14 July 2006 : Column 901
House of Lords
Friday, 14 July 2006.
The House met at eleven of the clock: the LORD SPEAKER on the Woolsack.
Prayers—Read by the Lord Bishop of Newcastle.
Business
Lord Grocott: My Lords, before we begin, I should like to give the usual advice about times. For the three debates today we have more than 30 speakers; if the maximum time for Back-Bench contributions were limited to 10 minutes, then we should finish by well before five o’clock, which is a bit later than we would normally finish. That is the guidance for today—a maximum of 10 minutes for Back-Bench speakers.
Climate Change (EAC Report)
11.06 am
Lord Wakeham rose to move That this Housetakes note of the report of the Economic Affairs Committee on the Economics of Climate Change (2nd Report, HL Paper 12).
The noble Lord said: My Lords, I am delighted to be able to introduce this debate. It is more than a year ago since our report was published, on the eve of the last G8 summit at Gleneagles. Since then we have had the opportunity in this House to discuss climate change in the debate on 10 November, which was initiated by the noble Lord, Lord May. But eight months later, the subject remains, of course, as topical as ever.
Like all economic affairs reports, this one is evidence-based and non-party political. And once again, the report has been agreed by all Members of the committee. My first thanks are to my colleagues on the committee for collectively making it possible for us to deal in a dispassionate and, I hope, effective way with so sensitive and difficult an issue.
I also want to say a particular word of appreciation for the work of the late Professor David Pearce, our specialist adviser. David Pearce was one of the founding fathers of environmental economics in this country. His international reputation was reflected in the lifetime achievement award ofthe European Association of Environmental and Resource Economists, which he received in June last year, only weeks before the publication of our report. He was a truly outstanding adviser to the committee, and our report would certainly not have been produced without him. So his sudden and early death, only a month after our report was published, is a terrible loss, not only to his family and friends but to the world of environmental economists.
I also wish to say how much we appreciated the work of our Clerk and his advisers on the team. They were a great help to us.
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The report received considerable publicitywhen it was published. Some of this reflected the international political context at the time. Climate change was central to the G8 agenda at Gleneagles, and the report appeared just as the world leaders were gathering. But I believe its reception also owed much to the fact that it was addressing the economic aspects of the subject. Many distinguished economists were working on climate change, and we took evidence from a number of them, but it is usually their scientific colleagues who receive the lion’s share of media attention.
Perhaps as a result of the relatively fresh perspective that I believe we were able to bring to the subject, most of the publicity received by our report on publication was very positive. Of course, there were critics too, although it subsequently emerged that some of them had not actually read the report when first pronouncing on it. When some later got round to doing so, one or two even acknowledged that they might have misjudged it.
However, the Government’s response, when it eventually emerged, was very disappointing—grudging in tone and generally negative on substance. I wrote in February to the then Secretary of State, Margaret Beckett, and to other Ministers, including the Prime Minister, to express our disappointment at the Government’s response. I noted that the response negativity was all the more surprising when it appeared increasingly that in important aspects, the Government’s thinking is close to the views set out in the committee’s report.
I referred then to the Prime Minister’s comments at the Clinton summit in New York in September and on subsequent occasions, which indicated a rather radical change in direction for the Government. The Prime Minister noted that he was changing his thinking on climate change and that there was a need for “brutal honesty” about the politics of how we deal with it.
On Kyoto, the Prime Minister noted that there,
He also said:All this was entirely in line with the thinking of the committee.The energy review
published this week appears to be the work of Jekyll and Hyde. On the
one hand, there is a recognition that nuclear power must play a part in
Britain’s energy supply mix. This realism is
welcome—indeed, long overdue—but I fear it will take a
number of years before there is a significant increase in nuclear
generation. On the other hand, the shortcomings of the 2003 review,
including in particular what we felt was the utter lack of realism
about the role of renewables, has unfortunately been carried over into
the recent review. However, I am always optimistic, and I hope that the
noble Lord, Lord Rooker, whom I have known and admired for more than 30
years, since we entered the House of Commons on the same day, will
produce a more measured, realistic and positive response from the
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On the central point of our report, the Government did immediately follow the advice of the committee. Given the importance and complexity of the issues involved, we were very clear that the Treasury needed to play a much more extensive role on climate change within government, so we were delighted that within days of publication of our report, the Chancellor announced the review of the economics of climate change to be led by Sir Nick Stern. That was the correct thing for the Government to do and we congratulate them on their action. The committee has been following Sir Nick Stern's review with interest and we very much look forward to his report.
I am hopeful that the Stern review will readily endorse many of the committee's conclusions and recommendations. For instance, there is a risk that international negotiations will not secure large-scale and effective action on mitigation. The Stern review might take a more sanguine view of the risk than we did. But there is clearly some risk. We therefore want to see a more balanced approach to the relative merits of adaptation and mitigation, with far more attention paid to adaptation measures.
Another key recommendation in our report, which I feel confident the Stern review will go along with, is the need for a far stronger focus on technology and research and development. That does not, in our view, mean a little more of what is being done now. It means a step change to a research and development effort into carbon-free and low carbon energy sources of an altogether different magnitude. In our report, we suggested that the US Apollo programme to put a man on the moon provided a precedent for the sort of extraordinary effort and priority that is needed. On that point, the recent energy review is disappointing. I see no evidence that the Government are committed to an effort on the scale of what is required on that front.
As I have already said, I hope that the Sternreview will follow the Prime Minister as well as the committee in taking a “brutally”—the Prime Minister’s word—realistic view of the prospects for effective emissions controls. But, in any case, the committee outlined concerns about the workingsof the relevant international body, the Intergovernmental Panel on Climate Change. There is perhaps room for debate about the significance and full implications of the shortcomings in the IPCC process. However, the IPCC has an exceptional, largely unquestioned, authority in this area—perhaps unparalleled in United Nations agencies working in other fields. In such a situation, what seems indisputable is the need for an organisation and a process whose procedures, objectivity and balance are not only beyond question, but are seen to be beyond question. For all the fine work done by the IPCC, to which I pay tribute, I fear that that is not the present position.
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Finally, I refer the House to the concerns that the committee expressed that UK energy and climate policy appeared to be based on some very dubious assumptions about the roles of renewable energy and energy efficiency. We also pressed for a proper carbon tax to replace the present climate change levy, and we urged the maintenance of as wide an energy portfolio as possible, with the retention of nuclear power. On that last point, the energy review is, as I have said, encouraging.
Although it is right that renewable energy and energy efficiency are given priority, it is disappointing not to find in the review much more realism about what they can be expected to achieve. Also disappointing is the lack of commitment to the introduction of a carbon tax. Some very distinguished speakers are taking part in this debate, which I am delighted about. Iam very much looking forward to hearing all the contributions, including the maiden speech of the noble Lord, Lord Teverson. I beg to move.
Moved, That this House takes note of the report of the Economic Affairs Committee on the Economics of Climate Change (2nd Report, HL Paper 12).—(Lord Wakeham.)
11.17 am
Lord Giddens: My Lords, I first congratulate the noble Lord, Lord Wakeham, and his committee on their report, which bears evidence of a great deal of thought and work. At least, it is a bit different to see something from a gaggle of economists writing on environmental issues. It is said that one advantage of being an economist is that you get to write about money without ever having to make any. I am pleased to see that this report is eminently practical in its implications.
In our society today—indeed, throughout the world—we are having to deal with the ripple of two types of intersecting shock. One is certainly climate change shock. For a long while, climate change seemed to many people to be a kind of abstract thing for the future—a possibility that was continuously disputed within certain sectors of the scientific community. Although I gather that some sceptics will speak later, having looked at the literature extensively for the past four or five years, I do not see how it is possible to hold that position any longer. Climate change is in the here and now. When a city in the richest country in the world can be overwhelmed by flooding within 24 hours, it is an indication that something is different in the world. Of course, we do not know whether what happened in New Orleans was influenced by climate change. But most of the models of climate change centre on the Caribbean as a source of major perturbations in world weather patterns.
Energy
price shock is just as important. It plainly intersects with climate
change shock because some of the solutions to the two clearly overlap.
One can see the difference today even from a year ago in the report,
which is quite muted on the theme of energy, but most people now agree
that energy pricing looks set to increase and that many of the risks
that we face in the world, including the risk of terrorism, overlap
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I find a lot in the report that I agree with. It is right to say that economics should be brought into the centre of debates about climate change and that the Treasury should play an important role alongside those arms of government that specialise in dealing with the environment. I am pleased to see that at least some progress has been made in that direction. I believe that it is right to put stress on technology and research and development, and what the report calls a “Kyoto plus”. We all know that Kyoto is inadequate, partly because the Americans have not signed up to it and because it covers only part of the world and, as we all know, even if it were fully signed up to, it would get nowhere near to resolving the issues that we face with climate change.
It is also right to say that every nation must have diverse energy sources and that nuclear power must be part of that mix—although even the advocates of nuclear power recognise that there are major problems with it. It is a long-term solution, and some of the crises involved have become short-term crises, especially around energy supplies. Having looked at this issue in detail recently in relation to European legislation, with which I was involved, there are major problems in setting up a scenario in which the private sector would be able to play the major role in financing new nuclear power stations. We should all watch closely the experiment in Finland, with that country’s new nuclear power station.
However, there are three critical comments that I should like to make about the report. First, I am a bit puzzled by the fact that it does not mention the theme of ecological modernisation. That is perhaps the dominant theme of the relationship between economics and the environment and has been prominent in the literature for at least the past 10 to 15 years. The idea is controversial, but it proposes that there are many circumstances in which environmentally friendly technologies are also more efficient than those which are not environmentally friendly or not environmentally neutral, and that environmentally sophisticated technologies might in principle have bigger markets than those which are less sophisticated or polluting. Of course, you can supplement those things with a range of energy taxes to make them more saleable and marketable in local and global markets.
Let us consider the
example of the Toyota motor car company. Toyota has recently overtaken
General Motors to be the largest car manufacturer in the world. There
are many reasons for this: Toyotas do not break down very often, as
anyone who has owned one knows. But most analysts agree that it is also
because Toyota is by far the most advanced manufacturer of
environmentally friendly cars, especially hybrid cars such as the
Toyota Prius. Toyota is also creating some very interesting
innovations, well
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In the report, the economics of the environment seem to be discussed almost wholly in terms of brute cost. It mentions the IEA estimate, which the noble Lord also mentioned; but one needs a much more sophisticated analysis than that of the net costs of the intersection between new technological innovation, global technological innovation and the costs of sustaining more environmentally friendly policies. That also has relevance for competitiveness because the Japanese are well ahead of the Europeans and Americans in some of these markets. If you go to California the Toyota hybrid cars are the most sought-after cars—there is a three-year waiting list for them there; so they are eminently marketable.
My second comment would be that we should put increasing emphasis on lifestyle change. The report says something to the effect that action to tackle climate change must be “potentially life-changing”; but there does not seem to be much development of that in the report. We cannot face up to the dual challenge of climate change shock and energy shock without lifestyle change. There are many areas here in which there is a win-win situation. We know, for example, that congestion charging has been successful in London. It certainly has an environmental impact and an impact on energy use. I fully support the Mayor’s intention to increase the congestion charge for the most environmentally unfriendly vehicles.
What we have to do is to rescue environmentalism from the hold of the Green movement, partly because the Green imagery is all wrong. You cannot go back to nature; there is no such thing as “nature”, in a sense, because technology is now so much involved with the natural world. Many things that we have to deal with are no longer directly natural. But also the Green movement tends to be hostile to science, and science and technology have to be at the front line in our attempts to cope with the influence of the dual agenda of shocks.
It is interesting to look at those countries thatare in the vanguard. In Sweden, for example, the Government have declared that there will be a fossil-free economy by 2020. That is not a long time ahead. One reason for that is that Sweden, unlike most other industrial countries, took action in the first oil crisis of the 1970s. So, too, did Japan, where consumption of oil has remained stable over the past 30 years even though the Japanese economy has grown by three times. If you look at the statistics, even the best performing European countries do not get close to that figure.
My third
point is that not only economics are relevant to climate change and
fuel change shock. The other social sciences are also relevant, such as
sociology and psychology, because we are dealing with different risk
situations from the past. We are dealing today with what I call
new-style risks. Old-style risks are those that you can measure, as you
do in an insurance company. Every time you step into
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In conclusion, there is a range of studies, onwhich I am sure other noble Lords will speak, onthe intersection between competitiveness and environmental innovation. Among the best I know of are those by Michael Porter and his colleagues at Harvard, which show that the introduction of environmentally friendly technologies is at least neutral in respect of economic competitiveness in most situations.
11.28 am
Lord Vallance of Tummel: My Lords, as a newcomer to the Select Committee on Economic Affairs at the time when it prepared its report, I approached the subject of climate change with some diffidence. That is not to say that I had no interest, either past or present. My present interest is as a member of the supervisory board of Siemens AG, a leading supplier of power generation plant and automotive equipment, among other things. My past interest was as a member of the board of the Mobil corporation, now part of ExxonMobil. Any lingering scepticism I may have had in that latter capacity about the gravity of the threat of climate change and the significance of greenhouse gas emissions has since gone. I believe that this is one of the greatest challenges to face us of all time, that the case for scientific action is made, and that the paramount issue now is what action to take.
It is here that my scepticism kicks back in. In choosing lines of action we must not miss the wood for the trees. We need to accept that the best that the UK can do of itself in controlling carbon emissions is to be exemplary—thoroughly desirable, but quite insufficient. Even if we cut the UK’s CO2 emissions to zero, there would be no measurable impact on global temperature in the foreseeable future. Only Europe as a whole can make a dent in the problem. The totality of those who ratified the Kyoto Protocol—the Kyoto club—could make only a rather bigger dent. What we have is a manifestly global problem and it can be tackled effectively only on a global scale. The bulk of greenhouse gas emissions—and a growing proportion—comes from the developing countries together with the United States. If they are not party to the solution, there will be no solution.
So, if we think we
can lean heavily on the Kyoto club’s carbon emissions trading
schemes to provide a global solution to the problem, we are mistaken.
Even if the current defects in the architecture of such schemes can be
remedied, we cannot bank on persuading the developing world and the US
to subject themselves to that level of discipline, certainly not in
time to be effective. That is not to say that I
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Face up to those facts and the issue becomesquite stark. We have to find the means of meetinga growing demand for energy, and indeed transportation, without emitting vast amounts of CO2 into the atmosphere or creating other environmental disasters.
In short, the key issue is technological. Technology and industry got us into this fix and it is for technology and industry to get us out of it. If we can accelerate—and acceleration is the key point—the provision, at scale, of competitively priced, environmentally friendly alternatives to fossil fuels or effective carbon capture, the problem will fade away. Remove the externalities and the market can be left to take care of itself. There is every reason to believe that technology will be able to meet that challenge. We also have a wide range of potential options to pursue: carbon capture, of course, as well as photovoltaics, hydrogen cells—you name it. The problem is not one of technological options but one of time. We need to bring forward solutions at scale, but to do that we need a massive boost in our efforts to address the technological and cost issues. That in turn means finding and applying sufficient financial and other resources to do the job.
The noble Lord, Lord Wakeham, mentioned the analogy of the moon shot as a means of marshalling the resources needed to speed up development of technologies. I think that a closer parallel would be that of an arms race. If we could provoke the equivalent of an arms race in the context of combating global warming, we would stand the very best chance of getting the right results in time. After all, if vast public resources can be found to accelerate technologies capable of destroying the world, surely it is not beyond the wit of man to devise the means of accelerating technologies capable of saving the world.
Where would the financial and technological resources come from? Here the members of the Kyoto club do have the resources to go it alone. They have the scientific base, the engineering capability and the economic strength not only to participate in such an environmental arms race but to get out in front. In our report, we urge the Government to take a leadin exploring alternative “architectures” for future protocols, based perhaps on agreements on technology and its diffusion. More experienced minds than mine will, I hope, take this forward, but perhaps I can make a few tentative suggestions.
First, reach agreement among the Kyoto
club members to levy a straightforward carbon tax ineach of
their countries. Secondly, agree to the
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Finally—and here is the sting in the tail—place the development contracts solely within the member countries of the Kyoto club. The resulting European-Japanese industrial axis would be sufficient to trigger our environmental arms race. The United States would have to follow suit; to do otherwise would be to risk being overtaken in the next generation of both power generation and transportation technologies. Neither is something that the Americans could really contemplate.
I appreciate that such an approach may seem too radical, too direct or just too simplistic, but I make no apologies for it. If ever there was an issue demanding radical and direct action, this is it. We must not let our understandable preoccupation with getting things right in the UK and the European Union lure us into thinking that that is all we must do. This is a global issue that demands global solutions. The Kyoto club has tried persuasion and leadership by example in emissions trading schemes, but it all has the makings of too little, too late. Now is the time for direct and focused intervention in the market and the application of financial and technological resources on a scale commensurate with the environmental threat. It is also an initiative where the UK Government might take the lead.
11.37 am
Lord Oxburgh: My Lords, I declare interests as a former chairman of Shell Transport and Trading and as a current adviser to Climate Change Capital and a variety of other bodies concerned with energy policy, climate change, investment and risk management. I, too, am grateful to the noble Lord, Lord Wakeham, for the opportunity to discuss the report of his committee. The report is very wide-ranging and I shall have time to touch on only a few aspects.
Modern civilisation has developed and
prospered during a 5,000-year period of relatively stable and benign
climate, and we have built a costly infrastructure of modern western
society to fit those conditions. The rapid changes in climate that we
are now experiencing will make many parts of that infrastructure
inappropriate or insufficient and we shall have to do our best to
adapt. That we do for ourselves. For our children and our
grandchildren, we must at the same time tackle the causes of climate
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It is therefore timely that we should consider the costs of these changes and what provision should be made for adapting to the new circumstances and for mitigating the causes of climate change. Both of those depend on the science, but the science of complex natural systems is particularly challenging. There is rarely, if ever, complete certainty and total understanding. I feel that the committee struggledin its efforts to come to terms with that. It ispretty meaningless to state, along with the US Administration, that the science is uncertain. Science is about uncertainty. It is not a matter of whether everything is known; it is a matter of whether enough is known to answer a particular question with a reasonable degree of confidence, and that may be a matter of experience and judgment. If that question is whether anthropogenic climate change is happening and is a threat to the planet, science gives an unequivocal affirmative. What is uncertain is how, when, where and how severely the consequences will be felt.
In the year since the report was written, the situation has become both clearer and more worrying. It looks as if 2005 was the hottest year since records have been kept, and that the two most recent decades have been the hottest certainly for 400 and possibly for 1,100 years. More worrying still is that, as is now recognised, the great masses of polar ice that help to keep the earth cool are being affected by rapid break-up processes that were not previously thought to be important. This is work in progress, but the implications are that both sea level and temperature rise may be faster than previously thought. Frankly, to assert, as some continue to do, that this is simply natural variation in the earth’s climate, when these changes are quantitatively and qualitatively predicted from our history of burning fossil fuels, seems to me perverse.
The Intergovernmental Panel on Climate Change, which comes in for some scathing criticism in the committee’s report, is a truly remarkable body. It is remarkable because it is unique in the history of science—more than 2,000 scientists from a wide range of disciplines and more than 100 countries collaborate in an attempt to analyse and understand the complexities of our climate. The process is not perfect, but the results are astonishing. The panel issues periodic progress reports. The one that the committee considered and criticised was published in 2001, reflecting work done largely in the 1990s. Some of the concerns that the committee lists in its conclusions had already been answered—for example, probability analyses of future temperatures, which had been available for some time. The committee quite rightly raises the question of political interference with the IPCC, but the report reads—perhaps this is not the intention—as if the fault rests solely with the IPCC. The greater responsibility is carried by Governments that fund the IPCC and without whose approval reports cannot be issued.
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