Draft Carbon Budget Order 2011
Draft Climate Change Act 2008
(Credit Limit) Order 2011
The Committee consisted of the following Members:
† Anderson, Mr David (Blaydon) (Lab)
† Barker, Gregory (Minister of State, Department of Energy and Climate Change)
† Baron, Mr John (Basildon and Billericay) (Con)
† Bradley, Karen (Staffordshire Moorlands) (Con)
† Bruce, Fiona (Congleton) (Con)
† Dakin, Nic (Scunthorpe) (Lab)
† Donaldson, Mr Jeffrey M. (Lagan Valley) (DUP)
† Esterson, Bill (Sefton Central) (Lab)
† Hillier, Meg (Hackney South and Shoreditch) (Lab/Co-op)
† Morris, Anne Marie (Newton Abbot) (Con)
† Robinson, Mr Geoffrey (Coventry North West) (Lab)
† Skinner, Mr Dennis (Bolsover) (Lab)
† Tredinnick, David (Bosworth) (Con)
† Truss, Elizabeth (South West Norfolk) (Con)
† Vara, Mr Shailesh (North West Cambridgeshire) (Con)
† Wright, Simon (Norwich South) (LD)
Richard Benwell, Committee Clerk
† attended the Committee
Second Delegated Legislation Committee
Monday 27 June 2011
[Mr David Amess in the Chair]
Draft Carbon Budget Order 2011
4.30 pm
The Minister of State, Department of Energy and Climate Change (Gregory Barker): I beg to move,
That the Committee has considered the Draft Carbon Budget Order 2011.
The Chair: With this it will be convenient to consider the draft Climate Change Act 2008 (Credit Limit) Order 2011.
Gregory Barker: It is a pleasure, Mr Amess, to serve under your chairmanship for the first time. I am grateful for the opportunity to debate the two orders, which we have agreed to debate together, and I thank the Joint Committee on Statutory Instruments for carefully considering them.
As you will be aware, Mr Amess, the Committee cleared the orders without comment. Both have been laid in draft, as is required under the Climate Change Act 2008. I had the privilege of serving on the Bill Committee for the Act, in this Committee Room. The Act, introduced by the previous Government, put the UK at the forefront of the challenge to reduce emissions and position the UK on a trajectory to move towards a low-carbon economy. The coalition Government are absolutely committed to delivering the provisions in the Act. The Prime Minister has stated that he wants the Government to be “the greenest ever”, and we see the Act as a cornerstone of that plan.
The core provisions in the first part of the Act are most relevant to today’s debate. The first order relates to the requirement to set the level of the fourth carbon budget. The five-yearly carbon budgets are one of the most radical and distinctive features of the Act, and provide an effective framework for monitoring and delivering the emission reductions required to achieve both the 2020 and 2050 targets. The second order sets the limit on the net amount of international carbon offset units that may be credited to the net UK carbon account for the second budget, covering the period 2013-17.
The first order relates to the fourth carbon budget—the total permissible level of the net UK carbon account for the period 2023 to 2027. The Act requires that that be set by 30 June 2011. For the avoidance of doubt, I should say that the net UK carbon account is the total amount of greenhouse gases emitted in the UK, adjusted for any purchase or sale of carbon credits.
The level in the Carbon Budget Order 2011 are units of millions of tonnes of carbon dioxide equipment: the standard for measuring greenhouse gas quantities. The
proposed level of the fourth budget—1,950 million tonnes of CO2
equivalent in that period—ensures that the UK will be on an optimum pathway to comply with the 2050 target of at least an 80% reduction in greenhouse gas emissions. The level of 1,950 million tonnes amounts to a 50% reduction on 1990 emissions in the 2023 to 2027 period—no mean achievement, if we can get there. In proposing that level, the Government have taken into account the advice of the Committee on Climate Change. The Committee published its report on the fourth carbon budget in December 2010, and proposed the level of 1,950 million tonnes. The Government have therefore agreed with the Committee’s recommendation.The Government aim to meet the proposed fourth carbon budget by reducing emissions domestically, as far as is practicable and affordable. Given the very high number of factors that can affect emissions, we also intend to keep open the option of carbon trading to retain flexibility. That is a pragmatic approach, considering the significant uncertainty involved in looking so far ahead.
We must also remember that carbon trading is an important tool in encouraging other countries, particularly the least developed countries, to build capacity to fight and adapt to climate change and dangerous man-made global warming. Trading is also an important way to ensure that the overall cost of tackling climate change is minimised, and to put the UK in a good position to make the transition to tighter budgets following an EU or, ideally, an international deal. It is right, therefore, that we do not rule it out at this stage.
I draw hon. Members’ attention to the Government’s policy statement made by the Secretary of State for Energy and Climate Change on the Floor of the House on 17 May, in which he referred to a review of this carbon budget in 2014. Let me explain the reasoning behind that. The level of emissions reductions that we achieve in the power and heavy industry sectors depends on the level of ambition in the EU emissions trading system, which sets a cap on the emissions from those sectors. Meeting the proposed fourth carbon budget would require a tightening of the EU ETS cap from its current trajectory.
It is therefore right that we return to this issue in a few years’ time to assess progress at EU level in moving to a more ambitious target. If, at that point, our domestic commitments place us on a different emissions trajectory from that of the emissions trading scheme agreed by the EU, we will, as appropriate, revise our budget to align it with the actual EU trajectory, pending advice from the Committee on Climate Change and taking into account the views of the devolved Administrations. In the meantime, we will continue to push as strongly as possible for a greater level of ambition in the EU and we are working hard to persuade our EU partners that that course of action is correct.
Of course, a key consideration is how much it will cost to deliver that level of enhanced emissions reduction. The impact assessment alongside the draft order for the fourth carbon budget set out some indicative potential costs, but ultimately the costs and benefits as well as the wider impacts of this carbon budget will depend on how we choose to deliver the emissions reductions. We will give more detail on that in the autumn.
Although there will undoubtedly be costs in implementing measures to meet the fourth carbon budget, there will also be huge opportunities in terms of efficiencies for business and scope for the expansion of green industries and the renewable energy sector. In addition, we will improve the security of our energy supply, with our economy becoming more resilient and less dependent on oil and gas imported from abroad.
It is clear from the advice of the Committee on Climate Change that setting an ambitious fourth carbon budget will put us on a cost-effective pathway to meeting our 2050 target. Taking less action in the 2020s would simply store up much greater costs for the future. In setting the level for the fourth carbon budget, we are taking a decision that is in the genuine long-term interests of our country.
That brings me to the second order—the Climate Change Act 2008 (Credit Limit) Order 2011. The 2008 Act requires a limit to be set on the net amount of carbon credits that can be used for each budget period. The order sets the limit for the second budget period, covering 2013 to 2017, at 55 million tonnes of carbon dioxide equivalent in total. This, too, must be set by 30 June 2011. Use of those credits would apply only to the non-traded sector—those sectors not covered by the EU emissions trading system.
The proposed limit is consistent with the flexibility mechanism under EU legislation covering the non-traded sector from 2013, which allows for limited use of international credits to help to meet annual reduction targets set under the EU effort sharing decision. There are already limits on the use of credits by participants in the EU emissions trading system through the EU ETS, which guarantees that at least 50% of the emissions reductions between 2008 and 2020 will take place in Europe.
Let me be clear. We already have a robust policy framework in place to meet the first three legislated carbon budgets. Emissions projections show that we expect to meet them domestically without recourse to purchasing credits. In proposing the 55 million tonnes limit, the Government are simply choosing not to rule out the use of credits at this stage, simply as a contingency. That should in no way be interpreted as a slackening off of our ambition to decarbonise our economy in line with the ambitious trajectory that we have set.
I hope that I have clearly explained the Government’s approach in the two instruments and the rationale underpinning our proposals. I look forward to hearing what hon. Members have to say, and I will respond as best I can to the significant points of substance that are raised.
4.40 pm
Meg Hillier (Hackney South and Shoreditch) (Lab/Co-op): It is a pleasure to serve under your chairmanship, Mr Amess—indeed, it is a pleasure actually to be here, because we thought at one point that the Government might not back the fourth carbon budget. We have also just made it under the wire before the 30 June deadline.
It is worth reminding the Committee at the outset that there is strong consensus across the House—certainly among Opposition Members—on the direction of energy policy and the necessity for the fourth carbon budget. Opposition Members share an understanding of what
the end result should be, and I hope we can achieve cross-party consensus on where we are heading. However, I have some things to say about how we get there.It has been quite a rocky path up to this point, as I hinted. The Committee on Climate Change set the first three budgets, which were implemented in full. It was no surprise, therefore, that emotions ran high in the House and elsewhere when we looked at what the Government would do with the CCC’s advice on the fourth budget, which runs from 2023 to 2027. We saw intergovernmental and intra-party warfare, which was finally tackled when the Prime Minister stepped in. In a leaked letter to the Deputy Prime Minister and the Chancellor, the Business Secretary said that he was
“unable to give clearance to the proposal as it stands”.
Perhaps we are here today because of some achievement on the part of the Minister; perhaps a higher force won on this occasion.
The CCC’s chief executive, David Kennedy, stated that the decision to embrace his Committee’s fourth carbon budget would be
“of crucial importance. It will be the key test of the government’s commitment to the low-carbon agenda.”
The Government take great pride in the statement that they are the greenest Government ever, but had they gone another way, their pride would have been dented.
The Opposition largely welcome the orders, but we have great concerns and, therefore, some reservations, because there is a very big get-out clause. For the first time ever, the recommendations have not been accepted in full. The Government’s endorsement for the fourth carbon budget was heavily qualified, and the referee at No. 10 had to step in among his warring Ministers. The Department rejected the CCC’s recommendations that carbon budgets for non-traded sectors outside the EU emissions trading scheme should be tightened in the second and third carbon budgets, covering the years 2013 to 2022, as the Minister mentioned. The Government’s acceptance of the CCC’s recommendations could also be seriously undermined in a review planned for 2014.
There has been a cautious welcome outside the House among non-governmental organisations and green business groups. There has been criticism from energy-intensive industries, and I will have some questions about that for the Minister. The chief executive of the Climate Group, Mark Kenber, said the review provision would work against the huge potential for green investment. The Opposition are keen to see more green investment, and green jobs, as well as a green future, and I hope the Minister can tell us how the proposals will promote that green investment.
I welcome the orders, but I would like the Minister to clarify several points. Why have the Government rejected several of the CCC’s recommendations? I should stress that this is the first time the recommendations have not been accepted in full since the Climate Change Act was introduced—the Minister was a member of the Committee that considered it. In particular, will the Minister give us the justifications for rejecting the recommendations on toughening emissions targets to 2023 to meet the 2025 target? Why did the Government also reject the advice to rule out the purchase of carbon offsets to meet to meet the 2025 targets? That requires a bit more explanation, and I hope that the Minister can enlighten us.
Rejecting tougher initial targets may provide more time to adjust to the high level of ambition that we all share across the House, but it also vastly increases the scale of challenge for future Governments and taxpayers. Will the Minister explain what that will mean for energy and climate change policy across the whole period and for the burden on industry and taxpayers year by year—particularly in the latter period, when the country will be playing catch-up and paying for it?
Does the Minister accept that the Government have postponed difficult decisions and placed the onus on future Governments to fulfil the promises that he has made today? Although we recognise and welcome those promises, it is easy to talk about jam tomorrow; delivery is much harder.
The Government’s rejection of the advice to rule out carbon offsets carries a risk that the UK will increasingly contract out carbon emissions to other countries. The Minister has tried to provide some reassurance on that matter, but we need more. As a country, we will strive hard to meet the more challenging targets of the fourth carbon budget, so it is important that the Minister addresses that point and outlines the details of any assessment that has been made of the use of carbon offsets over the next few years. I hope that there has been some detailed work in this area. If the Minister is not able to share that detail with us today, perhaps he could write to members of the Committee about it.
Most importantly, will the Minister precisely explain the scope and the function of the review in 2014? I was in the House when the Secretary of State explained what they would be, but they left me and others with many unanswered questions. Will he confirm whether the review is narrowly defined to assess the EU carbon emissions trajectory against that in the UK, to ensure that UK business is not disadvantaged and to minimise the chance of carbon leakage—and jobs leakage—from the UK? It is extraordinary that the Minister says that this Government are the greenest ever when this review process is built into an acceptance of this budget.
Furthermore, will the Minister explain what divergence between the EU and UK trajectories at the point of the 2014 review, or based on projections at that point, will lead to the Government’s revising their aims? That is a big unanswered question at the moment. If the Government have not examined this issue in detail, will the Minister undertake to do that assessment and place it in the Library and on his Department’s website? That should be done because we really need to see it.
The Government’s clear prior view on the criteria for the review in 2014 will be needed at the earliest opportunity as well, to ease uncertainty in industry and in non-governmental organisations, which, along with the Opposition, are nervous about what the Government’s actions will be in this respect.
In the interests of energy-intensive users, may I seek the Minister’s assurance that he will work with them exhaustively in the coming months to ensure that UK jobs are protected and that continuing efforts towards energy efficiency and demand management in these industries are fully acknowledged? It is apparent that mechanisms to mitigate the effects on this sector were not properly considered by the Department before the carbon floor price was set in the recent Budget.
We have pressed the Minister to refocus the unintended windfall for existing renewables and nuclear on helping these energy-intensive users to adapt, but he has so far refused to do that. Why is it right to ask the taxpayer to put additional funds into rewarding existing nuclear and renewables and, at the same time, punish British industry? What about driving new generation capacity? It is about getting the balance right, ensuring that we maintain an industrial sector, greening that and creating new green growth as we go.
Finally, based on everything that I have said and asked, will the Minister provide the Department’s current view on the probability of the 2014 review’s leading to the Government’s taking a different view on the Climate Change Committee’s recommendations and adjusting the UK’s carbon trajectory? Simply accepting the fourth carbon budget does not mean that things happen. The Government are big on their vision for the UK’s low-carbon future—a vision that the Opposition want to sign up to as well—but I, along with green groups, industry and the public, do not know how the Government will deliver it.
In recent weeks, we have seen the Government confirming massive cuts for feed-in tariffs. They have rejected the warm homes amendment and low carbon budgets in the Energy Bill and a limited pot of money with a cap on it for the renewable heat incentive. They have a green deal and energy-efficient measures that people still express concerns about and there is slow or no movement on green apprenticeships—though we live in hope following the successful vote in Committee on that issue. Many key questions on electricity market reform lie ahead of us that the Government will need to address, but that is not really a matter for this debate.
On policy, the Minister mentioned the European emissions trading scheme. We know and have debated—maybe even in this room—the challenges that computer hacking has posed to the scheme. Will he give us an update on how it is working?
There is broad consensus across the House on where we should be going; my questions to the Minister concern the “how”. I look forward to his answers to those questions.
4.50 pm
Nic Dakin (Scunthorpe) (Lab): It is a pleasure to serve under your chairmanship, Mr Amess. When Karl-Ulrich Köhler came to Scunthorpe a few weeks ago to announce that a number of jobs in the area were at risk, he drew attention to the lack of confidence about carbon taxes in the UK as one of two reasons for it; the other reason was the fall in domestic and global demand for sectioned steel. He compared carbon taxes in the UK with the rest of Europe’s and the rest of the world’s and said that they created a sense of uncertainty and a potential lack of competitiveness for manufacturers with bases in the UK. We must bear in mind that many companies that operate in the UK are now headquartered outside the UK. When they make decisions about investment, they do so while looking across the whole world. Carbon taxes are an area of uncertainty causing concern to major companies making investment decisions. The other area of uncertainty that is germane to this discussion is energy supply, which is the other side of the coin. Although I support the general direction
of travel, I have strong concerns about the proposals’ impact on high-energy manufacture. High-energy manufacturers produce carbon savings down the line by producing lighter, more effective steel, which causes products such as cars and aeroplanes, for example, to use less energy. The issue must be seen within the whole and not as simply as it sometimes is.On Friday, I had a briefing from Caparo Merchant Bar in my constituency. CMB made it clear that it sees the UK’s current carbon tax regime as complex and uncertain going forward. I ask the Minister and the Government to simplify carbon taxes over time so that we can bring them together and assist industry in planning. CMB is also concerned about certainty going forward, as it will affect the investment decisions made.
I worry that to become even more carbon-efficient, our high-energy manufacturers will need to invest significantly in new technology. How will the Government assist with that significant additional investment, so that we can remain competitive rather than seeing our jobs transported to other parts of the world that are less carbon-efficient? The overall impact would be to export British jobs, but import global CO
2
.
That is my worry. We will make progress in this difficult area only if we can balance those factors.I welcome the Minister’s ambition, but that ambition needs to recognise the reality of where we are and to be mitigated by the awareness that if we are overly ambitious on our own without taking other people with us, we will end up not with balanced green growth but the export of UK manufacturing jobs, to the detriment of UK industry and resulting in an increase in global CO
2
emissions. That is not what we wish to see.4.55 pm
Mr Dennis Skinner (Bolsover) (Lab): I am pleased that my hon. Friend the Member for Scunthorpe has had a word to say about this provision, because it is important that we have a word or two about whether we trust the Tories to carry it out. They have been dragged kicking and screaming into these targets—that is the original point made by my hon. Friend the Member for Hackney South and Shoreditch—but they did not need to be kicking and screaming when they were shutting the pits. They not only shut the pits, but they shut the clean-coal plant in south Yorkshire at the same time. That was the Tories of the 1980s, but I do not believe that they have changed. They shut about 170 pits after 1984 and they got rid of all the jobs. Some of those jobs were not quite like those described by my hon. Friend the Member for Scunthorpe, but by and large they were the same type of semi-manufacturing jobs. Those jobs all went, and then they shut the clean-coal plant as well. That is what prompted the film “Brassed Off”; that is how it came about with Peter Postlethwaite and all the rest. I do not trust the Tories at all—not an inch.
I have raised the windmills that are going up in built-up areas many times on the Floor of the House. In Scotland, there is an order that prevents windmills from being built within 2 km of somebody’s house.
The Chair: Order. I am listening very carefully to the hon. Gentleman, but I cannot see the relevance of windmills to the Climate Change Act 2008 and the Carbon Budget Order 2011. Perhaps the hon. Gentleman will kindly keep his remarks on windmills in order with our discussion.
Mr Skinner: I am amazed that you, Mr Amess, who everybody keeps praising, do not understand the connection between windmills and a green economy. It is so simple, it’s staring you in the face. As a matter of fact, those windmills will be staring in the faces of people in Palterton. It is all about being green, so they tell me. The Minister has said that many times when talking about the green deal on the Floor of the House—I am sure that you must have heard him, Mr Amess.
Another thing that people in my area are complaining about on the green deal is the anaerobic digester plant that is being built in Whitwell in my constituency. That is in accordance with the green deal, as the Minister said, but it is in the middle of a village. I happened to say to him on the Floor of the House, “Wouldn’t it be a good idea to ensure that these planning operations do not take place near to built-up areas?” That is what I said, and of course he said that it is all part of this wonderful green deal. When those lorries are going through, taking all this stuff from the anaerobic digester, it will not be a green deal, but of a different colour, and it will stink to high heaven because that is what comes out.
So, I do not trust the Tories; I wouldn’t trust ’em as far as I could throw ’em. The orders may be wonderful and beautiful and all the rest, but it is all about spinning. They know it is not 2020 yet. They know that they can put anything down on a piece of paper. Quite frankly, I regard it as a load of rubbish.
4.59 pm
Gregory Barker: After that very reasonable critique of this sophisticated piece of secondary legislation, I shall do my best to reply to questions that have been raised. On balance, some sensible points have been made.
First, let me address the level of ambition. The hon. Member for Hackney South and Shoreditch said in her opening remarks that this was a key test for the coalition. She is absolutely right. Of course there was a dialogue, as we would expect from different interests, represented by different Departments, putting different cases, but what counted ultimately was not just the outcome but the clear will at the top. If we are to be the greenest Government ever, as we aspire to be, the leadership starting in No. 10—given by the Prime Minister—is critical. If we look at the past, a failure by No. 10 to follow through has held policy back.
I will segue and deal briefly with the points made by the hon. Member for Bolsover. I do not remember the miners’ strike clearly, because I was at school when it was largely fought—I had other things such as A-levels on my mind. Clearly, however, it looms large in our political history, as does the hon. Gentleman. The miners’ strike might seem like yesterday to him, but I can assure him that our commitment to the Climate Change Act and to the transition to a low-carbon economy is very real, and at the heart of this Government’s programme. There is nothing superficial about such significant decisions and investment programmes.
Bill Esterson (Sefton Central) (Lab): The constituents of my hon. Friend the Member for Bolsover and many others from former mining communities would tell the Minister that the strike very much feels like only yesterday,
because of the damage done to their communities by the Tory Government of the 1980s. He should look at the lessons of history.I wanted to make a point about how green the Government are. In my constituency, to draw on my hon. Friend’s point about good locations, attempts to extend hugely a large offshore wind farm have encountered massive opposition from the local Conservative party. I hope that the Minister will take heed of that and deal with such opposition.
Gregory Barker: I am not familiar with the particular case mentioned by the hon. Gentleman, but he is obviously a champion of the offshore wind programme, which I am delighted to hear. We are certainly determined to roll out the world’s largest offshore wind programme, and to seek the maximum economic benefit for the UK from it.
The comments of the hon. Member for Scunthorpe were very reasonable, making exactly the point that we are attempting to deal with, and with which we wrestle daily in the Department of Energy and Climate Change. We have a high level of ambition but are not blind to the unintended or even perverse consequences. I will therefore be meeting the chief executives of the major energy-intensive businesses. The working group involves the Department for Business, Innovation and Skills, the Treasury and DECC and, as far as possible, we intend to avoid exporting our emissions abroad or unduly impacting on the competitiveness of certain sectors of British industry in this drive to a lower carbon economy. Subtle judgment is needed, and we do not underestimate the complexity of what we are dealing with, which is an economy-wide solution.
Ian Swales (Redcar) (LD): The Minister mentioned that he will be meeting chief executives of the energy-intensive industries. Is he aware that we have an all-party group on the subject? The secretariat is the Energy Intensive Users Group, an association covering many industries, and I suspect that he could not get all the chief executives into a room even the size of this one. Will he ensure that he raises the issue with the 10 or 12 separate industries with such concerns?
Gregory Barker: I am happy to do that. I believe that is already part of our thinking but I am happy to include the hon. Gentleman, as part of the all-party group, in our programme as we develop the policies over the next few months.
Meg Hillier: Does the Minister believe that setting a carbon floor price in the Budget was welcomed by energy-intensive users? We talked about the law of unintended consequences, but surely that is an example of where it did not work.
Gregory Barker: The hon. Lady cannot have it both ways. Either she wants a higher level of ambition towards decarbonisation—that was one part of her speech—or she wants to take her foot off the pedal to satisfy energy-intensive users. She cannot have an extreme position on both wings of that argument. We recognise that, for the majority of energy consumers—particularly in the energy-producing sector—a long-term degree of certainty on the price of carbon will greatly aid investment in low-carbon generating technology, the renewal of the
energy sector and the roll-out of a great deal of capital investment. However, we are not blind to the fact that there could be a detrimental impact on certain parts of the economy, which is why we are sensitive to the fact that the process has economy-wide impacts and, where it disproportionately impacts on certain industries, we are keen to address that through other measures.We have made it absolutely clear that, yes, we have an ambitious decarbonisation programme, but that that must not mean deindustrialisation. In fact, on the contrary, we need to ensure that in the forthcoming carbon budget period we increase the amount of advanced manufacturing in the UK. Going through the transformation to a low-carbon model is an opportunity to rebalance the British economy and put it on to a footing where we have more advanced manufacturing. We do not just see ourselves as an ideas factory, exporting the manufacture and production of these goods to other countries; we need an industrial policy that encourages manufacturing again, which is part of our wider plans to rebalance the economy away from one that is over-dependent on financial services. If the programme is handled sensitively and pragmatically, it can lead to a renaissance in manufacturing output.
Nic Dakin: I welcome the Minister’s comments about the opportunity to reindustrialise through this process. The manufacturing industry in my constituency has seen the involvement of DECC, BIS and the Treasury, and it thinks that there is a confusion of too many interests and a lack of clarity about where the leadership is on looking after and sticking up for manufacturing. Will the Minister take that thought into his discussions with those chief executives?
Gregory Barker: Absolutely. Historically, that is the case that we inherited. I am aware that inherent interests are pulling in different directions from those Departments, which is why we have formed a working group across the three Departments. We want better cross-governmental consensus and decision making. I do not pretend that these things are easy to reconcile, but we are aware that we need to try much harder and do much better to get the right outcome that does not impact disproportionately on a certain subset of the economy. Certainly, advanced manufacturing and keeping our productive industries onshore are absolutely critical not just to the short-term revival of the economy, but to our long-term prosperity and sustainability.
The hon. Member for Hackney South and Shoreditch asked about the 2014 review. Unlike the first three carbon budgets, which were set after the EU had already agreed a 2020 target, the fourth carbon budget is being set in advance of any EU decisions and there is no overarching EU framework within which we must work. If by 2014, our UK commitments place us on a wholly different emissions trajectory from the ETS trajectory agreed by the EU, we will as appropriate potentially revise up our budget to align it more closely with the EU trajectory. That speaks to the point on competitiveness that the hon. Member for Scunthorpe raised. We cannot cut ourselves off from the rest of the world, particularly the rest of Europe. The companies that we are asking to make significant investment decisions in the UK domestically are invariably global players and certainly have options to invest elsewhere in Europe. We need to ensure that we get that balance right.
The review is set out in a Government policy statement, but it is not a legally binding requirement or an absolute commitment. It is something that is there should we need it. Meeting the fourth carbon budget depends on progress on the European Union’s 20% target up to 2020, the 2050 road map and the UK’s share of the EU ETS. The review will take account of that progress. Any draft instrument containing an alteration of a carbon budget must take account of advice from the Committee on Climate Change, whose input we continue to value. That was always the intention, as I remember from my time on the Committee that considered the Climate Change Bill. We will also listen carefully to the devolved Administrations.
I think that I have dealt with the energy-intensive industries. The hon. Member for Hackney South and Shoreditch mentioned costs. The policy cost of meeting the fourth carbon budget will depend on the policy mix we deploy. In the autumn, we will publish as part of our carbon plan, as required under the Climate Change Act, what we plan to do across all sectors, including renewables. We will also highlight the costs to industry from 2023 to 2027. Many factors determine the competitiveness of UK companies, including relative wage, energy and variable costs and technological developments. Policies to meet the fourth carbon budget could enhance our industrial competitiveness in some sectors, but we have to be mindful that those same policies could have a negative impact on others. We are absolutely clear that, if the UK sets the pace in the low-carbon industrial transformation, we will see a net-net gain for the UK and an advantage in the race for low-carbon investment in industry and jobs. Investments in energy efficiency in particular, whether domestic or business, mean lower energy bills for consumers and industry, and lower energy imports.
Mr David Anderson (Blaydon) (Lab): It is a pleasure to serve under your chairmanship, Mr Amess. An issue has emerged at a local level in my constituency. The factory that makes electric cables has had to lay off 126 workers, because of the huge increase in the price of copper. Some of that is down to the fact that, following incidents in Chilean mines, some safety arrangements in mines are being questioned, but it is mainly about games being played on the commodity markets. Will the Minister comment on that? Is there an opportunity for him and the Government to have discussions on an international level to see if we can get a grip on what is happening about copper? Whatever technology we use and wherever we use it, copper will be needed.
Gregory Barker: The hon. Gentleman makes a good point about the need for copper. We also need to go beyond copper to rare earths and specialist metals in a more advanced manufacturing economy. I am afraid that I cannot respond to the specific point about copper, because it is outside my remit and the order, but he makes a good point. I will try to write to him but, if the issue is outside the Department’s scope, I will ensure that he receives a ministerial reply on our approach to the volatility in the commodities market.
I assure the hon. Gentleman that the coalition is committed to governing in the long-term economic interests of the country and that that is what the fourth carbon budget does by giving certainty to investors while protecting businesses today. The hon. Member for Hackney South and Shoreditch has chided us for not giving enough certainty, but a sensible balance has to be
struck. We are absolutely determined, wherever possible, to deliver what I call TLC—transparency, longevity and certainty—for industry, so that it and investors can align their investment timeline with Government policy. That means far fewer stop-go policies and less changing of policy for the sake of it. We need to be pragmatic, however, for the reasons given by my colleagues.The hon. Lady asked why we have not ruled out the use of carbon credits for the fourth carbon budget. She will see from the line of argument that I have been making, and from the concerns expressed by some of her colleagues, that the high level of uncertainty on meeting emissions reductions in the fourth carbon budget, which lie almost two decades away, mean that we need to retain a degree of flexibility. Certain policies, however, such as carbon capture and storage, should deliver carbon credits and give us a fall-back if we cannot deliver those savings at home.
In conclusion, these instruments are key steps in implementing the requirements of the Climate Change Act. They demonstrate the coalition’s commitment and leadership by setting in legislation the parameters within which we need to take action to address dangerous man-made climate change. The coalition is committed to governing in the country’s long-term economic and environmental interests. The fourth carbon budget announcement gives certainty to investors, while protecting businesses today. Implementing the fourth carbon budget will make the UK less reliant on imported energy and on any single energy technology and more resilient against oil price spikes. That approach will put the UK in a strong place with a clear commitment on the move to a low-carbon economy, in parallel with driving much-needed economic growth.
As I said in my opening speech, the next key step in this process will be made in the autumn, when the Government will publish and lay before Parliament, as required by the 2008 Act, a report on our policies and proposals for meeting the fourth carbon budget. I anticipate that at that point we will have much more detailed discussion on the meat of the proposals, which will be part of a wider climate and energy strategy, detailing options from now right the way through to our 2050 target. I am grateful for the thought that hon. Members have put into this debate.
The Committee divided: Ayes 13, Noes 2.
AYES
NOES
Question accordingly agreed to.
That the Committee has considered the Draft Carbon Budget Order 2011.
DRAFT CLIMATE Change ACT 2008 (CREDIT LIMIT) ORDER 2011
Motion made, and Question put,
That the Committee has considered the draft Climate Change Act 2008 (Credit Limit) Order 2011.—(Gregory Barker . )
The Committee divided: Ayes 12, Noes 2.
AYES
NOES
Question accordingly agreed to.