Select Committee on Environmental Audit Minutes of Evidence


Examination of Witnesses (Questions 200-219)

JONATHON PORRITT CBE AND MS SARA EPPEL

13 JULY 2006

  Q200  Mr Hurd: I want to ask about personal carbon trading and your disappointment effectively about political science in that regard. How could government meaningfully create a debate around that issue without raising too high an expectation about its own intentions? I am thinking of the precedent of road pricing where government launched the debate. It had some solidity to it because of its intention to launch pilots, in the sense that it really wanted to do that. Personal carbon trading, as you know, gives rise to quite big political issues, one being its potential complexity and the ability of people to understand it and the other being quite big issues relating to the potential redistribution of wealth. That would need to be thought through quite carefully. How would you like to see a progressive government launch that debate against that background?

  Jonathon Porritt: It would be quite wrong for government to leap instantly to the point that it has got to with road pricing, for instance, which is to start talking about pilots and testing. I do not think that there is enough of a settled understanding of what it means inside government to move to that stage, but surely the next stage has to be government's own inquiry processes and intellectual engagement in the discussion. There are a number of quite big picture inquiries going on at the moment, one of which is being spearheaded by the RSA in particular. It looks at ways in which this can be made more understandable and then more viable. These two things need to go hand in hand. All we are suggesting at this stage—in all honesty it is not a big request—is that the Government would be well advised to exercise some investigative capacity of its own to begin to map out what it looks like, to find a way to articulate it more broadly in society and then to think about whether there is a trial or feasibility process, not necessarily for a full rollout but perhaps a partial one. I refer, for instance, to the feasibility of some kind of "carbon card", which is talked about a lot as the mechanics by which one delivers the eventual trading scheme. Is there some way that it could be tested with a very progressive local authority which for its own purposes might want to begin to explore those kinds of areas? What is a little surprising is the risk-aversion side of things and no desire even to go that far. If one believes that ultimately the politics of carbon on both a global and personal scale will be mediated via trading schemes of one kind or another, then the more ground work one does now to understand the journey one has to make to get there, the better it is.

  Q201  Mr Hurd: Do you believe that at the moment with this Government and the new secretary of state the door is shut politically?

  Jonathon Porritt: I do not believe that the door is shut. We have never had the door shut when we have talked about it. It is absolutely true that we have not had the door flung open with huge enthusiasm. It is interesting that the new secretary of state, David Miliband, is beginning to test concepts such as his "environmental contract". That contract implies a revision of the relationship between government and the citizen to secure these environmental outcomes. If that is the nature of the inquiry that is going on in David Miliband's mind it would be very odd if he did not want as part of that new contract process to investigate one mechanism that would be available to government, namely a personalised trading scheme of that kind.

  Q202  Mr Chaytor: You are very critical of the target-setting process and protectionism of individual departments. Do you believe there is a case for disaggregating the overall target and setting targets for each individual government department? Would that produce a sharper focus?

  Jonathon Porritt: We have never advocated that. What we have done is to demonstrate that some departments are bearing more of the weight of meeting that target than others. For instance, we have commented that unless the Ministry of Defence had achieved some of the very substantial reductions in CO2 emissions that it had achieved, the picture would look even worse than it does. I do not believe we have ever advocated that we should go through a department-by-department target-setting process. What we are aware of as we look at Sustainable Development Action Plans, together with the new process of sustainable development targets in government, is that we will have much better data on which to base judgments about which departments are really picking up their share of a collective target and which are not.

  Ms Eppel: The PSAs of the departments drive departmental objectives in terms of the policies for their sectors. We believe that some of those are not adequately connected into the overall climate change targets, so there will be a disproportionate burden perhaps on departments that are not then able to influence it. The departments that could influence change within those sectors do not have that as a driving force in their objectives through the PSA system.

  Q203  Mr Chaytor: That was going to be my further point. The PSAs are a target-setting system for everything other than carbon reductions, so what is the argument against not simply including a PSA for carbon reduction?

  Jonathon Porritt: That is a very timely question. It would be extremely helpful at this stage to have the EAC's opinion on that. You will know that currently the Treasury is reflecting on whether or not PSAs are doing the job that it was hoped they would do and is to issue guidance to departments possibly about reformulating PSAs through the comprehensive spending review. If I am absolutely honest, at the moment the Commission has been much more focused on some of the fine grain of what has been going on through sustainable development in government process, the new Sustainable Development Action Plans and the sustainable procurement opportunities. All of that has given us much greater traction department by department than ever existed before. The commitment that government has now made at least on procurement, that the Cabinet Secretary will take overarching responsibility for overseeing delivery against whatever set of targets the Government agrees on sustainable procurement, has achieved another very important shift as far as we are concerned. It has lifted the whole thing in terms of the seriousness with which these issues are being addressed inside the department. We have been very worried that the failure to get the buy-in of Permanent Secretaries in the past on many of these issues led to consistent under-performance. That is the way organisations work. If one's organisation is not showing leadership from the top on these matters they tend to disappear in the woodwork. We believe that that change of heart and the strong steer from government, in that the Cabinet Secretary will have a hand at least in procurement and possibly beginning to look also at some of the framework targets, change the tone with which government is trying to address these matters. I think we have been focused more at that end than by high level departmental goal-setting through PSAs, which is a good prompt.

  Q204  Mr Chaytor: In respect of the longer-term issues and the target for 2050, clearly this Government will not be held accountable for its fulfilment. Given there is now a target for 2010 and a range of figures around 2020 but nothing after that until 2050, is there a case for interim targets at five-yearly periods? What can possibly be the argument against having a five-yearly target-setting process?

  Jonathon Porritt: Indeed. I believe that the agreement now by government to present an annual report on the effectiveness of the delivery on climate change targets is a very important commitment, and in a way that is bound to create a rolling, target-driven process. It will just be much more in the parliamentary process and people will find it inevitable that that will emerge. As to how government does it, I think we need to take accountð ñof the process going on through the Intergovernmental Panel on Climate Change. I believe that when the IPCC reports in 2007 and gives its advice to governments collectively about the adequacy, for instance, of a 60% reduction by 2050, or whatever it might be, that will provide a new injection of the state of scientific knowledge as it is today which all governments anywhere in the world can use to set these milestones towards the point we need to reach. I think the IPCC will be absolutely clear that the kind of guidance it gave in the third assessment report is clearly now not fit for purpose in the light of what we now know about accelerated change processes in many different areas. That may be the moment at which government can say, "Here we are. We have had the update and this is what the world's scientific community now tells us. We need to take stock of it. We felt we were brave in responding to the long-term goal of the Royal Commission on Environmental Pollution of 60% by 2050, but we now have more data and we need to set some milestones along the way."

  Q205  Mr Chaytor: Referring to the IPCC report, is it your feeling that following the publication of the next report 60% by 2050 will still be seen as adequate?

  Jonathon Porritt: I have not seen enough of the papers that are circulating at the moment, but my discussions with two of the leading individuals involved in the IPCC process indicate that they would have that as the absolute minimum that any government should look to achieve. That will depend slightly on where we are around stabilisation targets and some of the new consensus on concentrations of CO2 in the atmosphere. There is a growing need to define that concentration limit, whether it is 450 or 500 ppm, and a lot of work is now being done to get some kind of consensus on the concentration limits.

  Q206  Mr Hurd: I should like to ask briefly about the quality of the statistical data that underpin policymaking. Is it robust enough? Are we asking tough enough questions in this place about the quality of the data on the projections for both carbon emissions and reductions? How do you believe the process can be improved? In particular, do you have a view on the idea put forward that this process somehow should be taken out of departments and into some form of carbon audit office?

  Jonathon Porritt: I should like to ask my colleague to answer that because she is much closer to the details. But it is interesting that in the business of preparing our response to the review of the climate change programme we had to go from 10 million tonnes to 15 million tonnes as the shortfall required even in that period of time. We were very much aware of the fact that some of the data being offered was hardly as robust as we might have wanted. My colleague sat on the inter-departmental analysts' group and saw the issue of data much closer to hand.

  Ms Eppel: The difficulty is that a lot of the work on these projections is based on trying to show where we are likely to be if policies continue as they are. They are updated through this process more or less every month. Therefore, it was incredibly difficult to assess the work we had done at the beginning on the expectation of a shortfall of 10 million tonnes, which in six months turned out to be 15 million tonnes and then 18 million tonnes. To have to work on the basis of shifting sands and in that environment is not ideal for something as major as this. I do not believe that that process is a good one. Whether or not it should be moved out of the DTI is perhaps another issue, but it makes it more difficult because it becomes a department against department discussion which is not really helping.

  Q207  Mr Hurd: Perhaps it should be taken out of the departments entirely and put into some form of independent carbon audit office?

  Ms Eppel: Independence would be a good thing, and it does not feel very independent. That may be incorrect, but it does not feel that way when it is one department pitching against another and trying to catch up with the changes.

  Jonathon Porritt: I believe that that will become a big priority for MPs, because an annual report to Parliament necessitates robustness in the data used for that purpose. To a certain extent, whether or not the data are sufficiently robust for your purposes is something with which Parliament will have to feel content. The interesting proposal about an Office of Climate Change is certainly germane to that discussion because obviously that will not be an independent part of the system. I know that the Secretary of State is very keen to drive forward those proposals quite quickly, and does not want to spend another six months or year consulting on what such an office might look like, how it would be structured and to whom it would report, but early indications are that it would secure a much more serious level of cross-department co-ordination. I believe that people are talking of seven departments at secretary of state level with a team of people primarily still co-ordinated by Defra, as we understand it at the moment, providing the secretariat input into that office. That is not quite the same thing as you talked about. I believe that the function you are calling for is an independent body responsible for the data control, management and evaluation systems.

  Q208  Mr Hurd: The tracking of carbon?

  Jonathon Porritt: Indeed.

  Q209  Mr Hurd: Would you welcome such a thing?

  Jonathon Porritt: Yes. We have had discussions with ministers in Defra about this matter, and we have indicated that we regard it as hugely important. I genuinely cannot see any downside to it for government. If there is to be embarrassment on these issues it is better that they surface via a transparent process that others can point to rather than by something that is suddenly released at the dead of night by a government body that may well feel constrained by putting that data into the public domain. This is critical. We do not necessarily know that we are on track to achieving some of these targets. It is quite hard to say whether or not these reductions really are being achieved, and that is part of a much bigger picture that is now being looked at by different international bodies. How do we do this empirical evaluation of the amount of carbon that any one nation is emitting? There is no robust global process in place to secure that data. That will be critical for all sorts of reasons to do with the emissions trading scheme and compliance under Kyoto. At the moment, the compliance regime for Kyoto would not be able to demonstrate that any country's claim to have complied with its targets can be absolutely guaranteed.

  Q210  Mr Hurd: I want to bring you back briefly to the office of climate change. Is there a risk that that kind of structure, which we have seen before arguably with the SDU and Defra, may compartmentalise the issue, in the sense that people say that the office of climate change is dealing with the matter and so it becomes marginalised?

  Jonathon Porritt: I do not believe that that is the case. We have not seen enough yet, and we are talking here rather speculatively. Matters will probably look very different when the first iteration of what that Office would look like emerges. As I understand it—I hope that I am not saying anything with which the Secretary of State does not fully subscribe—the reason why he is very keen to push it forward is that his relatively recent engagement in the complexity of climate change has encouraged him to think of different mechanisms to achieve better cross-departmental co-operation. Perhaps the Commission can put on record that the new-found co-operation between DTI and Defra on the Energy Review and the very important contribution that that better method of working has made to the review was a signal to the secretary of state of Defra that that kind of serious engagement at secretary of state level would lead to much better and more robust processes for government as a whole. Those processes have not been there in the past; it has not been part of the equation.

  Q211  Chairman: If we return for a moment to the question of data, are you at all concerned that some of the schemes for offsets are also not adequately policed or audited?

  Jonathon Porritt: Are you referring to government offsets?

  Q212  Chairman: There appears to be a plethora of people now offering various ways of achieving carbon offsets. On the Internet one finds all sorts of schemes, but I am not quite clear whether they are really subject to a rigorous process. It is also quite a commercial area. Should we be looking at that a little more?

  Jonathon Porritt: I was about to say this was a huge and burgeoning market with lots of new entrants of varying credentials as to the degree to which trust might be put in them. That is my opinion, not the view of the commission. We have not done any work on this or analysed the level of risk associated with the new offset providers. The question is how the public, business and government—the latter is now into a substantive offset arrangement of its own already in the context of emissions from aviation—will get the reassurance they need that the offset provider is delivering exactly what the contract says. It will send shudders down people's backs when I say that there will have to be some regulatory intervention in the new market to give people that assurance. If there is no regulatory oversight one has a terrible vision of an appalling scam being manufactured in our midst and everybody, with the best of intentions, engaging in what they thought was a completely acceptable and credible offset scheme only to discover that a fictional forest is being planted in, say, the Negev desert. I give an absurd scenario, but the whole offset side of things depends on the credibility of the arrangement and the trust that the public and key players can put in those offset schemes. At the moment, it is very higgledy-piggledy. We have a sense of where reliability lies in that emerging market, but there are so many new entrants that pretty soon we would not feel confident to make that judgment.

  Q213  Chairman: Given what you say about the desirability of greater public engagement in the whole process, with which I strongly agree, people may think that now we are doing the right thing and offsetting and, therefore, the risk of a setback in public engagement if a scam emerges is quite high. On a related point, obviously emissions trading is well established and getting bigger, but I believe that a lot of people have a vague anxiety. For example, there are EU schemes. Are the monitoring mechanisms sufficiently robust for people to have confidence in them? This is more a business than personal issue. Do you have any views on that?

  Jonathon Porritt: I do not believe we have done any work on that and we do not have an official view on it. We along with many other organisations appreciated the difficulties associated with the revelations that governments had deliberately distorted their first national allocation plans which created a massive ripple of concern across the entire market. The UK now faces a very significant challenge to help rebuild the credibility of that market. It is absolutely vital that the EU ETS has its credibility restored and is enabled to deliver these cuts by 2012. There is absolutely nothing else anywhere in the European kitbag which will be able to generate that degree of savings between now and 2012, which is not very far away. There is nothing else remotely available to governments on a collective basis. Therefore, to restore credibility through the second phase of 2008 to 2012 is a very high level strategic goal for this Government and others that want the initiative to succeed. To be fair, I believe that the Government's determination to go for the target of eight million tonnes for the second phase of the ETS sent a strong signal, given that our performance over the first phase, especially with all the controversy about trying to get our initial level reduced, is a very much clearer and welcome signal that the UK Government has sent back into the European political system about our leadership in that area. If other countries follow suit, particularly Germany, it would be extremely welcome.

  Q214  Mr Caton: You mentioned the Energy Review and were quite positive about the new focus on consumers. Can you give your overall first impressions of the review? In particular, is there anything in it which will impact on the target for 2010?

  Jonathon Porritt: We have not had a chance to do a detailed analyse. Obviously, we shall do that because it is an important part of our engagement in relation to the CCP and the Energy Review. Overall impressions are broadly positive. Putting to one side for the moment the nuclear debate, which is connected to the whole of the rest of the Energy Review but sits in a special place of its own, the rest of the Energy Review is very encouraging from a number of different perspectives. Advice is coming to government from a variety of different sources, including this Committee, ourselves and others, about putting energy efficiency first and making that the most important area of policy drive. I get the sense for the first time ever in an official government document of this kind that that message has been well received and understood. There is still a long way to go between that and delivery of all the different efficiency systems that we shall see in place, but that is enormously heartening. That has never been part of DTI's thinking before now; energy efficiency was dumped back onto Defra and was regarded as that department's baby. It was not thought to be a top-level priority. The view was, "Defra does that and we do the serious stuff like making sure the grid works, building new power stations and things like that." I believe that that has changed and that this document genuinely gives confidence in that change. As to some of the other issues, the commitment to keep pushing the renewables obligation and to make sure we arrive at a point where 20% of our electricity comes from renewables is strong. There is a move to look again at the energy efficiency commitment and to see how in the third phase we can build it up. My colleague is in a much better position to talk about that than I am and perhaps she will say something about it. The commitment to consult on an Energy Performance Commitment for a trading scheme in the UK for those sectors of our economy that are not captured by the European Union's emissions trading scheme is very important. We think that the projected savings through instant response of 1.2 million tonnes are pretty weedy, but they are just testing the ground a little. There will be some parts of the business community which will instantly began to wave their panic signals at the prospect of what they will probably portray as another imposition on hard-pressed British business, although we do not believe it to be any such thing. We regard it as a very effective way to promote the kind of efficiency on which the future competitiveness of British business depends, but you know how that debate goes. There are a number of very strong pointers there. Finally, as a general summary, the recognition of the importance of decentralised or distributed energy systems is much stronger in this document than in any previous one. I know that there is a formal commitment to consult on this matter and set up a high-level inquiry through the research councils to see just how big this can be, but that is important. Government is now doing some quite important short-term things in terms of micro-generation, distributed systems, planning issues and perhaps giving more powers to the Mayor of London and the local authorities to push forward micro-generation schemes. This changes the tone of the balance between big, centralised grid-based systems and smaller-scale local distributive systems of that kind. That is new. I do not believe that we saw that in the Energy White Paper. We saw lots of provocative and flirtatious comments about how that might be important in the long run, but this is much more concrete than that. There is a lot of concrete stuff in it.

  Ms Eppel: In relation to the energy efficiency commitment, we have always been supportive because it works. In our original submission last year we said that the third phase should be at least triple the original one, but because of the nature of the shifting sands of the targets and so on we believed that it should be four times as much. In the review document it is very much in that ballpark. Of more interest is the fact that they are talking about shifting it into an energy-saving obligation which is a whole different framework. The supply is in a different mode of doing business which we believe is incredibly positive and could, therefore, be part of a much broader emissions trading way of thinking, getting it down also into households. We are very positive about it. The other matter that my colleague did not mention but is significant from this point of view is the review of the role of Ofgen which was announced in the Energy Review. We are doing a review of Ofgen this year. I believe that that is quite significant because its mandate is not necessarily moving us along this path. In our view there needs to be some change in their primary objective.

  Q215  Mr Caton: You neatly moved the nuclear issue aside at the beginning of your answer.

  Jonathon Porritt: I am very happy to come back to it, as you can imagine.

  Q216  Mr Caton: When we conducted our energy inquiry quite a lot of the evidence we received came from people who feared that if the green light was given to nuclear it would cut the investment from renewables. Do you believe that the way the Energy Review has tried to push both is adequate?

  Jonathon Porritt: On balance we do. In our nuclear report we were not necessarily persuaded by that view of capital opportunity cost so if nuclear became the preferred option there would not be enough capital to do a lot of these other things. This will be a hugely dynamic market in world investment terms anyway and we will see billions of dollars invested in different energy systems. Our concern was more the opportunity cost of political leadership around plumping for nuclear and then saying that all these other things are perhaps important but they are nothing like as important as nuclear. The way the energy review has chosen to characterise the position of the Government on nuclear is, from our point of view, manageable. It has been categorical that there will be no taxpayer support for nuclear and it will have to find its own investment strategy to make it work if they want to bring it forward. One of our biggest concerns was that the Government would deploy taxpayers' revenue to make it easier for energy suppliers to bring forward the nuclear option. Many of us on the Commission feel that without that kind of active intervention from government the likelihood of a substantive new nuclear programme coming forward in the UK is still very low. The Energy Review says that the costings indicate that this will be an attractive investment option for investors looking for opportunities in the UK. Let that be tested by the people who have to put their money into it. It is easy for the Government to say that this is an attractive investment option; it bears no risk in saying that whatsoever. The costings that the Government uses in the Energy Review are questionable, inasmuch as no one can offer an authoritative guide as to what the costs of a new nuclear power programme will be. We have said that categorically because we cannot find anyone who has given us sufficient comfort to offer that advice to anybody when we have had to give evidence, wherever it may be. I believe that the Government has finessed this one quite interestingly. It could have been much more bullish about it and driven it harder if it had wanted to, and to a certain extent by leaving it to our liberalised energy market processes, hopefully the level of political attention that that will require should not detract from the really serious business of driving this mixture of efficiency, renewables, combined heat and power and so on.

  Q217  Mr Caton: From what you know of the progress of the Stern review, do you foresee more changes in structure and policy to tackle climate change just a few months down the road?

  Jonathon Porritt: We have a small involvement in the Stern review process and have made a submission to it. We are tracking carefully what is going on there. It is difficult to make a judgment on what may happen as a consequence of that. As we read it now, I think that the review will be very helpful to all those governments who have basically been arguing that the economics of dealing with climate change in the short to medium term are nothing like as onerous and damaging to a nation's GDP prospects as is made out by many critics of the climate change consensus. This looks particularly at some of the studies that have been made in America which indicate huge damage to national interests through reductions in GDP over a 40 to 50-year period. As we understand it, the paper on which Sir Nicholas is working will say that a lot of that is completely specious and the overall impact over a number of decades in terms of net GDP will be very small indeed. If that case is made very robustly by an extremely authoritative body of that kind it will give a lot of comfort to those governments that say that they need to press much harder on the idea that addressing climate change enhances competitiveness and increases productivity in the economy rather than reduces or weakens the capacity of any one country's ability to perform competitively in the global economy. If that is the case we may see some more encouragement to the Chancellor to be rather more applied about what he calls ecological tax reform in the Government's statement of intent back in 1998 which, it has to be said, has been left largely mouldering on a shelf since that time. If the Stern review can encourage Treasury to go back to the 1998 statement of intent, which is an excellent statement that is extremely hard-hitting with a strategic commitment to shift part of the tax base over towards eliminating some of the threats to our long-term security in terms of CO2, climate change and so on, that would be a very positive outcome.

  Q218  Mr Hurd: I should like to bring you back briefly to the energy review and hear your view on what was said about coal. There is an argument that one of the biggest risks to climate stability is the degree to which we allow dirty coal to be burnt over the next 15 years and the momentum behind that in China, India and the States. Were you disappointed by what was said, given that Britain is generally thought to have some competitive advantages in terms of potential clean coal technologies?

  Jonathon Porritt: That section is quite modestly stated—rather less so than I thought would be the case, not least because of the decision by Japan to drive an extremely ambitious carbon capture and storage (CCS) strategy on the clear understanding that this will give them a lead in what will become a huge global industry. That is the rationale behind the Japanese decision to do it. That was announced before the final text of the Energy Review was signed off, so there would have been an opportunity to be a little more bullish about it. However, from our point of view to be a little cautious about it is no bad thing; there are so many unknowns in this whole area of inquiry. They are technical and economic, with complex issues about long-term liability. Some very big questions still have to be answered. As I understand it, the principal suggestion here is that the Government wants to move towards a demonstration project which I guess means a commercial-scale power station of one kind or another with a CCS capability, and it wants to do that in conjunction with the private sector. I know that discussions with energy companies in the UK have already started, and it is perfectly possible that they will be able to move quite quickly from that commitment to a demonstration project of that kind in a much shorter period of time than one might imagine. For CCS to make any difference at all to our own carbon targets, we need to get a move on with it to test out some of these difficult areas. I can understand the caution. It is somewhat similar to the caution about investigating things like the opportunity for energy systems on the Severn estuary. That is cautiously stated but nonetheless it is an area of inquiry that clearly the Government now wants to take forward, which we believe is the proper thing to do. We have raised a number of concerns about CCS in our report, but we believe it very probable that it will play a big part in different countries' carbon abatement strategies. You mentioned China and India. America is still enormously dependent on coal to a degree that people often under-estimate. If those three markets alone were able to find a technically and economically feasible way to do CCS big time, that would make a substantial contribution to the overall carbon abatement that we need to achieve.

  Q219  Chairman: Referring to the Energy Review, given what you said right at the beginning about missing the 2010 targets and so on, will anything in the review help in that respect? Does it have any impact in the next four years?

  Jonathon Porritt: I think I would have to check that out in more detail. My intuitive, instant response, having just read through it once quite quickly, is that very little additional reduction will come about because of what is in the Energy Review. I should like to come back to the Committee on that question because we have had no opportunity to do that analysis.


 
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