Examination of Witnesses (Questions 240
- 259)
WEDNESDAY 16 MAY 2007
MR MICHAEL
ROBERTS, MS
GILLIAN SIMMONDS,
MR GARETH
STACE AND
MR ROGER
SALOMONE
Q240 Lynne Jones: What about the
CBI's view on this?
Mr Roberts: On your point about
purchasing international credits?
Q241 Lynne Jones: And the floor on
the price of carbon.
Mr Roberts: On the point of buying
overseas emission reductions, our view is fairly straightforward,
which is that the approach in the UK should be consistent with
the approach that is taken internationally. First of all, there
is the principle of supplementarity which applies here. In other
words, the delivery against our own targets should not be exclusively
through purchasing overseas credits. It has to be in addition
to domestic action. There is a convention which has grown over
time about what supplementarity means. It means effectively domestic
action up to at least 50% of the total effort. I do not think
our view is that we should be looking to achieve our targets by
unfettered purchasing of overseas credits. What we should do is
adopt an approach which is internationally recognised.
Q242 Mr Rogerson: On this concept
of flexibility, could we say that there is an argument that the
whole point of this is to take it beyond the political debate
and set in stone what we want to do, so that you are taking it
away from political pressure and the only political pressure is
on the government to deliver as opposed to all the other pressures
on the government to back away from the targets that have been
set? Would you not agree that allowing that flexibility means
that there are not necessarily the organisations you represent
but others as well in society who will be pressing to move away
from those targets? In allowing us to do that, we are undermining
the whole thing.
Mr Salomone: I see where you are
coming from. We would not see having flexibility in there as an
entirely bad thing. Having rigid targets is not a substitute for
a sound judgment by an expert body that the Carbon Committee provides
in government. There is a role there. We are not going to be able
to set accurate targets for every single eventuality necessarily.
That is our main point. There needs to be a balance between certainty
and flexibility but that lies somewhere in the middle.
Q243 David Lepper: The role of the
Committee on Climate Change is obviously going to be an important
one. The government sees the role of that Committee as independently
assessing how the UK can optimally achieve its emissions reductions
goals. In EEF you talk about the Committee having mainly advisory
rather than a policy making or proposing role and you see that
advisory nature as central to its independence of government.
Could you explain that, please?
Mr Salomone: What might be a problem
for the Committee on Climate Change would be proposing what the
budgets are, setting the budgets and then reviewing whether progress
against those budgets was achieved. There could be a conflict
of interest there. It is far better to have someone standing back
objectively and making a recommendation that these are the levels
of carbon constraints that look feasible or these are the levels
we need to achieve our emission reductions targets. For government
to set the targets and for the Climate Change Committee to review
them. That might give it a degree of independence there.
Q244 David Lepper: It seems to me
to weaken the role of that Committee.
Mr Salomone: In setting the targets?
Q245 David Lepper: You see it as
a body that should be reviewing what has been achieved?
Mr Salomone: Advising on what
should be done.
Q246 David Lepper: Advising and then
reviewing rather than setting the targets?
Mr Salomone: That would be the
responsibility of the Secretary of State.
Q247 David Lepper: The kinds of analogies
that we heard earlier this afternoon and indeed from some of our
witnesses on Monday with the Monetary Policy Committee are not
the kinds of analogies that you feel would be appropriate to the
role of this ----?
Mr Salomone: We would probably
favour the model that is being put forward now.
Q248 David Lepper: Have you looked
at what the Bill says about the range of expertise which should
be represented on the Committee? I address this to all four. Does
that seem adequate? I wonder if you have any views—as well
as the individual members—on how those members should be
resourced to carry out their work.
Mr Stace: The members of the Committee
must be experts, not stakeholders. The list we see within the
Bill sets out the expertise that is needed. In terms of resource,
this Committee needs to be adequately resourced and, more importantly,
to enable them to be an independent body its secretariat needs
to be independent. There was some talk earlier that perhaps the
secretariat should come from the Office of Climate Change. We
would be thinking that they may recruit certain people who may
be currently part of the Office of Climate Change but once they
step out of that and step into the role of the secretariat for
the Committee on Climate Change they would be independent of government
and government departments.
Ms Simmonds: We would reflect
those views. We would like to see a secretariat that is independent
of government. Mindful of what was discussed earlier, that is
of also not wanting it to be a conflicting relationship between
government and the Climate Change Committee. There is a need for
that to be avoided. I do not think we necessarily want to see
a Climate Change Committee that is criticising government through
high profile public statements, but rather through a relationship
that is about monitoring progress and providing recommendations
in response to its progress.
Q249 David Lepper: So far as the
resourcing goes, a clear distinction between government departments
and those who are working on behalf of the Climate Change Committee?
Ms Simmonds: I think so. Without
that you have potential to co-opt the Committee or to weaken the
Committee.
Mr Roberts: Just as the draft
Bill suggests the expertise that needs to be reflected in the
Committee, one will want to see some sort of reflection of that
type of expertise in the secretariat. That might suggest that
the pool of the secretariat is not just from the classic Civil
Service but from outside of it.
Q250 David Lepper: Industry perhaps?
Mr Roberts: The scientific community
perhaps, for example.
Q251 Lynne Jones: I presume from
the earlier comments that you are all comfortable with the idea
of the enabling legislation to introduce new trading schemes?
Do you want to make any comment on that?
Mr Roberts: In our evidence we
did indicate that, whilst we are comfortable with the basic principle,
we are concerned that that might lead government to pursue particular
emphasis on a particular part of the economy. We want to watch
out for that. In other words, by focusing particularly on the
use of powers to introduce trading schemes, the natural inclination
might be to focus unduly on additional effort that can be achieved
through the business community rather than through other parts
of the community.
Q252 Lynne Jones: One trading scheme
could be personal carbon allowances. What is your view on that?
Mr Roberts: It is not one where
we have developed an extensive view but personally I think it
is an interesting idea. There are some significant issues to overcome,
both practical issues and also some social equity issues. There
will be parts of the community that are perhaps more at ease with
the idea of trading on the back of a personal carbon quota and
some parts of the community that might find that a bit more challenging.
Q253 Lynne Jones: You heard the discussion
earlier about other policy instruments that could be introduced
through enabling powers. Do you have any suggestions or concerns
about this?
Mr Salomone: Our understanding
of the rationale of the enabling powers is that there already
are the means to introduce fiscal measures and regulation without
recourse to primary legislation and that is the concept of bringing
this into here so that there is the same opportunity for emissions
trading schemes. We would echo a lot of the views of the CBI.
It is quite a wide ranging power, hopefully one that will be exercised
with caution and, in that respect, we are glad to see that the
trading schemes that can be introduced through this route would
have to involve free allocation because we think that there are
potentially more serious financial consequences for emissions
trading schemes with, say, auctioning and we think it would be
appropriate for those to come forward via separate legislation.
Q254 Lynne Jones: Professor Grubb
was suggesting that the Climate Change Committee should have some
oversight of these areas of policy. What do you think? Should
that be enshrined within the legislation or should that just be
a general competency?
Mr Salomone: I think it is in
the Bill that the Secretary of State would have to consult the
Committee on Climate Change before using enabling powers. That
would seem appropriate.
Q255 Lynne Jones: I do not mean enabling.
I mean other measures, building regulations, social measures.
Mr Salomone: It would definitely
be appropriate to look at what the appropriate burden across society
is and what types of policy instruments are most appropriate in
different sectors. Absolutely.
Mr Roberts: Yes, we would agree.
Q256 Mr Drew: Can I be sure what
your response would be to a community that might want to go further
than the government is currently suggesting? This notion of a
carbon free community is very attractive but that obviously has
an impact on your members. There is a real danger, if you saw
communities being picked off because they have a lot of ambition
but individual companies would say, "If you do those sorts
of things, we are out of here". How do you try and remedy
that danger, or do you not see it as a danger? Do you see that
we must go forward? Mr Stace, I saw your eyebrows raised. That
is what we have learned from Germany, that there were states that
have gone further and faster and have now gained by it but there
was pain in the short run and there must have been some interesting
discussions with industrialists.
Mr Stace: It is a very difficult
question.
Q257 Mr Drew: It is a hypothetical
one but it is one that could well arise.
Mr Stace: Just as an individual
you might find it a doable thing to become carbon neutral but
in terms of heavy industry, if you are producing steel, you are
producing carbon at the same time currently. With carbon capture
and storage and other measures, the steel industry currently is
undertaking a European funded project to develop ultra-low carbon
steel and also is looking to carbon capture and storage. Yes,
in the future, we might see a significant reduction in the amount
of carbon produced per tonne of steel. However, in terms of locally
here within the UK moving towards that, in terms of sectors that
have very limited abatement technologies currently and more importantly
are very exposed to international competition, such as steel,
you have a very difficult problem there. Once you start to internalise
the cost of carbon within your production and therefore increase
your cost, can you pass that cost on to your customer? We believe
there are certain sectors of the economy that can pass their costs
on. One of the easiest ones is the electricity supply industry.
At the other end of the scale is the steel sector that cannot
pass its costs on and we see the issue of carbon leakage as being
very significant for our sector and potentially very damaging
for our sector. I do not know if that fully answers your question
but for certain parts of the economy and society it will be much
more easy.
Q258 Lynne Jones: This is for EEF. You
have argued that carbon allowances should be distributed without
charge, for free. Why should this be the case given that there
is a lot of evidence that, when permits were allocated free of
charge through the EU Trading Scheme, there has been excess profit
in power generation sectors?
Mr Stace: What Roger was saying
is, if it is secondary legislation with enabling powers, then
free allowances. We are not saying that our trading schemes always
have to allocate allowances free of charge; it is just with enabling
powers.
Q259 Lynne Jones: That is the only
way in which any new schemes would be set up so why should the
allowances be distributed free?
Mr Salomone: I may have misunderstood
but I thought what the Bill was doing was introducing a quicker
route through secondary legislation whereby you could introduce
certain types of emission trading schemes. One of the criteria
for that would be that allocations have to get allocated free,
but there would still be the route through primary legislation
to introduce a different type of trading scheme. I do not think
that would be precluded by this piece of legislation, unless I
am wrong.
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