Examination of Witnesses (Questions 520-531)
SIR DIGBY
JONES AND
MR MICHAEL
ROBERTS
19 JANUARY 2005
Q520 Chairman: There is absolutely no
evidence—you yourself said there was no evidence—of
companies leaving Britain to go elsewhere. There is absolutely
no evidence from the European Commission competitiveness report
or the substantive documentation produced by WWF that the threat
that you always come up with that if we do the right thing by
the environment we are going to lose British jobs is true and
there is plenty of evidence that it is extremely exaggerated.
Sir Digby Jones: With respect,
Chairman, you do not get round the members I get round and you
do not talk to them in the way I talk to them, and frankly there
is a very real threat. The competitiveness threat is alive and
well. The thrust of what I was going to say was, and if only you
had let me finish, if you then said to them, "It will cause
you to lose your job" they will not say yes. I am not going
to say they will say no. If you say to them, "But I will
tell you what we will do, we will meet the box tick that you just
said you want this cleaner world but we will meet it in a time-frame
that enables us to reskill you in a different job where frankly
the job you are doing will not exist but you will be in employment
in a different way," I reckon they would buy into that. What
that needs is time and what you are suggesting, especially when
the Chairman just spoke, is not giving us that time.
Q521 Paul Flynn: I think their answer
will depend on whether they spent the previous evening reading
the Daily Mail or watching the programme on global dimming.
Sir Digby Jones: You are probably
right.
Q522 Paul Flynn: I think there will be
more people watching programmes like that than reading the Daily
Mail, thank God. There is a possibility that we will also
be selling some of our surplus credits because we get to the Kyoto
target, as you agreed. Do you think that is a good idea?
Mr Roberts: That we should sell
our credits?
Q523 Paul Flynn: Yes.
Mr Roberts: Clearly in a market
if we have something of value and other people are willing to
buy it then the market should operate.
Q524 Paul Flynn: The International Energy
Agency said that the emission trading targets we have will make
very little difference on international competitiveness. Is there
not too much being made of this? They will be small, they will
be manageable, but we do hear these complaints, and certainly
they are coming to me, about the effects they are going to have.
I think, as the Chairman says, they are very much exaggerated
on what is a very modest programme.
Mr Roberts: Let me suggest two
answers to that. The first is that the impact on competitiveness
depends upon assumptions about how the measures which are adopted
are put in place. The concern that we have expressed is that if
British companies for example under the trading scheme have commitments
which are in excess of the stringency of the commitments of their
competitors elsewhere in the trading scheme space, the implication
is that they will have a higher cost to achieve that. Now, the
extent to which that affects their competitiveness will also depend
on a number of other factors. There will be a number of other
pressures on business but one thing that we have noted in particular
at the moment in the UK economy is that at that stage of the economic
cycle (we are near the peak of the economic cycle) relative to
similar periods in the last 20 years, the level of profitability
in corporate Britain is low by historic standards, our margins
are low, and in that context anything that adds to cost alongside
other pressures on cost is viewed with sensitivity by the business
community. That is not to say that lock, stock and barrel the
whole of corporate Britain is going to go overseas but it is an
added pressure and makes life more difficult to do business in
this country. Our views as we have expressed them to the UK Government
and to the Commission reflect that sensitivity and seek to say
not that we should not be doing something but that we try and
do that something in the most cost-efficient way. It is very unfortunate
that people (not necessarily in this room but outside) misread
or mishear our concern about the design of particular environmental
objectives on climate change with somehow suggesting that we are
not up to doing something. I would hate to think that this Committee
would make that misinterpretation as well.
Q525 Paul Flynn: On Phase 2 would you
be happy to see aviation and road transport included?
Mr Roberts: We certainly think
that there is a strong case to try and have aviation integrated
in some way in Phase 2. We have been seeking to take that forward
and there is an event we have on Monday which will bring together
business and government both at EU and UK level to see how we
can do that. Technically there is going to be a range of issues
to take forward and I think the debate is about whether aviation
becomes a fully integrated part of the ETS in Phase 2 or whether
in some way it becomes linked to ETS but that is a technical discussion
to follow; the principle I think is a strong one.
Q526 Paul Flynn: Would the rest of business
and industry agree with British Airways that any increase should
be based on their future growth in aircraft traffic? Is that a
sensible way of looking forward?
Mr Roberts: I am not sure I understand
the question.
Q527 Paul Flynn: British Airways are
saying that they want the emissions allocation for aviation based
on its forecast growth. Is that something that you would agree
with? If their business goes down or goes up should it vary or
should they have a set line?
Mr Roberts: Exactly how British
Airways have approached it you would need to talk to them about
but I think they are readily up for making a commitment to tackling
their emissions over the longer term and they feel that emissions
trading is the best way and most cost efficient way of delivering
that at the end of the day for both British Airways and other
players within the UK aviation community. The debate about the
level of engagement is more broadly in the EU aviation community.
Within the UK I think there is already acknowledgement that aviation
will be a significant contributor to overall climate change emissions
and that something needs to be done. The debate is about how best
to achieve that and that is why I am sure trading is a way in
which they can make their contribution.
Q528 Mrs Clark: We understand and I think
it is quite widely known that carbon trading analysts are very
convinced that United Kingdom power generation is going to do
rather well and in fact make substantial windfall profits in Phase
1 of the scheme. I would be interested to know whether you think
it is going to happen and what you think the Government should
do?
Mr Roberts: First of all, I think
the judgment about the impact on the generating sector will vary
from generator to generator. It is not axiomatic that all generators
will profit in some way. The extent to which there is an impact
on their profitability would depend on their current generating
mix. Some may have a more carbon intensive mix than others and
therefore face a greater degree of change of behaviour to deliver
against their targets. At the end of the day the other issue that
is at stake here is the extent to which they feel able or feel
it is consistent with their corporate policy to pass on any cost
increases they might incur to consumers, whether that is industrial
or domestic. I would not take it absolutely as read that they
will be making a windfall of the sort that you mentioned.
Q529 Mrs Clark: Obviously the jury is
out on that one and we will have to wait and see. Have you been
in discussions with the Government about this? Is this something
you have gone into?
Mr Roberts: On the impact on generators
specifically?
Q530 Mrs Clark: Yes.
Mr Roberts: No.
Q531 Mrs Clark: Do you think the Government
should take action to ensure that if there are windfall profits—and
I understand you are a bit dubious about that—are then redirected
perhaps into low-carbon generation investment? Should it do that?
Sir Digby Jones: The answer is
wait and see, is it not, because a) we do not know if they will
and b) we do not know how the companies will behave if they did.
Governments of all parties at all times have had a pretty appalling
record of suggesting where companies should invest their money.
Chairman: On that note I think we had
better conclude this part of our inquiry. I appreciate that you
have been generous with your time already. Thank you for your
evidence on climate change.
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