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Pathways to a Low Carbon Economy: What will it take for the UK?

Deep cuts in carbon dioxide (CO2) emissions consistent with the UK's 80% greenhouse gas emission reduction target by 2050 are technologically and economically feasible. However, these cuts will require fundamental shifts in technology and behaviour. Much more ambitious policies are needed if the 2050 target, as well as 2020 targets for CO2 and renewable energy, are to be met. These are among the key findings obtained by UK Energy Research Centre (UKERC) researchers in a working report published today.

The report explores CO2 emission reductions of 26-39% (from 1990 levels) by 2020 and 40-90% by 2050. The deep cuts in emissions will require three things:

1. Virtual decarbonisation of the electricity sector with progressively larger deployments of coal with carbon capture and storage (CCS), nuclear and wind
2. increased energy end-use efficiency, and demand reductions of up to 25%, particularly in the industrial and residential sectors
3. more efficient vehicles and a switch to lower carbon transport technologies such as bio-fuels, electric or hydrogen fuel–cell vehicles.

Under all scenarios, de-carbonising the power sector is key. This will enable further low-carbon choices in the transport sector (e.g. plug-in hybrid and electric vehicles) and in buildings (electric heat pumps). Social policies to enable demand reduction and a bridge to new transport infrastructures are required.

A number of the low-carbon electricity technologies are not yet available on a commercial basis. Government support is urgently needed for the demonstration and commercialisation of CCS and renewable technologies. Reliable carbon pricing, for example through a strengthened EU Emissions Trading Scheme, will be necessary for the deployment of all low-carbon electricity technologies.  

Emission reductions of 40% - 90% by 2050 will entail significant costs. The annual loss in welfare could range from £5 - £52 billion in 2050. In particular, moving from a 60% to an 80% reduction almost doubles welfare costs from £20 - £39 billion. Although these numbers are large, they need to be set in the context of likely UK GDP in excess of £3 trillion by 2050.

The additional cost of obtaining an extra unit of CO2 reduction (marginal cost) could range from as low as £20/tCO2 in a 40% reduction scenario up to £300/tCO2 in the 90% scenario. The price of carbon will need to rise significantly if ambitious emission cuts are to be achieved.

The mixture of technologies and patterns of behaviour adopted by 2050 depends critically on the timing of action to reduce CO2 emissions, especially in the transport sector. Taking a long term perspective means giving greater weight to costs incurred in the more distant future. This implies early action and the selection of options with higher up-front and infrastructure costs. In transport, this means less reliance on bio-fuels and the greater diffusion of electric hybrid plug-in and hydrogen vehicles.

Report author Dr Neil Strachan of Kings College London & UKERC researcher said: "Near-term government policy should provide viable options; in the long term society through market mechanisms should decide the winning technology portfolio".

UKERC Research Director Professor Jim Skea said: "These results show that there is an urgent need to deploy key low carbon technologies and put in place policies that will stimulate behavioural change if the UK 2020 and 2050 targets are to be met". 

 Notes for Editors

1. This report is based on a version of the MARKAL model which has been widely used to support UK energy policy. It was used by government as background to the 2007 Energy White Paper and the Nuclear Review and by the Committee on Climate Change (CCC) in preparation for its inaugural report.
2. Energy systems models, such as MARKAL, are designed to develop insights into future energy developments and explore environmental implications, economic costs, technology choices and the contributions of different sectors. The MARKAL model has been designed to choose options which minimise welfare costs for the UK economy. System models help policy-makers explore choices in a deeply uncertain world. They do not predict the future.
3. UKERC's modelling work covers carbon dioxide emissions from the energy sector. It does not cover international aviation, shipping or greenhouse gases other than CO₂. The UK's 80% reduction target covers these other sectors and gases. The energy sector may need to cut emissions by more than 80% if the UK's target is to be achieved.
4. UKERC was set up by the UK Research Councils to be the focal point for UK research on sustainable energy. The Centre developed the MARKAL model as part of its whole systems, interdisciplinary research programme. The three research councils supporting UKERC are: the Natural Environment Research Council; the Economic and Social Research Council; and the Engineering and Physical Sciences Research Council.
5. This report - Pathways to a Low Carbon Economy: Energy systems modelling - is the first in a series describing outputs from the UKERC Energy 2050 project. It explores the implications and options for achieving a secure low-carbon energy system. The next reports in the series will address: a) accelerated technology development and innovation support; and b) the interaction between energy security and carbon reduction. Other reports will be published between now and April 2009.
6. More information about the UKERC Energy 2050 project is available from http://www.ukerc.ac.uk/ResearchProgrammes/UKERC2050
7. The full report can be downloaded here.

For further information, please contact

Patricia Luna on 020 7594 1573