7 Policy overlaps
Requirements of the guidance
7.1 The DECC guidance requires that attempts are made to work out the effects of only the policy concerned. Hence, overlaps with other policies should be described in the appraisal and taken into account in the costs and benefits assigned to the policy in question. The guidance suggests that where there are clear policy overlaps it might make sense to analyse two or more policies together.
7.2 A specific overlap that is addressed by the guidance is the overlap between UKGHG policies and the EU Climate and Energy Package. This is accounted for by splitting out the savings that arise in sectors covered by the EU Emissions Trading Scheme and those that are not covered by the EUETS. In addition, changes in final energy consumption and their impact on the cost of the renewable energy target are considered alongside changes in the amount of delivered renewable energy.
7.3 The guidance also includes a section on risk analysis, which is relevant where several policies are appraised, in order to estimate the combined delivery risk. Whilst this does not address policy overlaps specifically, it does recognise that risk of delivery might relate to policy packages rather than isolated instruments. The guidance suggests that the delivery risk should be assessed for correlated policies.
Application of guidance to pilots
7.4 The issue of policy overlaps is closely related to the issue of defining the baseline, as described in the previous section. In defining the baseline scenario, this should include the impacts of existing 'firm and funded' policies and measures.
7.5 For the two policies targeting energy consumption within households ( HIS, EAP), the isolation of the impacts of the policies in question from the impacts of other policies was incredibly difficult. Both of these policies had been designed to work in conjunction with existing initiatives. Whilst this may ensure an efficient allocation of resources, it creates challenges for isolating the policy impacts from those impacts that would have occurred anyway.
7.6 For the two grant funded projects ( SRDP, SEG) the assumption has been made that the projects would not have gone ahead in the absence of the policies. However, in both cases, the influence of other policies was considered important for stimulating associated markets (i.e. ensuring supplies of biomass for the biomass boiler supported by the SRDP, and driving demand for the hybrid buses supported by the SE Grant).
Table 7.1 Policy overlaps considered within each of the pilots
| Policy overlaps | Approach to dealing with overlaps |
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EGIP | As a specific infrastructure scheme then policy overlaps are more limited than for other policies. | The model uses existing timetable data. Therefore, as long as the impact of existing policies is reflected within the timetable data, the policy overlaps are assumed to have been addressed already. For example, policies such as the road transport fuel duty may help to drive demand for the new service but these are assumed to be within the baseline. |
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EAP | The EAP has a direct overlap with the carbon emission reduction target ( CERT). In the absence of the EAP a certain level of savings would have occurred in Scotland anyway, as a result of existing CERT activities. Since CERT determines a target obligation that each of the energy companies is required to meet, then the activities under the EAP are unlikely to deliver additional savings on a Great Britain wide basis 12. However, the EAP may reduce the overall cost to energy suppliers of delivering their CERT targets; it may influence the types of households that receive support under CERT; and, it may influence the geographic location of savings. Specifically, since the CERT targets are set on a GB wide basis, the EAP may facilitate a greater 'share' of the measures to be installed in Scotland than would have occurred in the absence of the package. Further overlaps may exist with the area-based Home Insulation Scheme. This may result in a more cost-effective delivery of the EAP, but is unlikely to deliver any additional savings since the overall level of funding is fixed. | Overall the scale of measures influenced by the EAP is considered to be not sufficiently large, in relation to the overall number of measures installed under CERT, to warrant the use of a modified baseline for the appraisal of Stage 3 insulation measures. For measures that are not covered by CERT i.e. Stage 4 measures, the issue of additionality is less of an issue, since it is unlikely that these measures would have been implemented without the policy stimulus. It is therefore appropriate for the package to claim 100% of the savings that arise from these measures. On this basis our baseline assumes that all of the Stage 3 measures delivered under CERT would have happened anyway so are included within the baseline for the carbon appraisal. However, all savings that are delivered under the Stage 4 measures are assumed to be over and above what would have happened in the baseline. |
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HIS | The HIS has a number of potential overlaps with existing policies and measures. In fact the scheme has been designed to maximise the opportunities (and funding streams) that are provided by existing policy mechanisms. Of particular importance is the overlap with the carbon emission reduction target ( CERT) since a number of the insulation opportunities identified by the HIS will be eligible for CERT support. | For the purposes of the pilot we have quantified all of the savings from all of the measures that are projected to be implemented in relation to the HIS. Of the total number of measures installed we have then made the following assumptions with respect to additionally: - 50% of the insulation measures would have been installed anyway under the CERT so have not been attributed to the HIS directly. These are assumed to be either cavity wall insulation or virgin loft insulation.
- 5% of the insulation measures would have been installed anyway under EAP so have not been attributed to the HIS directly. These are assumed to be a mix of cavity and loft insulations
- 5% of the insulation measures would have been installed anyway under local authority or other programmes so have not been attributed to the HIS directly. These are assumed to be a mix of cavity and loft insulations
- 20% of the insulation measures can be associated with additional activity in Scotland, under CERT, which can be attributed to the HIS. These are assumed to be either cavity wall insulation or virgin loft insulation.
- 20% of the insulation measures can be associated directly with HIS funding so can be fully attributed to the HIS. The are all assumed to be loft top ups
Whilst these assumptions are to some extent based upon expert judgement, we consider there is sufficient influence provided by the HIS on insulation activities to claim additional measures over and above the existing policy mix. This includes both direct funding of measures (exclusively loft top-ups), but also enhancing the measures installed under existing policies. |
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SRDP | The SRD Programme covers a wide range of areas and thus there is a danger that there might be a number of overlaps. An area of consideration is the potential for double counting impacts i.e. where alternative public sector funding sources might also be used to fund the same measure, or at least part of it. State aid rules only allow a maximum proportion of the project to be funded by public sectors sources so this puts a cap on any match funding. | Without further information to the contrary we have assumed that the SRDP grant is the only subsidisation of the holiday park project. |
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SEG | The R&D grant funding scheme has a number of potential overlaps with other policies and measures and in fact requires other measures and funding streams to maximise the potential for the technologies being researched. Each funded project will have very different policy overlaps so will need to be analysed separately. In the case of hybrid bus project there are clear policy overlap with the numerous city and state authority procurement policies in Europe and the US demanding clean, and energy efficient bus technologies. Indeed without the market pull the R&D project would not have been funded. | In the case for hybrid bus project it is assumed that the grant funding will bring forward the commercialisation of the hybrid bus by 3 years. All other policies (supported primarily by other funding sources) are considered to be part of the baseline. These policies are assumed to stimulate the market for hybrid buses, but the grant is assumed to deliver additional savings, by bringing forward the development of the technology sooner. The additionality is therefore the market transformation impacts. |
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Comments and recommendations from the pilots
7.7 It is difficult to provide generic guidance on dealing with policy overlaps, since the issue is very policy/sector specific. The current DECC guidance provides pragmatic advice (if policy cannot be isolated then appraise as a package) and also provides an example of where this might be appropriate. The guidance could potentially be expanded to provide a few more examples of how policy overlaps might be addressed in specific circumstances, but as stated, it is difficult to provide generic guidance.
7.8 Where overlaps exist but cannot easily be disentangled it might be appropriate to assess policy impacts both as a package and as isolated elements - as has been attempted in the analysis of the HIS. Whilst uncertainties with respect to the overall overlap remain, this at least provides an indication of the potential extent of this overlap.
7.9 More generally, the climate change policy space is becoming increasingly crowded, with a large number of policies and stakeholders potentially influencing the implementation of climate change mitigation measures across all sectors of the economy. Appraising these policies in a common and consistent manner is a large task. As a minimum, consideration should be given to the most important policy overlaps. For example, in the policies that targeted energy consumption with households, important overlaps existed with UK wide energy efficiency policies. An important consideration is therefore how Scottish policies interact with UK wide policies and measures.
7.10 Disentangling policy overlaps is even more challenging for those policies and programmes that cover a number of different sectors, with different policy overlaps potentially existing in each of the respective sectors.
7.11 Furthermore, certain policies have been designed specifically to complement the existing policy framework, either to support the activities of other policies, or deal with a specific market failure that is influencing the effectiveness of the policy. This is particularly relevant for R&D programme, which frequently operate in conjunction with other instruments.
7.12 To enable a better assessment of the policy overlaps it would be useful to have a more detailed assessment of the impacts of existing policies in Scotland. This would include both GB13/ UK and Scottish specific policies.
7.13 Whilst it is not practical for the guidance to provide detailed fuel split or other activity data for each of the policies some further details on the individual policies that are in place, which would need to be captured within the baseline would be useful. This may for example, link to work that has been undertaken to identify the 'Scottish share' of UK policies. Some of this information is available from other work (e.g. work to compile the UK's Energy Efficiency Action Plan) but may not be readily available to policy analysts.
7.14 More generally, further work to allocate the Scottish share of UK policies, including the underlying assumption with respect to energy savings would be useful to ensure a consistent baseline, and avoid the double counting. Such information would also be valuable for adjusting UK wide estimates of policy savings to adjust for the availability of detailed data on energy savings in Scotland. Such adjustment would be necessary should the carbon appraisal of Scottish policy assume different baseline assumptions to the rest of the UK.