Examination of witnesses (Questions 20-39)
WEDNESDAY 14 MARCH 2001
MR STEPHEN
TIMMS MP, MR
CLIVE MAXWELL
AND MR
JOHN HALL
20. Are you going to produce for each sector
base line environmental appraisals showing the absolute emissions
and the Government's current estimates of future emission trends
to 2010 with and without the energy tax? Presumably you must have
carried out the base line assessments to have arrived at the two
and a half million figure in the first place?
(Mr Timms) Let me ask Clive Maxwell to comment, but
let me first make the point that in terms of information that
we are publishing I understand that as of today 27 of the 40 sector
agreements are on the Web and can be seen there with all the information
about those. That number is rising rapidly; it is just slightly
behind the signing process but not far behind.
(Mr Maxwell) On the specific question about the absolute
emissions one has to go back to DETR and ask them what the numbers
look like. I would point out that all of these negotiations have
been informed by the Energy Technology Support Unit in the DETR
which includes experts from the sectors who know how the sectors
work, know what is realistic to achieve and have been in negotiations.
I do not think there is any doubt that the negotiation has been
properly informed and is realistic in that sense, and that their
analysis is available in the House library.
21. I want to come back to that but what mechanism
has the Government put in place to encourage businesses to transfer
to absolute targets in the future? Will the Government consider,
for example, reducing the size of the rebate over a period of
time?
(Mr Timms) The way we approach this is to leave it
up to the sectors which of the approaches they wish to pursue,
which was the most appropriate for their business conditions.
I think that has worked well. We certainly do not have any plans
to change the level of the rebate. As you know, the state aids
negotiations with the European Commission have been focusing on
a ten-year period, so we want to have a period of stability for
these agreements so that they can deliver the very substantial
carbon dioxide emission reductions that we are all very anxious
to see.
22. You pay tribute to all the hard work that
has gone on to produce this and is still going on. What actual
man hours other than in the DETR have been applied to this? I
am just thinking in comparison with some of the regulators which
have fairly large budgets. These are very complex and serious
calculations you are trying to make for the first time. What investment
has been put in, what sort of technical experts have been deployed
to do that, the base line point being are you happy that what
you are trying to achieve is effective and fair and sustainable
and that you have not got a lot more work still to do?
(Mr Timms) I am very confident that it is going to
be effective, that it has been fair, that it will be sustainable.
In terms of man hours in DETR, that is not a question for me to
answer. I do not imagine we have got that information here. I
am sure Michael Meacher will be very happy to provide information
about that. I think it has been a good process. It has been very
hard work for everybody involved. I would not want to minimise
the scale of the exercise that has been undertaken by everybody
but I think we are going to see that it has been a successful
exercise and a very important one, dealing with a very big issue
that faces us all.
23. Do you envisage changing the targets?
(Mr Timms) Which targets? The targets within negotiated
agreements?
24. Yes.
(Mr Timms) As I have said, what we have sought from
the European Commission is agreement that these agreements can
be in place for ten years. Clearly at the end of that period one
would need to review the whole process but I think it is important
that we have agreements that everybody understands and are in
place for a long period like that so that people can work towards
the targets that have been set.
25. If, after a few years, it becomes apparent
that for what you want to do businesses are getting off lightly,
that because of the advances in technology, for example, the actual
savings which they have signed up to for those targets are fairly
negligible, as some people may say now, is there any scope for
you to revisit those targets prior to the 2010 target date line?
(Mr Timms) I do not anticipate that the targets are
going to be light. Indeed, if you compare the objectives that
have been set up within those agreements with the ETSU view for
each sector of what can be achieved on a cost effective basis,
then I think you will see that the targets all go a very long
way towards the feasible reductions. There will though be reviews
of what is happening in each sector in 2004 and 2008, so there
is a mechanism there, but I see these as demanding agreements
and I think that view will be borne out by experience.
26. In 2004 a review, as you term it, could
mean that actually you are going to double the target?
(Mr Timms) I would be extremely surprised if any change
of that order were required.
27. All right, 50 per cent.
(Mr Timms) These are demanding targets and I think
people are going to have to go some to achieve them and I believe
that they will, but there is a mechanism in place to review those.
28. So theoretically you do not rule out a shift
in the goalposts within three years?
(Mr Timms) I think it is unlikely that that will be
necessary.
29. But you do not rule it out?
(Mr Timms) I think I would go no further than saying
it is unlikely that it will be necessary.
30. Can I finally touch on emissions trading?
You have just completed a consultation on the subject which was
slightly hurried, I think most people would admit. Can you just
comment on how things are going and whether you are going to produce
your proposals within the next month or so?
(Mr Timms) They are going well. I am surprised that
you describe it as a hurried consultation. I think it has been
a very thorough piece of work that has been carried out on emissions
trading. Certainly we see a key role for emissions trading as
part of the long term solution to cutting greenhouse gas emissions.
We have been working very closely with the Emissions Trading Group,
which as you know is business led, to develop the scheme. We announced
in the spending review last summer a financial incentive worth
£30 million from 2003-04 to help stimulate an early start
to maximise the environmental benefit of the Emissions Trading
Scheme. We announced in the Budget last week, by the way, that
we will ensure that that incentive is worth the equivalent of
£30 million after corporation tax. The responses to the consultation
in November 2000 on the rules of the scheme are being considered.
We will be publishing the framework for the United Kingdom Emissions
Trading Scheme shortly so that we will be on track for firms to
take targets from next year. I made the point at the beginning,
although I did not do so explicitly, that we believe that the
Emissions Trading Scheme could contribute, on top of the five
million tonnes of emission savings from the Climate Change Levy,
a further two million. Again that is a very significant contribution
to meeting the objectives that we have.
31. The reason we describe it as hasty is that
I think the consultation document, after a lot of work, as you
say, did not go out until the end of November with a target date
for the Government to produce its response before the end of this
month, which on a very complicated subject does seem a short space
of time. Can you just comment on the Emissions Trading Authority
which I gather you are not proposing to set up on a statutory
basis? Surely without that statutory basis it will rather lack
the teeth to enforce penalties?
(Mr Timms) I am not entirely certain what basis DETR
proposes for the Authority. If that is something you would like
some further information I will send you a note on that.
32. How many companies do you expect to join
it?
(Mr Timms) In due course a lot.
33. Can you be a little more precise?
(Mr Timms) To begin with I would expect a fairly modest
take-up. Once the incentive comes into effect that number will
certainly rise. We recognise, as did Lord Marshall in his report
on this, that emissions trading is most appropriate for larger
firms and that for smaller firms the mechanism available in the
Levy is likely to be the more effective one. Mr Maxwell was just
reminding me that of course there will be a particular incentive
to participate in the scheme for firms who are party to negotiated
agreements, so I guess those will be the immediate group of companies
who are likely to enter the scheme but once the incentive is in
place and once trading becomes a familiar part of commercial life
then we would expect it to become much more widely taken up.
34. So you are not putting any targets down
on which to judge the success of the scheme in terms of how many
companies have joined up in the first three or four years, even
those companies who are privy to these sector agreements?
(Mr Timms) I think the key thing is going to be the
achievement of the reduction of two million tonnes—I hope
more—of carbon dioxide emissions a year by 2010. That is
the real target that we have got in our sights.
Joan Walley
35. Minister, we welcome all the progress that
has been made in the Budget, but we always want to go further.
Given that we had the Prime Minister's speech the very day before
the Budget where he announced the very welcome news about extra
money for renewables, I wonder if you could tell the Committee
whether or not that money is new or whether or not it is recycled
old money in any way?
(Mr Timms) I can tell you where that has come from.
The £100 million comprises £60 million from the Capital
Modernisation Fund, £20 million from the Performance Innovation
Fund, and the final £20 million is being re-allocated from
within the DTI's own allocation, so there are three different
sources for it.
36. Are those three different sources which
together make up the new £100 million all new sources of
money?
(Mr Timms) New in their application to this purpose,
yes.
37. But were they previously existing for renewable
energy?
(Mr Timms) No.
38. So they are absolutely new?
(Mr Timms) Yes.
39. In that case could you confirm for me, if
you look at the 1999 figures for the Energy Efficiency Fund, that
the £50 million which was allocated over three years on a
year by year basis continues to be allocated and is still available
for energy efficiency purposes, that it is not part of this new
money that was announced the day before?
(Mr Timms) That is correct. This is the £50 million
fund being created from the proceeds of the Climate Change Levy?
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