Climate Change Bill [Lords]

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Martin Horwood: For once, I am reassured by the Minister’s comments. [Interruption.] Maybe I am going soft, at this late stage in the Committee. His comments about what is possible under the new clauses are encouraging. If he is true to his word, that will be a positive step. I was slightly worried that nevertheless he went on to talk about schemes based on grid averages, although I accept what he also said, that they could be varied for individual participants. The use of grid averages as the baseline is part of the problem. Once we have proper accounting for the source of energy, it is difficult to see why we need the grid average baseline at all.
Mr. Woolas: If I used “reference points”, rather than “baseline”, perhaps that would help.
Martin Horwood: I am grateful to the Minister but, again, if we are accounting accurately for energy, that should in time remove the need even for a reference point. Furthermore, if each energy statement to a particular enterprise specified, from the energy company’s side, what the source of that energy was, there would be a double benefit, by preventing energy companies from claiming double credit for green-tariff electricity, as we have discussed before. We will be able to account for each unit of electricity coming in, and its source. However, the intention behind the Minister’s comments is clear. I am glad that he appears to be accepting that the carbon reduction commitment has an anomaly at the moment and that, under the provisions of the Bill, Ministers will be able to change or remove that anomaly, to tighten up the scheme, which will be warmly welcomed in industry. I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Mr. Woolas: I beg to move amendment No. 23, in schedule 2, page 60, line 3, after ‘participants’, insert
‘or other persons authorised to trade in allowances, credits or certificates’.
The amendment makes a small change to the trading scheme powers in schedule 2 by ensuring that trading scheme regulations may make provision to levy charges on third parties, as well as on participants, for the cost of operating the trading schemes. As currently drafted, the Bill does not allow us to do that. We need that power in order to operate such a scheme. I hope that the amendment is accepted as a technical one.
Gregory Barker: Any amendment that judiciously enhances both the role and the efficiency of the carbon markets will have our support. The amendment appears to do just that. I am content to give it our support.
As the Bill stands, administration of national-level trading schemes can only be conducted by participants, such as devolved authorities or central Government. Under the amendment, powers to run and charge for a national levy scheme could be administered by a group other than a national authority; a scheme could be run by
“other persons authorised to trade in allowances, credits or certificates”.
That presumably means that banks, brokers or local authorities could run a scheme on behalf of or under contract to national authorities.
The amendment may be technical, but potentially it is a big little amendment. We are, therefore, taking an awful lot on trust. Could the Minister clarify in a little more detail which authorised persons he would envisage carrying out such duties on behalf of national authorities? We see no reason why the Government should run something when it could just as easily be done, or done better, at local level or by the private sector. I would welcome the Minister taking the opportunity to clarify who the other authorised persons are intended to be.
Mr. Woolas: The answer to the hon. Gentleman’s question is, predominantly, the Environment Agency. Let me clarify. The issue is about who can trade within the scheme, not who can run the scheme. Perhaps I should have made myself even clearer. If people trade within the scheme, but a third party is not allowed to pay into it, we would inadvertently be taking away a big United Kingdom industry growth area. The type of organisation that we envisage being able to run the trading schemes is the Environment Agency or a similar body.
2 pm
Martin Horwood: I am now slightly puzzled, because I had assumed that the amendment was rather innocuous and that it would simply extend the scope of those who can run the schemes to commercial organisations. Like the hon. Member for Bexhill and Battle, I had considered that to be a positive step. However, I am now confused, given that the Government have in mind yet another of their agencies. Does the Minister imagine that profit-making organisations could be involved in convenient circumstances?
Mr. Woolas: Once again, I have learned the lesson that reading out the next paragraph in the brief saves time in the debate. I am sorry, I should have made matters clear.
As drafted, paragraphs 9 and 19 of schedule 2 allow for third parties to trade in allowances or certificates under a trading scheme. We believe that that is necessary, so that a deeper and more liquid market can develop as a result of the scheme than would be the case if only the participants—the actual organisations and companies, whether public or private, that were members of the scheme—were allowed to trade. Those paragraphs make a distinction between third parties and participants, and that is not replicated under paragraph 26 in connection with the power to levy charges towards a trading scheme.
Participants are those who have an obligation under the scheme, such as the company, the Department or the supermarket, that are typically there to surrender a particular number of allowances equal to their emissions—indirect emissions, in some cases—to acquire a certain number of certificates. Third parties are those who have no obligations, but decide voluntarily as a business to trade in the scheme’s allowances or certificates. I should have explained that I am taking the provision under paragraphs 9 and 19 and putting it under paragraph 26. If the hon. Member for Cheltenham wants a debate on other agencies, we will come to that.
Amendment agreed to.
Schedule 2, as amended, agreed to.

Clause 46

Relevant national authorities
Question proposed, That the clause stand part of the Bill.
Miss McIntosh: In their own words, the Government admit that the devolution settlement on climate change policy is complex. Elements of energy policy and international relations are reserve matters, although generally energy policy is not reserved to Northern Ireland. Environmental policy is devolved to varying degrees, and the devolution settlement reflects that. The provisions in the Bill will be backed up by a concordat that will set out the rules and responsibilities of the different Administrations in more detail. If the concordat is not finalised until the Bill has finished its passage through Parliament, will we therefore not have the opportunity to scrutinise it? A climate change Bill will be presented to the Scottish Parliament in the autumn, so would it be a good idea to submit the concordat to the House for our consideration?
Mr. Woolas: The hon. Lady asks a fair question. We are trying to define the national authorities that may make trading schemes under the powers in the Bill. We are looking at future schemes, 30 years ahead, and the clause sets out the scope of each authority, reflecting the devolution settlements of each legislature. As the Bill’s scope is UK-wide, it is right for each UK Administration to have the power to introduce trading schemes, reduce emissions or encourage activities that reduce emissions. That will ensure that contributions towards meeting the targets and budgets in the Bill can be made by each of the UK’s territorial authorities, and as the hon. Lady says, that should be done in a way that does not cut across the devolution settlements.
Clause 48 and schedule 3—the other side of the coin with regard to clause 46—will allow the national authorities to establish trading schemes jointly. That is our preference over a single-country scheme, as it provides for an increased number of participants, which will give a deeper and more liquid market.
In the interest of transparency and continued constructive relations between the UK Government and the devolved Administrations, we expect to publish the concordat when it is finalised. That is consistent with the approach taken, for example, in the case of the bilateral memorandum of understanding on fisheries between the Department for Environment, Food and Rural Affairs and the Scottish Executive, which, I am told, is publicly available. However, as the precise detail of the concordat depends on the final provisions included in what, we hope, will become the Climate Change Act, it is not appropriate to publish the draft concordat ahead of Royal Assent. The answer to the question is yes, but we can do it only after Royal Assent.
Question put and agreed to.
Clause 46 ordered to stand part of the Bill.
Clauses 47 and 48 ordered to stand part of the Bill.

Schedule 3

Trading schemes regulations: further provisions
Question proposed, That the schedule be the Third schedule to the Bill.
Miss McIntosh: Schedule 3 goes into some detail. Not in the Bill or in primary legislation, but in secondary legislation, enormous powers will be given to the Secretary of State. The Government and the Minister ask us to take a great deal on trust, and I wonder whether the Orders in Council will cover such matters. For example, if the Secretary of State proceeds with personal carbon accounts, will that be subject to Orders in Council? If we proceed down the path of personal carbon accounts for England, will they therefore also exist in Scotland, Wales and Northern Ireland?
I make this point in every Committee that I attend, but the point of standing for Parliament and serving on Committees is that we are given the opportunity carefully to scrutinise the enabling powers. When such far-reaching, wide powers are placed on trust in the Secretary of State, we have effectively devolved responsibility to the Secretary of State without the opportunity to scrutinise the Orders in Council and the powers therein.
I think that the Minister said earlier that such measures will be subject to affirmative procedures and resolution, but if that scenario was to appear in relation to personal carbon accounts, would such accounts apply, by Orders in Council, to the whole United Kingdom? I am personally slightly sceptical about personalised carbon accounts, but industry, the CBI and a number of other bodies have spoken on a number of occasions about their concerns that business will be asked to take the lion’s share of pollution and emissions-reducing measures. My question is a probing one about the enabling legislation.
Mr. Woolas: I share the hon. Lady’s views. “An idea ahead of their time” was the response of my right hon. Friend the Secretary of State. Let me reassure the hon. Lady in two ways. First, we do not consider that the Bill would be the appropriate framework to introduce such a personal carbon-trading scheme, given the robust scrutiny by Parliament that such a scheme would rightly require.
I shall give the hon. Lady further assurance. Part 1 of the schedule sets out the procedure to be followed where regulations are made by a single national authority. It sets out the procedures for both Parliament and the devolved legislatures, in which support for the regulations is required. Part 2 sets out the process for regulation jointly made by the Secretary of State and/or Welsh Ministers and/or the relevant Northern Ireland Department. A separate arrangement applies to trading schemes that involve Scotland, which is covered by part 3 of the schedule.
Where the affirmative procedure applies, if either House of Parliament or a relevant devolved legislature does not approve the instrument, it cannot be made. That should cover the hon. Lady’s point. If the negative procedure applies, again if either House of Parliament or the relevant devolved legislature resolves that the regulation should be annulled, the instrument has no further effect and may be revoked by Order in Council. For those two reasons—common sense and procedural—the provisions satisfy her point. I asked for that point to be made as well.
Question put and agreed to.
Schedule 3 agreed to.
Clause 49 ordered to stand part of the Bill.

Schedule 4

Trading schemes: powers to require information
Question proposed, That the schedule be the Fourth schedule to the Bill.
Miss McIntosh: I would like to revert to my earlier comments, without expanding too much on them. Reading schedule 4, it seems to assume and set out certain types of trading schemes—relating in particular to electricity suppliers and electricity distributors. The Environment, Food and Rural Affairs Committee’s conclusions questioned the EU emissions trading scheme already covering a large proportion of heavy industries and representing about half of UK emissions. Also, perhaps within that scheme, the Government propose to introduce a new carbon reduction commitment scheme under the enabling powers of the Bill. That raises an issue in addition to that of personal carbon allowances, which might be introduced.
The Minister could take this opportunity to answer the question of which sectors might remain that would be suitable for an emissions trading scheme established by secondary legislation. Can he think of any other possibilities? As I alluded to earlier, the Select Committee went on to conclude that the enabling powers perhaps should not be within the legislation if there were no other trading schemes or if the Government were unable to say which other trading schemes there might be. Without further elucidation from the Government at this stage, it seems an open-ended power. I would be grateful to the Minister for some clarification.
2.15 pm
Mr. Woolas: The schedule is designed to facilitate the carbon reduction commitment and applies to that. The difficulty is that this is legislation for a long time, so the hon. Lady is right to ask the question. We envisage that the new powers will support the introduction of the CRC, a cap-and-trace scheme, as I said, that will apply to large non-energy-intensive organisations in the public and private sectors. As I think I mentioned before, the powers may also be used to introduce a household energy supplier obligation to succeed the carbon emissions reduction target scheme, which ends in 2011. It is difficult, if not impossible, to specify at this stage how the powers may be used beyond that, as their purpose is to maintain flexibility in supporting activities that will enable us to meet the targets set out in the Bill.
The Bill sets out the framework for 2050, so we take the view that it is important that the powers to introduce further trading schemes exist, even if at this point it is not known how exactly they may be applied in the future. I hope that the procedural points that I made in answer to the hon. Lady’s question on the previous clause also apply here. In layperson’s terms, we do not know yet.
Question put and agreed to.
Schedule 4 agreed to.
Clauses 50 to 54 ordered to stand part of the Bill.
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