Examination of Witnesses (Questions 120
TUESDAY 24 APRIL 2007
Q120 David Howarth: The idea it depends
on a mitigation path of course implies that we know what mitigation
path we are on, and that assumes the success of existing policy.
The problem was, right at the start of our session, we were struggling
to understand policy not succeeding. Is that going to be taken
into account, or will the report simply assume that the policy
Mr Taylor: I would not like to
pre-empt what the chief economists around Government will conclude
on this matter, but I imagine that they will take into account
the range of mitigation paths; and a different Social Cost of
Carbon therefore theoretically applies depending on what mitigation
path one is on. Clearly the decision on what kind of path we believe
we are on is a very complex one and it is based not only on the
UK's performance, given that we account for only 2% of global
emissions, but crucially, as Robin was saying earlier, the international
dimension and where we think we are moving on international agreements
Q121 Mr Hurd: Are any other countries
doing any serious work on the Social Cost of Carbon?
Mr Taylor: I am not aware of that,
but that does not mean to say that there are not any.
Q122 Mr Hurd: You are doing the work,
the Office of Climate Change, but you are not aware of any work
being done in any of the other countries?
Mr Taylor: I should clarify, the
work being done on reviewing the Social Cost of Carbon in light
of Stern and reviewing it every five years that is being done
by a range of Government chief economists, but predominantly Defra.
Q123 Dr Turner: Figures, forecasts
and targets et cetera get bandied about all over the place. We
had a very reasonable and logical request from the Engineering
Employers' Federation last week that the Government should put
the data, assumptions and the methodologies that they use to generate
emissions forecasts into the public domainat the moment
they are not, and they are figures that could just well have been
plucked out of thin air. They are calling on Government to use
a broader range of scenarios when it forecasts future emissions
and to anticipate the impacts of different trends of, say, fuel
prices and the impact that could have on emissions. What is your
reaction to that?
Mr Taylor: It is an interesting
perspective. I am not sure it is technically correct in all aspects,
because by far and away the largest element of the Government's
projections for greenhouse gases comes from the DTI's energy model,
and very many of the central assumptions within the DTI energy
model are not only transparent but also publicly consulted on.
There are consultations that run on the oil price, the oil price
to plug into the model, and the prices for other fossil fuels;
and the growth assumptions that feed into the model are, of course,
derived from the Treasury's assumptions on growth, which the NAO
in their reports agreed were cautious and reasonable. I could
go on. There are a range of assumptions that are plugged into
the different models around Government including, for instance,
on the transport models and various consultations go on about
which assumptions should be plugged in. I actually do think there
is already a pretty transparent process that is going on there.
However, I think one of the advantages of the Committee on Climate
Change, should it come to pass, is that that will make the process
even more transparent because its analysis will be much more open.
Q124 Dr Turner: What do you say to
their point, which I think is a very fair one, that you really
ought to be looking at alternative possibilities depending on
which assumption of fuel prices or fiscal measures you put into
the mix? You may find some surprises.
Mr Taylor: It is certainly true
that if you play around with different scenarios you are going
to get different results. The nature of modelling in this area
is that it is far from a precise science and one has to apply
judgments, and all you can hope is that you apply those judgments
professionally and with the best knowledge of evidence out there.
I think the DTI do an awful lot of sensitivity analysis on their
model and play around with different oil price assumptions and
so on. Scenario planning is very much part of the kind of modelling
that goes on for particularly longer-term targets. The 2050 targets
are less suitable for the kind of time series models that we use
for nearer-term projections, and we have to use more scenario-based
modelling, where you test the assumptions of various scenarios
using, for instance, the insights developed from the Office of
Scientific Innovation and the Foresight Programme and so on.
Q125 Dr Turner: This work will help
you understand the mechanisms that are going on and help you devise
policy instruments that will actually achieve the results that
you want. Would it not be helpful to publish all this stuff more
Mr Taylor: As I said before, there
is an awful lot of sensitivity analysis that is done and there
is a lot of consultation that goes on on the assumptions and that
is, therefore, published. When the DTI publishes its series called
the Updated Energy Projection Series, the UEP Series, it
actually has some annexes in there which compare different scenarios
based upon different inputs of oil prices and so on. It is a complex
and, as far as I can see, largely transparent process.
Q126 Mr Hurd: Turning to international
aviation and shipping, we had a nice letter from Friends of the
Earth to say that in leaving out emissions from those sectors
the targets in the Climate Change Bill are "rather like a
calorie-controlled diet that opts to exclude calories from chocolate".
How accurate and meaningful are targets and forecasts that leave
out these sources of emissions?
Mr Brearley: There is an issue
for both shipping and aviation in the sense that these are international
and, as yet, there is no agreement on how we allocate emissions
between countries. One of the risks of including these within
the Climate Change Bill, for example, is that we have perverse
effects on policy-making itself. For example, in shipping, do
we end up with ships being registered elsewhere rather than being
registered in the UK? I would argue, until we have an international
agreement that would allow us to understand better how we allocate
emissions, it is quite a challenge for us to include those within
our domestic targets.
Q127 Mr Hurd: That is a bit of a
cop-out, is it not? "We haven't got an agreementtherefore
we don't publish". What is the argument against us publishing
a parallel set of emissions forecasts that include those, because
that would send quite a strong signal that this position is untenable
in the medium or long-term. It would provide quite a good lead
from this country, would it not?
Mr Mortimer: There is a leadership
argument, but there is also an argument about whether we have
policy levers to immediately take on UK legal responsibility for
emissions where we do not control all the levers to reduce emissions.
Shipping is the best example where if we took on 50% of emissions
for all shipping which passes throughout UK waters, for example,
we have precious few ways to act on those outside international
agreement; and, therefore, we took the view that it would be much
more sensible to allow the Climate Change Bill to evolve and add
emissions later, than to artificially take on responsibility for
them in advance of any international agreement. It is a mixture
of not having an agreed basis for allocating them but also not
having the international agreement, as yet, on the policy measures
to reduce them.
Q128 Mr Hurd: Presumably Government
does use some form of forecasting of these emissions internally,
do you not; otherwise you are in danger of having everything thrown
completely off course?
Mr Mortimer: That is rather different
from taking on the legal responsibility for emissions over which
we require international agreement.
Q129 Mr Hurd: I am not sure I am
talking about taking on legal responsibility for emissions; I
am just talking about actually having a rather more honest dialogue
with the country in terms of the forecast of emissions; because
the reality is there is a little elephant in the corner of the
room that is getting bigger and bigger and bigger and in danger
of completely dwarfing what you are trying to do. That is not
transparent to the public because you are all hiding behind this
saying, "We don't have an agreement on that, therefore, we're
not going to publish it".
Mr Mortimer: I think there is
a separate question about whether the Government should be publishing
data not necessarily in the context of the Climate Change Bill
but about emissions from international aviation and shipping.
Some of that data is published, but I think that is a very different
question. From the Climate Change Bill where there is a very good
quality policy argument to be had for saying, "Let's primarily
pursue this in an international forum rather than taking on responsibility
Q130 David Howarth: Is there not
something the wrong way round? You are saying, "We don't
have the policy instruments to deal with this, so pretend it doesn't
exist". It seems a rather backwards way of thinking. Is not
the point about policy effectiveness separate from the point about
whether these emissions are there in the first place and we should
be trying to do something about them, and trying to think of some
more effective way rather than waiting until an international
agreement occurs? Your point about the transfer registration,
that might work in some cases but not all, so there would be some
effect but you would not have the 100% effect you might have if
you controlled the whole thing?
Mr Brearley: To emphasise, we
are not saying you should not address these sectors and you should
not essentially be putting in place policies that do address emissions
from these sectorsfor example, PPR is one of the measures
that is intended to do that. I think that is different from essentially
giving yourself a statutory obligation to address emissions in
the sector where you do not really have full control because you
are dependent on international action to do so. The Climate Change
Bill essentially is about tackling climate change, about tackling
UK emissions, but it is also about doing so in such a way that
is credible, allows Government to be able to do this but also
balances off economic growth and poverty and other objectives
which the Government has. If we give ourselves an objective which
we think is extremely difficult to meet under current circumstances
then we do not have a credible framework to take forward, say,
to 2050. As we pointed out before, there is a clause within the
Bill that does allow us to amend this if we do get international
agreement, and if we do get a fair way of allocating emissions
Q131 Dr Turner: Have we not already
gone some way down the road of getting international agreements?
Aviation is going to be included in the European Commission's
trading schemenow that is a big enough area to be enforceable
and to have a major effect. You must surely be factoring that
into your calculations, and it will be a very small step to extend
that to shipping?
Mr Mortimer: I am sorry to go
back to the clause which allows us to amend it but the clause
allows the Bill to be amended to add emissions from international
aviation at the point at which there are international developments.
That is one international development which might be in that category.
It has not happened yet. The Government will be free in 2011/2012
when that comes in to effect that decision.
Q132 Dr Turner: To go back to the
point that Mr Hurd made, there is nothing stopping you now from
publishing parallel figures that take this into account which
will illustrate the necessity for doing it?
Mr Taylor: May I come in on that.
There may have been some confusion. We do actually publish those
items under the Kyoto Protocol, because there is an agreement
on how the international aviation and shipping items should be
accounted for nationally. They are actually recorded as a "memo
item", so they are recorded in the tables, but they are recorded
so you do have this parallel set of figures there already. In
the Climate Change Programme Review, I was just looking through
here, there is information in there on projections also of the
growth in greenhouse gas emissions from aviation and shipping.
The Government publishes that information. It just may not always
be apparent to everybody that just looks at the core set of international
Chairman: Thank you very much for a very
helpful session. I am sure we will see you again before long.