Select Committee on Environmental Audit Minutes of Evidence


Examination of Witnesses (Questions 100 - 119)

TUESDAY 24 APRIL 2007

MR JONATHON BREARLEY, MR ROBIN MORTIMER AND MR TOM TAYLOR

  Q100  Mr Chayter: The motorist lobby is too strong?

  Mr Brearley: I think we already have the renewable transport fuel obligation, for example, and we have other policies for transport. I do think there are quite strong technical issues within that sector.

  Q101  Colin Challen: The outturn to the period of 2010 is, what, about 18%, do you think, in terms of cuts, against the 20% target; or do you think you will actually reach the 20% target?

  Mr Brearley: I think the outturn so far is 16.2% is my understanding.

  Q102  Colin Challen: Does that high probability in failing to meet that target influence the fact that, in terms of the legislation that is being proposed, we can meet a target by only getting up to 26%? It is not terribly ambitious, is it? If we had met our 2020 target, perhaps we still will, we could then perhaps do another 6% in 10 years. Is it your view that that is sufficiently ambitious?

  Mr Brearley: I think you need to balance up a number of things in climate change policy-making in general but particularly how you deliver against climate change versus economic growth and also poverty. What we need is a clear path to our 2050 goals. I think the interim roles will be set out in the Energy Review and it would seem entirely sensible to get us there. In terms of the 2010 target, we are going to ask the Committee on Climate Change to recommend a pathway to 2020 which will include helping us understand whether or not the 2010 target is achievable.

  Mr Mortimer: I think it is ambitious actually the 26-32% range. I think you need a range and therefore the trajectory could be at the higher end of that or the lower end of that but the legal requirement is 26%. The Energy White Paper, and measures which included transport as well as the electricity sector, takes us at the upper end of optimism to the current 25.2%, and actually bridging that gap is not insignificant. I think that it is ambitious. I think it is also important to say that it is part of the trajectory to 2050 so, in a sense, as long as the mitigation curve passes through that range on the way to the 60% target by 2050 then that delivers the outcome which the Bill is about. For both those reasons I would defend the 2020 target for being really ambitious.

  Q103  Colin Challen: Who do you talk to when actually deciding what is ambitious or not? We have heard that Ken Livingstone, for example, said the 2030 target was under the 60%. Is that wildly over-optimistic? Have you discussed with his office how they think they can achieve that kind of target?

  Mr Mortimer: I guess the starting point in terms of deciding the level of ambition would be to look internationally. We have been very conscious in the work on the Climate Change Bill to be particularly mindful of the European context. As you know, the European Council has set a 20% target and 30% on a conditional basis, which is the greenhouse gas target. I think the range in the Climate Change Bill which is for CO2 only is consistent with the upper limit of that, assuming burden-sharing on an historical basis. Even if the EU goes for its ambitious target of 30%, the UK Climate Bill range is already within that. On that, that would be one measure of recognition that the UK is at the front of the pack, if you like, within Europe. I think it is slightly difficult to compare sub-national actions in the way you describe. Obviously the Department has contacts with the Mayor's office but I do not think it is a direct comparison, because we have to look across the economy. There are different abatement opportunities in different parts of the economy. I am not sure the analogy quite works in the same way at the sub-national level. I think the ambition should be related more to the international context rather than the sub-national.

  Q104  Colin Challen: Looking at the 2050 target of 60%, the Bill contains provisions to update the target "if there have been significant developments in scientific knowledge about climate change". We know that the 60% figure arrives out of an RCD(?) report from 2000. When can we expect any scientific developments to take place, as if there have not been any in the last seven years? There have been two significant reports from the IPCC, we have the Stern Review, we have had the Exeter Conference Report(?), all of these point to a higher target being necessary. Could you say a bit more about whether we should be going for a higher target and, if we should, how will that come about? Is it going to have to be a process of years trying to change something in the Bill, because that does seem to suggest it can only be changed really rather exceptionally.

  Mr Mortimer: The first thing to say is I do not think the process of years point is right because the Bill contains specific provision to allow the target to be amended through secondary legislation in the light of significant development internationally or in climate science. That is the first point, that it does contain that scope for amendment. I think the second point is really to go back to what the purpose of the Bill is. Obviously part of it is about providing international leadership, and the Bill does represent the first of its kind. It is also extremely ambitious in relative terms compared with many of our international partners. The question is whether the UK should be putting an even more ambitious offer on the table at the start or, in a sense, waiting to develop that in the context of multilateral talks. I think the Government's position has been that we have got this ambitious target of 60%. There has been a consensus around that across large sections of society, including the business groups. Things have moved on a bit so that consensus is not, as you say, as firm as it was in 2000-01. Nevertheless, we are going into the international discussions with a very, very ambitious offer. I think the Government have always made it clear that if and when it is required to take on a more ambitious target as part of a multilateral context then it would be prepared to do so.

  Q105  Colin Challen: Our target is no different from the European Union's, how is that showing international leadership? We are just following the crowd. We are not actually distinguishing ourselves in any way. One could say that Norway in its recent announcement, although there will be a lot of off-setting involved in that, seeking to be carbon-neutral by 2050 is being rather more adventurous?

  Mr Mortimer: I think you have to take the Bill as a package. It is not just about targets. One of the unique things about the Bill is that it is not just about setting the long-term goal; it is also about creating an underpinning framework to ensure we manage our way towards it in a sensible way. I think the really interesting thing about the UK's Bill is the idea of embedding carbon budgeting in a domestic framework. Having three five-year carbon budgets in place sends a much more important signal for business to make intelligent investment decisions based upon a medium-term horizon. It is more important than a 2050 goal. I am not dismissing the 2050 goal, but I think that the budgeting framework is the more important part when it comes to businesses and Government making the investments in policy decisions.

  Q106  Colin Challen: Are you saying that we can perhaps ignore the 2050 goal to a certain extent provided that we have these interim measures? I cannot quite follow the logic you are making. Surely everything flows from the headline core target in this Bill. If it does not, is there really any point in having it there?

  Mr Mortimer: I am certainly not saying we should ignore the long-term target, but merely in a sense both Government and certainly businesses will be making investment decisions particularly over the 15-20 year timeframe; and, therefore, the 2020 target, which pins the trajectory in the middle if you like, is particularly important; as are the five-year budgets which provide certainty over the 15-year period. I am not in any sense trying to say the 2050 target is irrelevant. I am simply saying, going back to your question about the ambition in the Bill, that is a very unique aspect to it which is not present in other European legislation.

  Q107  Colin Challen: Is the Office of Climate Change preparing contingency plans to look at different scenarios with different long-term targets? Do you have a range of options? Are you simply working and focussing entirely on the one that is laid out in the Bill?

  Mr Brearley: I think we should be clear that we have now handed back the implementation of the Bill to Defra who are working on this. Essentially as part of that work, as we did, there will be ongoing discussion around the level the target should be and what the implications of those targets are.

  Q108  Chairman: Going back to what Mr Challon said at the start, what in your view would constitute a significant development in scientific knowledge about climate change over and above the reports we have had since the 60% target was set in 2000? I think many observers would say we have had some pretty substantial developments since 2000 in scientific knowledge. If those do not justify raising the target then what on earth does it need to take the Government to rethink it?

  Mr Mortimer: I go back to the point the Bill is intended to provide the UK with a very firm framework in which to go to the international context. The Government basically made clear that if there is new evidence or there is development internationally which justifies it then it is prepared to look again at those targets. Yes, there have been developments since 2000-01; no doubt there will be further development in science looking forward. I am not sure I can pre-empt those. I think the point simply to make is that the option is there to up the target in the light of change, and that is what the Bill provides the flexibility to do.

  Q109  Dr Turner: I think it could be further said that the scientific evidence is before us, and virtually the scientific consensus is there already. The Government Chief Scientist has himself been saying for the last two years, to my certain knowledge, that we should be aiming for 80% in the UK, like similar industrial countries, if the world is going to achieve 60%; and if we are going to achieve a higher target then we need to recognise that as early as possible and we need to adjust the trajectory on the way to it so the interim waypoint targets need to be more ambitious. Are you doing any work on that because this is inevitable? The 60% target is obsolete before we actually legislate for it.

   Mr Mortimer: I think the important thing is that the work that is going on on this in the Department is really in the context of the multilateral discussions. The UK as part of the EU is developing its position internationally and that is the context in which it is looking forward, to look at what obligations the UK should take on internationally. I would not disagree with much of what you said in your question, other than to say I think there is certainly no uniform consensus around a different figure. The Stern Report talked about developed countries taking on 60-80% consistent with 550 parts per million stabilisation, and obviously the UK target is in that range. There is a debate to be had on it; in a sense that is what we are now doing on the context of the draft Bill publication. I do not think there is yet a single consensus on what exact figure the UK should offer.

  Q110  Dr Turner: Two of the main policy strands that were invoked in the Climate Change Programme Review last year, and which the National Audit Office commented on, the Renewables Obligation and the Voluntary Agreement to reduce new car emissions, the National Audit Office reckoned that they performed rather poorly in terms of cost-effectiveness. We also know that both of them are performing rather poorly in absolute terms, because we show no sign of achieving the renewables obligation of 10% by 2010 and we are well behind on reducing new car emissions. What is your role in bringing these policies into some sort of effect?

  Mr Brearley: To date the OCC has not been asked to look at either of those issues. If we were to do so then we would run similar projects to the ones run at the moment.

  Q111  Dr Turner: One of the other comments of the National Audit Office is the fact that fiscal policy is entirely the preserve of the Treasury, and is not subject to the same sort of assessment progress that other policies are throughout Government. Does the Office of Climate Change have any remit to consider fiscal policies in this area?

  Mr Brearley: I think fiscal policies remain the ground that Treasury covers; so the OCC does not carry out any work on fiscal policies.

  Q112  Dr Turner: I am finding it difficult to find things you do have any grounds for working on. Your letter to us mentions the "Analytical Audit" work that you are doing "looking into the economic rationale for Government intervention to reduce greenhouse gas emissions". That is a fairly basic sort of aim—could you tell us how you are going about this?

  Mr Taylor: Phase 1 of the Analytical Audit looked at synthesizing what we know about the science and the measurement and projections process, and we actually published a report on the internet at the time, at the launch of the draft Climate Change Bill, which focussed predominantly on the science in order to produce a very accessible précis of the scientific orthodoxy at the time, which was consistent with the IPCC third and fourth reports. Phase 2 of the Analytical Audit, as Jonathon Brearley has said, is moving into the economic realm looking at the economic rationale for intervention; and there predominantly what we are doing is taking the logic laid down in the Stern Review, deconstructing that a bit more in the UK context and mapping out how the UK policy sits against the framework laid down by Stern.

  Q113  Dr Turner: Forgive me but that sounds a trifle vague.

  Mr Taylor: I am sorry, I did not mean to sound vague. Stern outlayed a number of principles—

  Q114  Dr Turner: We know what Stern said. We are familiar with Stern.

  Mr Taylor: If you are familiar with Stern then all we are simply doing is seeing how the UK policy mix maps against what Stern said.

  Q115  Dr Turner: Have you come up with any specifics?

  Mr Taylor: We have not finalised our report yet. We are still in the preliminary finding stage and we are checking our findings around various experts. As soon as we finish our reporting stage, in line with the principles of disclosure that Jonathon outlined earlier, we would be happy to share the analysis underpinning our conclusions with the Clerk.

  Q116  Dr Turner: When will that be available?

  Mr Taylor: The project is due to finish in mid May.

  Q117  Dr Turner: Because hopefully it may help illuminate the drafting of the final Climate Change Bill?

  Mr Taylor: Indeed, but of course we have been working very closely throughout our audit with Robin's team who worked up the draft Climate Change Bill, and we continue to work closely with all the departments involved, including the DTI drawing up the Energy White Paper.

  Q118  David Howarth: Could I ask about one of the specifics of the Stern Review, it is about the Social Cost of Carbon. Stern implies a much higher Social Cost of Carbon than the Government is using at the moment, up to three times more. We have had the Financial Secretary to the Treasury here before us and we have put it to him that it seems to be an implication of Stern that the Stern higher value should be used in the policy evaluation as opposed to the present lower value. He said to us that, no, that was not the case because Stern had to do with global cost rather than cost in the UK. As the person putting the question I did not quite understand what that meant. If you have any comments on that I would be grateful. He also said that some work was going on about how to update the use of the Social Cost of Carbon in Government policymaking as a consequence of Stern. I was wondering whether you could give us any progress on that particular work?

  Mr Taylor: First of all, I am not sure it is actually the case that the Stern Review recommendations on the Social Cost of Carbon are that different from the Government's current guidance. The Government's current guidance is that the Social Cost of Carbon for policy appraisal processes should be considered in a range of £35/tC up to £140/tC, with a central range of £70/tC. Stern's recommendations, if I recall them correctly, were in a range between £60/tC and roughly £200/tC, and that reflected the different mitigation path that one would assume to be on. A business's usual mitigation path would obviously be towards the higher end of that range. I think it is pretty clear that the Government's current estimates fall well within the Stern range.

  Q119  David Howarth: They do not fall within it—they overlap it, which is a rather different thing.

  Mr Taylor: Fair enough. It is clear they are not terribly different. In fact, the Stern recommendation on what the Social Cost of Carbon is around the 550 parts per million mitigation path is roughly £68/tC, which is nearly bang on the £70/tC the Government is currently using. However, I think it is pretty clear it is an area that is very complex; it is an area that it is difficult to come to any firm view on; and the Government committed to reviewing its guidance on the Social Cost of Carbon when it introduced it in 2002, I believe. I think that plans are to publish something later this year in the summer on updating the Social Cost of Carbon in the light of Stern.


 
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