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Lord Dixon-Smith: My Lords, like every speaker, I join in thanking my noble friend Lord Renton of Mount Harry for presenting this report. More particularly, I join in thanking the members of the committee for the immense hard work and study which must have gone into taking the evidence, trying to summarise it and putting it all into a presentable form.

I welcome Lord Haworth. I was fascinated by his speech, never having been a mountaineer—but even I can notice the climate changing in lowland Essex. It is dramatically different now in the middle of winter from what I knew when I was a boy.
 
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It would be impossible in the time available to try to sum up this debate, and I do not intend to attempt that impossible task. What I do intend to do is to mine one or two bits of information, in particular out of the book of evidence which comes with the report and which is actually far more revealing, intriguing, interesting, and in many ways useful, than the body of the report itself.

There is no doubt—and we can be grateful for this, since there is clearly a mounting problem—that Europe and the United Kingdom in a sense are leading the field globally. A more serious issue is whether we are ahead of the game. I am prompted to ask that question having looked at the evidence of the noble Lord, Lord Browne of Madingley, who is head of BP. He came up with an interesting and attractive formula which he described as his 50–50–50 formula for the year 2050. As the head of a major oil conglomeration he postulated that having considered all the options, in 2050 it seemed likely that we should be able to get to 50 per cent of our energy carbon dioxide-emissions free. He would include carbon dioxide sequestration within that 50 per cent. But by 2050 he thought that probably the best we could achieve would still involve 50 per cent of the world's energy coming directly from carbon fields and still emitting carbon dioxide.

That would represent a remarkable change and a great improvement on the present situation. It represents real progress. However, if one assumes that the global economy will continue to grow at an average rate of 2.5 per cent and that the growth in the economy is a proxy for the increase in the use of energy—and one is pretty well dependent on the other—after 30 years the use of energy doubles. After 45 years, by 2050, the use of energy would have trebled from today's rate. If one then turns that into carbon dioxide emissions and goes back to the statement of the noble Lord, Lord Browne of Madingley, in 2050 we shall still be emitting 50 per cent more carbon dioxide than at present, even if we have achieved his 50 per cent reduction. That is why there is a serious question: although we may be leading the field, are we ahead of the game? That is simply an observation which will not require a response from the Minister: it simply states where we are.

I wish to pick up another point from the evidence which I found fascinating. The noble Lords, Lord Livsey of Talgarth and Lord Hunt of Chesterton, touched on it. I refer to the first group to give evidence from the town of Woking. It is remarkable how often one finds good, competent and original work occurring in British local government. With the lifetime of experience of the noble Baroness, Lady Farrington, and others in this Chamber, we should not be surprised at that but this aspect is something quite special. They are trying to change the way in which Woking works as regards energy requirements.

Two or three matters arise from that. Perhaps the Minister will answer the question that the Secretary of State was unable to answer when she was giving evidence. Clearly she had not been advised on what Woking was doing. Have the Government any
 
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thoughts about relaxing the regulatory constrictions which hold back Woking's development? Two specific areas caused problems. Because of the system, it is generating a lot of its own electricity. It is limited on the number of customers it can supply on a private wire and believes that that is an unreasonable constraint. It is also limited in the amount of power it is able to export to the grid. One of the things that has to happen to the grid is that it must become a two-way system. It will increasingly have to take electricity in at the consumer level, as well as feeding it out at consumer level. It is interesting that Woking has run into that practical barrier. I found it infinitely depressing to find that, in getting backing for its projects, the council found central government capital controls a constraint. That is normal in local government, so I will not pay particular attention to it. The council had to get a partner from Denmark to make the system work and set up a public/private company.

The other interesting statistic that has profound implications—I think that the noble Lord, Lord Livsey of Talgarth, made the point—is the fact that 70 per cent of domestic energy requirements are thermal. There is lot of work with combined heat and power, but the business of heat recovery is fundamental to energy efficiency. It is not just a matter of condensing boilers and heat recovery in our households; a great amount of waste heat goes out from power stations and major industrial installations. There is no way of tapping it and feeding it into the communities whose main demand is for heat. That is something that needs to be thought about in the context of planning and decisions on how we organise our society.

Reality suggests that power stations should be built in the suburbs, not 50 miles out of a town. They should be built where the energy can be recovered and used. The same applies to incineration plants, and one can turn them into combined heat and power units. However, the facility must be there to feed heat into the domestic market. That is something that we have signally failed to do.

It is a good report. It deals with the wider European issues, particularly emissions trading, which is a welcome system. I do not think that we have done our case any credit by seeking to expand the initial applications that we propose to give industry. That said, the reductions have to be put in place. The targets are statutory and enforceable, and the penalties are considerable.

I am not sure how the penalties work, and I wonder whether the Minister could spend a little time explaining how they work. I see in the report that the penalty is €40 per tonne of carbon dioxide by which the target is exceeded until 2007 and €100 per tonne until 2012. Those are considerable sums, considering the major plants included in the scheme. Do the fines and penalties apply at plant level? Do they apply to a plant that has missed its target even if the nation concerned has met its target because others have exceeded theirs?
 
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Presumably, the penalties will be paid net of trading. It is notable that the Dutch are already in the market, buying emissions trading certificates while they are cheap. At the moment, there is no real market. One might congratulate the Dutch on their initiative, but that seems to circumvent the purposes for which the scheme was set up. They may be able to sell the certificates that they have bought at a considerable profit later on. That remains to be seen, but that is a form of government intervention that I would not wish to see. I would welcome a bit more explanation from the Minister of how it will work, if he has time.

That is quite enough. I look forward to a full reply from the Minister.

Lord Whitty: My Lords, my thanks to everyone who has taken part in this debate, and especially to the noble Lord, Lord Renton, and his committee, for producing such an effective report on which everyone has positively commented, and added to. It is a good example of how effectively our sub-committees can address important problems and engage a wide range of people in the process.

A lot of very interesting points were made, and I pay particular compliment to my noble friend Lord Hawarth who gave a graphic description of the reality of the effects of climate change in a very lonely place, and in a few words. The same effect is happening across the planet, but it is in situations like that which brings it home to most people.

As usual, he chose an iconoclastic approach by not being entirely uncontroversial in his speech in mentioning the issue of nuclear power. I may disagree with him slightly, although possibly not quite as much as the noble Baroness, Lady Miller. I have no doubt that we shall debate nuclear power on another occasion, so I do not intend to go into that in too much detail today.

The noble Lord, Lord Renton, made it clear in his report that he accepts there is a real problem with climate change and that much of it is induced by anthropogenic activity. By and large that is accepted by the vast majority of world scientists and everybody who spoke in the debate, apart from the noble Lord, Lord Taverne, who provided a welcome and healthy note of dissent from the Liberal Democrat Benches, including from his own colleagues.

I would never in any scientific assessment say that we are absolutely sure that we are right. It is right that such doubts should be expressed. Nevertheless, in view of the evidence and scientific opinion in general, an attitude that is taken by certain governments and organisations of denial or complacency is a much higher and potentially devastating risk than the risk of exaggeration by some scientists and others who espouse the climate change cause.

It is that issue that the committee grappled with, and which we must grapple with as a government and a society. The noble Baroness, Lady Young, said that things have moved on since the report was completed, and some further evidence both at the Exeter
 
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conference and from Oxford University suggests that the position might be worse, especially in relation to the level of carbon in the atmosphere.

On the other hand, we saw the very welcome bringing into legal effect of the Kyoto Protocol. While it is true that it will deliver global emissions cuts of only about 2 per cent by 2012, which is a minuscule step in achieving the objectives that we shall need to achieve by the middle of this century, it is a faltering, but nevertheless very impressive step that 141 countries have now ratified the treaty and we have the beginnings of a globally agreed strategy and mechanisms to tackle climate change.

It is regrettable that some other countries are not on board, but even that can be rectified in subsequent developments on the international scale, which I shall come to in a moment.

The committee focused on the European climate change programme, and rightly commends the EU's work in this area. The noble Lord, Lord Hunt, also referred to the support of the Kyoto mechanism and the linking directive, which enables credits from the Kyoto projects to be used in the EU emissions trading scheme itself. Although the overall implementation projects will not come into play under the UN rules until 2008, we are already registering projects under the clean development mechanisms. I note the views of the report on that.

Many people have complimented and supported the Government for making climate change a central priority for our presidency of the EU. We will clearly build on some effective work by the EU. I agree entirely that this demonstrates the importance of acting at EU level, which is now in the world leadership in this process. We, as the presidency in the latter half of this year, and the presidency of the G8 for this year, will be in a leadership role.

That is coincidental to the legal coming into effect of the Kyoto agreement, but it also gives an opportunity to focus on what happens beyond Kyoto. Negotiations on the future framework will begin at the first conference of the parties, which Canada has announced it will host in Montreal in November. The UK presidency will play an important role negotiating for the EU at that point.

The committee noted a number of points and gaps where the policy is not yet fully developed, or even identified, to bring certain pressures of growth of carbon and greenhouse gas emissions into a system of control. In particular, it focused on transport. The noble Baroness, Lady Young, my noble friend Lady Billingham, and the noble Lord, Lord Lewis, referred to the importance of getting a grip on the transport situation.

Clearly, as regards road transport, the technology is almost there to make a shift in the replacement fleets. It is not just a question of moving, in the short term, possibly to an increased use of biofuels and hybrid cars and, in the longer term, to hydrogen-based vehicles, it is also a question of use and management on surface transport.
 
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The same applies to aviation even more substantially because it is by far the fastest-growing sector in terms of carbon emissions. For international competitive reasons, it was excluded from the Kyoto Protocol. It is important that aviation is brought within the mechanisms that we are developing. That is why the Government, while not rejecting fiscal measures in relation to aviation, think that the most effective way to bring aviation into the system would be for it to join the EU Emissions Trading Scheme. We are strongly of the opinion that we ought, with all its difficulties, bring it into the EU Emissions Trading Scheme in its second phase in 2008.

Buildings were also emphasised as an area needing more activity. Clearly, in their construction, operation and what is done within them, buildings create about 50 per cent of the UK's carbon emissions. The Government have engaged in a number of measures in the UK to improve energy efficiency in households, including taxation measures such as reduced VAT, support for micro-CHP and developments in building regulations. We need to do more to ensure that new build and, in particular, new large developments are built to the highest sustainable building standards. We also need to improve on the refurbishment of all existing buildings, particularly the very old buildings to which the noble Lord, Lord Lewis, referred. The energy efficiency action programme that the Government announced is addressing that. The fuel poverty programme, while addressing fuel poverty, will also improve the installation of a lot of old buildings. So work is being done, but much more needs to be done in that respect.

Clearly, the EU Emissions Trading Scheme is a very important development, which builds, in part, on the experience that the UK had in its UK emissions scheme. Some of its techniques have been passed on to the member states in the EU Emissions Trading Scheme.

There has been much focus here and in the press on the UK's own cap and its national allocation plan. I should like to make two or three points about that. First, the UK's revised position on that is probably one of the most robust targets of any of the member states. Although I do no want to be too cynical about it, it is probably true that if the commission and others had seen those figures first, they would have jumped up in the air with glee that the UK could be so ambitious in the targets that it set.

The reason why the UK found it necessary to change those figures is not as is usually reported because of industry pressure, but because the underlying statistics were updated and showed that we were at a higher level of carbon burning in earlier years than we had previously estimated. That means that we will have to look at the figures again to see what is achievable within the timescale of the allocation plan.

As has been said, when the facts change I change my position, what do you do? In fact, compared with the underlying reality, the new figures are a tougher target than the original ones. A bigger cut is required in the
 
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business as usual figures than in the original ones. We are still in discussion with the Commission as to how we will deal with that and we have made clear that if the Commission insists on the original figures, regrettably some of the cut will have to come in relation to the generators. But we believe that the new UK position is viable and could make a significant contribution to the achievement of the ambitions of the European scheme—certainly, at least as big a contribution as other countries are likely to make.

I do not therefore think that the Government have much to apologise for on that front. Indeed, it is another aspect of our leadership role and of our pitching our ambitions way beyond the Kyoto target to our own 20 per cent domestic target, which is difficult and we are not yet on the trajectory to meet it. However, it remains our ambition and we recognise that further measures will be needed in order for us to achieve that target.

If we look a little outside Europe, because some noble Lords referred to the situation outside Europe, it is important that Europe uses its influence to bring other nations in—as we did very effectively with the EU pressure on Russia and support for Russia, which allowed us to get Russia to ratify the protocol and therefore trigger the legal effects of that. We are also operating in other areas including China and India and those countries that will require some support from Europe, particularly from the UK, both in terms of individual projects—to which the noble Baroness, Lady Miller, referred, and I will let her have an update of where we are on those—and in terms of new technology.

We referred earlier today in response to a Question from the noble Lord, Lord Ezra, to carbon capture and carbon storage. If the vast increase in coal-fired power stations in China is to take place, it ought to take place with the cleanest possible coal technology. That involves not only clean coal at the front end but also carbon capture and storage at the back end. That will make a huge difference to what is currently seen as a catastrophic increase in the Chinese contribution to carbon emissions.

That technology transfer is very important at that level. It is also very important at smaller levels, going down to what the noble Baroness, Lady Miller, referred to—parabolic cookers which use virtually no energy and smaller scale community, individual and small-business-based forms of cheap and low carbon energy in Africa and the rest of the developing world.

The Chinese were certainly not hostile to this issue. It is wrong to say that the Chinese are not party to Kyoto: they are signatories. However, the targets in Kyoto all relate to developing countries. We must recognise, as high consumers of carbon and producers of greenhouse gases, it is our responsibility to give a lead. Unless we can deliver that, the Chinas, Indias, Brazils and South Africas will not come on board. They are all interested in this area and are keen to benefit from our technology and experience of market systems such as the trading scheme.
 
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Of course, the big omission from this is the United States. I am sure that almost everyone in this Chamber regrets that the United States has not participated positively in this matter—such expressions have been made in this debate and in the report. However, all is not lost in the United States. The 10 north-eastern states are currently considering setting up their own emissions trading scheme, which may become compatible with the European scheme. The majority of those states have Republican governors. Of course, in California, where there is a well-known Republican governor, there is a great drive for setting targets for car emissions and for the development of the hydrogen economy.

Corporations within America are also taking a lead, which is not always reported in the European papers. DuPont for example has saved itself over $2 billion and also greatly increased its energy efficiency in the past few years. Other large-scale energy users in the United States are doing the same. Both at the corporate and the political level in America, which regrettably has not yet seriously influenced the Washington administration, there are dramatic moves towards addressing this problem as well.

Of course the underlying American position is that technology will eventually solve these problems. Yes, it will, but only if we give the space and the framework for technology to develop.

We need to support the technology directly and to create the climate where that technology is seen as the future market and the future return both for the owners of businesses and for a better society. It is all forms of technology, many of which have been referred to here. That includes immediately available technologies, such as biomass and many forms of CHP, solar energy, wind power—which is not always popular in this House, though I suspect it might be more popular with the subset of the House here tonight.

That also includes consideration of the future of nuclear power. I would certainly support continuing to invest in the research and development that is needed if we were to see the need for nuclear power. That technology—and a diverse range of technology—is absolutely essential if we are to drive for a low-carbon economy. That includes massive ways of investing in large-scale generation of electricity on a low-carbon basis, through tidal and wind power. That also includes relatively small-scale operations, such as community heating, as in the borough of Woking, which has been cited as a good example by the noble Lord, Lord Dixon-Smith, and others. Indeed, the inhibitions that the development of Woking-type systems have are being addressed by the Government in discussion with Ofgem and the regulators.

There are a whole range of things that need to be done and need to be brought together. None of them will be delivered as fast as is necessary unless we also convince public opinion. Here I greatly agree with the noble Lord, Lord Renton, in introducing this debate, and with the reference of the noble Baroness, Lady Young of Old Scone—we need to change public opinion.
 
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Part of that is the responsibility of government. The Government have announced a new £12 million package of funding in order to address this system. We have already seen recently on television both the Energy Saving Trust and the Carbon Trust using the mass media to try and raise consciousness and change behaviour. Past efforts at this have raised awareness, but hardly changed behaviour. We need to perform the trick of changing that higher awareness to changes in individual—personal, household and commercial—behaviour.

If we do that, we can begin to offset the effects of carbon emissions and of climate change on our planet and on our way of life. But we need that support from the general public, not only here and not only in America, but also in China, India and Brazil. To answer the point of the noble Lord, Lord Dixon-Smith, yes, we are, here in the UK and in the EU, leading the field on this issue, but we are not yet ahead of the game.

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