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These notes refer to the Climate Change Bill [HL] as brought from the House of Lords on 1st April 2008 [Bill 97]
CLIMATE CHANGE BILL [HL]
EXPLANATORY NOTES
INTRODUCTION
1. These explanatory notes relate to the Climate Change Bill as brought from the House of Lords on 1st April 2008. They have been prepared by the Department for Environment, Food and Rural Affairs and the Department for Transport in order to assist the reader of the Bill and to help inform debate on it. They do not form part of the Bill and have not been endorsed by Parliament.
2. The notes need to be read in conjunction with the Bill. They are not, and are not meant to be, a comprehensive description of the Bill. So where a clause or part of a clause does not seem to require any explanation or comment, none is given.
SUMMARY
3. This Bill sets up a framework for the UK to achieve its long-term goals of reducing carbon dioxide emissions and to ensure steps are taken towards adapting to the impact of climate change. Its main elements are as follows:
- Setting emissions reduction targets in statute and carbon budgeting. It is intended that the Bill will establish an economically credible emissions reduction pathway to 2050 and beyond, by putting into statute medium and long-term targets. These targets already exist on a non-statutory basis. In addition, a system of carbon budgeting is proposed which constrains the total amount of emissions in a given time period. The Bill proposes that carbon budget periods should last five years, beginning with the period 2008-2012, and be set three periods ahead. The Secretary of State is required to give indicative ranges for the net UK carbon account in each year of a budgetary period, and to develop and report on his proposals and policies for meeting carbon budgets.
Bill 97—EN 54/3
- The creation of an independent advisory body. The Bill proposes to create a new institutional framework with which to manage the UK's carbon budgets, through establishing a new independent body, "the Committee on Climate Change", to advise the Government and devolved administrations on how to reduce emissions over time and across the economy. This expert body will advise on the optimum trajectory to 2050, the level of carbon budgets, and on how much effort should be made by the part of the economy covered by trading schemes and by the rest of the economy, as well as reporting on progress.
- A new reporting framework. The Bill provides for a system of annual reporting by the Government on the UK's greenhouse gas emissions. The Committee on Climate Change will have a specific role in reporting annually on progress, with the Government required to lay before Parliament a response to this progress report.
- Trading scheme powers. The Bill includes new powers to enable the Government and the devolved administrations to introduce new domestic trading schemes to reduce emissions through secondary legislation. This increases the policy options which the Government could use to meet the medium and long-term targets in the Bill.
- Adaptation. The Bill sets out a procedure for assessing the risks of the impact of climate change for the UK, and a requirement on the Government to develop an adaptation programme on matters for which it is responsible. The programme must contribute to sustainable development. The Bill also gives powers to direct other bodies to prepare risk analyses and programmes of action.
- Policy measures to reduce emissions. The Bill will be used to support emissions reductions through several specific policy measures: implementation of the Carbon Reduction Commitment - a mandatory cap-and-trade scheme covering energy use emissions from large, non-energy-intensive organisations; improving the operation of the Renewable Transport Fuel Obligation; and providing a power to pilot local authority incentives for household waste minimisation and recycling.
BACKGROUND
4. The 2006 Stern Review sets out the economic case for action on climate change, and concludes that the cost of inaction will be far higher than tackling climate change now. It also makes clear that the costs are lowest in the context of multilateral action.
5. While the Government has already set out steps to strengthen the domestic programme on climate change - most recently by publishing the UK Climate Change Programme and Energy White Paper - the Government believes that the urgency of the need to tackle climate change requires further concerted action. In October 2006 the Government announced its intention to publish legislation on Climate Change, and a draft Climate Change Bill was published for public consultation and pre-legislative scrutiny in March 2007. The revised Bill was introduced into the House of Lords on 14th November 2007 after taking into account findings from the parliamentary scrutiny and public consultation processes.
THE BILL
Part 1: Carbon Target and Budgeting
6. This Part of the Bill gives the Secretary of State a duty to reduce the net UK carbon account for the year 2050 to at least 60% below the level of net UK emissions of targeted greenhouse gases in 1990. The term "targeted greenhouse case" is defined in clause 23 and the term "net UK carbon account" is defined in clause 27.
7. It also requires the Secretary of State to set "carbon budgets" representing UK emissions for five year periods beginning with the period 2008-2012, taking account of any "carbon units" which are credited or debited to the net UK carbon account under a system of "carbon accounting". Part 1 of the Bill includes a duty on the Secretary of State to report UK emissions levels to Parliament, and to report on the measures the Government will take to meet the carbon budgets in Part 1.
8. Part 1 makes further provision relating to the target and to budgets, including provision on how to calculate whether the target for 2050 has been met and how carbon budgets are to be set. It requires that the carbon budget for 2018-22 is set in a way that is consistent with the Government's target to reduce emissions by at least 26% by 2020, against 1990 levels. It makes provision for the amendment of certain aspects of Part 1 of the Bill in certain circumstances, and imposes a duty to make regulations about how carbon units are to be used to ensure that the net carbon account is within budget.
Part 2: The Committee on Climate Change
9. Part 2 and Schedule 1 establish a new independent non-departmental public body, the Committee on Climate Change ("the Committee").
10. Part 2 gives the Committee duties to advise the Secretary of State on a review of the 2050 target, on the levels of carbon budgets and on the apportionment of effort between reductions in domestic emissions levels and the use of carbon units. The Committee must also advise on the amount of effort to be made by sectors of the economy in trading schemes, and other sectors of the economy. The Committee is required to publish this advice as soon as reasonably practicable after giving it.
11. The Committee is also given a function of making an annual report to Parliament and the devolved legislatures on the progress that is being made towards meeting the objectives in Part 1 of the Bill. After the end of each budget period, the Committee must include in its annual report its views on the way in which the budget for the period was or was not met and action taken during the period to reduce net UK emissions of targeted greenhouse gases.
12. Part 2 also gives the Committee the powers it needs to deliver its advisory and reporting functions, and the Secretary of State and the devolved administrations are given powers to make grants to the Committee and to issue guidance and directions to the Committee. Schedule 1 sets out the Committee's constitution.
Part 3: Trading Schemes
13. Part 3 and Schedules 2, 3 and 4 provide the Secretary of State and the devolved administrations with powers to set up trading schemes relating to greenhouse gas emissions though secondary legislation. Trading schemes may limit activities that directly or indirectly lead to emissions of greenhouse gases (for example, by capping emissions from a particular set of activities and allow trading of emissions within the cap), or they may encourage activities that directly or indirectly lead to a reduction in greenhouse gas emissions or the removal of greenhouse gases from the atmosphere.
14. Before making regulations to establish a trading scheme the Secretary of State and/or devolved administration concerned must seek and take into account the advice of the Committee on Climate Change, and must consult those likely to be affected by the regulations.
15. The first use of the enabling powers will be to implement the Carbon Reduction Commitment, a mandatory cap-and-trade scheme covering energy use emissions from large, non-energy-intensive organisations.
Part 4: Impact of and adaptation to climate change
16. Part 4 places a duty on the Secretary of State to carry out an assessment of the risks to the UK from the impact of climate change; the first report must be made within three years, with subsequent reports at least every five years. Each risk assessment must be followed by the publication of a Government programme of adaptation measures. There is a parallel requirement on the relevant Northern Ireland department to publish an adaptation programme in Northern Ireland.
17. Part 4 also gives the Secretary of State and the Welsh Ministers the power to issue guidance and directions to persons or bodies with functions of a public nature, and statutory undertakers, on assessing the risks of climate change and the preparation of reports setting out policies and proposals for addressing those risks.
Part 5: other provisions
18. Part 5 contains the following measures to reduce emissions:
- Waste reduction schemes: the provisions amend the Environmental Protection Act 1990, allowing waste collection authorities designated by the Secretary of State to introduce pilot waste reduction schemes. Following the operation of pilot schemes, the Secretary of State must carry out a review and report to Parliament. After the review of and report on the pilot schemes, the provisions allow the Secretary of State to extend provisions for use by other waste collection authorities (with any necessary amendments) or to repeal the provisions.
- Renewable Transport Fuel Obligations: the provisions amend Chapter 5 of Part 2 of the Energy Act 2004 which provides for the Secretary of State by order to set up a renewable transport fuel obligations scheme. The amendments will introduce a new power to replace the Administrator with a new Administrator, who may be the Secretary of State, and to transfer functions accordingly; amend the provisions which determine how sums received by the Administrator are to be dealt with; give the Secretary of State a power to issue written directions to the Administrator; impose a duty on the Administrator to promote the supply of sustainable fuel which has a beneficial environmental effect; and set up an information gateway to allow disclosure of information by Her Majesty's Revenue and Customs to the Administrator.
- Reporting requirements in Wales: the Welsh Ministers are to publish from time to time a report on their objectives, actions and priorities in relation to greenhouse gas emissions and the impact of climate change in Wales. The provisions also make amendments to the Climate Change and Sustainable Energy Act 2006, transferring to Welsh Ministers the responsibility for publishing guidance for local authorities in Wales on climate change, currently a Government responsibility.
- Offsetting: the provisions give the Government and the devolved administrations the power to offset greenhouse gas emissions by acquiring units representing emissions reductions, units representing removals of greenhouse gases from the atmosphere, or units in schemes which cap emissions levels.
- Making a minor amendment to section 105(2) of the Clean Neighbourhoods and Environment Act 2005 to enable an increase in fines for pollution offences.
Part 6: General supplementary provisions
19. This part defines the territorial scope of provisions in the Bill, sets out requirements for making orders or regulations under the Bill, and defines terms used in the Bill.
TERRITORIAL EXTENT
20. Clauses 69 to 73 (with Schedule 5), 76 and 79 of the Bill extend only to England and Wales. All other clauses extend to the whole of the United Kingdom.
21. The Scottish Parliament's consent has been sought and obtained for the provisions in the Bill that trigger the Sewel convention. The provisions relate to the establishment of the Committee on Climate Change under Part 2 of the Bill, the conferral of powers on the Scottish Ministers under Part 3 of the Bill, the preparation by the Secretary of State of a UK-wide report on the impact of climate change under clause 55 and the power to acquire units relating to greenhouse gas emissions under clause 78. Part 1 of the Bill, although it imposes duties only on the Secretary of State, may also be viewed as affecting devolved matters in relation to setting targets and carbon budgets for Scotland. The Sewel convention provides that Westminster will not normally legislate with regard to devolved matters in Scotland without the consent of the Scottish Parliament; the Scottish Parliament granted its approval on 20th December 2007. If there are amendments relating to such matters which trigger the Convention, the consent of the Scottish Parliament will be sought for them.
22. By similar convention, the consent of the Northern Ireland Assembly was sought in relation to the same aspects of the Bill and also the duty on the relevant Northern Ireland department to prepare a programme on adaptation to climate change under clause 58 in Part 4 of the Bill; the Northern Ireland Assembly granted its approval on 10th December 2007.
TERRITORIAL APPLICATION
23. The Bill confers the following functions on the Welsh Ministers:
- Part 2 and Schedule 1: powers to seek advice from Committee on Climate Change and functions in relation to its joint sponsorship;
- Part 3 and Schedules 2, 3 and 4: the power to make trading schemes covering certain activities in Wales, and to require information from electricity suppliers and distributors and potential participants in a trading scheme;
- Part 4, clauses 64 and 65: powers to issue guidance and directions to reporting authorities in relation to adaptation.
- Part 5, clause 75: the duty to draw up a report on climate change in Wales and to lay it before the National Assembly for Wales;
- Part 5, clause 76: the function of preparing a climate change measures report in Wales; this clause inserts a new, Wales-specific section 3A into the Climate Change and Sustainable Energy Act 2006 (c.19);
- Part 5, clause 78: the power to acquire units to offset emissions.
24. Clauses 69 to 73 (waste reduction schemes) apply to England only, but clause 79 (fines for offences relating to pollution) applies to England and Wales.
COMMENTARY ON CLAUSES
Part 1: Carbon Target and Budgeting
Principal aim
Clause 1: Climate Change
25. Subsection (1) of this clause sets out the principal aim of the Act, which is to ensure that "UK emissions" of all "greenhouse gases" do not exceed the level necessary to contribute to limiting the global average temperature increase to not more than 2oC above pre-industrial levels.
26. The term "UK emissions" is defined in clause 29(1)(a) to mean, in relation to a greenhouse gas, emissions of that gas from sources in the United Kingdom. The term "greenhouse gas" is defined in clause 84 to include carbon dioxide, methane and other internationally recognised greenhouse gases.
27. Subsection (2) places a duty on any person exercising any power or duty under the Bill to do so with the objective of meeting the principal aim in subsection (1).
The target for 2050
Clause 2: The target for 2050
28. Subsection (1) of this clause imposes a duty on the Secretary of State to ensure that "the net UK carbon account" for 2050 is at least 60% lower than the "1990 baseline", which is defined in subsection (2) as the net amount of "targeted greenhouse gases" emitted in the UK in 1990.
29. The target for 2050 is set by reference to a 1990 baseline rather than a particular quantum of emissions because the baseline itself is subject to revision as understanding of historic emissions improves. This is the baseline used for emissions of greenhouse gases under the Kyoto Protocol, an international agreement to limit emissions of greenhouse gases, to which the UK is party.
30. The term "the net UK carbon account" is defined in clause 27. For 2050, it means the level of net UK emissions of targeted greenhouse gases in 2050 after numbers of "carbon units" have been added and subtracted in accordance with carbon accounting regulations. The commentary on clauses 26 and 27 provides a more detailed explanation of carbon accounting and the net UK carbon account.
31. The term "targeted greenhouse gas" is defined in clause 23. To begin with, the only targeted greenhouse gas is carbon dioxide. But clause 23 gives the Secretary of State the power to add other greenhouse gases to the list in due course. The commentary on clause 23 provides more details of the process.
Clause 3: Amendment of 2050 target or baseline year
32. Subsection (1) allows the Secretary of State, by order, to amend the 2050 target and to amend the baseline year.
33. Subsection (2) sets out the circumstances in which the Secretary of State can amend the 2050 target:
- paragraph (a) allows an amendment if there have been significant developments in scientific knowledge about climate change, in European Community law or policy or in international law or policy. For example, this power might be used in the event of a new international treaty on climate change;
- paragraph (b) allows an amendment if a change is made to the range of greenhouse gases covered by the target or emissions from international passenger transport or imports or exports of goods are added to the target.
34. Subsection (3) makes special provision on the meaning of "developments in scientific knowledge about climate change". The first time the Secretary of State amends the 2050 target or the baseline, he will be able to rely on scientific developments since June 2000 to justify the change; he will not be restricted to considering only scientific developments which have taken place after the Bill receives Royal Assent. June 2000 is the date the Royal Commission on Environmental Pollution recommended that UK emissions should be cut by 60% by 2050, so the intention is to allow the Secretary of State to consider all scientific developments since that date. But when making any subsequent amendment, the Secretary of State will be able to take into account scientific developments only since the target or baseline was last changed.
35. Subsection (4) provides that the baseline year can be amended only if there have been significant developments in scientific knowledge about climate change or in European Community or international law or policy which make an amendment appropriate.
36. Subsections (5) and (6) provide that an order amending the target is to be made by statutory instrument subject to the affirmative resolution procedure (that is, a draft of the order must be approved by both Houses of Parliament). An order that changes the baseline year may also amend other references in the Bill to "the 1990 baseline".
37. See also clause 33, which provides that the Committee on Climate Change must, by 1st December 2008, provide advice on a review the level of the 2050 target.
Clause 4: Consultation on order amending 2050 target or baseline year
38. This clause sets out the procedures that the Secretary of State must follow before amending the 2050 target or the baseline year.
39. Subsection (1) places a duty on the Secretary of State to obtain and consider advice from the Committee on Climate Change (a new non-departmental public body which is created by Part 2 of the Bill). The Secretary of State also has to consider the views of the devolved administrations (the Scottish Ministers, the Welsh Ministers and the relevant Northern Ireland department).
40. Subsections (2) to (7) set out the stages of the process:
- Subsection (2) places a duty on the Committee on Climate Change to send a copy of its advice to each of the devolved administrations;
- Subsection (3) requires the Committee on Climate Change, as soon as is reasonably practicable after giving its advice to the Secretary of State, to publish that advice in any way it thinks is appropriate.
- Subsection (4) provides that the devolved administrations have three months to send the Secretary of State their views. If they send their views within the three month period, the Secretary of State can lay a draft order before Parliament immediately after he has considered them; otherwise, he can lay the draft order only after the three month period has expired;
- Subsection (5) places a duty on the Secretary of State, at the same time as he lays the draft order, to publish a statement that sets out whether and how he has taken account of the devolved administrations' views.
- Subsection (6) places a duty on the Secretary of State, if amending the 2050 target or baseline year in a way that differs from the Committee's recommendations, to publish a statement setting out the reasons for that decision.
- Subsection (7) allows the Secretary of State to publish a statement under subsection (5) or (6) (that is, on taking account of the devolved administrations' views or on any deviation from the Committee's advice) in any way he thinks is appropriate.
Carbon budgeting
Clause 5: Carbon budgets
41. Subsection (1) of this clause places a duty on the Secretary of State to set five-year "carbon budgets", defined as an amount for the net UK carbon account for a given period (a "budgetary period"). The Secretary of State is also placed under a duty to ensure that the net UK carbon account stays within the budget for each period.
42. Subsection (2) requires the Secretary of State to set three consecutive carbon budgets for the periods 2008-2012, 2013-2017 and 2018-2022 by 1st June 2009. It also creates a duty to set subsequent carbon budgets at least 111/2 years ahead. The intent of the clause is to provide certainty in respect of the UK's carbon budgets in the medium term.
Clause 6: Level of carbon budgets
43. This clause sets limits on the levels of carbon budgets.
44. Subsection (1) sets out the requirement for carbon budgets to be consistent with certain emissions levels in particular years:
- paragraph (a) requires that the "annual equivalent of the carbon budget" for the carbon budget covering the year 2020 must be at least 26% lower than the 1990 baseline;
- paragraph (b) requires that the "annual equivalent of the carbon budget" for the carbon budget covering the year 2050 is no more than the level specified in clause 2 compared with the 1990 baseline (60% below 1990 levels, unless amended under clause 3);
- paragraph (c) gives the Secretary of State a power to set, by order, further percentage targets or target percentage ranges for years after 2050.
45. Subsection (2) provides that the "annual equivalent" of a given carbon budget is the total carbon budget for a period divided by the number of years in that period. Subsection (3) provides that an order setting a target percentage or percentage range for a year after 2050 must be made using the affirmative resolution procedure (see paragraph 36).
Clause 7: Amendment of target percentages
46. This clause sets out when and how the target percentages in clause 6 can be amended.
47. Subsection (1) gives the Secretary of State the power to amend the target percentage for 2020 (in clause 6(1)(a), and any target percentage or percentage range set for a year after 2050 (in clause 6(1)(c)).
48. Subsection (2) sets out the circumstances in which those percentages can be amended:
- paragraph (a) allows an amendment if there have been significant developments in scientific knowledge about climate change, in European Community law or policy or in international law or policy. For example, this power might be used in the event of a new international treaty on climate change;
- paragraph (b) allows an amendment if a change is made to the range of greenhouse gases covered by the target or emissions from international passenger transport or imports or exports of goods are added to the target.
49. Subsection (3) makes special provision on the meaning of "developments in scientific knowledge about climate change" and mirrors the rules for amendment of the 2050 target. The first time the Secretary of State amends the target percentage for 2020, he will be able to rely on scientific developments since June 2000 to justify the change; he will not be restricted to considering only scientific developments which have taken place after the Bill receives Royal Assent. If the Secretary of State wants to amend a target percentage or percentage range for a year after 2050, he will be allowed to rely only on scientific developments that occur after the percentage or range is set. When making any subsequent amendment to a target percentage or percentage range, the Secretary of State will be able to take into account scientific developments only since the percentage or range was last changed.
50. Subsection (4) prescribes that orders made under subsection (1) are subject to affirmative resolution procedure (see paragraph 36).
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