London (Platts)--27Nov2008

The UK's Climate Change Act, which was written into law late Wednesday,
sets the stage for the total de-carbonization of the UK economy, a senior
carbon markets figure said Thursday.

"It's a massive change. It's the base position for the complete
de-carbonization of the economy over the next 40 years. It's a big societal
change in how we use and consume energy," said Lionel Fretz, CEO of carbon
trading and fund management company, Carbon Capital Markets.

"In general, this is a big signal to where this is all going. It's real
and people are accountable for it in a way that they haven't been before," he
told Platts Thursday.

The bill, which became law after receiving Royal Assent late Wednesday,
commits the UK to an 80% cut in greenhouse gas emissions by 2050. It also
includes five-yearly "carbon budgets" that the government must stick to in
order to demonstrate ongoing compliance with the new law.

The law also commits the UK to a mid-term target of a specific CO2
reduction of at least 26% from 1990 levels by 2020. This target is expected to
be reviewed to reflect the move to all GHGs.

The enshrining into law of the world's first long-term legally binding
framework to tackle climate change had left carbon market participants from
Canada, Australia, Japan and New Zealand at a recent industry event "in awe,"
Fretz said.

"The UK is probably three to four years ahead of those countries on
this," he added.

He said the passage of the Climate Change Bill into law shows that the UK
is maintaining leadership on tackling climate change and takes the country to
"the next level" by holding politicians to account on progress to cut
emissions.

Fretz said the key development had been the increase in ambition
announced in October, whereby the UK's 2050 target was increased from a 60%
cut in GHG emissions to 80%.

He said the new Climate Change Act heralds a series of significant
changes that could include a renaissance of nuclear power, carbon capture and
storage, energy efficiency and renewable energy.

"It underpins all the big changes that will have to happen if we are to
meet the target," said Fretz.

The law also removes the possibility that the proposals could be reversed
by a future government, creating more confidence for investors in clean energy
and other low carbon activities, he said.

Fretz said the law should also help to galvanize government action on
climate change through better coordination of measures across different
departments. "It should bring together more joined up government," he said.

The law establishes an independent Committee on Climate Change as of
December 1, which will submit annual reports to Parliament on the UK's
progress toward targets and budgets, to which the government must respond.

The government must also either include international shipping and
aviation emissions in the Act, or explain why not to parliament by December
31, 2012.

Emissions from these sources have proved controversial and were not
directly addressed by the Kyoto Protocol, in part due to difficultly in
establishing responsibility for emissions from non-terrestrial sources.

The law also requires the government to consider a balance between
domestic emissions reductions and the use of offsets credits from projects
carried out abroad.

That issue will be subject to secondary legislation requiring debate in
both Houses of Parliament, taking into account the Climate Change Committee's
advice.