Examination of Witnesses (Questions 285-299)
19 MAY 2004
MR TOM
DELAY, MR
MICHAEL REA
AND DR
PETER MALLABURN
Q285 Chairman: Welcome. Welcome to a
very hot Committee Room, hot but probably environmentally friendly,
we will find out later. Thank you very much for coming back to
the Committee. It is a pleasure to see you again. When we saw
you last, in February, you referred to a carbon gap, which you
put at, I think, around six million tonnes, if I remember rightly,
by 2010, between the aspiration and the likely achievement. That
was the thing that worried you and obviously the gap which needed
to be filled. At that time you stressed the importance of the
forthcoming implementation programme in mapping out the measures
needed to fill that gap. We have now had that Implementation Programme,
and of course we have had the Budget as well, and there is a feeling
that really neither contains the sorts of substantial measures
which are needed to make the leap which you identified before.
Do you share in that view?
Mr Delay: I am going to suggest
that Michael here answers more fully, but I think the answer may
not be the one we all want to hear. It is not clear. I think the
Implementation Plan, in itself, is not a bad plan and it does
cover a great deal, but an awful lot of it is still aspirational
and has not been anchored in precise terms. If all the measures
in the Implementation Plan were to be put into action effectively
then I think there would be a very realistic chance of addressing
the gap and setting the course for 2020. I think the big question
is are they going to be put in place with anything like the rigour
that would be required reasonably to address certainly the uncertainty
around meeting that 2010 target, and the whole issue of building
a platform for 2020? It is not as clear maybe as we would all
have liked to see. I think the elements are there in the Implementation
Plan but probably not in sufficient detail to give any definitive
view.
Mr Rea: I think that is right.
I think when we wrote back we talked about the overall gap in
business and the public sector being in the order of 16 million
tonnes, and we said that effective implementation of Plan measures
could deliver a further ten to 12 million tonnes. The things which
are correct in the Implementation Plan, if implemented to the
full degree, would deliver that extra 10 to 12 million tonnes,
but there would still be a gap, I think, in our view. It is two
things. To pick up on Tom's point, one, it is implementing everything
in here to the nth degree. I think that things like that are the
right things but we need to get on and do them. Even doing that
there is still a gap, in our view, so we need to bring forward
new measures to fill that to 2010 and beyond.
Q286 Chairman: I wonder if you could
help us a little more by giving some examples of where this lack
of clarity lies?
Mr Rea: One I would pick out would
be that the Plan talks about public sector leadership in terms
of building procurement, so it talks about procuring buildings
that are top quartile in terms of energy efficiency performance,
which we think is absolutely the right thing to do. What it does
not talk about is how we are going to do that, how we are going
to make that happen, what is the methodology which defines how
we measure top quartile, how that links to the EU Buildings Directive
and what would be a sensible timescale to roll that out across
the government estate. As ever, the devil is in the detail, and
I think that is one good example.
Q287 Chairman: I heard what you were
saying earlier—sorry to interrupt—about if it is all
implemented fully probably you will be okay, but if it is as vague
as that how on earth can it be implemented at all, let alone fully?
Mr Delay: My sense is certainly
that the timing of the plan was difficult for Government, in that
it was pretty much a year after the publication of the Energy
White Paper, allowing for a period of reflection, so that one
could reflect on one full year, but it was before the current
spending round has been discussed and agreed. It is before the
Climate Change Programme has been reassessed, which is in the
plan for this year. Therefore, it is quite difficult to be precise
around the numbers when neither the funding nor the gap has been
confirmed by Government's own analysis, which is due to be carried
out this year. I think there will be a case to say this is a Plan
which, for various reasons, was published maybe six months earlier
than would have been ideal.
Q288 Chairman: Presumably, it is also
a problem that we have not yet seen the revised UK energy projections?
Mr Delay: Indeed.
Q289 Chairman: It might have been logical
to have had those before debating any of this, might it not?
Mr Delay: That is a reasonable
view.
Q290 Chairman: That is a cautious answer,
but I take it that you agree?
Mr Delay: Yes.
Mr Rea: The numbers we quote are
our numbers. That is what we try to model. We try to take our
view on where we think emissions are going over the next ten years.
Clearly, Government have much wider access to data than we have,
and I think it would have been helpful to have that earlier in
the debate. I think, from our perspective, the debate now shifts,
in a way, to the Climate Change Programme review and I think we
need to be realistic about what is the real level of gap and therefore
what we need to do to close that gap.
Q291 Chairman: When do you expect the
energy projections to be published?
Mr Delay: I think that would have
to be a question for the government departments responsible.
Q292 Chairman: You have not heard anything?
Mr Delay: No, we have not.
Q293 Chairman: Do you think that, in
a sense, too much is being left to future reviews? It all seems
to be being pushed off. It was going to be the Implementation
Plan then it was going to be the Budget, and now we are looking
at the Climate Change Programme later in the year, the Buildings
Directive, the changes to Building Regulations. It is always something
which is going to happen at some point in the future and you never
quite get there?
Dr Mallaburn: I think there is
an issue which we have not mentioned, a very general point, which
is partly encouraging and partly discouraging. There is a link
between the Government taking strong policy decisions and cost-effective
responses by programmes like ours and those of our colleagues
behind, and this is a nettle that they are starting to grasp but
really they do need to grasp that quite firmly if this Plan is
going to work. I think they need to do the same in the Climate
Change Programme review. I think, in a sense, they have started
to think about that, and this leadership in public procurement
is a very welcome step forward but that needs to be rolled out
much more widely across the Programme than currently it is.
Mr Rea: There is quite a good
forcing mechanism, in that we have a 2010 target for a 20% reduction
in CO2. Target or aspiration, I think you can debate the language,
but let us call it a target. I think, actually, sticking to that
in terms of the Climate Change Programme review would be a very
good forcing device, really to say, "This is the gap and
this is what we'd need to do to close the gap," because,
in effect, time is running out.
Mr Delay: Certainly, all the work
that we have done suggests that there is a real complementarity
between strong policy measures and the kinds of support measures
that we and others can put in place essentially to address knowledge
gaps and small financing gaps, but which nevertheless are pretty
sterile unless they are on the back of very strong policy measures.
All the analysis we have done suggests that the stronger the policy
measures in their entirety the easier it is, relatively, to find
support measures, and find support measures to fill the gap. If
we end up in the situation where, for various reasons, the policy
measures are not as strong as they might be, then one's only alternative,
if really one is to address the gap, is to start funding and subsidising
measures which are in themselves cost-effective. This is Government
subsidising NPV positive measures, which does not make a lot of
sense. I think there is a very strong imperative to come up with
the strongest possible set of measures, be it around standards,
building regulation and labelling, Climate Change Agreements,
Climate Change Levy measures, and so on, essentially to make it
as cost-effective as possible to meet the target and address the
gap which is there. The alternative is a very difficult situation
where in two or three years' time we will find ourselves with
an even bigger gap and facing really little other option than
basically to subsidise the measures required.
Q294 Chairman: It was interesting, in
fact, that the Implementation Plan differed from the White Paper
in terms of the targets set. Actually, overall, it increased the
amount of carbon savings that the Government say they are expecting,
and, given that the domestic target was cut, the whole of that
increase now is expected to come from the commercial industrial
sector. Have you identified where that is coming from, and I am
talking here about the increase to 12.1 million tonnes of carbon
coming from the commercial sector?
Mr Rea: I am looking at one of
the pages from the Plan itself. The main changes that we can see
pre and post the White Paper are around extending CCAs to other
sectors, extending CCA targets and extending the deliverable from
the Carbon Trust in 2010 from half a million to a million tonnes.
I think that the three big changes in terms of meaningful numbers
are, one, extending CCAs to other sectors, two, increasing CCA
targets and, three, extending the deliverable from the Carbon
Trust from half a million tonnes to a million tonnes in 2010.
I think the other measures are swings and roundabouts. The deliverable
from UK ETS has gone down but that has been brought back up again
by the EU ETS.
Mr Delay: I think you may well
ask is that a credible shift?
Q295 Chairman: Yes. Were you asked about
it before it was announced, because you are going to have to deliver
quite a lot of this?
Mr Delay: With appropriate funding,
and nevertheless focusing very much on what is cost-effective,
I do not think it is unreasonable for us to deliver our share
of that new target by 2010. I think the element on which certainly
we gave a view, and which I think Government has taken note of
but is probably less well-known, is the Climate Change Agreement
success. Climate Change Agreements, very broadly, have overdelivered
by a factor of three on what they were supposed to deliver. I
think that does reflect the real meaning which many businesses
attribute to a legally-binding commitment, built nevertheless
around a voluntary target, between a business and Government.
I think that is something which most businesses involved took
very seriously, and as a result they overdelivered. Therefore,
I think there is significant scope for both increasing the targets
of Climate Change Agreements and extending their sectoral coverage.
That was a view which we shared with Government before the Implementation
Plan was published.
Chairman: Thank you.
Q296 Mr Chaytor: Within the Carbon Trust's
own contribution to the targets, what is your estimate of the
contribution of the Action Energy programme, in terms of emission
reductions?
Mr Delay: I suppose it is a question
of how much we feel sure about and are prepared to back. We would
say that to 2010 our contribution to effective emissions reduction
is almost entirely Action Energy. It is our programme to reduce
carbon emissions now. Our other activities are there very much
to support early-stage technologies which will have real meaning
in 2020 and thereafter, but relatively few of them will be material
by 2010. In essence, Action Energy is what we will be delivering
at 2010, with developments that we will be putting in place to
ensure that it has as full an impact as it can. We will be looking
particularly at how we can extend the potential for SME loans
for working with very large companies on a partnership basis,
and so on. If we take what we believe we can achieve and we attribute
a sensible probability to achieving that, I think we feel reasonably
comfortable with the figure that is in the Plan.
Q297 Mr Chaytor: What are the figures
in the Plan?
Mr Delay: They are basic Action
Energy figures and we see potential to go beyond that if the funding
was available.
Q298 Mr Chaytor: Can you remind the Committee
what the figures are?
Mr Rea: It is a million tonnes
of carbon to 2010.
Q299 Mr Chaytor: How reliable are these
figures? I want to move on to the methodology, because obviously
the Government's figures have changed, a reduction on the domestic
side, an increase on the business side, but are you absolutely
certain that there is a reliable methodology used to calculate
these emissions figures, or are there competing ideologies and
can people pick and choose? Who does the calculation? Who do you
rely on? Do you have your own experts, does Defra do it, do they
contract it out to some university department? How is it done?
Mr Rea: In effect, we have developed
the methodology to assess the impact of our programmes. We have
a fairly rigorous process for Action Energy where we go out and
survey the customers that we work with in terms of what is the
overall impact in terms of emissions, have they gone up and have
they gone down. In cases where they have gone down we have a number
of questions where we try to assess our impact in terms of helping
them to deliver those reductions. Depending on the size of the
customer we have different methodologies. For customers with energy
bills of more than £1 million we survey each and every customer
we work with. For customers with energy bills of less than £1
million, we do it on a sampling basis and we do it on a statistically
robust basis that statisticians will recognise as being sensible.
We use an independent market research company to gather the data
and then we use a technical consultant to consolidate the data
and scale it up and give us the answer, so to the extent that
we can have one, it is an independent view. As I have said, we
developed the overall methodology about how actually you would
do it.
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