The low carbon transition plan sets out how the Government are seeking to maintain the right conditions for investment in low-carbon power generation. At the heart of the plan is the EU Emissions Trading System which sets a declining limit or “cap” for emissions.
The most effective way of strengthening the carbon price is by limiting the supply of allowances by tightening the cap. The UK Government are working hard to deliver an international climate agreement in Copenhagen later this year. If we achieve the right agreement, the EU has pledged to increase our target from a 20 per cent to a 30 per cent reduction on 1990 emissions. This would lead to a significant tightening of the EU ETS cap.
However, the carbon price is not the complete answer. The low carbon transition plan also sets out other steps the Government are taking to remove barriers to the development and deployment of low-carbon technologies with policies to:
produce around 30 per cent of our electricity from renewables;
fund up to four demonstrations of carbon capture and storage; and
facilitate the building of new nuclear power stations.