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Mr. Straw: I do not think that a statement is necessary. I cannot comment on the cases to which the
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hon. Gentleman refers, as I do not have the facts. However, the fact that people have been granted asylum is not a bar to their being extradited. Article 1F of the 1951 refugee convention provides that asylum status can be withdrawn if there is evidence that the person involved has committed a serious crime—which, plainly, genocide is.

Jim Sheridan (Paisley and Renfrewshire, North) (Lab): I draw my right hon. Friend’s attention to early-day motion 2447.

[That this House calls for a Government-led detailed inquiry into the pricing policies of the private utility companies to ensure that the consumer can make informed decisions on the provider and that the process for changing provider is simplified, which should create a truly transparent and competitive market.]

The motion has cross-party support, and I hope that my right hon. Friend will draw it to the attention of his Cabinet colleagues. Does he agree that it is wrong that energy companies are allowed to make significant price increases that have a devastating effect on all our communities?

Mr. Straw: I agree that prices for energy and other utilities have risen very significantly. I understand my hon. Friend’s concerns, and I shall certainly raise them with my right hon. Friend the Secretary of State for Trade and Industry.

Mr. Andrew Mackay (Bracknell) (Con): I commend the Leader of the House for adding, in a speech outside the House, to the debate on party political funding and on the democratic deficit illustrated by very low election turnouts. Does he agree that there needs to be a debate in the House on the matter quite soon? That would enable those of us with doubts about parts of his policy to cross-examine him about them. I am referring to the fact that trade unions are excluded from funding restrictions, yet the restrictions apply to political parties outside election times. That policy seems to benefit the Government, whichever party is power.

Mr. Straw: Of course there should be a debate on party funding. Whether it will be held before we get the report from Sir Hayden Phillips is a matter for consideration, but I accept the point that the right hon. Gentleman makes. Meanwhile, I invite him to read the chapter on donations in the Neill committee report published in 1998.

Dr. Phyllis Starkey (Milton Keynes, South-West) (Lab): May I offer an additional reason for a debate on the middle east? Other hon. Members have mentioned the high-profile issues, but every day the Israeli Government continue to annexe Palestinian land and expel Palestinians from Jerusalem. Effectively, Israel is closing off the possibility of a two-state solution in the area.

Mr. Straw: I am aware of my hon. Friend’s concern and great knowledge of these matters. As I have said to other hon. Members today, I understand that concern and want there to be a debate, and I am doing my best to ensure that there will be one.

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Mr. Desmond Swayne (New Forest, West) (Con): I ask the Leader of the House, for the third time in six weeks, when he will put on the Order Paper a motion to allow the European Scrutiny Committee to meet in public. Last time he said:

There is nothing more embarrassing than the idea of that critically important Committee meeting in secret. Nothing would do it more good than the fresh air of public scrutiny.

Mr. Straw: That is one point of view.

Mr. Philip Hollobone (Kettering) (Con): It is a good one.

Mr. Straw: Well, that depends. The other point of view has to do with the Committee’s effectiveness in scrutinising documents that have otherwise not yet been made public.

John Bercow: Yours suffers from the disadvantage of being wrong.

Mr. Straw: The hon. Gentleman says that I suffer from the disadvantage of being wrong—but that is often the case. However, I do not think that I am wrong on this occasion.

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Emissions Trading Scheme

12.18 pm

The Secretary of State for Environment, Food and Rural Affairs (David Miliband): With permission, Mr Speaker, I should like to make an announcement about the Government’s proposals for the second phase of the EU emissions trading scheme. Today, we are announcing the level of our cap. In due course, we will be presenting to the Commission our full and formal national allocation plan.

The case for tackling climate change, and the human contribution to it, is overwhelming. The scientific consensus is wide and deep, and the political consensus is widening and deepening. The need for international and domestic action, across all aspects of economic and social life, is very strong.

In the UK, we can take pride in the fact that we are projected to cut our emissions of greenhouses gases by 23 to 25 per cent. from 1990 levels over the Kyoto commitment period—nearly double the Kyoto targets. However, UK emissions of carbon dioxide are rising. We remain on track to meet our Kyoto targets, but on current trends, we will fall short of our national goal of a 20 per cent. reduction in CO2 emissions by 2010. Our challenge is to take action now to avoid the environmental and the economic and social costs of inaction.

The EU emissions trading scheme is the cornerstone of a Europe-wide drive to reduce emissions from highly energy-intensive sectors. It currently covers about 11,000 installations across Europe, and companies in the scheme in the UK account for some 45 per cent. of UK carbon dioxide emissions. The ETS gives a clear incentive to industry to invest in low-carbon technologies of the future, but achieves carbon reductions at lowest possible cost.

We are in the second year of the first phase of the scheme. The results from year one have provided a first opportunity to judge allocation against emissions, and most member states' caps for phase 1 do not provide the scarcity that the scheme demands. The UK cap was 245 million tonnes, and our system has worked well. The Government imposed the shortfall in allowances on the electricity supply industry, and all other sectors were allocated according to need. As intended, all but the electricity supply sector are living within their allocations.

The Commission has used the information from the first phase to assess what member states’ caps should be for phase 2, and has set out indicative figures that require substantial cuts from member states. Phase 1 has been, and is, in many ways a trial period. Phase 2 coincides with the first Kyoto period—2008 to 2012—and states that do not take the measures necessary within that period to reach their Kyoto targets will either have to purchase Kyoto allowances and credits from other states or face penalties for missing targets.

In March, in our consultation on the draft national allocation plan, we set out a range of UK reductions of emissions during phase 2, from 3 million tonnes of carbon to 8 million tonnes. At the time of consultation, that was equivalent to a cap of 234 to 252 million
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allowances a year, which, for the sake of clarity, I should explain represents 234 to 252 million tonnes of carbon dioxide.

I have to report to the House that there have been important changes since we published the draft national allocation plan. Our projections for emissions in 2010 have risen by 3 million tonnes of carbon for the UK as a whole—significantly, because of changes in household numbers—and by 1.1 million tonnes of carbon for the installations covered by the EU emissions trading scheme.

In those circumstances, we believe it is essential to make the maximum effort consistent with the range on which we consulted. In other words, that means reductions of 8 million tonnes of carbon per year below business as usual, which is equivalent to a reduction of 29.3 million tonnes of carbon dioxide. It may help the House if I say that that is roughly equivalent to the carbon emissions of 4.5 million households. This is now, since the change in projections, equivalent to an annual total allocation of 238 million allowances to UK installations covered by the scheme in phase 1. The figures may change slightly to reflect the expansion of the scheme and removal of the installations that emit the smallest amounts of CO2.

We looked carefully at the possible effects on business and consumers before making our final decision. Our intention is that for industrial sectors, including those most open to international competition, allocations should continue to be on the basis of need. In respect of electricity supply, however, the sector is mainly insulated from domestic competition, and is domestically liberalised. That sector's allowances could therefore be set lower and be subject to auctioning.

Phase 2 of the EU ETS allows for a maximum level of auctioning of allowances of 10 per cent. We propose to set the level of auctioning in the UK at 7 per cent. Obviously, the final amount raised by the auction cannot be determined in advance—it depends on the price of carbon—but it will be substantial.

We will build on the trading scheme agreement and go further. We believe there is a major opportunity for the UK not just to invest in renewable energy, other non-nuclear, low-carbon technologies, and energy efficiency, but to build successful businesses in these fields. We will establish a new environmental transformation fund, held jointly by the Department for Environment, Food and Rural Affairs and the Department of Trade and Industry, administered by my right hon. Friend the Secretary of State for Trade and Industry and myself, to grasp this opportunity. Final details of the scale and scope of the fund will be announced in the spending review for implementation, as in the ETS, in 2008.

The EU emissions trading scheme is also linked to a global carbon market and has been a major driver in its development. Project credits, which are credits generated in developing countries through the clean development mechanism, or in other developed countries by joint implementation projects, may be used to help meet the caps set for operators. The use of these credits provides a further driver for sustainable energy projects in the developing world and for technology transfer. However, member states need to ensure a balance between domestic and international
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effort. UK companies are already at the forefront of this market, and we want that to continue.

In the UK we are providing for the use of these credits to meet up to 66 per cent.—two thirds—of the effort in phase 2. In effect, that means that 5.3 million tonnes of carbon—19.5 million tonnes of carbon dioxide—from clean development and joint implementation projects can be used, which is equivalent to 8 per cent. of the total cap. All installations in the UK may use project credits to meet emissions up to 8 per cent. of their allocation.

The EU emissions trading scheme has an impact on electricity prices via the cost of carbon allowances, and we have looked at that carefully. It is very important to realise that the cost is driven by the cumulative effect of all member states' decisions, not by the decision of any individual member state for the citizens of that country. Many factors drive electricity prices, including global fuel prices and the weather, but our estimate is that the impact of the proposal, relative to the phase 1 cap, will be a one-off rise in industrial energy prices in the region of 1 per cent., and approximately half that for domestic users.

Our decision to set the cap at the top end of the range of effort on which we consulted sends a clear message that the emissions trading scheme is here to stay; that the Government are committed to making it work, providing clear, progressive rewards for a shift to low-carbon technologies; and that the UK is determined to maintain its leadership role on this issue. Today's decision will set us on course to deliver a 16.2 per cent. reduction in emissions against 1990 levels by 2010. We said when we launched the climate change programme review in March that it was not the last word, and we will use further opportunities, including the energy review and the environmental transformation fund, to help us move progressively towards our 2010 target.

EU member states are required to use emissions trading as a means to deliver their Kyoto protocol commitments. The level of ambition that individual member states set for the reductions to be made by the sectors covered by the emissions trading scheme will be an important element in the price of carbon. Now that member states will need to show that they are meeting their Kyoto targets, and with the Commission having phase 1 emissions data, the UK expects to see more stringent caps enforced in phase 2. We will therefore encourage and support the European Commission in its efforts to ensure, tough caps, to provide greater long-term certainty and to help smooth the running of the system to avoid potential competitive distortions. I spoke to Commissioner Dimas, the Environment Commissioner, this morning to emphasise that point.

Phase 2 also forms an important element in the broader consideration of our long-term carbon policy framework. My right hon. Friend the Trade and Industry Secretary, who is in Geneva today as part of the World Trade Organisation negotiations, will next month be reporting the findings of the energy review in which the Government is reviewing the UK's progress against the medium and long-term Energy White Paper goals, including our 2050 carbon reduction goals, and the options for further steps to achieve them.

My right hon. Friend the Prime Minister has made it clear that climate change is a global problem that requires a global solution. This target for phase 2 will
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support the development of a global carbon market, and we will therefore continue to work with our EU partners to ensure that negotiations for future commitments under the Kyoto protocol make clear and convincing progress. We will continue to work through the Gleneagles dialogue, launched during the UK presidency of the G8, to search for consensus on practical measures for tackling climate change. The case for taking action is overwhelming; the speed at which the world responds to that case will determine the effectiveness and positive economic impact of our response. Today's announcement takes another step towards our long-term objective of a 60 per cent. reduction in C02 emissions by 2050. I commend it to the House.

Mr. Peter Ainsworth (East Surrey) (Con): I thank the Secretary of State for his statement and for prior notice of what is undeniably its hideously complicated content. As he said, the case for tackling climate change is overwhelming. It is the biggest environmental threat that we face; indeed, I would go further and say that it may well be the biggest threat that we face in our generation of politicians. We strongly support the European emissions trading scheme, and we are concerned to ensure that it works as effectively as possible.

I recognise that the Government have a difficult job in balancing the interests of United Kingdom industry with the need to cut carbon emissions. That becomes even more difficult and complicated in the context of the European Union, where we need to ensure fair competition across all member states and a fair allocation system that is robust and does not distort competition, but which also reduces carbon emissions.

Nobody said that any of this was easy. In that context, does the Secretary of State agree that the plans recently set out by Germany for a 0.6 per cent. cut under its national allocation plan are a matter for concern? Will he urge the EU Commission to make Germany raise its game?

We have argued for the UK to set ambitious targets and we have advocated the greater use of auctioning in the allocation process. In that context, the Secretary of State’s announcement provides some evidence of welcome progress. We are pleased that the Government have opted for the target of cutting 8 million tonnes of carbon, which is at the higher end of the range that they set out earlier this year. However, I note that, since March, the base case projection for business as usual has been revised upward. Does not that suggest that the range of emission cuts should have been revised upward proportionately?

I welcome the announcement that 7 per cent. of the UK’s national allocation plan will be auctioned. It is the way in which the allocations were made in phase 1—the horse trading and deals done behind closed doors—that has led to many of the problems that we have already seen in the working of the emissions trading scheme, and it explains some of the volatility in the market. Auctioning is a good thing, which we support, but has the Secretary of State given any thought to how the money raised from that process might be used? For example, it could be used to compensate the industrial sectors that are particularly
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exposed to international competitive pressure as a result of the emissions trading scheme.

Will the Secretary of State confirm that under the arrangements for phase 1, the UK power sector made windfall profits of in the region of £1 billion? What plans does he have to address that unacceptable situation in phase 2?

I take note of the plan to establish an environmental transformation fund to encourage UK investment in renewable energy technologies and energy efficiency—an area in which we are sadly lacking in progress and lagging behind our international competitors. We certainly need to encourage effective action on that front and we look forward to seeing the details, but how will the new fund relate to the work already undertaken by the Carbon Trust, the Energy Saving Trust and others? Would it not have been possible to use one of those existing bodies to undertake the functions that the Secretary of State envisages for the new fund?

Does the Secretary of State agree that setting five-year targets causes industry problems in failing to provide the long-term framework that they need to justify the long-term investment that they are being asked to make in carbon technology? Will he argue in favour of longer-term commitments in future?

Does the Secretary of State agree that there is a need for a clearer and more regular reporting system in respect of national progress towards meeting the targets for delivering carbon reduction, which would help to avoid the destabilising volatility that we have recently seen in the carbon market? What plans does he have to promote a more open, transparent and visible means of measuring progress? He made no mention of the plan to include aviation in phase 2 of the emissions trading scheme, so I would be grateful if he updated the House on that issue.

Overall, I congratulate the Secretary of State on winning some of the arguments that his Department has had with the Department of Trade and Industry. His announcement today represents a step in the right direction. I wish him well in the vital effort that needs to be brought to bear to ensure that realistic, robust and equitable allocations are made across the whole of the EU.

David Miliband: I wholly concur with the hon. Gentleman that this is a complicated area and I thank him for his congratulations. I wish him equal success in his doubtless robust discussions with the right hon. Member for Wokingham (Mr. Redwood), whose views on environmental policy are well known, and who I note is not in his place today. The hon. Member for East Surrey (Mr. Ainsworth) is looking confused. He may have forgotten that the right hon. Member for Wokingham is leading the Conservative party’s review of trade and industry policy.

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