Select Committee on Environmental Audit Minutes of Evidence

Examination of Witnesses (Questions 233 - 239)




  233. Good morning, gentlemen. You have had the benefit of hearing some of the questions which the Energy Intensive Users Group have fielded. Obviously ours will be a little bit different for yourselves, but covering some of the same ground. Is there anything you would like to say by way of initial statement before we begin the questioning?

  (Mr Agar) Thank you, Chairman, and perhaps I should introduce my colleagues. I am Peter Agar, the Deputy Director General of the CBI. Michael Roberts, sitting on my left, is Head of our Industrial Policy Group which, amongst other things, means that he has day-to-day responsibility for our work on climate change and energy policy, and I also am accompanied this morning by Paul Everett, on my right, who is Head of Policy and Economics at the Society of Motor Manufacturers and Traders, the SMMT. We thought Paul particularly might be able to help the Committee in discussions about non-IPPC sites and our concerns over eligibility of non-IPPC sites for climate change rebates for which the automotive sector is a good example of a major sector which is currently excluded from negotiated agreements. The only other thing I would like to say to open, Chairman, is that the CBI over the past year has been at the forefront of discussions about the proposed Climate Change Levy and has expressed strong concerns about the initial proposals, as set out in the March Budget, that those concerns are concerns about means, not about ends. The CBI, as a membership organisation, has always supported the Kyoto process and supported the outcome of the Kyoto process and the allocation of targets both to the European Union and then to the UK, so this is not an argument and has not been an argument about the fact that we have to do something about climate change and that the Kyoto agreements are the right first step to guide us in what we should do both as a nation and as Europe. The concerns have been purely about means, not about ends.

  Chairman: Well, thank you for saying that and thank you also for bringing your colleagues along with you this morning.

Joan Walley

  234. I must say I am reassured that you feel that it is an important objective to strive towards. First of all, the submission which you have sent the Committee I think predated the Pre-Budget Report, so I just wonder if you would like to comment on concerns that you actually put out in the paper, to what extent you feel they have been addressed and to what extent you feel they are still outside the issues. I know you have just referred to the eligibility issue, but could you just expand on that a bit for us?
  (Mr Agar) Of course. I think the Committee does have a paper from us which is an initial reaction to the Pre-Budget Report. It is a short paper or an extract concerning climate change from our response to the whole Pre-Budget Statement which these days is a rather wide-ranging statement. On climate change, we were pleased that the Chancellor moved a considerable way towards what we had asked for, by announcing revenue neutrality for the private sector. Certainly for some energy-intensive sectors, the combination of 80 per cent rebates plus the NICs reduction will more or less give them 100 per cent relief from the levy; it is a combination of those two things of course because even energy-intensive users have some employees, although they may not be very labour intensive. It remains the case that that revenue neutrality is certainly not perfect for all those who will enter into negotiated agreements and there are a number of sectors where there will be a net cost and there are a number of sectors which remain outside the current negotiations, with automotive being one of those, which will certainly still have a significant net cost as a result of even the new proposals. So one of our key concerns, which really was not addressed in the Pre-Budget Statement is how do we extend the eligibility for negotiated agreements to other sectors who are willing to enter into negotiations and who are willing to accept challenging targets. Nobody on the business side, certainly in our membership, believes that negotiations are, as it were, a free lunch; negotiations are simply, in our view, a more efficient and effective way of getting the changes in energy efficiency and behaviour that we require nationally to meet the Kyoto Treaty commitments. Therefore, our key concern remains the question of who is allowed into the negotiated agreements framework and that is something which I am sure this Committee will want to return to. We were also pleased, however, that the Government also recognised that there needs to be more effort to provide positive support, particularly to small companies, to help them become more energy efficient. We had argued very strongly that the £50 million in the original March proposal was inadequate to that end and, although it was a considerable increase over what had previously been spent, it was still, in our view, too small and, therefore, we were very pleased that the Chancellor has now tripled that to £150 million and pleased too that there is now a consultation paper on the table, which I think only came to us at the end of last week, so we have had very little time to look at it, which sets out the range of questions that need to be answered about how we could use that £150 million in the first estimate in the most efficient way. Those were the key concerns. There are some other specific concerns about the structure of negotiated agreements, how the targets are set, some of which I know you have covered with our colleagues from the Energy Intensive Users Group.

  235. Can I just ask you to go into a little more detail about the extension of the eligibility because in your paper to us you do mention the scrap metal industry and you make the point that it is not covered by the IPPC and, therefore, not currently eligible for negotiated agreements.
  (Mr Agar) That is right.

  236. Can you talk in terms of the inclusiveness which you obviously would like to see in terms of the Government's procedures from the Marshall Report through to the stage we are at with the Budget and how we get the mechanisms to go further forward to meet these objectives.
  (Mr Agar) I am going to ask Paul to comment in a moment on the automotive sector because I think that is a very good example of a major sector—

  237. It is scrap metal actually.
  (Mr Agar) You want to talk about scrap metal?

  238. Yes.
  (Mr Roberts) I think in our paper we identified scrap metal as a sector where perversions have arisen as a result of the way that the negotiated agreements are being pursued, with eligibility based on IPPC, but there are other examples, for example, industrial gases, which was mentioned in your previous session. That is another classic case where we have a very highly energy-intensive sector which is not going to be eligible for rebates simply because it is not covered by IPPC.

  239. What I really wanted to do was to try and get at the issue which is all about how inclusive the procedure is actually for getting a mechanism in place for the Climate Change Levy and the extent to which that can sit comfortably side by side with other environmental objectives, like the one that you flag up in respect of scrap metal which is to do with recycling.
  (Mr Agar) I think you do need a kind of holistic view and I think our colleagues previously when I came in were answering a question about, as it were, the need in some cases to use more energy to produce a material, for example, which will then help save energy when it is incorporated in some final product. Another example of that is the glass industry where if you want to produce, as it were, triple glazing and very energy-efficient glass for use in buildings to cut down energy use, it is actually a more energy-intensive process to produce the glass in the first place. Therefore, I agree there is a question there of how you take a whole view which I think on the whole has not been addressed as part of the design of the CCL; I think it has been put probably in the "too difficult" category by the Government, too complex actually to do that, but Michael might want to add to that.

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