Examination of Witnesses (Questions 380
- 399)
WEDNESDAY 23 MAY 2007
MR JONATHAN
BREALEY AND
MR ROBIN
MORTIMER
Q380 David Taylor: --- It is half
a cycle out or thereabouts?
Mr Mortimer: Exactly.
Q381 David Taylor: So there is both
a data lag and a cycle lag which will tend to depress the achievements
of any Government?
Mr Mortimer: Yes.
Q382 David Taylor: And that is your
main concern?
Mr Mortimer: Those are the two.
Mr Brealey: The only thing I would
add is that there is a question about whether this really fits
with what we are being asked to do internationally. The one advantage
of five-year budgets is it does fit very well with what we do
on the EU ETS and what we do under the Kyoto Protocol. This system
seems harder to fix within that system.
Q383 Chairman: Just refresh my memory,
Kyoto finishes in?
Mr Brealey: 2012.
Q384 Chairman: The Bill starts in
2009.
Mr Brealey: Absolutely.
Q385 Chairman: So you reckon that
2014 is a good fit, is it, with something that ends in 2012?
Mr Mortimer: No, the budgets will
be set 2013 to 2017 and then 2018 to 2022?
Q386 Chairman: Assuming there is
a successor to Kyoto?
Mr Mortimer: Yes and the Bill
has flexibility in it to allow the periods to be amended in the
light of changes internationally, so if a successor to Kyoto were
on a seven-year budgeting period then the Bill could be amended.
Q387 Chairman: If you are saying
it could work at seven years we could go from five year targets
to seven-year targets?
Mr Mortimer: Or to three-year
budgets.
Q388 Chairman: So in other words
this idea of a synergy of five years is a bit of a myth, is it
not?
Mr Brealey: No, I am saying if
the international situation changes then the UK may want to mirror
that.
Q389 Chairman: In other words, the
targets are still potentially malleable and flexible in their
timing according to circumstance?
Mr Brealey: With all of this we
have to take into account what happens internationally and what
is happening elsewhere in the world.
Q390 Chairman: I am not disagreeing
that you might have to—
Mr Brealey: --- Therefore the
judgment the Government has got to make about how it manages its
budgets may have to be changed in the light of that.
Q391 Chairman: But the justification
that you said in the Bill for five-year targets is that they line
up with existing commitments and the little discourse we have
just had shows that those commitments in terms of their monitoring
periods could change?
Mr Brealey: Absolutely, but again
that is one of the justifications for a five-year budget. The
main reason we went for a period of five years was that on the
one hand we have to have something that is rigid enough to ensure
we are on the trajectory to meet our long-term goals but, on the
other hand, is flexible enough so that government is not basically
held to account for things that it cannot control for example
changes in the weather. As the Kyoto Protocol and other international
agreements evolve, of course the Government will have to consider
what it does in the light of that.
Q392 Lynne Jones: You have talked
about the delay in the emissions data. I think we have had some
evidence suggesting there were likely to be improvements in that.
Is that right?
Mr Mortimer: Defra, which deals
with the contract for data, certainly is always trying to get
the data as early as possible, but I am not aware of the final
verified data being brought forward. That is bound by an international
timetable in the sense that we have to report to the EU 17 months
after the end of the previous period.
Q393 Lynne Jones: Could we talk about
what sanctions there are if the targets are missed. There is a
five-year target, the Bill talks about the opportunity for judicial
review if those targets are missed but, say, an NGO takes the
Government to court and it is agreed that the targets have been
missed, what sanctions are there?
Mr Mortimer: I think the first
thing to say is that this is the very situation that the Bill
is trying to avoid in the sense that by creating a legal framework
it puts the onus on government both in political terms but also
in legal terms in the sense that the government respects the rule
of law to ensure that emissions do remain under the budget period,
and that is the strength of having the system in legislation rather
than as an administrative system.
Q394 Lynne Jones: But if there are
no sanctions it is not much of a strength, is it? There could
be a scenario whereby the Government is forced to purchase overseas
credits to bring the targets into line or they could be required
to set a tougher budget for the subsequent period. Do you envisage
either of those as likely to happen or should they be enshrined
within the legislation so that the Government has more incentive
to meet its targets?
Mr Mortimer: It is unclear ultimately
what the courts would do in the event of a judicial review. The
first point, as I said earlier, is the sanctions are both political
and legal in the sense that the Government would not want to be
found in breach of the law and to have a declaration made to that
effect, so that in itself would be a strong incentive.
Q395 Lynne Jones: It would be an
embarrassment for a couple of days or a bit longer but it could
then carry on in its own sweet way. Surely we need something tougher,
particularly for example if there has been a general election
and it is a new government. They could say, "It's not our
fault guv, it was the previous lot."
Mr Mortimer: As I say, it is not
clear ultimately what the courts would do in those circumstances.
It is a fairly new type of duty, as the Chairman alluded to earlier,
so the courts may indeed mandate particular action, although we
could not predict that.
Q396 Lynne Jones: Would it be feasible
to put it in the Bill that if the target is missed then it is
compulsory to buy up credits from overseas because that would
be if you like a fine, and if the Government knows that they could
have spent that money on actually doing something here rather
than relying on overseas credits maybe that would be a greater
incentive. Should that be something that is in the Bill?
Mr Mortimer: It would be feasible.
Clearly it is not infeasible. I think the point would be the judgment
needs to be made on having that sort of mandatory system which
then ties the Government into particular action in terms of purchasing
credits rather than doing something different, such as pre-empting
the risk of missing the budget by putting policies in place that
deliver savings within the UK, and whether that is the right judgment;
that is a judgment the Government would have to make. But yes,
it would be feasible.
Q397 Chairman: It is a bit wishy-washy,
is it not, at the end of the day because if the Government fails
on a European Union agreed policy it gets fined by disallowance,
so it knows that there is a financial penalty potentially there
if it does not do what it has signed up to do, and it just seems
odd that the Government is saying the only way we are going to
be disciplined is by inviting us to be judicially reviewed?
Mr Mortimer: I would go back to
the point that the fundamental point of the framework is to avoid
that situation arising.
Q398 Chairman: You said that perhaps
at the end of the period they might then put some new policies
in but you are playing catch-up and in terms of the Bill, the
Bill does allow for credits to be purchased abroad. Interestingly,
there does not seem to be any limit to what that could be. Did
you think about putting limits in there? It is a way of ultimately
making certain that you stay on track. As you rightly pointed
out, some of the measures that are associated with achieving these
objectives are long term in nature. But if after you have done
five years and you find you have missed it and somebody says,
"We've got this new whizzo scheme to put in," and you
are at the end of the second period before you have done anything
about it, at least by getting the credits in place then you could
be back on track?
Mr Mortimer: Stepping back a bit,
the point about setting the budget three periods ahead again is
to avoid that situation, so by having a 15-year horizon if it
is a policy that takes several years for the emissions savings
to result, if it is major capital investment or something like
that, then the point about having a 15-year horizon is to allow
the Government to take policy measures in time to impact on the
later period. Your question was about purchasing overseas. There
are international obligations, as you all know, around supplementarity
and the UK is effectively saying we will be bound by those, but
we have not created any unilateral legal constraints on supplementarity.
Mr Brealey: The other point I
would like to add on purchasing credits is that when you purchase
those credits, in terms of the emissions that you are producing
and therefore the budget that you are trying to meet next time,
buying credits will still leave you in a position where you will
have to catch up to your budget next time. There is going to have
to be a balance of judgment when we get towards that about whether
you purchase or whether you put in place policies which will help
in the medium to long term. That is why by having one blanket
measure of saying we will just purchase credits if we miss our
targets you may not get the optimal solution and you may be spending
money which may be better spent elsewhere on helping us reduce
our emissions within the UK.
Q399 Chairman: Some people might
argue it is cheaper to offset the lot elsewhere where you can
buy credits cheaper than you can in policy terms in the United
Kingdom.
Mr Mortimer: But there is an issue
about short-term and long-term costs, is there not, and this is
why we have said the Committee on Climate Change should look at
this and say if it ist economically rational, which it may be,
to purchase credits in the short term at a cheaper rate but if
that results in lack of incentive for policy and for UK investment
which in the long term results in greater costs then it would
not be economically rational, so it is about balancing those two
things off.
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