Rethinking Decarbonisation Incentives: Setting Standards for Carbon Intensity

Published: 20 June 2019

Introduction

Energy Systems Catapult’s ‘Rethinking Decarbonisation Incentives’ (RDI) is taking a fresh look at how carbon policy could be improved to promote clean growth.

The project has identified a number of stylised reform options for improving the incentives to cut emissions across the economy. This report explores whether setting standards for the carbon intensity of energy supplied could have some advantages as a policy instrument to drive decarbonisation in the residential heat and road transport sectors.

We commissioned Frontier Economics to analyse considerations around the design of a carbon intensity standard, which highlighted several key learnings. This is one of a number of policy options the Catapult is exploring to incentivise the decarbonisation of the UK economy.

What is a tradeable carbon intensity standard?

A carbon intensity standard would set an obligation on suppliers in the energy sector to reduce the carbon content of the energy they sell. Obligated parties could meet the standard either by reducing the emissions intensity of their activities, or by buying credits from parties who are supplying energy with a carbon intensity below the standard.

Next steps

This will inform the next phase of work by the Catapult to design a low carbon heat standard.

Additional content

  • Model (Excel spreadsheet)
  • User guide
    • How to use the model to simulate the effect of different policy options. It should be read in conjunction with Annex B of the main report, which sets out the underpinnings of the model, and the sources of its assumptions (including cell references).
  • Worked example generator (Excel spreadsheet)