Climate Change Bill [Lords]

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Martin Horwood: I will speak briefly. I sense that the amendment was not drafted in the Department for Environment, Food and Rural Affairs, but that it might have originated somewhere rather closer to No. 11 Downing street. It has the sniff of Treasury bean counting about it. When considering the pros and cons of offsetting, the Treasury has been remarkably immune to environmental arguments. However, at the prospect of Ministers squirreling away funds for their disposal outside of Treasury control, it has suddenly become interested.
This is an interesting amendment that may be technically and legally necessary and I shall not oppose it. I would be interested to hear the Minister’s response on its origins and the rationale for it in relation to the Treasury.
5 pm
Gregory Barker: I understand from the Minister that the clause is an enabling clause that allows the Government and the Departments to buy carbon credits to offset their emissions. If my reading of the amendment is correct, it enables Departments to sell carbon credits, as well as purchase them. That might be a rather cursory summary, but if that is the principle behind the amendment, we support it.
A few questions still need to be answered. First, the amendment will add to the ability to dispose of carbon credits the power to acquire them. This might simply be a matter of legal language, but will the Minister explain if anything is meant by disposing of the units, other than selling them? If the Government had the power to dispose of them in some other way, such as by nullifying or invalidating them, that could seriously affect the carbon market. If Departments had the power to acquire and invalidate units of reductions, it could cause a level of uncertainty in the carbon markets and contribute to unwanted volatility in the price of carbon. Will the Minister be clear that by “dispose” he exclusively means sell?
Similarly, Government amendment No. 28 seems superficially innocuous. If it simply clarifies that when the Treasury buys units, it owns them, it seems wholly reasonable. However, that poses an interesting question about what the Treasury’s involvement in the carbon market will be. Is it the Government’s intention to trade in carbon units? Will amendment No. 28 give the Treasury the power and scope to intervene in the carbon markets in a similar fashion to the way it speculates on gold? As hon. Members know, the Treasury’s speculation on gold has cost the country billions and billions of pounds. Indeed, the decision to sell gold reserves has cost the Treasury more money than any single financial decision by any Chancellor on record.
If amendment No. 28 will open the door to similar speculation in the carbon markets, we will have to address it in more detail. Perhaps the amendment is not even required for that. Will the Minister clarify whether the Treasury has the power or the intention to trade—or speculate, as some of his old Labour colleagues might say—in the carbon market? If the amendment is for clarification only and the Minister can assure the Committee categorically that it is not even the thinnest end of a very thin wedge that could lead to speculating in the manner of the gold reserves, I apologise for being alarmist. I am sure hon. Members share my concern, given that the stakes are so high.
Mr. Woolas: The biggest single retrograde decision by a Chancellor was the decision, as advised by the then right hon. Member for Witney, to join the European exchange rate mechanism at an unsustainable level against the express support of the vote of the national executive committee of the Labour party. The point about gold is that one has to look at what was done with the money in the meantime. It may well have been used to better purposes.
Miss Anne McIntosh (Vale of York) (Con): What did you do with the money?
Mr. Woolas: We invested in the economy of the United Kingdom to great effect.
Knockabout aside, the hon. Member for Cheltenham is scrutinising the Bill effectively. The Treasury, like any other Department, already has the power to buy and sell carbon units just like any other person. However, I am advised that the answer to his question is that the Treasury means the Lord Commissioners of the Treasury. They are not a corporate body. Amendment No. 28 will make it clear to a buyer of units that they can buy units from the Treasury even though it is not a corporate body. The hon. Gentleman is right that this is a technical provision.
The first question from the hon. Member for Bexhill and Battle was sensible, but I thought his second ridiculous. In answer to his first question, the term “dispose” is about selling, but in certain circumstances it could also mean cancelling—just to complicate matters. For example, if the country had reduced its emissions beyond what it was required to do, and had surplus carbon units, under clause 16, the Government could bank those units into the next period—remember the debate about banking or borrowing over periods—or sell them to another country. That is the basic principle. It could involve cancelling, but in practice it means selling.
Amendment agreed to.
Amendment made: No. 28, in clause 78, page 37, line 8, at end insert—
‘( ) If the Treasury acquire such units or interests in units, until they are disposed of they shall be treated as held by the persons for the time being constituting the Treasury.’.—[Mr. Woolas.]
Clause 78, as amended, ordered to stand part of the Bill.
Clause 79 ordered to stand part of the Bill.

Clause 80

Guidance on reporting
Question proposed, That the clause stand part of the Bill.
The Chairman: With this it will be convenient to discuss Government new clause 6 and Government new clause 7.
Steve Webb (Northavon) (LD): Clause 80, on corporate reporting of greenhouse gas emissions, was inserted in another place by my noble Friend Baroness Northover, and I warmly support its retention in the Bill, and the rejection of Government new clauses 6 and 7, which are a pale shadow of her version. To give a flavour of the paleness of that shadow—I am not sure how colourfully I can convey the flavour of paleness—the Government’s proposal is to take out the reporting requirements in clause 80 and to insert two other clauses.
New clause 6 refers to publishing guidance to assist reporting, which must be done by October 2009—getting on for 18 months. The first draconian measure planned by the Government on such a vital issue, therefore, is the publication of guidance late next year to assist reporting. It will not necessarily require anyone to do any reporting, but those who do, or would like to, will get some guidance some time late next year.
New clause 7 promises a review of whether the reporting would contribute much, and must be completed no later than 2011. That means that we will get some advice in one year, and a review concluding in three years. One might sense a lack of urgency over the whole issue. The challenge, therefore, is to explain why it matters to the Committee. It has emerged during the debate, and in the contributions from Members on both sides, that we all share a common concern about climate change. The question is what role the corporate sector has, and how far the reporting requirements address those concerns. Our contention is that retention of clause 80, and even stiffening it up, would contribute far more than the Government’s very weak alternative.
Mr. Gummer: Is the hon. Gentleman aware that very large numbers of companies were extremely distressed by the Government’s about-turn on the question of reporting? The best companies in the country felt that they had been deeply let down by the then Chancellor of the Exchequer. To them, this is another example of the Government’s unwillingness to recognise that most companies want a common system whereby they are commonly comparable, and do not want the system to be led by the least good companies, whose previous mouthpiece was Lord Digby Jones, who has become a Minister. No doubt that is the reason for this sad situation.
Steve Webb: I am grateful to the right hon. Gentleman. I concur that there are companies behaving well, and that others must be dragged, kicking and screaming, to the climate change agenda. It is entirely unacceptable that companies that accept their social responsibilities in this area can be undercut or face unfair competition from those that do not.
One of the aims that we intend through the retention of the clause is consistency and transparency. There is no great desire to impose swingeing burdens on business for the sake of it. If we can ensure that the reporting that takes place is to the greatest extent reporting that companies might be doing anyway, particularly in a world of carbon trading and carbon budgets, measures that enable that to be done consistently and systematically are entirely welcome.
All members of the Committee will have received the letter from the Aldersgate Group, a coalition of businesses, lobby organisations, academics and hon. Members, who are coming together to argue for the retention and strengthening of the reporting requirements. It is worth thinking about why those might be desirable. The first thing to observe is that at present, the extent of reporting in annual reports or equivalent, according to Christian Aid, is quite limited. Although many companies do some reporting, it found only 16 FTSE-100 companies reporting emissions in their annual report or a parallel report, and the coverage of the emissions that were reported was often limited.
Quoting from Christian Aid—I think hon. Members will have seen these figures—only 58 per cent. of the most direct and easily identifiable emissions are reported. Some emissions are omitted, and the indirect emissions caused by the company’s activities further down the chain are also omitted. It is important that there should be comprehensive reporting of the direct emissions from a company, and a view should taken on the indirect impact of the company’s activities and how far and in what way that should be measured. The idea of waiting more than a year for guidance and then three years for a review as to whether anything should happen is staggering in its lack of ambition.
Some companies already have similar obligations. For example, companies that fall within the carbon reduction commitment already have to monitor such matters closely, so for many companies the costs are marginal. Perhaps the data are being collected anyway and would have to be presented in a different or standardised way, but it is not an additional burden for many companies. No one expects the smallest businesses to be part of the scheme. Many of the largest businesses are already covered by such a scheme, but we want greater consistency.
It is worth stressing that we are moving into a new kind of world. In the discussion of earlier clauses, the Minister spoke about the setting of carbon budgets alongside the fiscal Budget. In a world where we are buying, banking and borrowing emissions, trading permits to pollute or selling excess permits where we have saved, such things will be almost literally part of the cash flow of major companies. Companies that have a significant impact on the environment through their activities will need to know what their emissions are, whether those are rising or falling and whether they can save more. As the scope of the emissions trading scheme increases, those issues will become the bread and butter of corporate life in Britain.
With an eye to the London stock exchange and a desire for Britain to be a leading part of carbon accounting and reporting, as the right hon. Member for Suffolk, Coastal has said on other occasions, there is an opportunity for Britain to be a world leader and to establish expertise and advice on such matters, rather than the Government dragging their heels, kicking and screaming, to a destination that we all know we shall reach. That seems to be a key point. None of us believes that a Committee such as this in the next Parliament or so would imagine a world where businesses, and certainly big businesses, were not reporting such information systematically and on a comparable basis.
The attitudes of business are obviously important. Again, hon. Members will have seen that CBI members have been surveyed on the subject and some are enthusiastic, but the majority are willing to give it a try, with further work. Most businesses are not hostile to reporting. It is an area where, dare I say it, the climate is changing. In other words, people are starting to recognise that that will have to happen sooner or later.
5.15 pm
There is inevitably an issue of cost on a matter such as this, but there are also benefits. I should be interested if the Minister gave us some idea as to what assessment the Department has made of the potential benefits in terms of carbon reduction from comprehensive, transparent and consistent reporting. Companies write to all hon. Members boasting of their credentials as socially responsible businesses, whether they sponsor computers in schools or whatever, and telling us what good guys they are. They increasingly do that in respect of carbon reduction, which is welcome, but we have no idea what the relative performance of those different companies is, because all we get are their figures on their definitions, with their coverage over time periods of their choosing. Therefore, there is limited scope for the competitive pressure to drive such things down, whereas if all the major companies had to report those figures consistently, the scope for pressure from shareholders, employees and consumers would be far greater. We all want to see a change of culture whereby this is as important a bottom line to many of the stakeholders in the business as the profit and loss account is to its shareholders.
There are costs involved. The Government have mentioned quite a high figure. We do not want something that is too onerous—it is pointless to be gratuitously onerous—but we want something that will build on the data that have already been collected by businesses and enables the public to know what is happening.
There is widespread support outside the House for the retention of guidance on reporting and, indeed, probably for beefing it up. I suspect that there is precious little support for removing what limited provision there is in the Bill—which the Government did not even include in the first place—and replacing it with lily-livered alternatives that are not worth the paper they are written on.
I urge the Committee to consider retaining clause 80 and rejecting the Government new clauses.
Gregory Barker: I associate myself with the sensible remarks made by the hon. Member for Northavon. We Conservatives are disappointed that the Government appear intent on weakening the Bill. Their lordships did an excellent job in enhancing the Bill in the other place and I am sorry that the Government are, again, trying to move back from the efforts that were made there.
“Investors still lack much of the necessary information to make informed decisions with respect to carbon emissions and embedded costs, given the limited quantitative disclosures by many of the companies listed in the FTSE 350.”
For that reason, Conservative peers supported the inclusion of clause 80 in the Bill, and for the same reason I should like the clause to stay where it is. My party has long been aware of the necessity for greater clarity on carbon reporting, but with two caveats. First, one standard methodology should be agreed to, rather than allowing a situation to develop where a patchwork of different accounting methodologies are being used by different companies, resulting in little more than mutual confusion. Secondly, we do not want small enterprises given additional reporting requirements that would add even more red tape and costs to their businesses.
I draw Committee members’ attention to early-day motion 81, tabled by my hon. Friend the Member for East Surrey (Mr. Ainsworth), which stated:
“This House...congratulates businesses that have begun to measure to reduce the carbon emissions resulting from their operations, supply chains, products and services; further notes the difficulties in defining the parameters for such measurement and in agreeing methodologies; believes that such measurements would enable both informed comparison and customer choice; emphasises the need for national and international consensus on such measurement and methodologies; and calls upon the Royal Society to take forward the process for establishing a mechanism for achieving such a consensus”
on such measurement and methodologies.
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