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I strongly urge the Committee to follow the recommendations of the Joint Committee on the draft Bill, which spent a lot of time considering these issues. It reported on them in pages 30 through to 35, covering the whole issue of supplementarity and strongly urging that the Bill be amended,
- “to give the Committee on Climate Change a duty to report annually on the use of carbon credits in the preceding year. In doing so, the Committee should be required to give an opinion on the robustness of the schemes under which these credits have been issued, the effectiveness of these credits in reducing global greenhouse emissions, and the transparency with which the Government has reported their use”.
We made other similar recommendations on the slightly wider issue of the Kyoto Protocol to which the noble Baroness referred.
I suspect that we shall return to this matter and I do not want to delay the Committee too long. I hope that we shall come back to it when we come to Clauses 21 and 22, which is the appropriate place to do so. We should look at the issue there and in the terms of the job that we are giving to the climate change committee, because it really is a ludicrous proposition that we in this House can come to sensible decisions about particular percentages applied in this extremely complex and changing situation.
Lord Puttnam: I endorse very much the principle lying behind the noble Baroness’s amendments, particularly Amendment No. 27, and in only one respect do I depart from the views of my noble colleague on the committee, the noble Lord, Lord Crickhowell.
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I came to the conclusion following our report, and having read more and having talked to a great number of people, that the heart of a successful Bill lies in the concept set out by the noble Baroness—and, indeed, the one that we shall discuss in the group led by Amendment No. 29. I discovered that very little is known by the Government about the present situation. As a result I have put down a Written Question asking the Government what the present indicative figures are for the purchase of carbon emissions. In a sense this amendment is the litmus test, for all the reasons set out by the noble Lord, Lord Dixon-Smith, just now. This is a very significant Bill, which will fail unless it is able to provoke very significant behaviour changes in this country. This is the area in which I depart from the noble Lord, Lord Crickhowell.
I think that it matters very greatly where each individual carbon emission is saved from. If we fail to alter our behaviours and somehow, by dint of our wealth or sheer cleverness, are able to push the problem overseas and make it one that developing countries effectively solve for us, we shall have failed, and this Bill frankly will have no real reason to be on the statute book. At that point, we may as well call it the “Carbon Emissions Trading Bill”, because that is what it will have become. I do not think that that is something that anyone in this House particularly wishes to see happen.
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Lord Crickhowell: If I gave the impression that I did not think it mattered, that was not what I intended to say. Of course, I agree that we have got to make a very substantial contribution as part of this, but, with regard to CO2 emissions, it does not matter where they come from anywhere in the world. There are a lot of extremely good reasons why we should make a very substantial contribution. What I am saying is that I do not think that I am in a position, or this Committee is in a position, to say whether the cap should be 10 per cent, 20 per cent or 30 per cent. That is the issue that the climate change committee can recommend on in the light of the circumstances of the time, the price of carbon and all the other relevant issues.
Lord Puttnam: I thank the noble Lord. I did not for one moment think that he did think that, but I felt it necessary to raise the point.
I urge the noble Baroness, when she reconsiders this matter before Report, to push the figure up from 30 per cent to 40 per cent. I believe that there has to be such a figure. I am grateful to the Front Bench for supplying us with briefing paper 5, page 2 of which reads:
“The Kyoto Protocol allows countries to use international emissions trading mechanisms to help meet their targets, provided that this is ‘supplemental’ to domestic action to reduce emissions (which must constitute a ‘significant element’ of the action taken by developed countries)”.
I wish that I could trust words such as “supplemental” and “significant”, but life has taught me that I cannot. That is the reason—certainly from my perspective—for insisting on a figure being in the Bill. I would rather that it was 30 per cent but I shall settle for 40 if that is what it needs to get this amendment through this House. I shall support that situation at Report.
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Lord Turner of Ecchinswell: My comments are in sympathy with those put forward by the noble Lord, Lord Crickhowell. This is a very important issue of how far the UK relies on its own reductions in carbon emissions and how much on bought-in credits from overseas. Clearly, there is a balance to be struck. There is a strong case in theory for achieving carbon emissions at lowest cost, wherever that is possible across the world. There is also a good argument for carbon trading being a mechanism by which economic resources are transferred to developing countries that are themselves achieving carbon emissions cuts.
On the other hand, it is clear that the primary focus of developed countries—and this is why the word “supplemental” was used in the Kyoto Protocol—must be on reducing their own carbon and other greenhouse gas emissions. That is vital for two reasons. First, it is only because we are driving down and are committed to driving down our own emissions that we will be the drivers of the new technologies that are then available to the rest of the world, be they new technologies in energy efficiency or renewable energy. The other is perhaps a more short-term thing, but at the moment we cannot be as sure as we should like to be about the robustness of some of the offsets that we can purchase from the other end of the world. Therefore, it is essential that the primary focus of the UK climate programme be on our own greenhouse gas emission cuts with only a supplemental role for bought-in credits.
In that context, I believe that the noble Lord, Lord Crickhowell, is correct to say that the details of that require more thought and that that is something that the climate change committee should look at and develop recommendations on. The appropriate amount of a purchase from overseas will change over time; it may be appropriate for it to be somewhat bigger in the very short term—in the first budget or so—because it is difficult to turn the ship quickly, but it should reduce over time. In that respect, I admired the ability of the noble Baroness, Lady Miller, to construct between Amendments Nos. 25 and 27 something which many of us when we first looked at the paper thought must be contradictory but which is a clever mathematical way in which to achieve that tightening over time. However, I worry that, if we accept the amendments, we would inadvertently make them far too lax.
For example, if we run the figures on Amendment No. 27, if the budget for 2020—the third of the first three carbon budgets—was at the lower end of the range suggested by the Bill at 26 per cent, so that the budget would be 74 per cent of the 1990 figure of 100 minus 26, the amount that we could buy in to achieve that would be 30 per cent of 74 per cent, which would be 22 per cent. In that case, we would have achieved 90 per cent of our reduction by a bought-in mechanism and, over 30 years, would hardly have cut our greenhouse gases at all. Therefore, the principle of the amendment is worth talking about, but the details have to be worked out by the committee. If one puts in place a set of figures without that detailed thought, there are two dangers. On the one hand, it is impossibly tight, but it also signals a willingness to buy in credits from overseas. That is what would be achieved by the 30 per cent figure proposed in Amendment No. 27.
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Baroness Northover: I endorse the principle of the amendments and what was said by the noble Lords, Lord Puttnam and Lord Turner. It sounds as though the son of the noble Lord, Lord Crickhowell, is in favour of the principle even if he cannot decide on the relevant level. We clearly cannot simply deal with this problem by shuffling it off on to other countries. That is the important principle of the amendments. All countries will need to reduce their carbon emissions, but especially developed western ones. That is the focus of the amendments. Clearly, credits will be useful to developing countries, but we need to balance that if those countries are to be able to develop themselves. It is extremely important to bear that in mind. Therefore, we must give a strong direction to the climate change committee that these reductions must be largely in the UK and not simply by trading. That is why I support the principle of the amendments.
Lord Whitty: The noble Lord, Lord Turner, pre-empted aspects of what I was about to say. The noble Lord, Lord Crickhowell, is undoubtedly right that this is complex. He may well be right that, in the end, wherever the carbon cut occurs in the world is equal. However, there are a number of important political and technical issues that require us to take the principle of the amendment very seriously. If the outcome were, never mind the precise arithmetic of the 30 per cent, something like what the noble Lord, Lord Turner, said—that 90 per cent of our achievements as a result of following the precepts of the Bill were actually achieved overseas—that is not the Bill that we are selling to our own people and the rest of the world. If we were buying all the credits overseas, British citizens would be without the pressure on their way of life to adopt new technologies and new ways of doing things which keep us ahead of the game.
It is complex, because three different elements are intertwined. They are interrelated but not the same: there is the issue of trading; of our domestic target, which is essentially what is in the Bill; and our Kyoto commitments and the supplemental mechanisms that are provided under Kyoto. They do not all end up with the same result. The latter two, in this context, can be seen as mechanisms for achieving the first, but they are not the same and they are not the same answer. One could adopt a figure along the lines of the amendment without at the same time inhibiting trading or any new post-Kyoto international agreement.
The central theme of the Bill is that Britain is setting itself—its own industry and people—a target to make a significant contribution towards the problem of climate change. If we allow a situation under the Bill whereby our companies and institutions are buying those credits elsewhere, that central principle falls.
The noble Lord, Lord Crickhowell, may well be right: the exact figure and the way in which that is achieved may be best left to the advice of the climate change committee. The optimum figure will certainly change over time. Apart from anything else, if the whole economy is in the trading mechanism you cannot count these things twice; therefore you are at the end of the road. But at this stage of the Bill, whereas we may not actually agree on a percentage, the principle
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Baroness Young of Old Scone: The noble Lord, Lord Turner, admirably expressed what I was going to say, but I want to add one more thing. It is important to get the right balance between international credits and UK action for all the reasons that Members of the Committee have described, such as the decarbonisation—that is a dreadful word—of the UK economy. Furthermore, we will not exactly look like global statesman and leaders on the carbon front if we are not doing very much back home, and, at the moment, confidence in the green development mechanism is not where it should be in terms of the sorts of gases that it is reducing and the verification mechanism. In the early stages, there is an absolute need for a strong focus on carbon reduction within the UK as well as doing our bit for carbon reduction internationally.
I am not sure whether the target is the right one—there are two different targets for two different amendments in this group. The noble Baroness Lady Miller of Chilthorne Domer, admirably wrestled with the complications of the targets. The answer probably lies with the climate change commission—sorry, climate change committee: that was a Freudian slip that pre-empts a future amendment—but that worries me. The noble Lord, Lord Crickhowell, talked about year-to-year changes by the climate change committee. That is not the answer either. We have to find a way of giving a strong signal to British business and investors in British business that the Government are earnest about UK carbon reduction. However we do that, it needs to happen. Some strengthening of the role of the climate change committee in the Bill to make it clear that there is a requirement for it to report in that fashion and to make a strong recommendation to the Government along those lines would be of some assistance.
Lord Teverson: I was interested to hear interviews with the Secretary of State in Bali at the weekend because he endorsed an earlier amendment of my noble friend Lady Miller when she said that by the time we get to 2050, the 60 per cent reduction should be completely UK. The Secretary of State said that we are bold in the United Kingdom—I paraphrase that but it is what he said. We are putting through legislation that will ensure that Britain reduces its carbon emissions by 60 per cent on a statutory basis. That is what he said, but that is not what the Bill does. I wish it did but it does not. Because of international trading and the concept of a carbon account, we can get to 2050 and under certain circumstances not have reduced our carbon emissions at all. In fact, under certain circumstances, we could reach the 2050 target but miss it because we had been selling credits because our industry had decarbonised so much.
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Lord Campbell-Savours: Does the noble Lord not accept that Parliament would not allow that? With annual reporting to Parliament and the debate in Parliament what he is saying is inconceivable.
Lord Teverson: Can the noble Lord please repeat that?
Lord Campbell-Savours: What the noble Lord is saying is inconceivable because the annual debate in Parliament, discussions among Members of Parliament, decisions in Parliament on these matters and the work of the committee would prevent that happening. He is talking totally hypothetically.
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Lord Teverson: I did indeed say that it would be in extremis, but the Bill does allow that. It is very unlikely that that would happen. I am not arguing that it would actually happen, but it could, within a very large spectrum, mean that any of those results, between what we emit now and what our target is in the future, could be possible, given the flexibility of the concept of the carbon account in this Bill. It is quite clear that those outcomes could be very broad. The principle of my own amendment, Amendment No. 111, that I also wish to talk to, is that we need to understand this difference. I am not completely against including a certain degree of trading within our targets for reduction—that is a practical and reasonable way forward. Again, I emphasise the point that if we say that we do not allow all credits and trades to count, that does not in any way stop those trades happening anyway, because they do happen. The EU ETS will carry on regardless, as will the flexible mechanisms under Kyoto and no doubt its successors.
What we are saying—this is absolutely core to what the Government themselves believe—is that there has to be, primarily, a reduction in carbon in our own economy, outside of any trading. To do that, we need to have that stated in the Bill itself. It is as simple as that. In my own amendment, and that of my noble friend Lord Redesdale, we have put two numbers. We have said 10 per cent up to 2020 and then 5 per cent. I am far less adept at mathematics than my noble friend Lady Miller. I had meant that to mean 10 per cent and 5 per cent of the total carbon budget, rather than the difference. These numbers are clearly things that we would have to be more clear and precise about, as we move through the Bill.
It is essential for the purpose of the Bill, for the reputation of the Bill internationally and for our leadership internationally that there should be a restriction—preferably one that gets tighter as time goes on—on how much we can include carbon trades within our carbon budget. That is the way that we will lead. That is the way to make it clear to the international community that there is no fudge factor—this is much bigger than wiggle room—and to say that really we are leading here. We need that to be in the Bill.
In terms of the view of the noble Lord, Lord Crickhowell, on targets, I am very reticent—I am not saying it is impossible—about delegating that entirely to a climate change committee. At the end of the day, it is up to politicians to decide on the right figure. It is not going to be just a technical calculation. It is not
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Lord Crickhowell: I am entirely of the view that we need to have a very strict internal limit. The question is how best to define it in the Bill. I also agree that we need to give the climate change committee a very clear direction and steer. That may take the form of saying that the figure of 60 per cent, if that is what it finally is, is an internal figure, rather than this complicated series of formulae that were introduced by the noble Baroness, which I think people would find very hard to comprehend or explain. I would prefer, if we are going to say that there has got to be a limit and a steer, to turn around and say that the internal figure has got to be a fixed percentage and that the climate change committee should take us in that direction. The noble Baroness, Lady Young of Old Scone, was right when she said that we have to give that steer and direction. What we are groping for is how we get there in a way that is clear. It is not a very good idea to have a Bill that sets out a formula that produces total incomprehension in the ordinary individual.
Lord Teverson: I thank the noble Lord for that intervention and I agree with much of what he says. I am not fully resolved on the mechanism myself. All that exists at the minute is part of the remit of the climate change committee, which says that this will be something on which it advises. I would certainly require there to be a restriction even if we decided later what it was. I believe we should make up our mind on that restriction before the Bill gets Royal Assent. This is a core area. It does not get in the way of carbon trading happening within the schemes that exist at the moment or those that will exist in the future. In terms of the UK’s leadership, and the Government’s and the Secretary of State’s desire to lead, a formula like this is essential.
Lord Oxburgh: I endorse much of what my noble friends Lord Turner, Lady Young and Lord Whitty said, as well as some comments made by the noble Lord, Lord Teverson. It does not matter to the world very much whether this clause exists or not. In principle, provided those reductions that are certified are indeed legitimately made, it does not matter globally. But it certainly does matter for the UK, both from the point of view of moral leadership and for the positioning of our industry. I would add that if we are doing this in the interests of supporting British industry and positioning it better for a low-carbon world, we need to do this in a considered and gradual way, so that British industry is not dually disadvantaged by comparison with its competitors in Europe. We believe that in the long term, this would be an advantage. But a lot of industry lives on a quarter-by-quarter, year-by-year basis. It would be important not to impose burdens that would unduly disadvantage it in the short term. I am sympathetic to the view of the noble Lord, Lord Teverson, that this is not entirely a matter for the climate change committee.
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Earl Cathcart: Before we started to debate these amendments, I was going to say that the amendments from the Liberal Democrat Benches are confusing, as they seem to contradict Amendment No. 8 to Clause 1, earlier tabled by the noble Baroness, Lady Miller, which was supported by the Liberal Democrat Front Bench. That amendment seemed to rule out carbon trading altogether, by confining our 2050 target to UK domestic reductions only. Now the Liberal Democrat Benches seem to have changed their mind and accepted that there is a place for carbon credits.
Lord Teverson: The Liberal Democrat Benches have been absolutely consistent. We are not in any way saying that there should be no trading. Trading will continue anyway, whatever goes on with the targets of this Bill. The amendment of the noble Baroness, Lady Miller, which we supported, said that by 2050, we should come down to zero trading in terms of counting it towards our emissions. But trading will continue anyway. The EU ETS just carries on trading; the flexible mechanisms of Kyoto will just carry on, whatever we use as a measurement here. We are being entirely consistent. We agree with trading entirely, but how much of it you can count towards a domestic target is a matter of political debate.
Earl Cathcart: I thank the noble Lord for that intervention. I had thought that the idea was to confine the 2050 target to UK domestic use, although he may have said that there would be carbon trading on top of that. Be that as it may.
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