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Jo Swinson: Does my hon. Friend agree that the whole concept of emissions trading and having a price for carbon is to deal with the anomaly in the system that whether goods are produced in Britain or China, the ultimate consumer does not pay the full cost to the planet or of producing the goods? If charges are applied, the cost should be on the consumer. Anything that creates more of an environmental problem should
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cost more. That is how the market should work, but we are not yet there with international emissions trading markets.

Martin Horwood: My hon. Friend has thought a lot about the matter and she is of course right. The beauty of a simple market mechanism is that it applies a price to carbon as universally as possible across the whole economy, and preferably across the whole global economy, so that the approach is equitable.

I shall focus on other long-term signals that we could give in particular markets. One might involve car manufacture. If we set a target at European level that all car manufacturers producing new cars should produce zero-carbon vehicles by 2040, that would be an important long-term signal. At the moment, we have much shorter-term and more modest targets, but that would be realistic and set a clear framework for manufacturers in a particular sector that is responsible for a great deal of carbon emissions to move strongly towards producing zero-carbon products within a specific time.

We could tax road freight, hopefully on an equitable basis so that British road hauliers are not disadvantaged relative to foreign road hauliers, which I know is an issue. That would drive freight from the roads on to rail whenever possible, which, tonne for tonne, produces 90 per cent. fewer emissions.

We could aim for much more ambitious targets on renewable energy. The Liberal Democrats have suggested that by 2050 we should be aiming for 100 per cent. clean energy. That might not be entirely from renewables and could incorporate carbon capture and storage so that fossil fuel sectors in the energy industry would be incentivised to reduce their carbon emissions to zero.

There are targets in the draft climate change Bill. As the Committee Chairman said, they do not seem to chime with the ambitions of policy frameworks such as the emissions trading scheme. At the moment, the target in the draft Bill is a reduction of only 60 per cent. by 2050, which seems ludicrously unambitious. The Committee Chairman suggested that a target of 90 per cent. by an earlier date would be more acceptable. My suggestion is that we should be even more ambitious and set ourselves a target of zero net emissions by 2050, which would be a very clear, long-term policy signal.

We could not reduce absolutely all greenhouse gas emissions to zero in this country, so there would have to be an element of trading and offsetting within the policy framework, but that is the sort of context in which we should see trading and offsetting schemes. They should be part of the solution, not the whole solution. In championing the European emissions trading scheme, the European Union has taken an important first step. We recognise the realistic shortcomings of the scheme, but it is an important contribution to the battle against climate change.

3.46 pm

Gregory Barker (Bexhill and Battle) (Con): This has been an excellent debate, even if it has not run its full allotted time. The quality of the contributions could not have been bettered. I was particularly impressed by the opening comments of the Committee Chairman, my hon. Friend the Member for South Suffolk (Mr. Yeo), who skilfully outlined the detailed and
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lengthy report, which I thoroughly commend. It is very much in line with progressive thinking in the Conservative party as we move towards creating our manifesto for the next election. The Committee Chairman rightly reminded us that science tells us that the problem is getting worse faster than we appreciated even quite recently, and matched that by quoting the Stern report, which said that action now costs far less than action later. That theme has run through this debate.

The hon. Member for Edinburgh, North and Leith (Mark Lazarowicz) made a worthwhile contribution, and the hon. Member for Morley and Rothwell (Colin Challen) rightly picked up another theme of the debate. He is not present now, unfortunately, but he said that the emissions trading scheme must be improved, and that it is not the saviour of all our souls, nor is it an end in itself. I shall return to that point.

My hon. Friend the Member for Ruislip-Northwood (Mr. Hurd) rightly focused on the need profoundly to reform the emissions trading scheme, and drilled down to remind us that we must remove political risk and move towards full auctioning if we are to obtain maximum value from the scheme.

The hon. Member for Gower (Mr. Caton) reiterated that the ETS must be seen as a complement to other policy drivers, and not just as part of a game of one-club golf—that is my metaphor, not his. Although he is a self-avowed democratic socialist, which is not something we hear a lot of around here, he made some sensible suggestions.

The hon. Member for Cheltenham (Martin Horwood) produced his own thoughtful list of recommendations, some of which were sensible and some rather more challenging. I look forward to fleshing out the details of those ideas during the passage of the climate change Bill. However, I caution him that although his lofty ambition for a zero-carbon Britain in 2050 makes a great soundbite, if we as politicians come up with ideas that are so incredible and so beyond what people think is possible, there is a danger that they will not take us seriously or believe that those ideas can be achieved, so will not try. It is important to find the right balance, and we can be far more ambitious and stretching than the Government’s inadequate approach, but we must calibrate that ambition so that we do not get so far ahead of the debate and people’s expectations that we begin to lose the plot.

Martin Horwood: The hon. Gentleman criticised the idea of a zero carbon Britain by 2020 by saying that it is too ambitious a goal, but it is not far removed from the suggestion of a 90 per cent. reduction by an earlier date made by the hon. Member for South Suffolk (Mr. Yeo). What date and what percentage would the hon. Gentleman suggest on behalf of the Conservative party?

Gregory Barker: I am not going to come out on that matter—I do not have an exact date or number in mind. I was simply making the point that we must be careful—all of us, not only the hon. Gentleman—when calibrating our expectations and the terms of our arguments. If we do that, we can stretch our ambition to cover the furthest possibilities but remain credible, which is an art not a science. I do not wish to stray too far from my point, but my argument is that there is no correct number and no wrong number.

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Jo Swinson: I take issue with the hon. Gentleman’s argument that we should not be ambitious. He said that our ambitions ought to stretch only as far as they are credible. The Environmental Audit Committee this week heard how industry is saying that it cannot go further on carbon emissions, but it also said that when the climate change levy was introduced. Technology moves forward and we must be ambitious—if we confine our ambitions by thinking only of existing technology, we will sell ourselves short and fail to recognise the true challenge.

Gregory Barker: If the hon. Lady listens to more of my speech, she will realise that I am nothing if not ambitious. My single greatest criticism of the Government concerns their lack of ambition, aspiration, and energy in creating policies to drive the agenda forward. I simply offer the warning that our ambitions must be credible.

To return to the crux of the debate, my hon. Friend the Member for South Suffolk was right to say that the debate is topical this week. Last Friday, the oil price per barrel hit a record $90. We learned this week that seven of Britain’s 16 nuclear power stations are out of operation, which will be music to the ears of the Minister if not her colleagues. On Monday, the Government performed a staggering U-turn on the EU renewable energy commitment of 20 per cent. by 2020, thereby letting it be known that they want the rest of Europe to take the strain. The Government said that the UK would manage only 15 per cent. or perhaps closer to 10 per cent.

Joan Ruddock: I must remind the hon. Gentleman that he is talking about an EU-wide energy target. The Government are signed up and committed to it, but the allocation of the burden to be carried, and contribution to be made, by each country is yet to be decided.

Gregory Barker: I shall return to that point, but I do not think that people will give any credit to the Government for saying that the UK will be at the bottom of the table when it comes to the allocation of renewable technologies targets. The Minister’s colleagues are on record saying that their target will be between 10 and 15 per cent.

Joan Ruddock: The hon. Gentleman must acknowledge that the UK has been at the bottom of the table for renewables for a long period, including the time for which his party were in Government. We are now making enormous progress on renewables. Our target is to treble the contribution of renewable sources to electricity by 2015. We are in a different situation from that of other European nations, and it is appropriate that the member states and the Commission agree on the contribution that each member state should make.

Gregory Barker: The Minister is candid on renewables and she is absolutely right—we have been at the bottom of the league tables for the whole period of the Labour Government despite their rhetoric on climate change. She will accept that, internationally, the climate change imperative has held sway over politics for only 10 or 15 years. It is 20 years since Margaret
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Thatcher first kicked the whole issue off, but only in the past decade has it assumed absolute importance as a driver of public policy.

If we look at what Germany has been able to achieve with its feed-in tariffs—they are based on a different policy model that the Conservatives are pledging to introduce along similar lines—we will see that they are the kind of policy drivers that we need. The UK has performed miserably in the past 10 years under this Government, and we cannot afford to continue with the status quo or to adopt a “business as usual” position. The ETS alone will not provide the required solutions, and the Minister cannot be satisfied with the unambitious target of 10 or 15 per cent. We are supposed to be a leader in Europe; after all, we have one of the largest economies in the region. Will Latvia or Estonia or eastern European fringe countries make up the difference? It would be an abrogation of responsibility and, more importantly, a loss of economic opportunity if we allowed the Government to get their way on the issue.

Martin Horwood: I shall resist the temptation to quote to the hon. Gentleman the Liberals’ environmental policies going back to the 1970s and 1980s when the Conservatives thought that carbon reduction meant closing coal mines.

On the renewables target, I recall the former Prime Minister, Mr. Blair, expressly stating—he described it as an aspiration—that he wanted 20 per cent. of electricity to be produced by renewables by 2020. Perhaps the hon. Gentleman recalls the same.

Gregory Barker: I am not an expert on Tony Blair, but I recall him saying that.

Everyone in the House is amazed by the Government’s U-turn and the downgrading of their environmental commitment. Sadly, it does not seem to be out of character with the way in which the Prime Minister is proceeding on environmental matters. The U-turn is all of a piece, as the hon. Gentleman outlined in his own remarks on the watering down of the Merton rule and the disgraceful treatment of the low-carbon building programme. It will be interesting to hear what the Minister has to say about the fact that the Government have put all their eggs, as it were, in the nuclear basket.

Across the piece, there is little ground for hope that the Prime Minister will take climate change seriously. Whatever Tony Blair’s domestic failures, we never doubted his personal commitment to the climate change issue or that he argued forcefully about it on the international stage. Unfortunately, the Prime Minister is not prepared to do so much as that, which is sad for all of us.

We learned about the Government U-turn on the EU renewables target. In addition, some of us read a peer-reviewed article this week that states that atmospheric CO2 levels have grown 35 per cent. faster than expected since 2000 as the effectiveness of existing natural carbon sinks degrades. The effectiveness of the EU emissions trading scheme, both as a carbon reduction tool and as an incentive mechanism for technology development, is more vital than ever.

I commend the Environmental Audit Committee on its excellent work and the Conservatives recognise that the ETS is an invaluable tool. It is an excellent way in
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which to marshal the power of the markets for the public good. I acknowledge that phase 1 has been a failure—too many credits were handed out for free, which effectively gave industry a licence to pollute. My hon. Friend the Member for Ruislip-Northwood said that as a result of that mistake, UK utilities have made around £800 million in windfall profits. Ultimately, that was a political rather than a market failure.

Phase 2 looks stronger, and I give credit to the Government for their part in it. It happened under Tony Blair’s premiership, but the Government nevertheless argued for more robust allocations.

Mr. Bailey: Does the hon. Gentleman agree that to pursue that robust stance in phase 2 in the EU, Britain had to take a leading role and be accepted as a leading player in the EU? Will he comment on his party’s position in prosecuting that role and policy?

Gregory Barker: The hon. Gentleman is right. The environment is one of the key core functions and areas of expertise of the EU. It is a classic example of where the EU can act in a way that no nation on its own can act and where we are all much better by recognising the communality of our interest. That only makes me more frustrated when the EU gets involved in all sorts of areas where it has no writ and its competencies are clearly unwarranted, but that is an argument for another day.

The second phase has resulted in greater market confidence, which is already reflected in forward carbon pricing of more than €20, but we must do better in the third phase. I will not go into detail, but the Conservative party quality of life commission under Zac Goldsmith and my right hon. Friend the Member for Suffolk, Coastal (Mr. Gummer) reported very similar findings to the EAC report as to how we can do better in the third phase. The latter rightly concluded that the Government must be clearer about why phase 1 of the ETS was not a success.

To have public confidence in the ETS going forward, there must be transparency. Are declared reductions for absolute or for “business as usual” targets? Are declared reductions for CO2 or other greenhouse gases? Are declared reductions happening in the UK or abroad? It should not take a parliamentary Committee report to extract clarity from the Department for Environment, Food and Rural Affairs about how it calculates its emissions reductions. What chance do the ordinary public have to understand the complexities of the ETS targets if it takes the Government this amount of time and this number of attempts to explain their processes to us?

From speaking to interested members of the public, I know that one of the most important questions on which clarity is needed to ensure public trust in the ETS is whether the scheme is causing emissions reductions within the EU or merely allowing us to pay other countries to do our cleaning up for us. The Government have announced that phase 2 will result in a reduction of 8 million tonnes of carbon, they hope, from Britain’s “business as usual” projections, but 5.3 million tonnes, or two thirds, of that UK carbon reduction will take place not only outside the UK but outside the EU—in the developing world, where it is cheaper per tonne of carbon to make the reduction.

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The EAC was correct to recommend—and I am glad that DEFRA accepted the recommendation—that all future communication of these emissions reductions should clarify what proportion of the reductions takes place in the UK and what proportion is simply funded by the UK, but takes place elsewhere in the world.

I fully accept the reality that one tonne of carbon saved in China is atmospherically exactly the same as one tonne saved in Britain, and I recognise the virtue in the fact that a properly functioning market will provide reductions at the cheapest price available, wherever the reduction may be found. However, I believe that it is important that we ask ourselves what the long-term implications are of Britain buying its way out of the majority of its emissions. The ETS is not just an international offsetting tool. It is designed to encourage behavioural change in Europe and to incentivise technology development in our own economy. The ETS was not designed merely to act as a conduit for us to pay others to change while we continue in our old ways with an unreconstructed hydrocarbon-dependent economic model.

This week, the Government announced that they were lowering their sights in relation to their own renewable technology targets. They are even going below the average in Europe—no surprises there. What I did find extraordinary—this was referred to in the debate—was that the leaked paper from the Department for Business, Enterprise and Regulatory Reform stated that the Government’s concern was that increasing Britain’s renewable energy capacity would


Does the Minister believe that it is right to lower our renewables target in Europe because it is likely to undermine the incentives to invest in low-carbon technologies, and that nuclear power is one of the low-carbon technologies that should be the beneficiary of such an exercise? The Government, if that paper is to be believed, believe that if we increase our renewable energy production, that will undermine the carbon market. Does the Minister believe that the ETS would be undermined by more renewable technology? In effect, that is what this boils down to.

Further to that, why are the Government keen to secure the future of nuclear power as part of that mix? Is it, as the comments in the Department for Business, Enterprise and Regulatory Reform document seem to imply, on the basis of special favours? We can only deduce from the Government’s fuzzy logic that they are willing to forego Britain’s place at the forefront of a global green energy revolution in order to keep the carbon market secure so that they can continue to buy Britain’s way out of its carbon budgets for the indefinite future. Achieving two thirds of our national carbon reduction by 2012 by buying offsets abroad, as the Government are currently doing, will not lead to behavioural change, nor incentivise British business. It will not deliver the change that Britain needs; it will leave Britain lagging behind on competitiveness.

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