The UK government is to introduce several new policies to ensure that it stays at the centre of global efforts to tackle climate change and is considering increasing its carbon emission reduction targets to ambitious new levels.

To help meet the country’s ambition to become a low-carbon economy, the government plans to introduce five-year carbon budgets, full auctioning of emission allowances and support for low carbon technologies. It has also asked an independent committee to assess whether the UK should increase its carbon emissions reduction target.

Presenting the Budget for 2008, chancellor of the exchequer Alistair Darling said that Britain is one of the few countries on track to meet Kyoto targets and is a leading financial centre for carbon markets.

But he added that the country’s target of reducing greenhouse gas emissions by at least 60 per cent by 2050 might not be enough.

“We need to do more and we need to do it now. Few doubt the science. The need to take action is urgent,” said Darling. “There will be catastrophic economic and social consequences if we fail to act.”

A key element of the government’s plans is the introduction of full auctioning for EU emission trading scheme (ETS) allowances for electricity generators in 2013. This is in line with the European Commission’s recent proposals and will prevent electricity companies from making windfall profits from free ETS allowances.

“If we want to encourage investment in low carbon technology in energy renewables and in nuclear, for example, and to make industry more carbon efficient we need to go further,” said Darling. “So in the next phase, instead of auctioning seven per cent, I want to see auctioning of 100 per cent of these allowances for energy generators.”

Darling also announced that the government would supplement its carbon capture and storage (CCS) demonstration programme with a new expression of interest to demonstrate component parts of CCS. It will also announce soon a consultation on the regulatory framework for CCS and the definition of ‘capture readiness’.

This move will send a strong signal to investors in and developers of CCS technology, and help the UK move from demonstration to wider deployment of CCS, says Dr. Jim Fitzgerald, a director in Ernst & Young’s Renewable, Waste and Clean Energy practice.

“If the consultation successfully deals with the regulatory challenges that currently face the sector it could place the UK at the forefront of developing low carbon energy solutions worldwide, with potential benefits to UK competitiveness and the wider economy,” said Fitzgerald.

“What the industry now needs is delivery from government of the necessary UK, European and international legislative and regulatory framework to enable CCS to be successfully demonstrated and deployed … This will give investors and developers of CCS the certainty they need to move forward rapidly with their proposed projects.”

The government is also planning to help fund the demonstration and commercialization of other low carbon technologies through a new Environmental Transformation Fund. It has allocated over £400 million to bring technologies in the later stages of development to market, including £200 million for renewable energy and low carbon technologies.

To ensure that carbon reduction plays a central role in fiscal policy, the government will introduce the first carbon budgets to 2022 next year. The budgets will be based on advice from the Climate Change Committee, an independent panel of experts that is also advising the government on whether it should increase its carbon reduction target to 80 per cent.

“If we are serious about reaching demanding targets then every department in government, every public sector body, every business, every one of us needs to play its part,” said Darling. “Long-term growth must be sustainable.”