAU. 170
British Glass Manufacturers Association —  A BAU improvement by 2010 relative to 2000 BAU of 6 per cent.

—  An ACE improvement by 2010 relative to 2000 BAU of 21 per cent.

The sector target, expressed in equivalent terms, is above BAU and corresponds to a 9 per cent improvement relative to 2000 BAU. 20
British Ceramics Confederation—  A BAU improvement by 2010 relative to 2000 BAU of 6 per cent.

—  An ACE improvement by 2010 relative to 2000 BAU of 22 per cent.

The sector target, expressed in equivalent terms, is above BAU and corresponds to a 13 per cent improvement relative to 2000 BAU. 44
Foundries: Target 2010—  A BAU improvement by 2010 relative to 2000 BAU of 8 per cent.

—  An ACE improvement by 2010 relative to 2000 BAU of 16 per cent.

The sector target, expressed in equivalent terms, is above BAU and corresponds to an 11 per cent improvement relative to 2000 BAU. 20
TOTAL 1st Wave 2,294




2ND WAVE CLIMATE CHANGE LEVY NEGOTIATIONS: COMPARISON OF TARGET WITH ETSU PREDICTIONS AND ESTIMATED CARBON SAVINGS

Sector AssociationETSU Original Estimate for Primary Specific Energy Consumption ("Business As Usual"—BAU; "All Cost Effective"—ACE) Effect of Sector Target in Specific Energy Consumption Terms Additional
Carbon Savings
(in 1,000tC)
from agreement
by 2010
British Rubber Manufacturers Association —  A BAU improvement by 2010 relative to 2000 BAU of 5 per cent.

—  An ACE improvement by 2010 relative to 2000 BAU of 12 per cent.

The sector target, expressed in equivalent terms, is above BAU and corresponds to an 8.7 per cent improvement relative to 2000 BAU. 5.0
Slag Grinders AssociationThe ETSU estimate did not cover this sector in sufficient detail to allow this data to be extracted. 2.0
Gypsum Products Development Association The ETSU estimate did not cover this sector in sufficient detail to allow this data to be extracted. 7.2
British Lime AssociationThe ETSU estimate did not cover this sector in sufficient detail to allow this data to be extracted. 6.0
Wallcovering Manufacturing Association of GB Ltd The ETSU estimate did not cover this sector in sufficient detail to allow this data to be extracted. 2.0
Brewers & Licensed Retailers Association —  A BAU improvement by 2010 relative to 2000 BAU of 5 per cent.

—  An ACE improvement by 2010 relative to 2000 BAU of 14.5 per cent.

The sector target, expressed in equivalent terms, is above BAU and corresponds to an 11 per cent improvement relative to 2000 BAU. 16.0
Egg Production—British Egg Industry Council and NFU The ETSU estimate did not cover this sector in sufficient detail to allow this data to be extracted. 1.5
Egg Processing—BEIC/BEPAThe ETSU estimate did not cover this sector in sufficient detail to allow this data to be extracted. 0.4
British Meat Foundation—  A BAU improvement by 2010 relative to 2000 BAU of 0.8 per cent.

—  An ACE improvement by 2010 relative to 2000 BAU of 11.9 per cent.

The sector target, expressed in equivalent terms, is above BAU and corresponds to a 9.5 per cent improvement relative to 2000 BAU. 3.8
Poultry rearing—British Poultry Meat Federation The ETSU estimate did not cover this sector in sufficient detail to allow this data to be extracted. 7.9
Poultry rearing—NFUThe ETSU estimate did not cover this sector in sufficient detail to allow this data to be extracted. 4.5
Poultry meat processing—British Poultry Meat Federation —  A BAU improvement by 2010 relative to 2000 BAU of 0.9 per cent.

—  An ACE improvement by 2010 relative to 2000 BAU of 11.1 per cent.

The sector target, expressed in equivalent terms, is above BAU and corresponds to a 12.7 per cent improvement relative to 2000 BAU. 13.2
Dairy Industry Federation—  A BAU improvement by 2010 relative to 2000 BAU of 1.9 per cent.

—  An ACE improvement by 2010 relative to 2000 BAU of 16.9 per cent.

The sector target, expressed in equivalent terms, is above BAU and corresponds to a 7.6 per cent improvement relative to 2000 BAU. 17.2
Maltsters Association of Great Britain The ETSU estimate did not cover this sector in sufficient detail to allow this data to be extracted. 5.0
National Association of Master Bakers/Scottish Association of Master Bakers The ETSU estimate did not cover this sector in sufficient detail to allow this data to be extracted. 1.7
Pig rearing—NFUThe ETSU estimate did not cover this sector in sufficient detail to allow this data to be extracted. 4.5
Scotch Whisky Association
Gin & Vodka Association
—  A BAU improvement by 2010 relative to 2000 BAU of 0.2 per cent.

—  An ACE improvement by 2010 relative to 2000 BAU of 6 per cent.

The sector target, expressed in equivalent terms, is above BAU and corresponds to a 3.3 per cent improvement relative to 2000 BAU. 6.5
UK Agricultural Supply Trade Association —  A BAU improvement by 2010 relative to 2000 BAU of 1.7 per cent.

—  An ACE improvement by 2010 relative to 2000 BAU of 10.5 per cent.

The sector target, expressed in equivalent terms, is above BAU and corresponds to a 6.9 per cent improvement relative to 2000 BAU. 7.9
UK Renderers AssociationThe ETSU estimate did not cover this sector in sufficient detail to allow this data to be extracted. 4.5
British Apparel and Textile Confederation The ETSU estimate did not cover this sector in sufficient detail to allow this data to be extracted. 9.5
British Leather ConfederationThe ETSU estimate did not cover this sector in sufficient detail to allow this data to be extracted. 0.7
Confederation of British MetalformingThe ETSU estimate did not cover this sector in sufficient detail to allow this data to be extracted. 0.8
EurisolThe ETSU estimate did not cover this sector in sufficient detail to allow this data to be extracted. 6.7
Metal Packaging Manufacturers Association The ETSU estimate did not cover this sector in sufficient detail to allow this data to be extracted. 2.5
National Microelectronics Institute (Semiconductors) The ETSU estimate did not cover this sector in sufficient detail to allow this data to be extracted. 220.0
National Microelectronics Institute (CRTs) The ETSU estimate did not cover this sector in sufficient detail to allow this data to be extracted. 7.4
Society of British Aerospace Companies The ETSU estimate did not cover this sector in sufficient detail to allow this data to be extracted. 0.5
Society of Motor Manufacturers and Traders The ETSU estimate did not cover this sector in sufficient detail to allow this data to be extracted. 19.2
Surface Engineering AssociationThe ETSU estimate did not cover this sector in sufficient detail to allow this data to be extracted. 2.5
Vehicle Builders and Repairers Association The ETSU estimate did not cover this sector in sufficient detail to allow this data to be extracted. Finalising data
British Printing Industry FederationThe ETSU estimate did not cover this sector in sufficient detail to allow this data to be extracted. 4.2
Wood Panel Industries FederationThe ETSU estimate did not cover this sector in sufficient detail to allow this data to be extracted. 1.9
SupermarketsThe ETSU estimate did not cover this sector in sufficient detail to allow this data to be extracted. 5.0
Single agreement for Reprotech LtdThe ETSU estimate did not cover this sector in sufficient detail to allow this data to be extracted. Negligible
TOTAL 2nd Wave 397.7
TOTAL 1st and 2nd Waves 2,692


LIST OF AGREEMENTS
Sector CodeSector
SBACAerospace
AFAluminium
BLRABrewers
BCACement
BCCCeramics
CIAChemicals
NMI2Cathode Ray Tube Manufacturing
DIFDairy Industry
BEICEgg Processing
NFU3Egg Production
EUREurisol (mineral wool)
FDFFood and Drink
T2010Foundries
BGMCGlass
GPDAGypsum Products
BLCLeather
BLALime
MAGBMaltsters
BPMF2Poultry Meat Processing/Feed
BMFMeat
CBMMetal Forming
MPMAMetal Packaging
SMMTMotor Manufacturers
NFU1NFU—Pigs
NFANon-Ferrous Metals
TPFPaper
NFU2Poultry Meat
BPMF1Poultry Meat
BPIFPrinting
UKRARenderers
REPReprotech (waste derived fuel)
BRMARubber
NMI1Semiconductors
SGSSlag Grinders
SEECSpirits
UKSASteel
FDFSSupermarkets
SEASurface Engineering
BATCTextiles
UKASTAAnimal Foods
AWMWallcoverings
WPIFWood Panel




 
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