Climate Action

What are carbon budgets, and how can they help us reach net zero?

Smoke rises above a factory

Carbon budgets measure how much CO2 is produced by industry, homes and all other parts of the economy to calculate by how much emissions must be cut in the future. Image: Unsplash/Anne Nygård

Annabel Walker
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Climate Crisis

This article is part of: Centre for Nature and Climate

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This article was first published in 2022 and was updated in March 2024.

  • Carbon budgets offer a way to benchmark the progress of governments in meeting their climate goals.
  • The UK has met its carbon budget for 2018-2022, but this was in part due to transport emissions being reduced during the COVID-19 pandemic.
  • Extreme weather events due to the climate crisis are the second biggest risk affecting the world, according to the World Economic Forum's Global Risks Report 2024.

Carbon budgets measure how much CO₂ is produced by industry, homes and all other parts of the economy to calculate by how much emissions must be cut in the future. The aim is to reach net-zero emissions – striking an equal balance between the carbon released into the atmosphere and that removed from it.

But with carbon building up quickly, countries are having to redraw their budgets more often than hoped.

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How do carbon budgets work?

Carbon budgets seek to balance an emission increase in one sector, such as agriculture, with corresponding reductions in another.

They can help limit global warming because carbon budgets link the rate of emissions to the additional rise in temperature and can offer a stepped approach to reaching climate targets. Also, they help gauge the effectiveness of GHG-reduction measures, such as using renewable energy sources, and take account of mitigation factors like carbon capture initiatives or re-forestation schemes.

In that way, they open a window on how close a country is to reaching net zero. Some, including the UK and Japan, have set legally binding carbon budgets.

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The road to net zero

Reducing emissions is vital for limiting rising temperatures to no more than 1.5C-2°C above pre-industrial levels. Beyond that, scientists say communities and livelihoods will be hit by natural disasters like frequent severe weather events, rising sea levels and declining biodiversity.

Extreme weather events due to the climate crisis are the second biggest risk affecting the world in the next two years, according to the World Economic Forum's Global Risks Report 2024, rising to the biggest risk over the coming 10 years.

Net zero is expected to cap that rise – and it has strong backing. In 2015, 196 countries and the European Union signed the United Nations Paris Agreement to cut emissions. And more than 70 countries, including China, the US and the EU – which are responsible for the greatest volume of carbon emissions – have pledged to reach net zero by between 2050 and 2060. This covers 76% of emissions worldwide.

The World Economic Forum established the Net Zero Carbon Cities programme to aid the decarbonization of the world’s most populous places.

The challenges ahead

In its most recent report published in 2023, the Intergovernmental Panel on Climate Change (IPCC) summarized five years of reports on global temperature rises, fossil fuel emissions and climate impacts.

AR6 Synthesis Report: Climate Change 2023 warned that, to keep within the 1.5°C limit, emissions need to be reduced by at least 43% by 2030 compared to 2019 levels, and at least 60% by 2035. This is the decisive decade to make that happen.

A diagram visualising the carbon budget
Carbon budgets measure how much CO2 is produced and calculate by how much emissions must be cut in the future. Image: Carbon Tracker

Progress so far

The IPCC report found emissions are increasing at about half the rate of the decade earlier. And some countries are using their carbon budget to help chart a long-term course centred on sustainability.

Costa Rica’s budget, for instance, includes measures to ensure investment is funnelled to sustainable public transport, while Fiji, an island chain vulnerable to rising sea levels, is targeting the restoration of its ecosystems.

There’s also debate about which countries should set the toughest budgets; should the biggest emitters shoulder most responsibility, or should it be shared?

The UK has met its Third Carbon Budget - for the period 2018 to 2022 - with a surplus.

But the country's Climate Change Committee (CCC), an independent body which advises on emissions target, has warned the government not to carry forward the surplus to "loosen later carbon budgets".

The Climate Change Act 2008 set out carbon budgets as the legal targets for UK greenhouse emissions over a five-year period.

In an open letter to MP Graham Stuart, the Interim Chair of the CCC, Professor Piers Forster, wrote: "Future carbon budgets will require an increase in the pace and breadth of decarbonization. It is essential that an ambitious path of emissions reduction is maintained towards Net Zero. The Committee’s unequivocal advice is that surplus emissions from the Third Carbon Budget should not be carried forward."

An annex to the letter explains how the budget was made easier to achieve by "predominantly external factors", specifically a "tighter-than-expected EU ETS cap, lower-than-expected GDP, and the effect on transport emissions of the COVID-19 pandemic".

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Climate ActionNature and BiodiversityFinancial and Monetary Systems
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