UK climate change policy: how does it affect competitiveness?

The Committee on Climate Change has recommended that setting a target to reduce UK emissions of greenhouse gases to an average of 57 per cent below their 1990 levels during the period of the fifth carbon budget (2028-2032) is consistent with a least cost path to meeting the UK’s long-term climate objectives. This policy brief compares the ambition of UK climate change policy with its major international competitors and explores the impact it could have on economic competitiveness.

The key findings of this analysis are:

• The UK is an international leader in cutting greenhouse gas emissions, but is not acting alone.
• The European Union (EU) should be prepared to raise the ambition of its emissions reduction target for 2030.
• Current policies to tackle climate change have not damaged the competitiveness of businesses.
• Evidence shows that climate change policies can increase the competitiveness of the UK in the long term by encouraging greater innovation and efficiency.
• Carbon-related energy costs remain small relative to other production costs in the economy.
• Competitiveness concerns are valid for a small number of sectors representing approximately four per cent of the economy.
• Policies to support vulnerable sectors are already in place in the UK in the form of free emissions trading permits and sector discounts or exemptions from national policies.
• More needs to be done over the next decade to actively manage structural change in the economy.