Andrew
Mackinlay: I am pleased to catch your eye, Mr.
Jones. I consider this to be a major piece of legislation, albeit a
delegated piece of legislation. To some extent, I feel inadequate for
the task. It was just 24 hours ago that I was told that I was on the
Committee. I am not going to acquiesce by my silence in this charade or
suggest that either this Committee or many other Committees give
adequate scrutiny to delegated legislation. There is no reason on
God’s earth why Ministers and the Whips cannot give longer
notice and allow people who are better qualified than me, who
understand the subject and have majored on such legislation, to
volunteer for membership of the
Committee. Faced
with the task of being on the Committee and being aware that I was put
on the Committee 24 hours ago, I have endeavoured to understand this
difficult delegated legislation. I need to follow the example of the
hon. Member for Putney, who skilfully and forensically asked some
important questions. I listened with great interest. Credit where
credit is due, she did very well—I do not see it as a partisan
matter. All of the questions that she posed need to be answered if the
Committee is to give adequate scrutiny to the
legislation. I
would say, cheekily, “Hands up anybody who understands the
legislation?” We are not being televised, but nobody put their
hand up. This is the kind of nonsense that goes on in Parliament and it
is time that it stopped. The Whips could give longer notice and allow
people who are qualified adequately to volunteer to scrutinise subjects
that they are interested in. Having got that off my chest, I want to
ask a
question. I
searched the documentation to find out precisely who the consultees
were. I cannot find any information and I imagine that it is a long
list. I would not expect the Minister to list them in Committee today,
but who has been consulted and what the time scale was should be
amplified. I am open to correction but the documentation seems to be
silent on the views of the European Union and the European institutions
that have a legitimate and institutional interest in the
matter—the Commission and the European Parliament. I ask that
because, in my inadequate, cursory examination of the regulations, I
noted that the European Union Commission was concerned about what the
United Kingdom was proposing in respect of phase I. I should like some
reassurance on
that. The
regulations exclude the trading of aviation emissions. If that is
correct, we need to ask why. Our own House of Commons Environmental
Audit Committee
said: “We
are astonished at the lack of essential research to underpin the
incorporation of aviation in the EU Emissions Trading System (ETS). In
view of the timescales involved in developing and
ratifying EU directives, we suspect it may soon be too late to achieve
the Government’s professed intention of incorporating aviation
in the second phase of the EU ETS from
2008.” If
that is so, it is reasonable for us to ask when such a scheme will be
forthcoming. Are we failing in our duties in that regard? I should also
like some reassurance from the Minister that the UK is on target to
meet our carbon dioxide emission reduction targets. If she reassured us
in her opening remarks, then I apologise, but I do not think that there
was any reference to
that. The
hon. Member for Putney also referred to the windfall which appears to
have emerged from the trading scheme. One of the outcomes of how the
allowances were allocated in phase I was the windfall profits for the
power sector as a result of their increasing prices to consumers in
line with the value of the credits allocated to them for free. Is that
so? How is it remedied in respect of phase II?
The Carbon
Trust has told us that the question of the impact of the European Union
emissions trading scheme on the power sector is dominated by the issue
of windfall profits. It drew to our attention the fact that in November
2005 the Department of Trade and Industry published a study which
estimated that the United Kingdom power sector stood to earn an extra
£800 million a year net through phase I as a result of its
participation in the scheme.
In 2006, the
report of the Carbon Trust gave a figure of €1
billion—£673 million—for 2005. Those figures are
contested by the Association of Electricity Producers, but that is
hardly a surprise. The profits that have arisen are due in my view to
the power companies raising prices to incorporate the market value of
all ETS allowances. The majority of those allowances, it would seem,
were not purchased on the market but given to them in their original
allocations. They were given to them entirely free. It is therefore not
unreasonable for hon. Members to seek the Minister’s reassurance
that things are different this
time. In
my 24-hour search, I noticed that a man called Digby Jones, who, I
think, is now a Minister, said when he was director general of the CBI,
no doubt in a pleading
tone: “It’s
vital the European Commission approves the three per cent increase in
allowances proposed by the UK government. Without this extra
headroom”— I
take that to mean licence, latitude and do not come at us too
hard— “business
would not be able to cope with the more ambitious targets, which result
from the increased projections for future emissions announced
today...This is vital at a time when companies energy
costs”— poor
dears— “have
already increased by 40 per cent this year.”
It would seem
that the then Secretary of State for the Environment, Food and Rural
Affairs was persuaded by the plea of the then director general of the
CBI and gave him some reassurance. Well, that might have reassured him,
but it does not reassure me. I think that the power companies, like the
big battalions in this country, call all the shots. That is why I feel
that this process of parliamentary scrutiny is seriously flawed. It is
partly an issue of the time scale and partly because I do not feel
adequate for the task—I know, however, that other hon. Members
in this place major on this topic and
should have had the opportunity to sit on the Committee. Those are the
areas that I wanted to raise with regard to
reassurance. The
other matter that I want to raise relates to the statutory instrument
itself. The hon. Member for Putney touched upon regulation 10, which
prompts me to say that I do not understand how that will work in
relation to the devolved Administrations. Regulation 10 needs to be
read in conjunction with regulation 3, which states:
“The
Treasury may...appoint...the Scottish Ministers, the Welsh
Ministers or the Department of the Environment in Northern
Ireland”.
That is interesting. I
am not clear why it does not refer to Northern Ireland Ministers. I
would not be so unfair as to suggest that I smell a rat, but I was a
little suspicious about why the drafters of the legislation specified
Scottish and Welsh Ministers, but not Northern Ireland Ministers, and I
would like to be told why they made that distinction between Ministers
and the Department of the Environment.
I often find
sloppy drafting in provisions relating to Northern Ireland in other
delegated legislation Committees in which I have been prevailed upon,
or rather persuaded, to make a speech. In one case that I remember the
statutory instrument had to be withdrawn because it had been so
sloppily drafted. Will the Minster explain why the regulation specifies
the Department of the Environment in Northern Ireland, rather than
Northern Ireland Ministers?
My second
question on that point relates to the extent of the power and
discretion that Ministers in the devolved Administrations have to
decide not only the conduct of the auction, which is covered by
regulation 3, but the allocation of the allowances. Is there a UK
strategy, or are the three devolved Administrations being given
specific allocations that relate to quantity or apply to some sort of
industrial area? That is not clear to me, and I think that it is
extremely important that we should be told what the ground rules are
for the UK outside England.
I hope that
the Minister feels that these are legitimate questions, which she
should have been told about this afternoon. Earlier, I referred to the
consultees, whom the Minister probably cannot list, and the fact that
we need to be told about their findings today if we are expected to
approve the regulations. The formulation, “I will write to my
hon. Friend”, will not satisfy me, because that is a way of
fobbing me off. Ministers try that a great deal and often get away it.
In answer to that, I am saying, thus far, no further. I want to be told
what the position is with regard to the devolved Administrations, and I
would have thought that most of the other issues to which I have
referred could be responded to this
afternoon. 5.19
pm Dr.
John Pugh (Southport) (LD): It is a privilege to serve
under your august and wise chairmanship, Mr.
Jones. The
carbon emissions trading scheme is a big subject, but we are not here
to debate its environmentally important objectives. Nor are we here to
discuss the principle of using market mechanisms rather than forms of
direct taxation, whether to use cap and transfer or baseline systems,
or the measure’s efficacy and whether it is
effective or over-optimistic. Nor are we here to discuss the
scheme’s history, which is relatively recent and ill defined. We
are talking about the housekeeping, and it is a fairly modest remit for
this statutory instrument. I stand to be corrected, but as I understand
it we are talking about how payments are paid in and out of accounts;
how debits, credits and refunds are to be dealt with; and how financial
information is to be shared and disputes resolved. The substance of the
statutory instrument is relatively uncontentious. It should console the
hon. Member for Thurrock that we are not doing anything very radical on
this
occasion. I
have fewer questions than the hon. Member for Putney. I shall wrap some
of her questions into one, which is primarily about auctions. Auctions
are referred to throughout the regulations and that is the heading of
part 2. However, the regulation of the auction itself, as opposed to
the after-effects of it and how payments are to be disposed of when the
auction is concluded, is not dealt with extensively in the regulations.
Does the Minister anticipate further regulations on the conduct of
auctions? If she does not anticipate a statutory instrument such as
regulations, does she anticipate a document being published by the
Treasury to assist in that
matter? My
second question relates to the transfer of excess allowances. Perhaps I
am being unduly suspicious, but regulation 9 states
that “when
the transfer of excess allowances comes to the account holder’s
notice, that account holder must, as soon as reasonably
practicable— (a)
give notice to the Environment
Agency”. What
will happen if the account holders fail to notice the transfer of
excess allowances? That would presumably be an advantage to them. If
that is deliberate, it is censurable under regulation 11 on public
censure. Could ignorance or feigned ignorance be a defence in those
circumstances or will the onus be on the person receiving an excess
allowance to own up straight away? Will they be in default if they do
not? That question was also put by the hon. Member for
Putney. Thirdly,
going over similar territory on disputes, there is a character in the
regulations called the independent observer. I think that the Minister
will accept that the definition of that role is rather skeletal. He is
simply a person not involved in the previous decision-making process.
The independent observer has two critical roles: reviewing decisions
and overseeing the process of allocations. Like the hon. Lady, I would
like more flesh to be put on the bones of that rather skeletal
definition. Does the independent observer need to be qualified
financially or in environmental audits? Will there be a job description
for such people or will they simply need to be independent? We can all
claim from time to time to be
independent. I
will conclude on a slightly ironic note. The explanatory notes, which
as usual do not explain nearly as much as one would want, conclude by
saying: “These
regulations provide the framework for allocating Community tradeable
emissions allowances in return for payment...The administrative
impact of allocations in return for payment will depend on the detailed
design of the auction or other allocation
method.” They
go on to say
that “no
administrative impact in the private sector is
foreseen.”
That is a very
optimistic view and it may come to sound sadly ironic as the scheme
evolves because I suspect that there will be some administrative
impact. Even if that is not foreseen by the Treasury, it is probably
foreseen in the industrial
community. 5.24
pm Mr.
David Hamilton (Midlothian) (Lab): I would like
clarification from the Minister. Will the regulations have a
detrimental effect on the remainder of the coal industry or on
coal-fired power stations? On the administration of the regulations,
regulation 10 suggests that this matter will be devolved to the
Scottish Parliament, the Welsh Assembly and the Northern Ireland
Assembly. There will therefore be a great deal of administration in
each of those countries. However, we have heard that there will be a
Treasury windfall. If I were in the Scottish Parliament, the Welsh
Assembly or the Northern Ireland Assembly and I had to do a substantial
amount of increased administration, I would question that money coming
in through the Treasury. Will each of those countries get part of the
windfall to administer the
measure? I
would also like clarification on the independent observer. What role
would the independent observer have in respect of the three other
devolved Parliaments, which can make their own measures to apply the
legislation that we are applying within the UK Parliament? Does he or
she have any authority within the devolved Parliaments or do I not
understand the position
properly? 5.25
pm Mr.
Crispin Blunt (Reigate) (Con): I have a brief question
about how the Treasury intends to conduct these auctions. Regulation 3
states: “The
Treasury may—
(a) conduct auctions to
allocate allowances, or
(b) appoint the
Secretary of State... to conduct auctions to allocate
allowances”. Given
the rather unhappy experience of the Treasury exercising direct policy
in terms of tax credits, for example, would it be better if that
function were carried out by the Departments that can be appointed to
do so by the Treasury, rather than by the Treasury itself? What is the
Minister’s expectation? Will these auctions be carried out by
the Treasury itself or in the normal course of events will it delegate
them to the Departments named in the
regulations?
5.26
pm
Angela
Eagle: I will do my best to answer the questions put by
members on both sides of the Committee, but in doing so it is important
to remember the observations made by the hon. Member for Southport.
This is a mechanism to conduct auctions. It is not about the merits or
otherwise of climate change proposals, what we need to be doing to
reach our Kyoto targets and beyond, what might be being considered,
even as we speak, in the Climate Change Bill Committee, or any of those
other areas, fascinating though they are. These regulations merely deal
with the mechanics of holding an auction for allowances.
As all hon.
Members have pointed out, and as I mentioned at the beginning, in phase
II of the EU ETS, European directives allow us to auction up to 10 per
cent. of all allowances. We have already said that as phase III
develops we would wish to move as close as
possible to 100 per cent. auctioning, which deals with the windfall
profits issue, again mentioned on both sides of the Committee today.
Why 7 per cent? We are allowed a maximum of 10 per cent. and the
purpose of holding back 3 per cent., at least in the initial stages of
our planning, is to allow new entrants who may come on the scene over
the five-year period and who may wish to have allocations to have some
space to do so. By the end we may well be in a situation where we
auction 10 per cent. Auctioning 7 per cent. is about allowing that
space for new entrants who may come into the market to have access to
auction
emissions. The
hon. Member for Putney asked: what is it 7 per cent. of? It is 7 per
cent. of all the emission permits that are going to be available. I
believe that it is 85 million tonnes for this phase of EU ETS. People
need to remember that one unit of emissions-traded carbon is very like
another unit of emissions-traded carbon. We are talking about 7 per
cent. of the
whole.
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