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18 Jun 2009 : Column 166WH—continued
Mr. Yeo:
I fully recognise that applying personal carbon trading to transport is vastly more complicated and vastly less attractive than applying it to the domestic energy sector, which is substantial, so it is worth making reductions in it. Transport can be dealt with more
effectively in other ways. I acknowledge that trying to apply it to people who are driving around is almost certainly unworkable.
The Minister knows that we dispute the costs of the scheme. I do not know what brief was given to the consultants who said that it would cost up to £2 billion to set up and another £2 billion a year, but I bet that they did not talk to Tesco about how it runs its card scheme, which involves tens of millions of people.
If the personal free allowance were set at a sufficient level, it should be possible for a substantial proportion of households—this would include a high proportion of low-income households—to come in well below their allowance. Even if there were an annual £40 admin cost, which I dispute, the value of the surplus allowances would in many cases well exceed that.
John Bercow (in the Chair): Order. May I tell the hon. Gentleman carefully and diplomatically that his intervention is learned but lengthy? I am sure that it is coming to an end.
Mr. Yeo: I am grateful to you, Mr. Bercow. Being corrected will not prejudice my decision on Monday.
Some of the objections that the Minister is raising to such a scheme could be dealt with.
Joan Ruddock: The hon. Gentleman tries to second-guess a serious group of studies that the Department undertook. We undertook that work because we genuinely wanted to find out what was possible. He must accept that those are the findings, and that they led us to certain conclusions. I do not believe that his Committee was able to produce other modelling that would suggest otherwise. I will respond later in my speech to the suggestions that he makes: for example, that the scheme should be very much restricted—perhaps restricted to domestic energy use.
Before dealing with public acceptability, perhaps I should acknowledge the comments about the hon. Member for Cheltenham (Martin Horwood) that were made by the hon. Member for North Southwark and Bermondsey (Simon Hughes) and the concerns that were expressed by him about those who are less able to pay. Even if the less able to pay are a relatively small group of people, the system, if it is to work, depends on trading, and apart from the least able to pay, there are people in one sector of society—I think that he will acknowledge this, as I do—in constituencies such as ours that not only do not have bank accounts, but have the greatest difficulty because their lives are very complicated and stressed. It would be very difficult for many people to take on that burden in addition to everything else that they are dealing with. That needs to be understood.
We found that public acceptance of personal carbon trading would be a major hurdle. Although the majority of individuals in our study recognised the need to take personal action, people easily perceive personal carbon trading as a form of rationing. Furthermore, they had concerns about imposing what were seen to be limits on activities. There were concerns about the complexity of trading and the extent to which people would engage
with that aspect of the scheme, and there was strong reluctance about the use of price signals to influence individuals’ behaviour.
The hon. Member for Bexhill and Battle (Gregory Barker) advanced strong arguments, along those lines, about the terrific controversy that would arise about the process itself. We take that very seriously. That does not equate to the Government being unprepared to meet the public, head-on if necessary, on issues on which persuasion and behaviour change are required to meet our carbon limits. We are more than prepared to do that, but to do it in the face of concerns that we think would lead to real and major difficulties would be somewhat foolish.
We see the need to question how personal carbon trading might deliver savings beyond those that we are establishing from alternative policies. That is the opposite of what hon. Members have argued. They have argued that, through this method, we could do things that we will not be able to do, or do enough of, through other methods. That is the central question that I now want to address.
Because personal carbon trading schemes target energy users directly, we describe them as downstream trading schemes, as opposed to upstream trading of emissions through fuel suppliers, for example. At the moment, all emissions from electricity usage are already capped through the EU emissions trading scheme, which covers all the major power generators. Therefore, some of the emissions—the electricity emissions—that would be covered by a limited personal carbon trading scheme such as the hon. Member for South Suffolk has proposed are already accounted for further upstream. Any actions to reduce electricity demand do not, therefore, create additional emissions reductions. That sounds counterintuitive, but it is a fact, because if we reduce within the UK, within the EU emissions trading scheme, we allow more scope for more emissions elsewhere.
Colin Challen: I wonder whether my hon. Friend has a fix on the extra amount that everybody has to pay on their energy bills to cover the cost of the ETS and the raft of other upstream schemes. There is a cost to poor people there. How are we addressing that?
Joan Ruddock: My hon. Friend is right. There is a cost, and it is fair to say that as we develop more policies directed at producing more renewable energy, we will have to put more cost on to bills. We have acknowledged that. The fact is, however, that if we do that through upstream schemes, we will do the overall scheme at much lower cost than we believe we could do through personal carbon allowances. That is the case that I make. It is not that personal carbon allowances could not be made to work. I believe that they could. The question is whether that is the more effective way of dealing with carbon limits in the UK and in the EU, or whether the current schemes and the development of the current schemes that we plan for the future are more effective. I believe that the latter is the way forward.
I say clearly for the record that any actions to reduce electricity demand do not therefore create additional emissions reductions, but that is not to say that they are not valuable for other reasons, such as reducing overall abatement costs for the UK and enhancing our security of supply. There is value there, but it does not achieve what my hon. Friend argued it did.
From 2013, aviation will join the EU ETS, so another element of personal carbon emissions will be tackled upstream. It would be feasible to cap heating fuel and road transport fuel upstream as well, at which point all the main sources of carbon emissions from individuals would be subject to upstream caps. Because upstream trading schemes involve relatively few parties, their implementation costs would be relatively small.
Earlier, I gave the costs of the personal carbon trading schemes. With regard to the upstream schemes, we estimate that it would cost about £50 million to cover a few dozen fuel companies, compared with the £1 billion to £2 billion to introduce a trading scheme that would have to involve 50 million participants. So what additional benefit could be gained by the downstream approach? This is important and, I hope, illustrates to hon. Members that we have taken the issue very seriously. My hon. Friend the Member for Morley and Rothwell has already argued the case, but essentially the downstream scheme offers greater visibility. People become more conscious of what they are doing and, if they are more conscious and more involved, they are more likely to be willing to adjust. Each person would have an awareness of their annual allocation and would relate that to the carbon content of their heating fuel, a flight or a tank of petrol when they filled up the car. Obviously, that is an important element, but the central question remains: how can most be achieved?
The hypothesis that we tested is that that higher visibility could drive changes in behaviour of sufficient scale to justify the additional complexity and cost. However, based on our assumed costs, we found that personal carbon trading was very unlikely to be a cost-effective way of reducing emissions compared to alternatives. In the central case scenario, the costs outweighed the benefits by a factor of 15. A scheme would need to deliver personal carbon reductions of about 40 per cent. to be cost-effective at a carbon price of £30 per tonne of carbon dioxide.
Let me offer a comparison with one of the new schemes that we are introducing—the carbon reduction commitment, which is coming in next year. That is a cap- and-trade scheme targeting major organisations in the commercial and public sectors. When we first proposed it, we considered an entry threshold for electricity bills of about £15,000 per annum. That would have covered most organisations other than the smallest SMEs. However, our analysis showed that, for many of the smaller participants, the costs would exceed the benefits. As a consequence, the scheme now has a much higher threshold; it is probably about £500,000 a year in the cost of electricity, but that is necessary to ensure that the scheme is cost-effective.
If a trading scheme is not expected to be cost-effective even for small or medium-sized businesses, that reinforces our conclusion that a similar approach is unlikely to be cost-effective if applied to individuals. I say that with regret, because I set out wanting it to work and for the Government to be able to say that it is the road down which we should go, and I could have supported everything proposed by the Committee. However, I stand by everything that we have said in our response to the Committee’s findings. We concluded that although personal carbon trading remains a promising concept, and one to which we may return, we could not justify further work at this stage. Even though my Department is not actively carrying
out further research on personal carbon trading, we follow developments elsewhere with interest.
The hon. Member for North Southwark and Bermondsey referred to the RSA report. I must disabuse him of his belief that the report was positive. The RSA set out to be positive, and it expected a good outcome, but its findings mirrored many of our own. It concluded that personal carbon trading posed too many problems to be introduced immediately as a mandatory national programme. However, I believe, as does the RSA, that the main elements of personal carbon trading are relevant in respect of voluntary action, and that we should consider them.
Calculating one’s own carbon footprint, trying to reduce it and being rewarded for making emissions reductions can make a valuable contribution to voluntary efforts to reduce carbon. That is particularly true if adopted at community level. I applaud the efforts of members of carbon reduction action groups to monitor and reduce their carbon emissions. The strength of the growing Transition Towns movement and the success of schemes such as the British Gas green streets competition demonstrate the power of collective action. Although we are not actively pursuing personal carbon trading at this stage, we are far from being complacent about the challenge of reducing emissions from individuals.
One of the Committee’s recommendations, which was repeated today, was that the Government should press forward with the introduction of smart meters. We announced last year that we would mandate the roll-out of smart meters to all households, and we are consulting on the details. The roll-out will happen over the next 10 years. That may seem a long time, but it is a major infrastructure operation. However, by 2020, every household will have a smart meter. Over that period, we will have raised people’s awareness, and people will more actively understand their electricity use and how they use their appliances. Things will all be coming together, which will allow people to reduce their energy because they understand it—and they will have a smart meter to prove it.
Simon Hughes: Strategy in that direction is welcome. Will the Minister be good enough to look at what has happened in other countries? Another argument suggests that it might be possible to have such a scheme in a shorter time scale—but not necessarily as short as Italy, which I gather did it in three years. However, we could combine a shorter and more effective scheme with the right labour being trained up to deliver it and not being made redundant at the end. I gather it can be done more quickly.
Joan Ruddock:
The hon. Gentleman has made that point before. I am an enthusiast; with everything that the Department considers, I say that we should go further and faster. I acknowledge the need to train people, and the fact that there are skills and capacity issues, but that needs a great deal of consultation with the energy companies. Starting next year and moving forward at the best pace we can, we believe that it will be complete by 2020. Clearly, if we can do more and do it more quickly, we will, but we want to get the design right. The technology has been evolving very fast, and smart meters can do much more than they could one or
two years ago. We want to get the optimum out of this; to do so, we need to do it in the fastest time consistent with doing it well.
In our heat and energy-saving strategy consultation, we announced the great British Refurb—a programme to complete all basic household insulation measures by 2015, which is six years away. We also proposed offering whole-house refurbishments to 7 million homes by 2020. We will say more about how we intend to deliver all that in a White Paper later this summer and in the final document of our heat and energy saving strategy later this year. As hon. Members know, we are committed to introducing a feed-in tariff for renewable electricity next year, and a renewable heat incentive the following year, both of which will help householders to install low and zero-carbon energy technologies in their homes.
A number of hon. Members referred to our Act on CO2 calculator. For the record, I shall give the up-to-date figure. Unfortunately, it is not 2 million; I wish it was. Since we started, 1.6 million unique users have generated more than 608,000 footprint profiles. Many of those who did, as well as Ministers and officials, gave feedback on how to develop it further. Those ideas have come to fruition, and version 2 of the calculator will be launched at the end of this month. It will provide a personalised action plan for the steps needed to reduce our carbon footprint. Other new features will include point-to-point flights, public transport and a comparison tool to help consumers understand how their carbon footprints compare with those of others.
My hon. Friend the Member for Morley and Rothwell argued that the results, although welcome, were rather small. In some ways, however, he went against his own argument on how easy it would be to get the population engaged in carbon trading. We know that there is not yet enough real awareness, understanding and participation, so it is difficult to believe that personal carbon trading, starting from where we are, could just take off. However, it is happening with small communities of self-selecting enthusiasts, as has happened with the carbon calculator. However, as with the carbon calculator, we intend to back it up with advertising, particularly on television during popular programmes when it can be afforded. In that way, we hope to keep drawing new audiences and new segments of the population towards the calculator, leading them to a greater awareness of how they can contribute, saving both energy and money.
The hon. Member for North Southwark and Bermondsey spoke of the need for people to understand much more about their energy use and their appliances. I agree with him absolutely. Again, the Government will be working through sustainable products, particularly energy-using products. We are doing a great deal of work in Europe—that is where it needs to be done—to ensure that people can obtain the most energy-efficient products, and that when they buy they can be more confident that those products will be appropriately labelled.
The Government have further plans for advertising on national television, in the press and on radio and online for our Act on CO2 campaign. That advertising will be supported by brand partnerships and other public relations activity. It goes across Government, and is not just restricted to DECC. We required the Energy Saving Trust to open a network of advice centres,
and through them, and its other campaigns, it reached 1.3 million households in England, Wales and Northern Ireland last year.
My hon. Friend the Member for Stoke-on-Trent, North (Joan Walley) challenged me in a number of ways. She spoke about the need to take seriously the work of the Environmental Audit Committee. She might recall that I was a shadow Environment Minister at the time of the road to the manifesto for the 1997 election. When I was asked what were the three things that we should have in the manifesto, I said that one of them was the EAC, so she should not doubt in any way my commitment in government to ensuring that we take the EAC’s work very seriously indeed. We value it and look very carefully and soberly at all its recommendations. I am only sorry to have to disappoint the people who have shown enthusiasm for this topic, but that is not because we do not take the Committee’s work very seriously. She asked me to show more willingness—the willingness is there; I just need to be convinced.
My hon. Friend the Member for Morley and Rothwell asked me to be bold and radical because we have nothing to lose. Again, I share those sentiments, but, as good as all our ideas are, we must work through them systematically to translate them into policies that can be implemented. This is a difficult business. I say to the Front-Bench spokesmen that I am glad that we have had such a meaningful exchange. I appreciate the support of the Conservative Front-Bench spokesman, the hon. Member for Bexhill and Battle (Gregory Barker), who agreed with much that we have said, and I look forward to the Liberal Democrats’ report at the end of the consultation, to which the hon. Member for North Southwark and Bermondsey referred.
We remain open-minded about the possibility of future action and shall follow very carefully the work being done elsewhere. We believe that some of the elements of the report are entirely applicable to voluntary and community action. We are addressing the situation at the highest level, through the EU emissions trading scheme, the new carbon reduction commitment, our climate change levies and agreements, and other upstream ways of tackling carbon emissions and meeting limits.
We are also looking at the problem from the perspective of ordinary people through our Act on CO2 campaign. We are trying to increase public awareness and encourage a sense of a national mission. Nothing less than that—this was reflected in the sentiments expressed today—will enable us to make the emissions reductions necessary to make the UK more secure and less likely to contribute to global warming. We have to take that commitment to Copenhagen. If we do not get a global deal, the worst consequences of climate change, as revealed in today’s report, will come about. I am very grateful for the work done by the Committee. It has not been wasted. It triggered this debate and will keep us on our toes and thinking and listening. I welcome hon. Members’ contributions and congratulate the hon. Member for South Suffolk and his Committee on their work.
4.43 pm
Mr. Yeo: With the leave of the House, I should like to respond. I join the hon. Member for Morley and Rothwell (Colin Challen) in paying tribute to David Fleming’s work on this subject. It is enormous and inspirational.
I am grateful to my Committee colleagues for their contributions, support and warm words. I welcome the comments of my hon. Friend the Member for Bexhill and Battle (Gregory Barker) and the hon. Member for North Southwark and Bermondsey (Simon Hughes). I would have welcomed them a bit more warmly had they been more supportive of what the Committee is advocating, but nevertheless their contributions were constructive and thoughtful, and I look forward to seeing the Liberal Democrat’s conclusions after they have mulled this over for another few weeks.
I acknowledge the Minister’s personal interest in, and commitment to, this subject. It goes back many years. That is welcomed by the Committee. However, I cannot help regretting the journey that she has made on this particular topic—she has gone in the wrong direction. I have a sneaking suspicion that it was encouraged, if not led, by officials. I am sure that she will not admit that, but it is very difficult for me to believe that anyone could have made such a long journey in the wrong direction without coercion by the civil service.
Joan Ruddock: I am sorry, but the hon. Gentleman must allow me to intervene. I value our civil service—it does a huge amount of work—but my job as a Minister is clear: to examine what it tells me and come to my own conclusions, and I am a scientist, so I have a discipline that allows me to do that. I assure him that I would not have come to the conclusion that I set out if I did not believe absolutely the case presented to me on a factual basis.
Mr. Yeo: I accept what the Minister says.
I do not share the Minister’s confidence—I am sure that it was not complacency—that Britain is doing enough. Time will tell. The Committee on Climate Change will take a view on that before long. I am simply anxious that, if we say, “We’re on track”, we shall soon be in for an unpleasant shock. I am also not sure that all her arguments against personal carbon trading apply to the much more limited ambitions harboured by the Committee members who spoke today. We are not in favour of immediately rolling out some nationwide, all-embracing scheme. We are suggesting that the concept is worth doing more on than the Minister indicated she is willing to do. I sensed a degree of incompatibility on a couple of occasions. She said that a fixed cap, necessary to achieve a guaranteed reduction, ran the risk of price spikes, but, as I understand it, we have a fixed cap in the EU emissions trading scheme, which has the Government’s support. In theory at least, there is the risk of a price spike, although perhaps not a very big risk, in view of the global recession.
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