Examination of Witnesses (Questions 40-54)
MR SIMON
BULLOCK AND
MS SARAH-JAYNE
CLIFTON
23 JANUARY 2007
Q40 Joan Walley: It is a good start?
Mr Bullock: I think it is a good
start, that they are accepting that you have to use tax to tackle
aviation emissions. That is a good sign. It would certainly be
welcome if Gordon Brown said at the next Budget, "We will
commit to bringing in an Air Passenger Duty escalator", to
say, "Yes, taxes are the right measure to do this until the
Emissions Trading Scheme is up and running. We will do it in a
way which is genuine and effective, rather than just tinkering".
Q41 Joan Walley: I think we have
noted your support for an annual escalator; but in terms of the
detail of that, in taking what is a good start that much further
forward, how do you go about establishing what the rate of escalator
should be for Air Passenger Duty?
Mr Bullock: The modelling is in
this report by the Environmental Change Unit. It looks at the
different elasticity of air travel and sets out, if you put up
flights by this much then it would have this much effect on demand.
Again, it is part of the overall package which you need for climate
change to say what is the level of emissions that we want aviation
to be at, and then you use your tax measure, in the absence of
the Emissions Trading, to achieve that. I will send you the report.
They go into far more detail than I can now.
Q42 Joan Walley: We would very much
like to see that. Finally on the issue of aviation, I think we
have seen quite a bit of the Prime Minister's comments on it in
relation to his holiday over Christmas. What do you think about
the increasing support from the general public? Is it a political
suicide to be contemplating this? How do you see the public taking
on board what has to be done in the name of environmental protection
and protecting the planet?
Mr Bullock: I think opinion surveys
generally show a much greater understanding of climate change
and the problems that it brings. I think people generally do see
and want more action from politicians on it. I think some issues
are becoming quite polarised in the press by unhelpful comments
from people like Tony Blair about flying; because he was caricaturing
things like taxes on flying as being an issue of either flying
or not flying; and that patently is not what it is about. Nobody
is saying that flying should disappear overnight or even disappear
in 20 years. What we are saying is that it is the growth of flying
which has to be stopped as a first step. That is not the same
as saying that people cannot fly at all. It is probable in the
future that people will fly less than is currently the case, but
it will not be overnight. I think it is unhelpful the way that
it is caricatured in the press as being, "We're stopping
you from going on holiday", because that is not the case
at all.
Q43 Joan Walley: You are not recommending
a Big Brother house made up of globe-trotting celebrities discussing
aviation?
Mr Bullock: That might put me
off flying anyway seeing celebrities do it!
Q44 Chairman: Would you acknowledge
a case for those routes where there is a rail alternative for
the case for flying to be very much weaker within intercontinental
journeys?
Mr Bullock: Yes, absolutely. It
is certainly the case that rail, for example, is far less polluting
than going by plane.
Q45 Mr Chaytor: Going back to energy
efficiency and microgeneration, you said earlier that the problem
with microgeneration was that the pay-back periods were too long
and the customer was not getting paid for the electricity they
exported to the grid. Surely that is not the case because if they
were exported to the grid the pay-back period would not be so
long? The problem is that the technology as it stands at the moment
does not generate enough electricity for a shorter pay-back period,
surely?
Mr Bullock: I think there are
two things in there. I think the capital costs upfront with technology
do deter a lot of people because they are expensive. I think that
will come down as more people do it, because there is a certainly
a case in the short-term for Government to massively increase
the amount of financial help it gives to people. The current amounts
work out at 58p per household which is nothing. There is the issue
that, once you have got it installed, there is an unfair situation
where you are not guaranteed a price for the electricity you export
back to the grid, and if you were that would dramatically reduce
the pay-back period. I cite an example in Germany where there
is strong legislation on this, the current sell back time is 35p
per kilowatt hour, which is very, very good. I have a friend who
lives in Bavaria who says, "I open my window in the morning,
lie back in bed and my house is making me money".
Q46 Mr Chaytor: Is it not the point
in the UK, as it stands, the possibility of selling back to the
grid is pretty remote unless you live in an extremely windy area
and your location is very well endowed, because the microgeneration
technology as of now is not sufficiently efficient to generate
a surplus that will enable you to sell back to the grid in most
cases?
Mr Bullock: Yes.
Q47 Mr Chaytor: Your submission is
very strong on criticism of where the PBR is weak, but it lacks
specifics about what you would like to see as an alternative.
You say you want to see more spent on energy efficiency and microgeneration
subsidy. How should that be spent? Should it be through the energy
efficiency commitment, or simply an increase in grants through
the low carbon buildings programme? What are the pros and cons
doing it through the LCBP as against through the EAC?
Mr Bullock: That is an issue we
would have to get back to you on because I personally do not have
the expertise to answer that. What we have advocated is the increases
in the low carbon programme, but I will get more information for
you.
Q48 Dr Turner: I do not know about
you but I was personally disappointed with the PBR in that it
did not really effectively do anything to tackle the problems
with bio-fuels. You recognise in your submission that bio-fuels
have a potential role in tackling carbon emissions. It is the
only obvious immediate instrument to use with private transport,
for instance; yet at the moment the incentives for bio-fuel sales
are too small for the market to start; so you can buy a bio-fuel
car, with great difficulty, but you cannot buy the bio-fuel to
put into it; and, if you could, there is the very real concern
expressed by yourselves and by Greenpeace that if the bio-fuels
are not produced under a controlled environmentally sustainable
manner then you do a lot of damage as well. It seems to me that
the PBR could have addressed both these issues together. Do you
have any views on that?
Mr Bullock: From our perspective
the most important thing is to ensure that bio-fuels are produced
to decent environmental and social standards. We do not want to
see the Government supporting the technology until it has got
those safeguards in place. There is a very real danger that if
you put heavy subsidies, tax breaks, into promoting bio-fuels
before those systems are in place then you will set up a large
infrastructure based on extremely damaging technology. Bio-fuels
could be very good but it, equally, has a massive potential to
be very bad. It is all in how it is designed. We are most concerned
for making sure that the standards are right before it goes ahead
too quickly.
Q49 Dr Turner: There is a chicken
and egg situation here because if the tax incentives are not there
there will not be a significant market for bio-fuels anyway. Do
you not think it sensible to link the availability of a tax incentive
to the certificate of origin of the fuel, in which case you can
actually use the incentive to drive not only the market but actually
the control of the environmental standards to which it is produced
at the same time?
Mr Bullock: Linking the tax relief,
or whatever, to passing very strong environmental standards, yes.
Q50 Mr Caton: You have expressed
disappointment to the fact that the Pre-Budget Report did not
really address the issues Stern had raised. One thing it did have
in it was the announcement about zero-carbon homes by 2016. What
is your response to that announcement, and how do you see the
Government achieving that target?
Mr Bullock: I think the zero-carbon
homes by 2016 is a good policy; it is good the Government has
done it. I think it could have brought it in faster than that.
There is not really a reason why it could not be in place by 2011,
but it is generally a good thing. The concern we have with, and
looking at, the building stock in general, is that new homes every
year only account for 1% of homes; so that by 2016 we will have
10% of homes which will be built between now and then. For the
domestic sector the overwhelming priority is dealing with the
90% of homes which do not fall into that bracket. Although we
do welcome the announcement on zero-carbon homes, we think there
needs to be far greater emphasis placed on the existing housing
stock in particular, because that is where poorer people live
and one of the biggest problems is with fuel poverty and carbon
emissions.
Q51 Mr Caton: I take your point but
the way that the Government apparently is going to do it is through
building regulation and turning the current voluntary sustainable
homes star rating into a compulsion over a 10-year period. Do
you find that star rating system a good benchmark? Do you accept
that the six star that is supposed to deliver the zero carbon
option will manage to do that?
Mr Bullock: On the standards I
think you may be better asking Greenpeace and the Green Alliance
who are coming on later. A couple of points on it though: firstly,
for it to be effective it needs to be mandatory quicker. It will
work better if it is mandatory. Secondly, again, 2016 is too far
into the future. It should be quicker than that. The third thing
about the whole thing is that it is just for homes; and there
is no reason why it should not include all buildings that are
newly built, that they should all conform to this. We are missing
out a huge sector of the economy (which you could have dealt with)
by just having it about homes.
Q52 Mr Caton: Do you see any problems
in doing that? As I mentioned, at least we have got the Sustainable
Homes benchmark for domestic housing. We do not really have anything
at the moment equivalent for the commercial or public sector.
Do we need to get that benchmark in place and then look at transferring
the same principle to that sector?
Mr Bullock: My understanding is
that there has been a lot of work on this done already, and it
would not be difficult for Defra, or whichever government ministry
ran with it, to put in place such benchmarks pretty quickly.
Q53 David Howarth: Turning to the
topic of environmental reporting in the Companies Act, all a distant
memory now, I wondered what you thought about where the Companies
Act ended up? What do you think should happen now, and what should
the next steps be? What kind of reaction was there especially
from business to that whole saga?
Ms Clifton: As we expressed in
our written evidence to the Committee, we saw 2006 really as a
year when there were two steps backwards and one step forward
on sustainability reporting. We started the year with the repeal
of the Operating and Financial Review regulations which had been
in the making for some time and were there really to standardise
reporting, reflecting that quite a few companies were already
starting to report on social and environmental issues but not
just for common standards but were to start to use that as a driver
for better social and environmental performance that needed to
be standardised. They were identified by the Chancellor as an
example of EU legislation and wrongly, Friends of the Earth believe,
were scrapped and leaving in place, at the beginning of the passage
of the Companies Bill through Parliament, quite weak social and
environmental reporting requirements on Companies linked to the
EU Accounts Modernisation Directive. Friends of the Earth and
also a number of other society groups that made up the corporate
responsibility coalition campaigned very strongly during the course
of last year for a strengthening of the requirements in the Bill
in relation to social and environmental reporting. We welcomed
amendments which were tabled during the Bill's passage through
Parliament both in the House of Lords and in the House of Commons,
which put in place the strengthening of the requirements in a
number of different areas. In terms of actual details, some progress
was made in the sense that the one step forward was putting back
some of the reporting requirements from the Operating and Financial
Review into the Business Review, so we ended up with something
nearly as good as the OFR but not quite as good. We welcomed the
fact that the Government widened out the number of factors on
which listed companies will have to report. Initially the Operating
and Financial Review required reporting on environmental issues,
but also the impact of the company's business on the environment
which was wider, and social and community issues which would include
human rights, employee issues and then policies affecting policies
in all of those areas. During the passage of the Bill through
Parliament, again those factors were all put back in. We very
much welcome that. At the final stages of the Bill, the Report
stage in the House of Commons, the Government added supply chains
to that list of factors. Again, that was something that we welcomed.
In terms of where we are at now, we still are concerned to find
it regrettable that the report requirements are weaker than they
were a year ago. Most importantly, there is no reporting standard,
so although Government is pointing companies to a statement produced
by the Accounting Standards Board it is not mandatory. That means,
not only will it actually make compliance with the regulations
harder for companies, but it will mean that the reports themselves
are less comparable between companies in the same sector, and
also year on year. Again, that will undermine the role we see
for reporting performance. Also the auditing standards are weaker
than there were for the OFR. We are still also concerned, and
Friends of the Earth did not think the OFR went far enough to
start with. We would like to see mandatory social and environmental
reporting rolled out to a much wider number of companies, not
just 1,300 publicly quoted companies. Also we are really concerned
about what is called the "materiality limitation", in
relation to reporting. Those factors which I mentioned earlier,
companies who only need to report on them so long as they have
a bearing on the company's financial performance, it is not even
clear whether that will mean that companies have to report on
carbon emissions. The DTI have said that some companies will because
in the directors' judgment they will have a bearing; but it is
certainly not clear as to whether all those quoted companies who
have to report will have to report on carbon emissions. We are
glad essentially that those improvements were made during the
passage of the Bill and combined with the inclusion in the statement
of directors' duties a duty for directors to have regard to environmental
impacts. We see the Bill as a whole, as a step in the right direction
of UK accountability but we have very much now got our eye on
the two-year point where the Government is going to be viewing
a system of voluntary standards, and are very much going to be
pressing for a widening of the number of companies who have to
report on environmental issues, and a strengthening of standards
as well.
Q54 David Howarth: What do you make
of the business reaction especially on the supply chain issue
where business seemed to say that on the one side they did not
know where they stood because the standard was too vague, and
when they were offered a mandatory standard they did not want
that either? How are relations between Friends of the Earth and
business now?
Ms Clifton: The reaction mainly
in relation to the supply chain amendment came from business,
and I think that is quite important to stress. We know of quite
a few businesses who are supportive of the mandatory standard
but obviously there are lots of sensitivities around those that
do not come out publicly. We were very concerned about the reaction
of the lobby groups but also the justifications that they used
for criticising the supply chain amendment; and our legal advice
advised that they were pretty unfounded. There was one concern
which we shared, or appreciated at least, which was the one about
disloading information which could be picked up by extremists
groups and the Government addressed that in the end; but there
are other concerns about commercial confidentiality, about current
excessive burdens on small on small quoted companies. We did not
think they were sufficiently justified really. Essentially we
understood their reaction as just one of general hostility to
the fact that a concession had been made and in the interests
of wider social environmental effects—instead of just going
along with the main direction of the whole Bill, which is about
creating an environment in which UK business is researched.
Chairman: Thank you very much for coming
in—a useful session with lots of clear answers to many of
the questions. We are very grateful to you indeed.
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