UK climate change policy reflects legal obligations under international law. The starting point is the United Nations Framework Convention on Climate Change (UNFCCC), which was adopted in 1992 and came into force in 1994. To date, the UNFCCC has been ratified by 192 countries, including the UK and the US.

In terms of shaping our national climate change policies, the UNFCCC provides little in the way of concrete obligations. It obliges all parties to:

• gather and share information on greenhouse gas (GHG) emissions, national policies and best practices
• launch national strategies for addressing GHG emissions and adapting to expected impacts, including the provision of financial and technological support to developing countries
• co-operate in preparing for adaptation to the impacts of climate change.

The UNFCCC also sets, for 36 industrialised countries and those with economies in transition to a market economy (so called Annex 1 countries, which include the UK), a non-binding goal to stabilise their GHG emissions at 1990 levels by 2000.

Annex II countries are separately listed - broadly speaking the Annex I countries excluding those with economies in transition (the former Soviet Union states and central/eastern European countries). Annex II countries have extra obligations - "to provide new and additional financial resources to meet the full costs incurred by developing countries in measuring and communicating their emissions", as well as underwriting costs of transferring green technology.

The non-Annex I countries - essentially India, China and the rest of the developing world - have no specific commitments.

It was quickly recognised that this weak, non-binding GHG stabilisation goal would not halt increases in global GHG emissions. This led to the negotiation and agreement of the Kyoto Protocol in 1997 which had a somewhat fragile existence until it came into force on 16 February 2005 following ratification by Russia.

In terms of stimulating a national policy response, the Kyoto Protocol represents a major advance over the UNFCCC as it sets legally binding limits on GHG emissions for the UK and 38 other countries - the so-called Annex B countries. The USA and Australia are listed as Annex B countries, but notably the US has not ratified the Protocol.

These targets require from those countries a reduction in emissions of a basket of six GHGs (carbon dioxide, methane, nitrous oxide, hydrofluorocarbons, perfluorocarbons and sulphur hexafluoride) to an average of 5.2% below their 1990 levels as an average over the period 2008 - 2012 (the so-called Kyoto first commitment period). The EU 15 were assigned a single emissions reduction target of 8%. Under a burden sharing agreement. The UK accepted a target reduction of 12.5%.

There is a compliance regime underpinning these commitments, which requires any shortfall to be made up in the next commitment period, as well as payment of a penalty, suspension of trading rights and the submission of a compliance action plan.

The Kyoto Protocol did more than just introduce binding emission caps on Annex B countries. It also introduced the so-called flexibility mechanisms, namely the clean development mechanism (CDM), joint implementation (JI) and international emissions trading. These mechanisms are designed to allow Annex B countries to meet their emission reduction targets by using emissions reductions secured in other countries. CDM and JI are project based schemes; CDM allows the creation of project credits from non-Annex 1 countries, whilst JI allows an Annex 1 country to receive project credits from another Annex 1 country (with a corresponding debit to the host Annex I country's emissions target). International emissions trading allows Annex B countries which are able to operate within their emissions cap to trade surplus allowances with those which cannot.

Absolutely vital now is progress in reaching a global settlement for emissions reductions after 2012, when the Kyoto Protocol ends. The US is under particular pressure to commit to binding emissions reduction targets, as are key non-Annex 1 countries such as China, India and Brazil. The recent negotiations in Bali saw 187 countries agree to a roadmap aiming to secure an international climate change deal to take us beyond 2012 following the expiry of the Kyoto Protocol. However, of disappointment to many, no official targets for emissions reductions were set during the talks with only a vague commitment to “deep cuts” being agreed. Negotiations to finalise a future climate agreement are set to be concluded in Copenhagen in 2009.

In response to these international obligations, Europe launched an Emissions Trading Scheme (ETS) in 2005, now the largest environmental asset market ever created. This requires Member States to impose CO₂ emission caps on their energy intensive industries, and power sectors. In a similar way to the Kyoto Protocol, caps translate into an allocation of allowances, and allowances matching emissions must be surrendered by operators of affected installations annually.

Failure to do so triggers penalties, whilst operators emitting within caps may sell surplus allowances to those who are short.

Affected businesses will find life harder in the scheme's second phase, which began in January 2008. The Commission's response to criticisms of the first phase has been to ensure scarcity of allowances, and a high carbon price, and has been tough with Member States to secure ambitious allocation plans.

But the Commission has been busy on a number of other fronts, culminating in the announcement from Brussels in March 2007 of a series of agreed 2020 targets (restated in January 2008 as part of its new Climate Action and Renewable Energy Package). Notably, these include a CO₂ emission reduction across Europe of 20% (on 1990 levels), increasing to 30% if a global climate change deal is reached with the US and others post 2012 when the Kyoto Protocol expires. Also announced, after much haggling, was a mandatory 20% by 2020 renewable energy target Europe wide - a challenging target given that the share of renewables across Europe currently stands at 8.5%.

As for transport, the ETS is set to capture aviation, whilst the car industry remains under siege. The new 2020 targets include a 10% binding minimum share for biofuels in transport fuels, and the Commission plans more legislation to improve fuel quality and promote a second generation of biofuels, which are to be sustainably produced. The Commission also plans to require manufacturers to make an 18% cut in CO₂ emissions from new cars by 2012.

These 2020 targets were reinforced by the EU in January 2008 with the publication of its Climate Action and Renewable Energy Package. This package had three key themes:

• Emissions Trading : an overhaul of the ETS from 2013 (Phase 3), with wider coverage and, notably, the current system of national allocations scrapped in favour of a single EU wide emission cap and a rationing of allowances by linear decrease over the period from 2013 to 2020 consistent with the 20% reduction target.
• Renewables : after much haggling, an allocation of the binding 20% by 2020 target amongst member states, with the prospect of trading between member states via guarantee of origin certificates, together with a relaxation of state aid rules for renewables
• Biofuels : a restatement of the 10% by 2020 target, but with its environmental credentials bolstered by new sustainability criteria for producers.

These new initiatives complement the Commission's recent Energy Efficiency Action Plan, aimed at reducing energy consumption by 20% by 2020. This Plan will accompany another Directive on energy performance of buildings, which has already meant tighter energy performance standards in UK building regulations.

On a domestic level, the government reassessed its policies in a revised Climate Change Programme published in 2006, followed by a new Energy Review laying the ground for a nuclear build programme and streamlining of the consents process. More recently (May 2007) the government published the Energy White Paper “Meeting the Energy Challenge”.

These documents set out a plethora of other measures, some new and some which have been around for some time. Key amongst these is the Climate Change Levy, which operates as a tax on energy use by industry, commerce and the public sector. Another major initiative is the Renewables Obligation, which was introduced in 2002, and is the UK government's main support mechanism for the expansion of renewable electricity. The scheme, administered by energy regulator Ofgem, requires electricity suppliers to source an increasing percentage of their supplies from renewable sources, and is based on the issue of green certificates to qualifying generation stations for their output.

The buildings sector has also been targeted. It accounts for about 40% of the EU's energy requirements, and offers the single largest potential for energy efficiency. Developments have been largely driven by the EU, and include a new Code for Sustainable Homes, Energy Performance Certificates, and ever tightening Buildings Regulations.

The Energy Review also paved the way for consultation on a new trading scheme, the Energy Performance Commitment (EPC) aimed at non-energy intensive industry outside of the ETS. Under the Energy White Paper, EPC was rebranded as the Carbon Reduction Commitment. This scheme will impose caps and allocate tradable allowances, related to energy consumption, and is designed to cover organisations with mandatory half-hourly metered electricity consumption over 6,000MWh per year, including health trusts, local authorities, supermarkets, retail and hotel chains and banks.

These developments support those who argue that the EU, especially the UK, has a key role in driving forward climate change policy globally. The Government certainly think so, with several pieces of legislation setting the scene. The first of these, the Climate Change and Sustainable Energy Act 2006, does a number of things, notably giving the development of microgeneration a shot in the arm by a number of measures including the publication of annual microgeneration targets, the review of permitted development rights to ensure adequate take up of microgeneration in the domestic sector and changes to the buildings regulations. The Act also seeks to facilitate the involvement of local authorities in promoting microgeneration technologies in community energy schemes, and establishes a regime of reporting of emissions reductions achieved by government departments.

The second piece of legislation is the new Climate Change Bill and is arguably of greater significance. If enacted, the Bill will make the UK the first country to set itself legally binding carbon reduction targets (although the legal consequences of a failure to achieve these targets are not at all clear). The target is a cut in CO₂ emissions of 60% (against 1990 levels) by 2050, with five yearly "carbon budgets" to show the way, set by an independent panel which will monitor progress. Although the Bill will go to public and parliamentary consultation with the aim of becoming law by 2008, the road ahead is likely to be a rocky one, with opposition parties calling for annual targets, and the environmental lobby arguing that targets should be more ambitious.

In addition to the Climate Change Bill is the forthcoming Energy Bill and Planning Reform Bill. These three Bills are said to form the Government’s three “legislative pillars” of its strategy to tackle climate change and reduce carbon emissions. The Government aims to streamline the planning regime in the Planning Reform Bill by including single consent for major infrastructure projects and by the creation of an Independent Infrastructure Planning Commission. This should speed up the applications for nuclear projects, wind farms and clean coal plants. The Energy Bill aims to create greater incentives for renewables, to make it easier for private sector involvement in offshore gas infrastructure and carbon capture storage and provide a framework for financing of nuclear waste management and decommissioning.