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[Amendment No. 104 not moved.]

Clause 19 agreed to.

Clause 20 [Base years for targeted greenhouse gases other than CO2]:

Earl Cathcart moved Amendment No. 105:

The noble Earl said: After the recent convention on climate change meeting in Bali, who can be in any doubt that there are many shades of opinion on the importance of tackling climate change? I was particularly struck by the claim that the US position on binding targets will alter once the current Administration are no longer in place.

Is subsection (2) intended to cover the position should such a move take the form of a renegotiation of Kyoto? The Written Answer from the noble Lord, Lord Rooker, on 22 November implies quite clearly that the Kyoto base years are set and that the corresponding UK gas emissions are known. Why is it necessary to make provision for determining the amount of net UK emissions for the year 1990? Why would the UK Government need to redesignate base years? Could this provision be used to fudge a situation where performance against the original targets was unsatisfactory? Would it be possible for this mechanism to be used more than once in respect of one or more targeted gases? I beg to move.



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Lord Rooker:The noble Earl raised the issue of Bali and talked about the onset of a new US Administration and what they might do. I have a calendar on my desk that tells me that there are 377 days to the end of George Bush, so we have a 377-day countdown on the issue that the noble Earl raised. I cannot comment on what a new US Administration might do, but I understand the reason why questions are raised about subsection (2). As I said earlier, Clause 20 builds on the provisions of Clause 19 and allows the Secretary of State, when including further greenhouse gases in the targets and budgets under the Bill, to designate the base year for those gases.

This power is necessary to take account of international practice. For example, the Kyoto Protocol currently allows countries to choose 1990 or 1995 as the base year for emissions of industrial gases. This flexibility was allowed internationally because not all countries have reliable emissions data for those gases for 1990. The UK has therefore chosen to use 1995 as the base year for those gases for the Kyoto Protocol. Clause 20(2), the subject of this amendment, is therefore intended to ensure that we are able to take a consistent approach between our domestic targets and our Kyoto targets. If we decided to include those industrial gases in our domestic targets, this clause would allow us to include them on the same basis as they are included in our Kyoto targets.

It is also possible—the noble Earl raised this point earlier on—that at some time between now and 2050 an additional gas or gases may be identified by the international community as contributing to climate change. It is possible that there could be no reliable data for emissions of that new gas—I shall call it “gas X”—in 1990. If that gas is included in the international climate change framework with a different base year, it would be helpful for our domestic approach to mirror what happens internationally.

Amendment No. 105 would remove that flexibility. It is not there for a fiddle—the noble Earl did not use that word, but he is right to ask the question. The removal of that flexibility would not be a good idea, which is why we cannot accept the amendment. However, recognising the arguments behind the noble Earl’s point, we are very happy to consider whether the safeguards in Clause 20 can be strengthened. The drafting is being looked at. We want to ensure proper scrutiny of this power. The Bill already provides that any orders made under this clause would need to be made by the affirmative resolution procedure. However, we are happy to look again at whether there are ways in which we can provide further reassurance to the House and to those outside that these powers would not be used inappropriately. We are at one on that and are happy to take this away and look at it again.

Earl Cathcart: I thank the Minister for his full explanation and for looking again at redrafting this provision. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 106 not moved.]

Clause 20 agreed to.



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Clause 21 [Carbon units and carbon accounting]:

The Duke of Montrose moved Amendment No. 107:

The noble Duke said: I move this probing amendment on behalf of my noble friend Lord Taylor. It may raise more questions than it answers but, as was mentioned in debate on the Bill yesterday and has been mentioned before, the UK's attempts to curb carbon emissions must have a major domestic input, but with a constant eye to international agreements, trade practice and standards. Although the Bill shows many signs of alignment with international practice concerning emissions reductions—the five-year budgets, the provision for trading, the provision for amendment according to international treaties and so on—when it comes to defining what is a carbon unit, it does not have any explicit regard for international reporting practice. Our amendment is intended to ensure that the definition of carbon units used in domestic carbon accounting accords with international practice as defined in Clause 66.

Further to our discussion yesterday, I have looked into the matter a little more. As far as I understand it, carbon units are generated at the moment under four different international headings. Speaking briefly, and asking your Lordships’ forgiveness for the list of acronyms, there are AAUs, CERs, ERUs and EAUs. I will explain. Under the original Kyoto agreement, those countries that signed up were given national assigned amounts related to their 1990 outputs. Those allow them to have as a trading element assigned amount units. The next thing that came under Kyoto was the clean development mechanism. That was for countries that had signed up under Kyoto but had not undertaken to reduce CO2 emissions. They were allowed to generate units under clean energy reduction, or CERs. The third element of Kyoto that relates to carbon units was the joint implementation programme, where project-based emission reductions, such as those that we have all heard about in China and India, were allowed to create energy reduction units, or ERUs. Finally there are the allowances allocated under the EU ETS, which then give European allowance units, or EAUs.

Perhaps the Minister can help us with whether there will be some body that can rule if any of those elements get out of line. Obviously, we want to align our carbon units with the most authoritative units that we can find. At present, as far as I understand it, those units are all equivalent. We understand that Clause 21(1)(c) refers to schemes or arrangements that might define what amount of greenhouse gas emission represents a carbon unit. However, we feel that the definition of carbon units should be explicitly linked to those employed internationally. I think that the Minister intends the carbon units used in the UK carbon count to accord with international reporting practice. We simply feel that, by making that explicit, we provide greater clarity in this part of the Bill and hope that the Minister will accept the amendment. If he does not intend carbon units as defined in the clause to correspond to carbon units as defined in current international reporting, can he explain why not? I beg to move.



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Lord Rooker: I say at the outset that I am more than happy to take the amendment away to consider it, so that gets me off to a good start today. We had an interesting session last night about types of carbon units. The noble Duke read them out: the assigned amount unit, the emissions reduction unit—I also have the certified emissions reduction—the removal unit and then the EU allowance. We are considering whether to use the existing accounting system under Kyoto and in the EU Emissions Trading Scheme, where most of those are found, or whether to create a new accounting system.

Clause 21 states that carbon units can be counted only if they represent a reduction in greenhouse gas emissions, removal of greenhouse gases from the atmosphere or an amount of permitted emissions of greenhouse gases with a capped system. That mirrors the international carbon accounting rules, where those are the only types of carbon units allowed to be used.

I accept the strength of the argument. I cannot accept the amendment, but it is obviously important that any carbon units used under the Bill are of the right standing and environmental rigour. There is no question about that. We will certainly consider this point in advance of Report.

4 pm

The Earl of Onslow: Which units are used in carbon trading? It is so obvious that it must be the same all the way around. We cannot have rods, poles, perches and centimetres et cetera all mixed up. This is too important to have those sorts of misunderstandings. How does a carbon trading system work? I ask that purely for information.

Lord Rooker: There are four types of carbon unit under the Kyoto Protocol and there is the EU allowance under the EU Emissions Trading Scheme that is unified within the European Union. They are all internationally accepted.

The Earl of Onslow: I am sorry to go on, but I do not think that I am probably the only person who totally fails to understand this. How different are these units, one from the other?

Lord Rooker: That is difficult because I can explain some but not all the units. While I am reading out these descriptions, perhaps I can get one on the EU. Under Kyoto, the assigned amount unit is issued by all developed countries which have targets; the emissions reduction unit is issued under joint implementation which relates to emissions projects in developed countries; the certified emissions reduction is issued under the clean development mechanism which relates to emission projects in developing countries; and the removal unit relates to land use, land-use change and forestry activities in developed countries. That explains the four units under Kyoto.

Under the EU Emissions Trading Scheme, my note says simply “EU allowance”. I would imagine that the noble Earl might be able to explain this better than I can.



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The Earl of Onslow: I almost could go around the Chamber and say, “Hands up anybody who understood a single word of what that was saying”. Surely we are trying to make sure that the X amount of muck that goes into the air is reduced. How we measure it should be simple and comprehensible to everybody. Again, hands up anyone who understood that, because I certainly did not.

Lord Rooker: There was a hand up at the back. To put it crudely in black and white, under that list of units, some units are measured differently in developing countries as opposed to developed countries. It depends on the nature of the business and the environment—for example, whether it is deforestation or water. Therefore, there is bound to be a different set of parameters for developing countries and developed countries. Presumably they all work out to be the same, but the calculations are done differently. Some issues have been industrial and some are related to land use, but the end unit would be the same amount of carbon. The calculation of how it is arrived at would be different, but the unit would be worth the same amount of carbon.

Lord Campbell-Savours: Perhaps I may join this little party. I am sorry to ask my noble friend if he remembers that at Second Reading I raised the issue of tonnes. I have asked a lot of people and no one can give me a good explanation. Will he tell us whether, under his reference to “industrial”, there is a connection between these units and gigatonnes and tonnes of carbon dioxide?

Lord Rooker: I am getting into deep water here. I do not have the answer to that. I simply say to my noble friend that the tonne of carbon dioxide, which is probably the end result of what we are talking about, is arrived at in different ways and is calculated from different sources—for example, by developed countries and developing countries. If it is done under emission projects in developed countries as opposed to the clean development mechanism, which is specific only for developing countries, the tonne of carbon at the end is still a tonne of carbon, but it is arrived at differently. That is the only explanation given. Obviously, the calculation in terms of land use changes whether it is being used for deforestation or for growing other kinds of crops. Ultimately, the calculation of how it is arrived at will be different, but a tonne of carbon is still what one is trying to get to in the end.

Lord Teverson: I thank the Minister for the masterclass in this difficult area, one that I certainly do not understand. One of the key things to remember is that EU ETS carbon units are part of a cap and trade system in that they are limited and can be brought down, while there is potentially an infinite supply of the other units under joint implementation and the clean development mechanism. Once projects have been audited by the United Nations procedure, you can have an infinite allowance for them. The issue is that the units cannot be completely intertradable. If one could be substituted for another, all the caps on the EU ETS, which is why they have value, would effectively suffer from inflation and lose that value.



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I want to bring up the issue of the different currencies we are talking about here, even though they all revolve around a tonne of carbon equivalent. Later in the Bill the Government introduce the carbon reduction commitment, which will itself have more units of its own. Given that it too will be a cap and trade system, I would like to ask whether it would not be much better if we kept to that commitment and did not invent another currency at that point. But I am assuming that for this part of the Bill, the CRC units will not be internationally tradable in any way. Presumably you cannot stop investment banks using them as a sort of derivative or whatever, and I am not sure how the CRC units would be treated in the UK carbon account. However, that is probably a matter for later in the Bill.

Lord Dixon-Smith: Before we finally leave this subject, I feel that we are in danger of reopening a debate that we have already had. The answers given by the noble Lord are absolutely satisfactory in themselves in that they give us an understanding that these units, while they may each have a different calculation base, in fact all result in the same tonne equivalent of carbon. That is enormously helpful. However, the discussion has also highlighted the fact that these different sorts of units, unless we are very careful, will mean that because of interchangeability we will be able to meet all kinds of targets by preventing or not permitting carbon dioxide emissions to take place in other countries. If the units are tradable, we may be able to meet our targets without reducing our own emissions at all.

Lord Rooker: I have nothing further to add, but that was the central theme of our earlier debates on buying allowances. Obviously there is consensus around the Committee that it is not a good idea for the Government to get out of this issue by simply buying allowances and then not changing anything we do in this country, so what the noble Lord said was absolutely right.

I am told that a briefing sheet has already been provided for Peers that explains further how to assess whether the UK has met its carbon budget. It is Climate Change Bill briefing paper No. 2. The masterclass can continue at one’s desk or over a cup of tea later.

The Duke of Montrose: This debate has been a useful way of opening up the area. However, I wonder whether we would be better saying that the carbon units we were most interested in were those approved under the UN Kyoto agreement. I know that there can be a problem in pinpointing things too much, but at the moment the position is much too open. So far as I understand it, we are signed up to the EU ETS, and presumably we will be able to trade carbon units throughout the EU. The noble Lord, Lord Teverson, talked about a cap and trade system. I believe that some people reckon that European countries will be able to buy in energy reduction units from the joint implementation. But until we have a deeper understanding, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.



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Earl Cathcart moved Amendment No. 108:

The noble Earl said: Amendment No. 108, which is grouped with Amendments Nos. 109 and 112, would leave out the words,

Unparliamentary language has a special connotation and probably should not be used to describe that phrase. However, “otherwise keeping track of” does not sound terribly legalistic, nor can it be designated as plain English. What is intended? If registration is unsatisfactory or unworkable, presumably there will have to be a system of calculating and recording. Has any research been done on this area? Has there been a pilot registration scheme? If so, what was the outcome? Why do the Government think that it may be necessary to do other than register carbon units? Will the Minister explain the thinking behind this phrase?

Amendment No. 109 would leave out the words “or impose”. Titles of various sorts are “conferred”, with the implication that this is with the prior, probably enthusiastic, agreement of the recipient. Duties or responsibilities may be “imposed”, with the possibility that they are not welcomed by the unwilling recipient, who is under some constraint to discharge them. Here, the Secretary of State,

and those regulations may apparently impose on the Secretary of State one or more functions. Is it possible that a Secretary of State can lay upon himself a function with which he disagrees, either in its content or in its positioning? Would it be ethical for the Secretary of State to do so? Can the Minister give an example of the type of situation that might be covered by that phrase?

I move on to Amendment No. 112. Clause 21 concerns carbon units and how they are to be accounted for. The Bill allows for the affirmative resolution procedure when the scheme is first established. Any changes thereafter will be under the negative procedure. I do not wish to appear naive or unfamiliar with the workings of these things, but the problem with the negative procedure is that either the proposed change is thrown out in its entirety or differences are aired and then it is accepted in its entirety. The Government may of course withdraw the regulations and replace them with something that reflects more closely the opinion of the House. This, however, seems to happen most often when there is an error of fact or drafting but only rarely when opinions differ.

I draw the Committee’s attention to the Written Statement on Crossrail, which states:

and so on. Did the Government consult Parliament on this? Is this the sort of manoeuvre that could be applied to a carbon accounting scheme?



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We have heard in the past month of several instances where the involvement of private companies in the workings of government departments or agencies has resulted in confusion. We believe that Parliament should be involved in changes to the organisation of schemes arranged under the auspices of the Climate Change Bill. The opportunities for mismanagement and simple thoughtlessness are too great to abandon basic structural changes to statutory instruments under the negative procedure. We want Parliament to be part of this decision-making process. I beg to move.


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