Draft Final Report to the Shadow Secretariat on Climate Change/ Office of Climate Change

Executive Summary The aim of this study is to provide external advice and recommendations to the Shadow Committee on Climate Change (SCCC) on the methodological approaches that could be used to propose UK interim carbon budgets for the period 2008-2022. These interim budgets are bounded by existing Government commitments, most notably the 26-32% reduction in CO 2 emissions by 2020 (on 1990 levels), on the way to ‗at least' a 60% CO 2 reduction by 2050. As such, the interim carbon budgets will effectively set the UK's 2020 reduction target, and this date has been the primary focus of the study. The findings are summarised below.  The setting of interim budgets is strongly influenced from the ‗top down' by: long-term global stabilisation targets; the global pathways of emissions to these long-term targets; and the UK's relative share in global emissions reductions (e.g. as a developed country). It is also influenced from the ‗bottom up' by the UK's decisions on how much of its commitment to meet from overseas through international flexible mechanisms, and the relative share of reductions by sectors within and outside the emissions trading scheme. Finally it is influenced by external political negotiations with respect to the EU's 2020 GHG targets and the burden sharing agreement. Any decision on interim targets therefore sits within a much wider set of policy considerations.  A review has found a variety of possible methods for setting carbon targets. These reflect different perspectives for framing climate-change policy, and accordingly, different methodological approaches. The entry points range from a strong economic perspective through to a non-economic/precautionary perspective. To date, most proposed long-term targets have used a precautionary approach, but most interim targets (and the UK Government's long-term target) have been set after a check for technical and economic achievability using cost-effectiveness analysis (CEA).  The challenge for the UK is to set short-term (interim) carbon targets under multiple sources of uncertainty over the future evidence and the course of policy. Many of these uncertainties will be reduced in the future. Therefore, any methodological approach should consider the extent to which interim targets keep options open for the longer term, thereby avoiding irreversible commitments. This problem is one of decision making under uncertainty, or options analysis. In the literature, this has been explored in most depth using cost-benefit analysis (CBA), though such a framework can be applied to other methods.  Each of …