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UNCORRECTED TRANSCRIPT OF ORAL EVIDENCE To be published as HC 595-i House of COMMONS MINUTES OF EVIDENCE TAKEN BEFORE ENVIRONMENTAL AUDIT COMMITTEE
THE CHALLENGE OF CLIMATE CHANGE
Monday 4 June 2007 RT HON DAVID MILIBAND MP Evidence heard in Public Questions 1 - 57
USE OF THE TRANSCRIPT
Oral Evidence Taken before the Environmental Audit Committee on Monday 4 June 2007 Members present Mr Tim Yeo, in the Chair Colin Challen Mr David Chaytor David Howarth Mr Nick Hurd Mark Lazarowicz Joan Walley ________________ Witness: Rt Hon David Miliband MP, Secretary of State for Environment, Food and Rural Affairs, gave evidence. Q1 Chairman: Thank you very much. Welcome to your second visit to the Committee. I appreciate we have only got an hour so I will not waste a lot of time with flattering introductions. David Miliband: It is all right. I do not mind. Q2 Chairman: Can I kick off with Stern, which obviously came out after you saw us last summer? It was described, for example, by the Green Alliance as "a challenge not just to the international community, but also to the UK government that commissioned it". It is six months since Stern was published. What are the specific domestic policy measures that have been taken or are planned in response to the Stern conclusions, which are quite strong? David Miliband: I think Stern was a challenge to all countries to up their game. The answer that I would give to your question is to point first of all, obviously, to the Pre-Budget Report just preceding Stern but then the Budget, and the Budget took on its own measures about six million tonnes of carbon out of the UK emissions on an annual basis. That is on a baseline of 150-160 million tonnes of carbon, and obviously the Energy Review, because the Energy Review added to the Climate Change Programme Review that was published just over a year before, took 22-33 million tonnes of carbon out of the atmosphere by 2020. We can go through the individual measures - I do not know if that is what you want - but I would say that since Stern those have been two major changes. I would say thirdly that while it would be wrong to say that the Stern report was the sole motivating factor in the publication of the Climate Change Bill I think that Stern helped answer the second great cry of the climate change deniers, the first cry being, "The science is not proven", the second cry being, "We cannot afford to do anything about it". I think Stern, by rebutting that second cry, helped to prepare the ground for a strong Climate Change Bill. Q3 Chairman: In the light of some of the criticisms that were made in Stern, both on the science and on the economics, do you think the impact of the Stern report was as great as you would have hoped? David Miliband: I think it is greater. There is no question in my mind that the impact of the Stern report (while never a prophet in his own land) has been that around the world countless not just environment ministers but also more senior people have said to me that Stern has helped to change the debate in fundamental ways - inside their governments, inside business and in the wider public realm. Obviously, I have not seen the telegrams that have come back from Nick Stern's visits around the world, which have been numerous, but there is absolutely no question in my mind that when he goes in the cabinet of Singapore, the cabinet of Australia, the cabinets of a range of countries come to have a presentation from him, and the massive business audiences, the massive university audiences and the massive media coverage have been remarkable. Q4 Mark Lazarowicz: The Energy White Paper reaffirms the Government's acceptance of the Royal Commission on Environmental Pollution's recommendation of cutting carbon emissions by 60 per cent by 2050, and that is obviously the same premise that the Climate Change Bill is founded on, but, as you know, the Royal Commission's rationale was based on a target of limiting global concentrations of CO2 to 550 parts per million, and of course the science has moved on since then. Can the Government still be confident that a 60 per cent target is the right one to enshrine as the starting point for legislation? David Miliband: The starting point is not 60 per cent; it is at least 60 per cent, and those two words "at least", which are on the face of the Bill, are very important indeed because underlying your question is perhaps a supplementary, which might be, "Has the science not moved on since 2000 when the Royal Commission met"? Yes, it has. There is certainly greater certainty, and that is one reason why the Climate Change Bill refers to at least a 60 per cent reduction, because there is no question in my mind that there is only one direction in which the scale and effort is going to go, which is up. If we were to change I think we should do so on the basis of considered advice, most obviously from the Committee on Climate Change, but I think the Bill is consistent in that respect because it recognises that 60 per cent is the minimum. Q5 Mark Lazarowicz: But, given the way the science is going, as you recognised, and indeed Stern himself makes the point that the upper end of his range of CO2 concentration in the atmosphere is a "dangerous place to be", would it not be better at this stage to go for a higher target because that could reduce the difficulty that might face Government now or in the very near future of moving up to a higher target? If everybody is accepting that it is going to be more than 60 per cent should we not try and get that figure as far as we can from the start? David Miliband: My answer would be no for three main reasons. First of all, remember that Stern was talking about greenhouse gases, not CO2, and that 60 per cent of CO would translate to a higher level of reduction for greenhouse gases. Secondly, I think it would be quite wrong for me or anyone else just to pick a number out of the air on the grounds that it is better to have any higher number than 60. If we were to move from 60 it should be on the basis of considered scientific work, et cetera. That is why the Bill makes specific provision for that sort of change to happen. I think we should only move on after very careful consideration. Thirdly and critically, what Stern says, and what I agree with very strongly, is that we need to shift the investment decisions that are being made over the next five to ten years, and that is why having the 2020 target on the face of the Bill is so important. Although a lot of attention is on the "at least 60 per cent change by 2050", more important for the decisions that are being made by businesses today is the fact that the 2020 target is on the face of the Bill. That is what is going to govern their decisions and fortunately the target that has been set for 2020 of 26-32 per cent reduction is consistent with higher levels of reduction come 2050, so while it is right to unlock the door to a higher figure I think it is right now to build on the consensus that exists around 60 per cent, the very strong business commitment there has been recently in front of you and all the NGOs agreeing that that is within the range that is needed, so I think it would not have been sensible to have plucked another figure out of the air. Q6 Mark Lazarowicz: I was not suggesting you should pluck a figure out of the air but, given that there are question marks about whether 60 per cent is the right figure, would it not be better at this stage to decide, based upon the scientific evidence that is developing and is available now, to have a higher figure at the start rather having to come back later? David Miliband: And I keep referring you to the fact that it is "at least 60 per cent", and "at least 60 per cent" is the right figure. I think it is right to build on the consensus around the fact that at least 60 per cent in terms of CO2 is the right place to start. The first priority is to get our system of carbon budgeting up and running. That is the first task of the Carbon Committee, to get 15 years' worth of carbon budgets up to 2022, which is what business wants. Business wants that long term certainty about what they are going to be required to do up and running and then we can consider whether or not it is right to shift the figure up, but at the moment business decisions will be governed by the shorter term target of 2020. Q7 Mark Lazarowicz: The draft Bill does specify fairly rigorously the considerations that your success will have to take into account to change the 2050 target if "there have been significant developments in scientific knowledge about climate change or international law or policy that make it appropriate to do so". Clearly, we cannot foresee what is going to happen over the next 40 or 50 years but what are the kinds of significant developments that were in mind when these provisions were framed? David Miliband: The obvious one is that the science is becoming more certain but, more significantly, it is becoming worse in that the urgency of the change is becoming more stark and the evidence of the impact of global warming is becoming more stark. I would guess, knowing what most of you have said about this, that you would agree with me about this, that the danger in this whole debate about a "safe" level of carbon dioxide or its equivalent in the atmosphere is Nick Stern saying that 550 parts per million is "a very dangerous place to be". We are now at 430. One of the things I worry about is that people think that if you pick a number between 450 and 550 it is safe if you are below it and it is dangerous if you are above it, whereas actually we are in a situation where Nick Stern says 550 is a very dangerous place to be so the current level is a place that carries dangers - 0.7 degrees increase in temperature over the last 100 years, 0.4 degrees over the last 30 years. That is an unprecedented level of climatic change induced by human activity and it carries with it relatively manageable risks in this country. We are now spending £850 million a year on flood defence, 35 per cent more than we were ten years ago. It is a risk that is having to be managed. There are much starker risks in other parts of the world and it is about risk, not just you are safe at one level and you are unsafe at another level. It is about the degree of risk. We already carry a 30-35 per cent risk that average temperatures by 2050 will rise by two degrees centigrade. I think it is incumbent on us to try and explain to people that we are in a place that carries dangers now and it is about mitigating very serious consequences. Q8 Mr Hurd: Everyone recognises the uncertainties but if 550 is increasingly seen as a very dangerous place to be why do we still talk about it in terms of our range of apparently acceptable options? Should the British Government not be taking a lead in narrowing the frame at this stage? David Miliband: I think we can be slightly more precise than saying it is a very dangerous place to be. What we know is that at 500 parts per million there is a better than even chance of a three-degree average change in the temperature of the earth's surface by mid century and we know that at 450 parts per million there is a better than even chance of a two-degree change in the average temperature of the earth's surface. The debates that are going on in the G8 plus 5 almost as we speak are about narrowing within that range. What I always say to people is that that step you take towards 550 increases the risk but I think at the moment it is right to establish that range in our minds. That is not to say that we should ignore the fact that the closer you get to 550 the more dangerous it is. Q9 Mr Hurd: But is there not a risk that we will get to a point pretty soon where the experts are telling us that 550 is out of reach, in other words, there is slippage of ambition? David Miliband: That is interesting but I do not think so. I think it would be easier for me to make the opposite case, that over the last six months since Stern came out instead of the range being beyond 550 we have narrowed it down to 550 or below. I think that if we had been having this discussion six months or a year ago you would have said, "But there is no limit on the level". Even the notion of a stabilisation goal might not have been part of the common currency that it is now, so I would say to you six months on from Stern, that we have got a range, all of which involves danger but we have got to move on from that. If you are saying, "Does not 550 carry greater dangers than 500?", you are right, and 500 carries greater dangers than 450. Q10 Mr Hurd: Are we still committed to two degrees? David Miliband: Completely, and, just for the record, two degrees is a European interpretation of what constitutes the dangerous climate change that the 1992 Rio Summit involving all 189 countries, including the US, said they wanted to prevent. We have got a concept of dangerous climate change, 189 countries have committed to fighting against it, the European Union has said that two degrees constitutes a dangerous rise and we remain committed to trying to prevent that level of change. What I would say though is that it is not an on-off switch. I do not need to tell you. You know that different levels of stock of CO2 or its equivalent carry different levels of risk that you will breach the two-degree barrier. I am sorry to go on but someone told me this last week, which I think is striking and is not understood. People understand that a two-degree average change in the temperature of the earth's surface means the earth is a bit hotter. Some people know that the difference in temperature between now and the last Ice Age is five degrees, so you begin to get a sense of the scale, but what is underestimated in this and what I have learned over the last year is that this is not a linear process; it carries with it more extreme temperatures. Just to put that in perspective, I was told - and I am going to try and find out if this is right - that with a two-degree average change it will not be uncommon to have 50oC in Berlin by mid century, so associated with a two-degree change is something that is pretty unprecedented in northern Europe, and I think that is quite a sobering demonstration because 50oC is beyond our experience. Q11 Chairman: The debate has moved on quite dramatically in the last six months but I do find your characterisation of the urgency of the situation and the dangers, which I wholly agree with, very much at odds with your first answer about the adequacy of the Government's response to the Stern report. I think that the measures in the PBR last December were not in any way reflective of the urgency of the problem you have described rather accurately. David Miliband: That is a very odd thing to say, if I may say so, because first of all the PBR set out that sector by sector the Government would work through different parts of the economy to achieve significant emissions reductions. The PBR announced really significant change in respect of housing stock, the commitment to zero carbon homes. Q12 Chairman: New homes. David Miliband: Yes, zero carbon new homes. Q13 Chairman: And what proportion of the total housing stock is that? David Miliband: By 2050, which is what we are talking about, a third of the houses in the country will be zero carbon. Q14 Chairman: So on two-thirds the Government has no policy to reduce carbon emissions? David Miliband: No, that is not true. If it were true that we had no policy for two-thirds of the houses then you would be in a stronger position to say that we had no policy. People often say, "Why do you not spend money on this?" We have spent £300 million a year through the Warm Front programme on insulation, £400 million a year through energy efficiency commitment in respect of existing stock of housing, 850,000 to a million cavity walls per year are being filled by 2008, so what the PBR signalled and the Budget followed through is that sector by sector we will be taking the right range of market incentives, regulatory moves and informational changes for consumers to have bottom-up pressure, and surely the message of Stern is that this is a local and national problem that needs local and national action, but also that it is an international problem and no one, I think, can credibly say that the British Government has not been anything other than extremely forward in fashioning a very rigorous agenda for the international level. Q15 Joan Walley: I do not think anyone would dispute that there is a much greater public awareness about all the issues that we are talking about here and which our reports have centred on previously, but you have just been talking now about risk, which is the one word that comes across really strongly: the risk that is involved. I just wonder how much that sense of risk is shared by the general public in terms of environmental awareness. Some of us met with insurers the other week and they obviously see the whole issue of risk translating into insurance policies, but how much do you see the public at a local level really buying into the high level of risk which in your high office you have understood in the last 12 months but there is still a huge gap between the understanding that many people have and other people, as it were? David Miliband: "Mixed" and "limited" are the words that come to mind about the degree of risk that people are exposed to or that people perceive. In part there has been a real issue about the way in which risk has been talked about and dramatised by the environmental movement over the last ten or 15 years in that there has been a perception that, if you like, the end of the world is nigh, which is not the right way to think about this. The right way to think about this is that climate change carries with it the risk of much greater suffering by a large number of people, most of whom had nothing to do with causing the problem, so it is about greater suffering, not the end of the world. There is an issue there and it is striking that the Al Gore movie should have as its sub-title A Planetary Emergency, not A Humanitarian Emergency. It is quite a striking tell, if you like, that it is thought of in terms of the planet, not in terms of the people on the planet. Secondly, and we have to be honest about this, while it is true that if you go to Kenya you will meet herdspeople, as I have, who tell you that they have to walk three or four hours to water and their grandparents did not, while it is also true that in Australia they have the biggest drought in a thousand years, that has not yet happened here. Hopefully it will not happen here but nonetheless the degree of risk that people in this country, in my constituency or yours, are exposed to has not yet been dramatised in the same sort of way. I would not want to say that people see the risk around the corner or that when you think about insecurity people are thinking about crime and antisocial behaviour rather than the planet. However, I agree with you that there is much greater awareness and people want to make a difference, and I think that is one of the things that we have to try and help them do. Q16 Mr Chaytor: The UK's share of total global emissions is generally considered to be about two per cent, but there has been an argument surfacing recently that says that if you took into account the investments by British companies abroad it would be 15 per cent. Does the Government recognise that figure and, if not, would that make a difference? David Miliband: I would not want to hang my hat on that particular figure, but there is a generic point, which is that if you measure the flow of emissions we are two per cent of the problem. If you measure the contribution to the stock, it is obviously greater because carbon dioxide sits there for 100 years and we were the first industrialised country so we bear a greater share of the responsibility for the stock. Thirdly, you can make an argument both about British investments abroad from the city but also about our own consumption of goods that are manufactured abroad and that we import, so you can certainly make an argument that we should not use the two per cent figure as an excuse for thinking we do not have to do anything. I would not want to hang my hat on saying it is 15, 12, eight or six; I do not think it really matters. The point is we are a relatively small part of the problem but we have a big interest in being a significant part of the solution. Q17 Mr Chaytor: But should the higher figure play a major or bigger part in the general debate about it to try and increase the scale of Britain's responsibility rather than diminishing it by focusing entirely on the two per cent? David Miliband: When people say, "Look: I buy the science, I buy the economics but it does not matter at all what we do because China is opening a coal-fired power station every week so why should we bother? We are only two per cent of the problem", I think you might deploy the argument, "Two per cent is the absolute minimum that we are responsible for". I would also deploy the argument of the economic advantage to be had from being an early mover into low carbon. I would also deploy the argument that as the UK's climate change negotiator I have not a cat in hell's chance of persuading the Indian or the Chinese negotiators that they should take their responsibilities seriously if we are not doing so ourselves, and I would also deploy the argument that we are a long-term polluter so we have got the responsibility to do it. I might also deploy the argument, "Do not shield behind the two per cent. Whether you are two or ten you are still massively dependent on getting other countries to do their bit". Q18 Mr Chaytor: In terms of the relationship between economic growth and emissions, although there is a divergence between the rates, when do you expect we will see a complete disconnection between the patterns of emission and the patterns of growth, ie, continued increase in growth with no reduction in emissions? David Miliband: If you look at the last ten years, despite the hike in gas prices which has increased the amount of coal burned the economy has grown by 28 per cent since 1997. I am sure you and I have both put out many leaflets trumpeting that fact. Greenhouse gas emissions have fallen by eight per cent, so we have decoupled economic growth from carbon growth. However, because of the changes in gas prices over the last two or three years, 1997-2007 carbon dioxide emissions are up by one and a half per cent, so it is a complicated picture. I think you can confidently say that we have decoupled economic growth from overall pollution growth but we have obviously got to go further. I think it is interesting that the environmental industry should be one of the fastest growing sectors of job creation in the economy. Half a million people now work in the environmental industry compared to 175,000 four or six years ago. That is pretty striking, but there is a lot more gain to be made from low carbon economics, I would say, in everything from the research right through to the manufacturing and the services associated with it. I had a presentation this morning from a very large car manufacturer about how they saw the agenda shifting towards electric and hydrogen fuelled cars. I told them about the study that the Chancellor announced in the Budget by Julia King and Nick Stern of how to take the carbon out of the UK car fleet, 33 million cars over 20 years. They thought that was a perfectly manageable time frame. It is interesting. Q19 David Howarth: Can I take you to another aspect of the transport sector, which is aviation? David Miliband: If you must! Q20 Chairman: As you know, the draft Bill excludes international aviation and shipping from the target, although it creates a provision to bring it back in. We have discussed this several times and I still do not understand why that is the case, why we cannot just include aviation's emissions when they are made in international waters in the ordinary way in which you would do that, so perhaps you could explain why they are excluded. Can I also ask you something very specific about the way that the Bill was drafted? The power to put international aviation back into the target seems to depend on there being a change in international carbon reporting practice relating to aviation and shipping. Does that mean that the rest of the world has a veto on what power you as Secretary of State would have to take unilateral action if you thought that was the right thing to do? David Miliband: No, no one else has vetoes. If I may say so, it is a slightly glass-half-full way of looking at the Bill to say we have excluded aviation and shipping when a whole clause, I think it is clause 15 or 16, is dedicated to making it easy to include aviation and shipping, and which clearly should be done because aviation and shipping are important contributors to global emissions. In respect of aviation, there are two things that are under discussion at the moment that we want to get sorted out before including them. One is the actual measurement and how you include the fact that you are emitting at 35,000 feet, how much more damage does that do, so a calculation of the amount of damage. Secondly, there is the allocation issue. If you are flying from A to B do you allocate to where you are going to or where you have come from, or do you do half and half? We want to get those things sorted out. This is not punting it into the long grass. We now have agreement that there should be aviation included in the EU ETS by 2011. Those two issues will have to be resolved as part of that process. Once they are resolved we can get aviation in, so I think it is a reasonably responsible approach and the fact that the EU should have said that caps should be set for aviation's entry into the trading scheme on the basis of 2004 levels of emissions is a good thing because that means that they are not just allowing for lots of business as usual over the five or six years before they include it. They have used 2004 as a base year, when it must have been three or four per cent, I cannot remember the exact figure, of total EU emissions, maybe a little bit higher. It is not like we are losing ground by getting the number-crunching right before including it. Q21 David Howarth: But you will have seen, and we have seen, the Tyndall Centre's method of allocation, for example, which follows they are using the half-and-half rule. Why can we not just start with the half-and-half rule and then move to something else later if something else comes along rather than start from a situation where we are saying we do not move unless we have agreement? Is it not going back to the previous discussion about using the two per cent as a possible excuse not to have it? David Miliband: I do not think so. If I were sitting here saying, "I am hoping the EU will get agreement to get aviation into the Emissions Trading Scheme. I do not know when it will be and therefore I do not know when we will sort out these calculations", I think you would be in a stronger position to say, "Look: just go with the common sense proposal by the Tyndall Centre". Since we have got EU agreement to get this in, since we are going to have 27 nations figuring out the basis of allocation methodology, I think it is not unreasonable for me to say let us do it on a basis that everyone else uses and then it will be in and we will be working on a common basis. We are in a pre-legislative phase, so I would not want to give the impression that I do not welcome challenge and suggestions on it, but my instinct is that I do not feel it is an uncomfortable position to defend. I am not sure I would tell you it was an uncomfortable position to defend if it were uncomfortable, but because we have got the EU ETS agreement I feel pretty comfortable defending that. Q22 David Howarth: What about the policy consequences of thinking about aviation in a more strict way? You will have seen the figures, and we quote them in our report, that if we take the best scenario for the growth of aviation and stick to the 60 per cent figure aviation will take up a very large proportion of emissions by 2050 and if you go beyond that and look at a high growth scenario for aviation, which would be plausible given present trends, and you have a higher target, an 80 per cent target, then aviation will be taking up the whole of the country's allocation, and plainly that is an absurd situation to obtain or predict. Why is there no apparent movement on the most obvious policy measures, for example, bringing policy on airport expansion into line, which has got to be the policy for the longer term? David Miliband: I would say two things about that. One, in and of itself it does not seem to be unreasonable for us as a country to make a social, economic and technological choice that aviation should be a rising share of our total allowable emissions as long as we live within our emissions envelope. What it requires though, if aviation is going to become a rising share of the emissions that we are allowed, is that we take more radical action in other sectors - electricity, heat and transport. As long as we live within our emissions budget, if you like, our carbon budget that is set, it seems to me perfectly legitimate for a country, given the level of technological progress that exists in aviation compared to other areas, to say that aviation will be a rising share of our total allowable level of emissions. There is no aviation company able to make the presentation to me that the car company did today about taking all the carbon out of air transport in the way that you can think of doing in respect of cars. You can, the experts say, get between 17 and 20 or 23 per cent improvement in the emissions from aviation through technological things but also the way airlines are handled and circling round Heathrow and all of that sort of thing, so it seems to me there are technological, social and economic reasons why people might want to choose to fly more. If they do we are going to have much less pollution from other sectors, which is far from impossible. The second point is that in December Douglas Alexander set out for the first time that any airport expansion will require an emissions statement from the proposer of an expansion and to sit in front of the minister the emissions test that will be established. That means that for the first time anyone thinking of proposing a new runway or airport and a government minister or a planning inspector thinking about that would have to think about the emissions impact, so you have got the EU ETS applying a cap with a price on emissions. You have then got an emissions test for any airport expansion, so I do not think it is quite right to say there is no recognition. What we have tried to do is do it consistent with the principles of Stern, which is that any section of the economy should bear the price of the pollution that it generates within the cap that is established. Q23 David Howarth: The problem with the emissions test was that every time we on this Committee have spoken to transport ministers either about airport expansion or about road building they have come back with a notion that what matters is the proportion of overall emissions from transport or to what extent would that change with this project, and that is always going to be a small figure. The problem with that is that you need a firmer line in public policy to tell you where you want ----- David Miliband: Yes, but if we are saying that there is a cap on aviation emissions as part of the European Emissions Trading Scheme, then surely that is providing the sort of hard cap that you are talking about. It is a very difficult thing to put into English, but the fact that we have got the commitment that aviation, which is currently seven per cent of emissions, should be going into the EU ETS, the fact that there will thereby be a cap on emissions, the fact that if, for the sake of argument, aviation grows as fast as or faster than you suggest or technological progress in aviation is slower than you or I expect, the price of carbon will rise within the ETS, thereby increasing the incentive for aviation operators and anyone else to take tougher action against emissions. It may be surprising for me to say this but yes, global warming is the biggest market failure, as Nick Stern said, but the answer is not to abolish markets. It is to put a price on the pollution that is corroding and corrupting those markets. If aviation goes the wrong way in terms of emissions then the price mechanism kicks in in a serious way. I have not checked on the exchange today but the fact that for phase two of the ETS carbon is trading at €20 per tonne, €19.65 last week, suggests it is beginning to be priced in in a serious way. Q24 Chairman: What you have described certainly is very adequate in theory. I think those of us who have observed phase one and even phase two of the EU ETS so far also are aware of the considerable power of the aviation industry lobby, so we are not holding our breath for very tight limits to be set in the early years of aviation inside the ETS. David Miliband: I understand why you say that about phase one. Tell me why you say that about phase two. Q25 Chairman: Because phase two does not take account of aviation at all as yet so we do not know what the figures are going to be when aviation comes in, but unless the European Commission and the Member States show a great deal more robustness in the negotiations against what is a far more powerful lobby, and you have got the whole might of the United States aviation industry lined up against you in year two, I would not be hopeful that in the first four or five years of aviation inside the ETS they would be subject to a very tight cap. David Miliband: I take seriously what you say about that. Let me just play this back to you though. No one is saying the European Commission have not been tough on national allocations for phase two, tougher than you might have - I mean, I know you are not one of the Europhobes of the Tory Party, but you might ----- Q26 Chairman: I might be still. David Miliband: I will try to make sure you never get Shadow ministerial office. Without being a Europhobe you might have said, if we had been sitting here a year ago, "The Commission has been far too lax in phase one. There has been massive over-allocation. We have to have tougher action in phase two". We have, including the French. If I told you that the French cap would have been rejected out of hand by the Commission and that they have battered their way through a tougher solution, you would have said, "Well, yes, let us see. The proof of the pudding will be in the eating". Well, they have done it so let us recognise that. Every allocation is going to be within its Kyoto requirements and below the current level of emissions, so scarcely in the market. Secondly, we were pushing for early entry of aviation into the ETS. In the end it was 2011/2012, which was later than we had originally argued for. However, the fact that they have set 2004 as the base year is almost better than having it coming in in 2008 but with 2008 as the base year. That is why I slightly raise my eyebrows when you say phase two has been shown to be inadequate. I think that is premature, if I may say so. Q27 Mr Hurd: Let me talk about offsetting. David Miliband: That was what I was meant to be coming to talk about. I am supposed to be the world expert on the offsetting market, which I am not. Q28 Mr Hurd: There has been a lot of noise around the integrity of offsetting. Anyone who read The Guardian on Saturday would have seen a long article on it. David Miliband: I am afraid I have spent all my time reading the glowing tribute to the Prime Minister by Martin Amis. Q29 Mr Hurd: Which was not in The Guardian. As you will be aware, there is a lot of concern about the integrity of offsetting, both in terms of the compliance market and the voluntary market. I had a meeting last week with a large British bank which wanted to offer an offsetting scheme to their customer base but were put off by the fact that they just felt the sands were shifting the whole time and they did not know what they could trust. My first question to you is, what conclusions have you reached about the degree to which the Government should now encourage people to offset, and, secondly, the degree to which the Government should meet our own national obligations to offsetting? David Miliband: I do not want to end your career as well as the Chairman's by saying I agree with you. Q30 Chairman: Mine ended some time ago. David Miliband: Maybe I should try and end your career by saying that. One, I think it is right for national government to be robust. There are 60 offsetting schemes in operation in the UK and you know this as well as anyone else. Four of them met the Defra standard that was published in our consultation document in February. There you have the argument that the consumer needs to be put properly in the picture about what constitutes an offsetting standard, but, in respect of the Government, I am flying to the States today. The offsetting will be done through a completely recognised gold standard as offset. Before you ask, offsetting is not as good as not emitting in the first place but nonetheless half a loaf is better than none at all and that is what offsetting represents. It represents a mitigation of the damage that is done and it is worth doing. As part of a global carbon market it is valuable because it helps invest in the low carbon energy infrastructure that people need. Q31 Mr Hurd: But in terms of the question about meeting national obligations we have just concluded a report on emissions trading and it became quite clear from that report that a large proportion of the next stage of emissions reductions this Government will effectively purchase in overseas markets. Do you agree that we should accept that perhaps in terms of a maximum of national offsetting? David Miliband: That is interesting. I got this wrong on Newsnight a couple of months ago. Half the economy is covered by the European Emissions Trading Scheme and the rules governing the amount of emissions reduction that you can purchase abroad - this is what you are talking about: supplementarity - are designed to ensure that your purchases abroad are to supplement your domestic effort, not to be instead of it, and it is all defined in terms of the percentage of effort. I said, I think, that two-thirds of the reduction could be purchased overseas. That was wrong. Two-thirds of the effort that you have to make against business as usual can be purchased overseas, so in phase two of the Emissions Trading Scheme our cap requires a reduction of 12 per cent. Two-thirds of that effort can be purchased overseas; in other words, eight per cent, so eight per cent of our total emissions can be purchased overseas, in other words two-thirds of the effort, not two-thirds of the total. I hope that is clearer than it was before. You are nodding. It should be supplementary, it should be defined in terms of a fraction of the level of effort and the rules should be taken from international best practice, and that is what the Climate Change Bill does. It says we will follow international rules on the basis of the advice of the Climate Change Committee, so I think that is the sensible thing to do, but remember it is a global problem so reducing by a tonne the emissions in Bangalore is as valuable as reducing by a tonne the emissions in Birmingham. Q32 Mr Hurd: If they are additional, yes. Can I press you a little bit on the question of the Clean Development Mechanism, because it is a hugely important mechanism and there is a whiff of a scam around it at the moment, and The Guardian headline was, "All Profit No Carbon", and this is very damaging to its integrity. What is the British Government doing to support greater integrity in terms of that mechanism? David Miliband: This was a big topic at the Nairobi UN Conference last year, mainly, it has to be said, about why there was not more CDM in Africa as opposed to China and India rather than the integrity of it, but the integrity of it is very important. First of all, we always make sure that our own offsetting is done through completely copper-bottomed projects and we can take you to the projects so that you can see them. Secondly, we work very hard with the UN itself - it is a UN-mandated scheme, the CDM - to make sure that they are not the victims of scams. What is interesting at the moment is that the criticism of CDM is that it has got too much bureaucracy associated with it. Although it probably has got too much bureaucracy, the bureaucracy is not tackling the scam, so we have to find a way of taking the bureaucracy out without binning the scrutiny and that is what we are arguing with them to do and that is what they are trying to do themselves. The other thing I would say to you, which I think is relevant to this, is that as more developing countries become enthusiastic about the potential of CDM you are going to get more, better projects coming forward and I think that is important as well. Q33 Mr Hurd: If I can take you back to the voluntary market and your code of practice, we are just concluding the inquiry into that and we heard complaints from basically two quarters of people. The first was the people who are structuring the smaller type projects. The conversation was that they were talking in Nairobi about the fact that the CDM appears completely to ignore Africa and the argument was that the Government's rather heavy-handed approach towards raising the bar in terms of standards was in their view in danger of killing off the smaller projects, killing off the more innovative end of the projects market, so basically shutting the door on African projects. I would like your comment on that. The second critical voice was from the aviation industry, which was clearly in a big sulk and their message was, "We are keen to structure innovative offsetting schemes but the combination of this heavy-handed approach and the way in which the air passenger duty was introduced has put us off". David Miliband: What has air passenger duty got to do with it? Q34 Mr Hurd: The fact that you doubled the taxation. David Miliband: But what has that got to do with the integrity of the offsetting market? Q35 Mr Hurd: They were in a sulk because they basically said, "We were going to do all this innovative stuff to improve our performance and help our passengers offset but we are not going to do it now because of the way the Government is implementing it". David Miliband: The heavy-handedness was about the fact that it was too bureaucratic? Q36 Mr Hurd: And was just basically saying, "This is the standard you have got to maintain", which was a very high standard and people who were doing smaller scale projects might not be able to comply with it. David Miliband: The answer to that is two-fold: one, we are trying to take the bureaucracy out of it, and, two, we are trying to take the bureaucracy out of it without taking the scrutiny out of it by bundling projects. That was what the whole debate in Nairobi was designed to achieve because at the moment each project needs a vetting process. That can be tough for smaller projects but if you can bundle them up then you can get through. I have not got a note on this but I am happy to write to you about progress since Nairobi in terms of bundling up projects and making the process go more smoothly if that would be helpful. We have just had the Bonn subsidiary bodies' meeting in May and so I could easily find out where we are on that. Thanks, by the way, for all of your support on the raising of the air passenger duty. I noticed your strong vote for us not on that issue. Q37 Mr Hurd: What about the point of the aviation industry? Their point was that an opportunity that was being missed here by the way the policy has been implemented. Should we not be encouraging them to offer offset schemes? David Miliband: Of course we should. It is open to any airline, when you book your flight and when they offer you cut-price insurance, to also say, "We presume you will want to offset, tick. Untick this box if you do not want to offset", but they do not do that. It is alleged that you can find it on some of airlines' websites on, you know, page 9000 of the terms and conditions contract. Of course, it would be good for them to make offsetting a bigger thing, and I recommend going on holiday by Eurostar, which I recently booked, and there they explain all the virtues of going on holiday by train. Q38 Mr Hurd: The last aspect of offsetting, forests, has soared up the political agenda, not least because of the emphasis that Stern put on it but it is a highly sensitive area, as you know from your own Brazilian press clippings. What conclusions have you reached in terms of - and I know Defra is taking a lead on this - how we can structure an effective conservation credit for countries to preserve forests in a way that does not swamp the carbon market? David Miliband: I met the Brazilian President and Foreign Minister on Friday and they have a real sense of urgency about wanting to see more progress through the G8 plus 5 on this, rightly. The foundation is having sustainable forestry schemes. This is not just about paying people not to log; it is about sustainable forestry and there is a lot of Brazilian experience on that. Secondly, you have to have a baseline against which to measure progress and the Brazilian proposal in Rome last August was a step forward on this. I met all the other rainforest nations at the Nairobi conference and I think most people recognised that that Brazilian proposal established a new basis for discussion. Thirdly, I think you have to find a way of bringing it into CDM, and this is an intensely complicated area, but my prejudice is that you are better off bringing it into CDM than not and you are better off mitigating the dangers of what you call the swamping of the market. The fourth thing, which I think is relevant, is that if you do have a sustainable basis and if you do it as part of the UN framework, you can mobilise private as well as public money for it, and I think that is worth doing. The public money is very important, that was where I think the Chancellor's announcement about the Congo Basin was very, very welcome in the Budget. That will be another thing to add to the litany of good things that have happened since Stern; £50 million going to tackling deforestation in the Congo Basin which was announced in the Budget in March, which has subsequently been matched by the Australian Government who are also putting a lot of money into this. I think that is the way I would approach it. Q39 Colin Challen: Turning to personal carbon allowances, a year ago on the same day when you came to this Committee you told the Audit Commission that the idea was a "thought experiment". I am just wondering how the idea has developed in the last 12 months. David Miliband: I think it has developed on three tracks, this is the idea of a carbon credit card. Track one is that we have got more research about how it will work and who it will affect. The Bristol University study that went into this, which will be published, rather confirms the work of the Tyndall Centre that is broadly progressing. Second, and significantly, you have got organisations like the Royal Society of Arts running pilot schemes, which I think is good and interesting. Third, you have got a public debate about it which also takes it forward. Someone said on the radio yesterday that there are huge organisational and technological issues associated with it, but so are there with Oyster cards and no one thinks the Oyster card is the end of civil liberties as we know it. I would say on the idea of personal carbon allowances that the thought experiment carries on. Q40 Colin Challen: Carries on, but in the light of those technological difficulties, and perhaps the financial complexities of introducing such a scheme, are you moving towards a position where you think that the benefits of such a scheme would outweigh those difficulties? David Miliband: I have always been clear that if you can make it work the benefits are large. Forty-four per cent of emissions are household emissions. You have got to make sure it is workable and equitable, and that is what we are trying to look at at the moment. The fact that organisations are actually piloting it is a good thing. Q41 Colin Challen: It is certainly true that the RSA are doing a lot of work and Tyndall have done a lot of work. Perhaps it is time that the Government itself thought about introducing a pilot scheme which perhaps would carry a lot more weight and could be more extensive in its scope so that we have a far sounder evidence base on which to make a judgment about our policy. David Miliband: Because of our unblemished record of introducing complicated technological solutions to tricky policy problems! Q42 Colin Challen: Absolutely. David Miliband: The schemes that are being run at the moment are going to reveal quite a lot. I am not sure that there is a particular need for government to duplicate that, they seem to me to be covering quite a wide range of issues. Q43 Colin Challen: But they can be kept at arm's length, perhaps, and maybe this idea does need a greater push for it to be properly examined and, given the urgency of the problem, that should be a feature of the way that we do think of developing it. David Miliband: I had not actually thought of that. We could think about it. No one has said to me that the pilot schemes that are going on at the moment are not covering the issues in a serious way. If you found that the pilot schemes that were being run were not covering the right things then I suppose you could make a stronger argument for government doing it. Q44 Colin Challen: Being involved in one of them quite closely, I would nevertheless say that a government scheme perhaps just looking at the introduction of personal carbon allowances in a more limited sense --- David Miliband: What, geographically or limited --- Q45 Colin Challen: Possibly that way or just looking at domestic emissions rather than across the whole field, including transport, you could actually get a lot more information when no policy of this sort has ever been attempted before, so it does require perhaps more than just the resources, no matter how good they are, of the RSA and the Tyndall Centre to examine it. David Miliband: Let me think about that. That has not been raised as an issue before so let me think about that. Q46 Colin Challen: Would you be surprised if the idea emerged in any of the main party manifestos in time for the next General Election in any shape or form? David Miliband: What do you mean, "Would I be surprised"? Do you mean do I think it would be shocking? Q47 Colin Challen: I am just asking you, would you be surprised to see the idea in a party manifesto? It might be in the Green Party manifesto but since nobody pays any attention to them very much --- David Miliband: Oh, dear. Q48 Colin Challen: I am asking whether or not you would be surprised if one of the main parties put that in their manifesto. David Miliband: I think it is something that all the main parties will think about, yes. Q49 Colin Challen: Okay. I hope that is a recommendation. David Miliband: I only have an input into one of the main parties' manifestos; it is for others to decide what they do. Q50 Colin Challen: It will be interesting to see what others do, particularly in this field. The policy itself has been criticised on many grounds, of course, some on civil liberties grounds, if you introduce this universal carbon card, but also it would affect people living in remote areas or people who live in large, leaky, non-draught proofed houses. Do you think that the kind of work we are doing at the moment examining the idea is really going to eke out the question of equitable distribution? David Miliband: I think it can make quite a big contribution to it. My view on this is that if you are in government and you have been in government for ten years and you are unwilling to look at ideas that, to quote you, "have not been tried before" then you are asking for trouble, you are asking for political trouble, because you are basically saying, "We are so stale and so stuck in a rut that we are going to discount all this and we are not the home of radical thinking". Actually, the fact that we have been in government for ten years and we are the Government and the party that is carrying forward an idea that was described by you - I do not think you will mind me saying this - when at one meeting you asked whether or not we were taking it too fast, that suggests to me we are asking the right questions. My approach to this is that as a party of Government that has been in ten years it is right that we are looking for bold solutions. We have got to test them out, we have got to make sure they are sensible, we have to make sure that they are in tune with our values and the considerations of equity are paramount in that for my party, but it is right that we look at it. I do not think we should make any excuses about saying we have not decided but we think it is worth working through. Q51 Colin Challen: What do you think it would take to help the idea gain public acceptability? A lot of people might say that this is simply rationing by the back door or some other evil which they would not want to contemplate in a very consumerist society. What actually would convince people that this was worth it? David Miliband: I think a workable plan would help, that has got to be the starting point. It is one thing to have a thought experiment, it is another thing to have pilot projects that are ongoing but, as you say, are still working through. Let us see where we can take it. The other thing is there are a lot of other things that need to be done in any case, and certainly as a prelude. While you have not got proper information for people, either from real-time electricity displays or from proper labelling on food items, then it is legitimate for them to say, "Well, hang on, if I don't know how much damage I'm doing how can you start charging me for it". I think that is a legitimate point and that is why it is right that we press ahead on the real-time displays, it is right that we press ahead on the carbon labelling and it is right that we press ahead on the public subsidy for some of the basic ideas like cavity wall insulation and loft insulation, et cetera, for poorer families. Those are the things we have got to do anyway but they also seem to me to be the foundation of any scheme that could really work and because it is a very large enterprise you would want to be absolutely sure you knew what you were doing before you went into it. Q52 Colin Challen: All that is true. How long do you think it might take before this idea could be accepted in Government or rejected as being perhaps impractical or whatever else? David Miliband: The answer to that has got to be it depends; it depends what we learn from the projects that are going on. The RSA project has been going for maybe just six months. It depends what we find out. If we find big technical problems then it is obviously going to take longer than if we do not. Q53 Mr Hurd: I just want to get this in the right frame. Is it fair to think of it as a mechanism that we may well need in the future if the evidence moves to the point where we are in crisis and carbon rationing is the only way forward in this and because of the scale of the imminent crisis people accept it and, therefore, we have to think it through, work it through and have it ready as a mechanism, or are you saying it is a sort of ultimate fallback Plan B or is it something that you see could be coming to the fore as a Plan A? David Miliband: I do not see it as a crisis response but, to describe it as Plan A, I am not sure I would put it like that. It is a mechanism that could be a way of helping individuals maximise their contribution to the carbon reduction targets, the emission reduction targets that we have set in the Climate Change Bill. I do not think it is just a matter of verbal dancing to say that it is odd to think about it in terms of rationing because you ration goods, not bads. The point about pollution is it is a bad. Q54 Mr Hurd: This is rationing, it is a cap. David Miliband: I do not think it is just a verbal thing because we are trying to establish a basis on which we minimise the damage that we do to ourselves, and to future generations admittedly, and that seems to me to put it into a slightly different camp, or a different place. At the moment we are all setting out - there is cross-party support to establish binding emission reduction targets, although there might be discussion about whether it should be five years, 15 years, et cetera - on that path for the country as a whole and we have then got to find a way for different sectors, the economy and a different balance of government and business individuals, to make their contribution within that overall camp. That is slightly in brackets, but I am not sure I would describe it as a rationing mechanism. Q55 Mr Hurd: I am just trying to get a sense of the urgency with which Defra is pursuing this. Is this something that a few bright people are throwing around in a top room in Defra or is this something where you are saying, "I need answers on this by X"? David Miliband: We get to 26 per cent reduction by 2020 if we implement all the policies that we have got at the moment, so that is the base on which we are building. Obviously we want to go further and this is one idea that is worth thinking through. It is an idea that has greater complexity attached to it than some of the other ideas that are around. The 26 per cent reduction that we are on track to achieve, I think I am right in saying, does not include the zero carbon homes, for example. That is something that we are definitely going to do and we are putting in a huge effort jointly between us and the DCLG to get it done. This is an idea that would dramatise the individual's contribution to it. Q56 Chairman: One final topic. Did you think that the speech by President Bush last week proposing what appeared to be a sort of separate parallel initiative of discussions with countries that are large emitters was helpful just before the G8 and EU Summits which are going to be very concerned with how we take forward the Kyoto process? David Miliband: I think that it is not helpful for anything that muddies the waters about the primacy of the UN process, but I do not think that is what the President said in his speech. I read the speech and saw him say three important things. One, for the first time he committed the United States to a stabilisation goal. He did not say what it should be but, nonetheless, the first step to having a stabilisation goal that is a specific number or figure is you have got to accept that there should be one and for the first time he has said that there should be one. Secondly, he said that there should be national interim targets. He did not say whether they should be sectoral or for all greenhouse emissions but, nonetheless, he said there should be interim targets. Thirdly, the speech actually did refer twice to the UN process, so I think one of the things that is going to be discussed at the G8 is the relationship between various ad hoc groupings, which we ourselves have sponsored. Remember the Gleneagles dialogue, which most people would say has been a productive process, that has been an ad hoc grouping feeding into the UN which is ultimately the only body that can establish legally binding limits. I would describe the President's speech as an important step forward but one which requires further urgent and detailed discussion. I am going to the States later today and I will be trying to say there that America has a huge amount to contribute to this global battle against climate change, that it will not be won without the United States. It is obvious that since it is a global problem no one country can solve it, but I would confidently say that without the participation of the United States it will not be solved. Thirdly, the US has a huge amount to gain from putting itself at the head of this, and increasingly that is recognised by US states, US cities and US business, and I hope to learn more about how evangelical groups, politicians, states, all of whom I am meeting, see that. Obviously the discussion that needs to go on with the President is the extent to which he wants to be specific now, for example, about the stabilisation goals. I think it is important that we see the speech as an important step forward but one that now needs to be followed by further steps forward. Q57 Chairman: We promised to only keep you an hour, so thank you very much for coming in. There has been a lot of useful discussion there and I am sure we will have another chance to pursue this issue with you again in the future. David Miliband: Thank you very much.
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