Climate Change Bill [Lords]

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Dr. Whitehead: Has the hon. Gentleman taken into account the fact that even when goods arrive in the UK by sea, there may be a number of circumstances in which that freight is then subject to short sea shipping—one has to say that very carefully—around the UK? That means that a number of other ports are used for the ultimate destination of something that has already arrived in the UK. Therefore, additional measures relating to shipping within the UK have to be taken into account.
Gregory Barker: I have taken that into account in the amendments, but the hon. Gentleman has made a sensible point. Obviously, if national emissions trading schemes are in existence through the transit states, there would be a disincentive to use freight transport. Effectively, what we are saying is why take that risk and not give clarity when we can close that loophole here and now. If we introduced our system before some or all of our neighbouring European transit states, Britain would be perversely incentivising the movement of goods away from direct shipping and towards a more polluting alternative. Clearly, if we were leading by example, we would not want that perverse impact.
Similarly, if one imports goods from China, the best way, both in terms of cost and the environment, is for the container to be shipped directly to the UK. Yet, if we specifically mention aviation and shipping in the Bill without reference to other means of importing goods, it could make economic sense to ship only as far as Rotterdam and then move the goods by lorry into the UK to minimise the amount of carbon officially being counted. The Conservative party believes that it is correct to stick to the current wording of “international trade and transport”, because it takes in more than aviation and shipping. We are not against aviation and shipping—completely the reverse—but the term should be stretched more broadly. We would prefer our amendment No. 82 to be included, rather than returning to the previous definition of aviation and shipping.
The opt-out in clause 30 should be removed. Although it requires a report from the Government about why they were incapable of preparing the requisite regulations within five years, which would provide an incentive for them to avoid embarrassment, the fact that the alternative to having to find a solution exists at all gives the whole process a degree of uncertainty that should not be present.
My party has said all along that the Bill must give business and the market long-term certainty and clarity. Maintaining the uncertainty about whether trade and transport emissions would be included in five years’ time does not give that clear market signal that the private sector needs and deserves. That is why we have tabled amendment (b) to the Minister’s amendment No. 7. Moreover, I am happy to speak in support of the proposed change in the reporting deadline, as included in new clause 1. It makes good sense to have the new regulations laid out before setting the second five-year budget period, because, depending on the pace towards Royal Assent, if we are to stick to the existing five-year reporting period, the necessary clarity of trade and transport may not be set until 10 months into the second budgeting period. In the interests of common sense and market clarity, resetting the deadline to 1 January 2013 is a wise decision that would be welcomed by the private sector.
Martin Horwood: I suppose that I should start by welcoming the progress that has been made. The Government seem to have been taxiing up the runway, but some of the Minister’s remarks suggest that the plane may be stalling before take-off. As well as welcoming the need for the inclusion of aviation and shipping, which we welcome, too, the Minister seemed to be creating a long list of possible excuses and reasons why this is a complex area with various technical stages. Of course, it is complex; nobody is arguing that it is not. Almost all calculations of emissions are complex and there are complexities to be overcome. However, that is what the Government, the National Audit Office and many others are struggling with in terms of finding accurate reporting mechanisms. These are obstacles to be overcome, not excuses not to be prepared.
As the hon. Member for Bexhill and Battle has said, the reasons are clear. Aviation and shipping are important according to the Government’s own figures from 2006. The fuel sold to the aviation and shipping industries produced 42.8 million tonnes of carbon, representing 7.6 per cent. of the UK’s total emissions. Although the hon. Member for Bexhill and Battle has rightly pointed out that, in the long term, if those emissions are rising and all others are stabilising, reducing or being reduced through energy efficiency, the proportion of the whole will be even greater—possibly in excess of 20 per cent.—and even removing 7.6 per cent. of the UK’s current emissions would start to undermine the long-term carbon budgeting process.
That point has been strongly reinforced by a number of Select Committees. For example, the Environmental Audit Committee, on which I am honoured to sit, concluded that,
“While the draft Bill contains provisions that allow these emissions to be included in the future, we recommend that they be included immediately...There already is an internationally agreed methodology for attributing and recording these emissions as memo items to national Kyoto accounts; the Government should simply use this to track these emissions within the UK's carbon budgets.”
I should be grateful if the Minister, in his closing remarks, were to respond to the EAC’s draft report, which made that point. A similar point was made by the Select Committee on Environment, Food and Rural Affairs, which stated:
“these emissions are already reported to the UN as a ‘memo item’...The inclusion of the UK’s share of emissions from international aviation and shipping will have significant implications for the validity of the 2050 target.”
Generally, the rationale for amendments Nos. 6 and 7 was that they were about technical tidying up and rewording where necessary, which we are used to in Government amendments. Most of that looks reasonably innocuous, but I am beginning to be persuaded by the argument advanced by the hon. Member for Bexhill and Battle on terminology. Moving from
“passenger travel and imports or exports of goods”
to specific references to “aviation or international shipping” highlights the precise problem that the Minister has mentioned. Such an approach might exclude road freight and therefore lead to perverse results whereby goods that might have come in by air are transferred by an even less carbon-efficient form of transport—road freight. Perhaps our noble Friends knew what they were doing when they came up with the phraseology in the current text. If the Bill goes back to them, they might want to look at it again.
5 pm
In Government amendment No. 7, we see the mysterious subsection (3)(b), which I shall describe as the parachute clause because it would enable the Government to get out of the five-year obligation altogether by laying before Parliament
“a report explaining why regulations making such provision have not been made.”
That means not bringing the matter to a vote in Parliament, or amending legislation, but simply laying a report explaining why they have failed to do that. That is not acceptable.
There are clear reasons why aviation and shipping have to be in at the earliest opportunity. Various arguments to the contrary have been put forward, such as that international agreements are ongoing and that we are developing ways of measuring these things at an international level, but that has not stopped the Government from pioneering other well-regarded legislation or policies on climate change. The emissions trading scheme was a UK initiative before it was part of a wider international scheme, and only this week the Government made an announcement on the definition of “carbon capture ready” in terms of new power stations. That is being worked on at the EU level, but we hear that the Government have come up with a definition in advance. It is quite possible for UK Governments to be pioneering in that respect and to lead rather than follow.
Clearly, new clause 1—I shall be interested to hear what the hon. Member for Bury, North says about that measure in the context of the Government’s amendments—would effectively achieve the same thing as the amendments to Government amendment No. 7, so I am inclined to be sympathetic on that.
The Minister has set out some strange arguments against the non-Government amendments. He has said that our forging ahead would somehow give other countries the impression that we were trying not to forge an international agreement, but to force something on those countries. Of course we are trying to forge an international agreement—no one doubts that in the slightest—but we are also trying to step up the pace and lead by example. I cannot see how the construction of a truly comprehensive budget for the UK would in any way undermine the development of international negotiations or agreements. If, as the Minister said in response to my intervention, a truly comprehensive sectoral agreement on aviation and shipping was in place by 2009, which is what he has said he hopes for, I would be completely astonished, but very pleased. However, even if that were the case, it would simply be another factor to take into account when setting our carbon budget.
Timing is quite important, because if we do not bring aviation and shipping in at the earliest stage, let alone if we allow that move to be delayed for longer than five years, the industries that have to be included in the carbon budget will be not be on a level playing field. They will have to make adjustments to their business plans and practices and take account of a new decarbonising economy, while airlines and others will not have to make those adjustments. Those in industries that are subject to quite rigorous international competition, such as the aluminium industry, might justifiably feel aggrieved that one of the most dangerous emitters of all was getting away relatively scot-free.
Mr. Mike Weir (Angus) (SNP): Is the hon. Gentleman aware that industries such as the aluminium industry are already seeking exemptions from the European scheme at the next stage of the EU ETS discussions? Indeed, there has been talk of the German automobile industry looking for such exemptions. If aviation and shipping are not included, will not that send the wrong message and have an effect when we come to discuss the details of that scheme?
Martin Horwood: The hon. Gentleman makes an extremely valuable point—that is exactly right. If we send out a signal that it is possible to opt out or to include oneself in the small percentage of industries that will not have to make fundamental changes, we will undermine the UK’s progress towards a decarbonising, low or even zero-carbon economy. In the meantime, of course, it would make a difference to the other sectors covered by budget. Whether aviation and shipping are included makes a difference to the emissions budgeted for in housing, energy generation and so on. If those emissions are included, and there is an international agreement on the methodology by 2009, all well and good, but that will alter the carbon and energy reductions that have to be delivered in housing under the UK budget. It is vital, therefore, that we have a truly comprehensive carbon budget, which is what our amendments are designed to achieve.
Let us imagine the nightmare scenario in which, in five years’ time, the Government have failed to work out how that is to be done, despite all the expertise at their disposal and the fact that they are calculating those emissions already as a memo item for the Kyoto protocol, as pointed out by Select Committees. What will the situation be? Under the Government amendments, the Secretary of State could simply slide a quiet report before Parliament—just before a recess probably—and get away with a few negative media stories, and that would be it! In such a nightmare scenario, we would want the Government to be held fully to account and to amend legislation in the full glare of parliamentary scrutiny and publicity, because they would have let down their overall carbon reduction plan.
Mr. David Chaytor (Bury, North) (Lab): The Minister and others have set out the context of the serious issues underlying the inclusion of aviation and shipping extremely well. I shall speak briefly, therefore, to new clause 1, and comment also on Government amendment No. 7. Although the arguments have been well rehearsed over the past 12 months, I think that we have moved on considerably from the initial debate on the draft Bill last year, and it is heartening to see such an overwhelming consensus on the inclusion of aviation and shipping.
There is no disputing, however, that the measures before us are very complex, and I still struggle to get my head around many of the measurements, the different formulae that could be adopted and the different impacts that that could have on the UK. I also struggle to understand precisely the way in which the ETS and our climate change legislation will work. However, in a sense, that does not matter, because just as there is consensus on the need to include aviation and shipping, there is consensus on the complexity and a willingness to cut through it.
The value of new clause 1 lies not only in the fact that it is quite explicit about including aviation and shipping, but in the fact that it sets a start date—1 January 2013—in advance of the second carbon budget period, whereas Government amendment No. 7 and the Government’s current commitment do not allow for that. The earliest date on which they would consider the inclusion of aviation and shipping would be after the start of the next carbon budget period. There is, of course, a way around that, as there was a way around the previous contentious issue concerning the choice between 60 per cent. and 80 per cent., which is to adjust the date. However, we will come on to that a little later.
The other advantage of new clause 1 is that it would do away with the provision for the Government to provide a report if they are unable to meet the five-year deadline. The Minister described that as an opt-out; whether it is an opt-out or a cop-out I would not wish to say. There is a growing consensus that that is not the ideal way forward. There is an analogy to be made with the earlier debate about the 60 per cent. or 80 per cent. choice. The Government’s argument is that we cannot push the issue too fast because of the complex interrelationship with international negotiations, and that pushing it too fast would cause problems. We did not make that argument when publishing the Bill in the first place, although the Bill is moving forward the international debate significantly, and nor did we make that argument in recognising that there needed to be a target for 2010 and 2050. If we accept the argument that it is absolutely legitimate for the United Kingdom to be the first country in the world to publish such a Bill, and that that actually advances the cause of international agreement by setting tough targets for 2020 and 2050, it is logical that the argument for including aviation and shipping by a set date, preferably in advance of a second carbon budget period, is perfectly valid and convincing.
In drawing to a close—I do not want to delay the Committee—we know that the figures are there because the Government collect the figures for aviation and shipping. First, will my hon. Friend the Minister tell us why those figures cannot be published alongside the first carbon budget: not only the figures for bunker fuels purchased in the aviation and shipping sectors, but figures showing how they relate to the calculation of emissions? What is the argument against doing that? I think that it would generally help the debate along. Secondly, will he comment on the fact that the date that he is proposing—five years from Royal Assent—will almost inevitably be after the start of the second carbon budget period? Could he not consider an alternative before Report?
Thirdly, we understand that it may not be possible to introduce the change by 1 January 2013—there may be overwhelming arguments against and there may be a total failure to move the international agreement process forward. Does he accept, however, that rather than have the opt-out of the Government simply producing a report to say why they had not met the deadline, if we fixed the date in the Bill now, there would still be the possibility of amending it to reflect the stalling of international negotiations in the parliamentary Session of 2012-13?
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