Climate Change Bill [Lords]

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New Clause 8

Reporting on greenhouse gas emissions by Export Credits Guarantee Department
‘(1) The Export and Investment Guarantees Act 1991 is amended as follows.
(2) In section 7 after subsection (1) insert—
“(1A) The annual report shall include an assessment of the direct and indirect contribution of greenhouse gases to the climate from those projects falling into Category A, High Potential Impact or Category B, Medium Potential Impact of the Export Credits Guarantee Department Case Impact Analysis Process for which arrangements were entered pursuant to sections 1, 2 or 3 in that year.”’.—[Mr. Hurd.]
Brought up, and read the First time.
Mr. Hurd: I beg to move, That the clause be read a Second time.
I shall be brief, both because I know that the Committee is keen to get on and because events have unfolded in respect of the Government’s response to the new clause since it was tabled. The new clause, which was tabled in my name, has distinguished cross-party support, including from an ex-Labour climate change Minister. Our short debate will take us back to the issue of disclosure.
We spoke at length about the need, or otherwise, for large British companies to disclose their emissions. The new clause would extend that principle to the public sector, which should be a beacon of best practice. The new clause focuses on one particular Government agency: the Export Credits Guarantee Department.
Most of us recognise that the ECGD plays an extremely important economic role in facilitating UK exports. Over the past five years, it has supported more than £12.5 billion of UK exports. No one would underestimate the importance of its role to the economy in underwriting risks that others are not prepared to underwrite. However, a growing number of people in this House and outside, most notably the WWF, are concerned that the process that the agency works to has inadequate transparency and accountability.
The ECGD has been allowed to operate in a way that is semi-detached from the Government, and it is not entirely in tune with the priorities that the Government attach to the environment and the battle against climate change. For some months, we have been campaigning to reform this important agency and to drag it out of the shadows so that it more effectively considers its impact on the environment.
A non-governmental organisation called—believe it or not—ECA Watch has estimated that, worldwide, ECAs support twice the number of oil, gas and mining projects as all the multilateral development banks combined, and half of all new greenhouse gas emitting industrial projects in developing countries have some form of ECA support. The point that I am trying to make is that we should not think of the issue in terms of one relatively small Government agency. The agency has real power to drive change, especially if it is seen to take a lead on the way in which ECAs around the world work.
The underlying issue is that to date the ECGD business book, if we can call it that, has been focused on carbon-intensive industries. To give that some context, defence and carbon-intensive industries, including aerospace and fossil fuel developments, typically make up more than 75 per cent. of ECGD’s customers.
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The problem is that the evidence accumulated by WWF and others suggests that there are inadequate processes within the ECGD regarding the rules for assessing projects for their impact on the environment. When rules exist, their application appears to be discretionary, and more than half the business is focused on defence and aerospace, for which no such rules exist. Surely it is time, given the context of a Government who take great pride in their leadership on climate change and the importance that they attach to the climate change agenda, that the agency is brought up to date and seen to be consistent with the Government’s priorities elsewhere.
We are pressing for reform of the agency. In parallel with this Committee’s deliberations, the Environmental Audit Committee has launched a second inquiry into the agency to explore some of the concerns that have been expressed. We have campaigned for amending the Export and Investment Guarantees Act 1991 so that governance of this agency is reviewed and reformed, and to give it the requirement to have a more explicit regard for climate change in how it does business and in the processes by which it makes decisions.
The ECGD should have its own targets, as other agencies do, and it should be leading the shift towards low-carbon finance, rather than continuing to be so heavily weighted towards financing carbon-intensive industries. Frankly, I am sure that the Minister will share my surprise that a £50 million fund that is ring-fenced within the ECGD to facilitate investment in the export of low-carbon technologies has not been deployed at all. As far as I understand it, only about 2 per cent. of the business book of the ECGD is focused on what we might call new technologies. That seems to be a wasted opportunity in the context of a British Government who are seeking to position the British economy as a leader in the low-carbon future. We need everyone to pull in the same direction.
Finally, and this point is most relevant to the new clause, the agency should be transparent and should disclose the emissions that result from the decisions that it makes. There seems to be little practical argument against that because the agency has confirmed to me that it collects the data from what it calls the high-impact projects that it facilitates, and there appears to be no practical difficulty in collecting the data from the medium-impact projects.
What we are asking for goes with the grain of what seems to be happening in the international market, with OPEC and ECOSIM, which I know are slightly different from the ECGD, apparently disclosing the details of emissions that result from their decisions. There really seems to be no practical argument against disclosure.
I am delighted to hear, although I have yet to see the hard proof, that we are pushing on an open door in this context, because I understand that the Government accept the principle of the new clause, but they prefer not to action its intention through amendments to the Bill. Instead, they would prefer to make the change in a different way. I am thus being asked to take things on trust, pending what I understand to be an imminent announcement from a Minister, perhaps next week. I will listen to the Minister’s response very carefully.
Gregory Barker: In the interests of brevity, I do not intend to repeat the arguments that my hon. Friend has powerfully made. I will simply reiterate that the ECGD wields a power and influence that is well above its level of financing for private sector projects. Ignoring the effects of carbon-polluting activities that are directly supported by the UK Government fundamentally undermines the rationale of establishing a climate Bill to reduce the contribution of the UK to global man-made climate change. I thus wholeheartedly endorse my hon. Friend’s comments.
Mr. Gummer: Will my hon. Friend ensure that he listens carefully to the response, because in my experience of battling with the ECGD in the past against the Ilisu dam, it took a great deal of effort to make it think outside the box at all? We thus need some tough words from the Minister.
Gregory Barker: Indeed we do, and that is what we are looking for. Ultimately, we need a far more ambitious strategy right at the heart of the Government, not just at the ECGD. As my hon. Friend the Member for Ruislip-Northwood hopes, now is the time for the Government to get serious about matching ambition with action. I hope that the Committee supports the principles behind the new clause.
Steve Webb: I also lend my support to the measure, which was expertly moved. I see the name of the Chair of the International Development Committee, my right hon. Friend the Member for Gordon (Malcolm Bruce), attached to the amendment. I have a sneaking suspicion that my hon. Friend the Member for Twickenham (Dr. Cable), in his characteristically iconoclastic fashion, would rather abolish—or something—the ECGD. However, for as long as it continues, I can see no reason, particularly because of the global leadership factors that the hon. Member for Ruislip-Northwood mentioned, why we should not have comprehensive reporting of the sort that he suggests. The Liberal Democrats thus support the new clause.
Mr. Woolas: Congratulations are due to the hon. Member for Ruislip-Northwood on tabling the amendment. It is always nice when there is a champagne moment in a Committee, and we have reached such a point, because the Government have listened to the arguments made by the hon. Member for Ruislip-Northwood and, incidentally, those of the right hon. Member for Gordon and the right hon. Member for Scunthorpe (Mr. Morley), and faced with the array of arguments, we have decided to announce that we agree with the proposal.
I confirm here and now that the ECGD will report emissions from high-potential-impact cases from this financial year and will inform applicants in respect of its support for medium-potential-impact cases that they will be required to provide information on their emissions. That information will be published from the financial year 2009-10. My hon. Friend the Minister for Energy will confirm the details of that arrangement shortly. The Environmental Audit Committee is looking at this matter.
As the hon. Member for Ruislip-Northwood mentioned, in line with the approach on better regulation—not having regulation when it is not necessary—it makes sense to achieve the effects of the new clause without legislative change. This is a fast-moving field, so it would be a shame if the ECGD was not able to maintain its position as the leader of the pack in the world because it needed, at some point, to change an Act every time new developments occurred. This announcement makes the ECGD the first export credit agency in the world to report systematically on emissions from projects that it supports. That is a good example of how we can lead the way.
Let me just cover the high potential impact cases. Starting with the financial year 2008-09, ECGD will publish on its website, in respect of each financial year, estimates of the greenhouse gas emissions as follows: first, it will publish estimates on those projects for which ECGD has provided support in that financial year that fall into category A—high-potential impact—as determined in accordance with the ECGD’s case impact analysis process statement; secondly, it will publish estimates for those projects with greenhouse gas emissions that exceed the threshold used by the International Finance Corporation, as described in its performance standard; and, thirdly, it will publish estimates when the value of the goods and services supported by ECGD exceeds a sum, which is equivalent at the moment to about £8.2 million, to the threshold set out in the OECD council recommendation on common approaches on environment and officially supported export credits.
On medium-potential-impact cases, there is more good news for the hon. Gentleman. From 1 January 2009, ECGD will collect data on greenhouse gas emissions as follows: first, it will collect data from projects that it has provided support for that fall into category B, as determined in accordance with the case impact analysis statement. It will collect data from projects with emissions that exceed the threshold used by the International Finance Corporation, as described in performance standard 3 and when the value of goods and services, supported by ECGD, exceeds the special drawing rights threshold set out in the OECD common approaches policy statement. Those are the thresholds that are used on a multinational basis.
The argument is very strong. It is important that this country’s export credit guarantees are supporting our international efforts, as has been said. That is why the Government are pleased to make this announcement. In the interests of pursuing this policy immediately, I respectfully ask the hon. Gentleman to withdraw the new clause.
Mr. Hurd: A champagne moment indeed. I thank the Minister for that extremely detailed reply. I know that he and his Department dance with the angels on this issue. I also know that the ECGD reports directly to the Department of Business, Enterprise and Regulatory Reform, about which many of us are more sceptical when it comes to its commitment to this agenda. Because I have done business with the Minster before, I accept at face value what he says and what he has read out. We will consider the detail of the proposal with great interest. We note that the ECGD continues to demand flexibility on how it does that, and that it avoids that being done on a statutory basis or on any amendment being made to the Act that governs it. That causes us some concern. However, on the basis of what I have heard, I beg to ask leave to withdraw the motion.
Motion and clause, by leave, withdrawn.

New Clause 10

Carbon impact assessments
‘(1) After the publication of proposals and policies for meeting carbon budgets under section 13, the Secretary of State must for any new measure, proposal or policy made in any area of administration carry out an assessment of how that measure, proposal or policy will affect UK emissions and what effect it will have on the achievement of the 2050 target (a “carbon impact assessment”).
(2) If a carbon impact assessment shows that a measure, proposal or policy would increase UK emissions, then it must also set out the measures necessary to ensure that the 2050 target is nonetheless achieved.
(3) A carbon impact assessment must be published at the same time as the measure, proposal or policy to which it relates.’.—[Gregory Barker.]
Brought up, and read the First time.
Gregory Barker: I beg to move, That the clause be read a Second time.
The new clause is intended to formalise a policy that already exists informally in government. The requirement to assist the carbon impact of any policy is to be adopted across the Administration. The Prime Minister said in a speech last November that every new policy would be examined for its impact on carbon emissions—not just those that reduce emissions, but those that increase them. When emissions rise in one sector, we will have to achieve corresponding falls in another. That does not just mean every new Act of Parliament. It means that all policies, proposals and spending commitments right across Government must be assessed in that way. That was an ambitious statement from the Prime Minster, and we welcomed it then and we welcome it now. However, we would like to see that policy enshrined in law and linked to the duty on the Secretary of State to report on the proposals and policies for meeting the carbon budget as required under clause 13 of the Bill. If it is not, how can the public be confident that the de facto requirement is being followed? How can they be confident that successive Governments, between 2010 and 2050, will take seriously the word of a weak Prime Minister in 2007?
One only need to have listened to our previous debate on the enormous yet unaccounted carbon pollution from the Export Credit Guarantee Department to see that while an unwritten requirement might exist in the Government to assess the carbon impact of any new policy, that does not stop different Departments from carrying on regardless. DBERR’s support for a new and unabated coal-burning power plant at Kingsnorth also suggests that the writ of the Prime Minister’s words of last December does not currently extend to every reach of his Government, so we must do better. That is why our new clause would require the Secretary of State to order a formal assessment of how any new measure, proposal or policy across any Government Department would affect our carbon budgets and the 2050 targets.
Moreover, if the assessment showed that the new policy would increase UK emissions, the report would have to set out the measures necessary to ensure that the 2050 target was nevertheless achieved. The impact assessment must be published at the same time as the proposed policy to which it relates. That will prevent a situation in which the Government can say that while the impact assessments concludes, the emission levels will increase as a result of the policy. The process has already progressed too far to stop it.
Lord Rooker said in the other place:
“legislation is often made toward the end of policy development, so a test applied only at that stage would not, in itself, achieve much.”—[Official Report, House of Lords, 25 February 2008; Vol. 699, c. 487.]
We believe that our new clause would prevent that situation from arising by requiring the assessment to be published at the same time as the policy proposal to which it relates. It is about enhancing the joined-up nature of government, and the adequacy of our political response to the challenge that we face. Do we want to continue with business as usual, allowing the opening of new airport runways and the building of new coal-powered plants, all without questioning the contributing effect that such decisions will have on our carbon reduction targets; or do we want truly to change the way in which we do government so that we can respond effectively to the climate change agenda, rather than progressing with a patchwork of non-joined-up and all too often contradictory policies?
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I conclude by quoting Abraham Lincoln. He said:
“The dogmas of the quiet past are inadequate to the stormy present...we must think anew and act anew. We must disenthrall ourselves”.
That is what the new clause challenges us to do: to think anew, and to conduct government in a way that is commensurate with the challenge that we face from dangerous, man-made climate change. It demands a new, joined-up, big-picture approach from Government. If we are to succeed, that is what we need.
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Prepared 9 July 2008