During 2008, the UK adopted a leading position on climate change by becoming the first country to introduce a legally binding vehicle to reduce greenhouse gas emissions, through the Climate Change Act.

The Government also established the Department of Energy and Climate Change, with three overall objectives: to ensure secure, affordable and efficient energy; to bring about the transition to a low-carbon Britain; and to achieve an international agreement on climate change at Copenhagen in December 2009.

Climate Change Committee
The Committee on Climate Change (CCC) is an independent body established under the Climate Change Act to advise the UK Government on setting carbon budgets, and to report to Parliament on the progress made in reducing greenhouse gas emissions.

The UK Government has acknowledged the recommendations of Lord Turner's Climate Change Committee (CCC), set out in their report of December 2008, aiming to reduce greenhouse gas emissions by 80% on 1990 levels by 2050 and to substantially decarbonise the electricity system by 2030. The cuts will be achieved by setting a system of five-year carbon budgets, the first of which will be announced in June 2009. Government will also publish policies and proposals to meet the carbon budgets during summer 2009.The Scottish Government is pursuing its own Climate Change (Scotland) Bill that could see the introduction of a statutory target to reduce Scotland's greenhouse gas emissions by 80% by 2050, with an interim target of 50% emissions reductions by 2030.

European Agreement
At European level, leaders reached agreement in December 2008 to reduce greenhouse gas emissions by 20% by 2020, compared with 1990 levels. This may be increased to 30% via future international agreements.

It is hoped that a global agreement on climate change can be reached at the United Nations Climate Change Conference in Copenhagen, which will bring together 200 world leaders in December 2009.

During 2008, Phase II of the EU's Emission Trading Scheme came into force.

The UK Government auctioned four million carbon allowances, raising £54 million towards carbon capture and storage projects. Further auctions under the Emission Trading Scheme (ETS) are planned for 2009. Long-term emission reduction targets have also been set for the energy sector at EU and UK level.

Low Carbon Generation
Progress was made with the short-listing of three bids aiming to build a UK carbon capture and storage facility on an unprecedented scale. ScottishPower is at the forefront of a consortium aiming to construct such a facility at Longannet Power Station. In the Government's Budget 2009, it was announced they were developing "a new and more ambitious" CCS policy including the intention to fund up to four CCS demonstrations and supporting companies in the current competition to undertake detailed preparatory studies.

There are also two European Union wide initiatives on carbon capture and storage (CCS). The first initiative to demonstrate 5 CCS plants is to be funded by money from the European Union Economic Recovery Plan. The second initiative will see partial funding of 10-12 CCS projects funded from EU ETS allowances.

The UK Government is supportive of new nuclear power stations as a key component of a low-carbon energy portfolio. Most of the UK's energy companies, including ScottishPower, are currently evaluating the opportunities that could be presented by new nuclear installations.

During 2008, the UK overtook Denmark in becoming the world's leading operator of offshore wind. Offshore wind could provide up to 25,000 MW of energy by 2020.

Energy Efficiency
During the year the Government also announced support for the deployment of "smart meters" that will encourage householders and small businesses to use energy much more efficiently.

Obligations on energy companies to fund energy efficiency programmes through the Carbon Emissions Reduction Target (CERT) programme were also increased by 20%, taking funding to almost £4 billion from 2008-2011.

Separately, a new Community Energy Saving Programme (CESP) to support energy efficiency projects at a local level was announced by the Government. The £350 million cost will be shared between energy suppliers and generators. CESP aims to deliver CO₂ savings, while helping some of the UK's poorest communities achieve savings on their fuel bills.

In addition a new mandatory emissions trading scheme, called the Carbon Reduction Commitment (CRC,) aims to reduce carbon emissions in large non-energy intensive organisations by 1.2 million tonnes of carbon per year by 2020.

The EU has agreed an Action Plan for Energy Efficiency which will run up to 2012. The objective of the Action Plan is to control and reduce energy demand and to take targeted action on consumption and supply in order to save 20% of annual consumption of primary energy by 2020. This objective corresponds to achieving approximately 1.5% saving per year. In order to achieve these energy savings, energy-efficient techniques, products and services must be developed and consumption habits must be changed so that less energy is used to deliver desired quality of life.

John Campbell, Impact Leader