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Phase 2 of the scheme may be more effective. It has come into effect. The price of a tonne of carbon emissions has risen to somewhere near what may become a sensible figure. Phase 3 is under negotiation. At this moment I have no confidence in the political willpower of those responsible for this scheme, which—if my memory is correct—we heard earlier this evening is responsible for something like 50 per cent of UK carbon dioxide emissions. I have no confidence that the administrators of this scheme will set limits that will take our emissions down to the sorts of levels implied by the figure that the Government have now put in Part 1 of this Bill, still less the figure that the Committee on Climate Change may well ask the Government to impose when it has had time to consider adequately the development of information on climate change since the original figure was suggested.

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Therefore, we need to look at any scheme introduced under this part of the Bill, to ensure that it has regard to the strategic target which the nation has now set, and which may be amended to an even more severe target. It may well be that the Minister will be able to tell us not to worry, and that this is not an issue because it is implicit in everything the Bill says that the state I want to bring about will happen. If the Minister gets up and tells me that, that will be fine. If he cannot tell me that, we need to be quite concerned. If we are going to establish these schemes, and if they are going to work, they have to take emissions down to the levels implied under Part 1 of the Bill. If they do not, frankly, they are not worth establishing. I hope I do not have to come back to this and that the Minister will be able to give me the assurances that I need. I beg to move.

Lord Teverson: My Lords, again, this is a very interesting subject and one I could speak a lot about, but at this time of night I will restrain my remarks. It is an important point and I congratulate the noble Lord, Lord Dixon-Smith, on raising it. Clearly, one of the major potential flaws of the independence of the Committee on Climate Change is that all its budgets are already fixed by the emissions trading schemes that are already in operation.

That is pretty well the case with the EU ETS. The post-2013 proposals have a very precise linear decrease in total carbon dioxide emissions to 21 per cent by 2020. This is in comparison with the 2005 level. Of course, in every other ETS we talk about the 1990 level.

I should be interested to hear from the Minister what the 2020 reduction is in terms of 1990 levels. I think that it is pretty compatible with the mid-range target, but the Commission is very clear on the matter and I shall read from its questions and answers document:

In fact, in the non-EU ETS sectors that means a reduction of about 10 per cent compared with 2005 for the sectors not covered by the scheme. That illustrates the sort of difficulties that there are and shows that the degrees of freedom that the Committee on Climate Change will have in agreeing budgets because of EU obligations will be severely limited. Of course, it will be more than 50 per cent—I think that it is currently 52 per cent—because it will include aluminium and phosphates in additional sectors. Therefore, very deep questions arise here.

I am also interested to hear the Minister’s answer with regard to UK domestic schemes. Will there be a need for any significant scheme, and will carbon budgets and the targets of the Committee on Climate Change be undermined?

Lord Rooker: My Lords, here comes my deep answer to the deep questions. It will probably sound quite shallow to noble Lords opposite, who are much more expert in this than I am.

As the noble Lord, Lord Dixon-Smith, knows, Amendment No. 183ZA would require each trading scheme, which is set up under Part 3 to limit activities

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that cause greenhouse gas emissions, to deliver the same level of reduction as required by the target in Clause 1(1). Our key concern with the amendment is that it would restrict the flexible approach which, as I have often mentioned, is absolutely key to the trading scheme powers. The amendment would essentially introduce sectoral targets by the back door. A trading scheme could be introduced only if it reduced the emissions in 2050 from that sector by at least 60 per cent.

The 60 per cent target applies to the whole economy. It does not matter where in the economy our emissions are reduced as long as the overall target is met. It will obviously be more cost-effective to reduce emissions in some sectors than in others, so some sectors will achieve more than 60 per cent and others less than 60 per cent. However, the amendment would require that any sector covered by a trading scheme which limited emissions would have to reduce its emissions by at least 60 per cent. We think that this could increase the overall costs for the UK of meeting our target. For that reason, we have rejected rigid, top-down sectoral targets, and we cannot accept the amendment. However, I think that that message had already come across.

In addition, what would happen if a scheme was introduced in, say, 2010, and we did not know at that time what impact the scheme would have in 2050? Would the amendment mean that the scheme could not be introduced at all? That could lead to the bizarre situation where the Government might not be able to introduce the measures needed to take us towards the target in the Bill, because individually each measure would not deliver a 60 per cent reduction. This would leave us still further from meeting the targets and budgets overall.

A further practical difficulty concerns the nature and level of the target in Clause 1(1). The Bill contains provision for the target to be revised, but what would be the impact on existing trading schemes if the target was made more stringent? Would the existing schemes have to be adjusted to ensure that they delivered the increased reductions required?

We appreciate the sentiment of the amendment, which is to ensure that new trading schemes deliver reductions in line with the long-term target. However, I have outlined the practical difficulties, and the existence of robust scrutiny arrangements, which we have discussed before, will ensure that inappropriate trading schemes may not be brought in using these powers. I hope that that provides sufficient reassurance for the noble Lord and that he will not push his amendment.

The noble Lord asked whether the amendment covered the EU Emissions Trading Scheme. The answer is that the European Commission has recently published proposals for the EU Emissions Trading Scheme to 2020. The EU is committed to demanding emission targets for 2020 and the Commission’s proposals on the EU Emissions Trading Scheme are consistent with that. Those proposals will now be debated by the member states in the European Parliament and we hope that agreement can be reached there.

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The noble Lord, Lord Teverson, asked about the EU proposals being consistent with our 2020 target. I am not sure whether I covered this earlier today, but as I have a few minutes left I shall put this on the record. The Government have proposed a target of a 26 to 32 per cent reduction in UK carbon dioxide emissions by 2020 from a 1990 baseline. That equates to a 32 to 37 per cent reduction in emissions of the Kyoto basket of greenhouse gases. In addition, the Committee on Climate Change will look at the level of the 2020 target as part of its review of the UK’s longer term 2050 target.

The Commission’s proposals set out the minimum level of effort that is required of member states for 2020. These proposals do not include whole economy targets for each member state, so it is not possible at this stage to estimate the accuracy of the proposed UK’s contribution to an EU 20 per cent greenhouse gas reduction target. That will become clear once further decisions have been taken on how to divide the EU-wide central cap for the Emissions Trading Scheme. Under the Commission’s proposals that is likely to be in 2011 or 2012. However, on the basis of what the Commission has set out so far, the overall UK share of the EU’s greenhouse gas reduction target of 20 per cent by 2020 will not be above the 2020 target set out in the Climate Change Bill.

Our projections suggest that achieving the target in the Climate Change Bill to reduce our carbon dioxide emissions to 26 to 32 per cent—that is the range—below the 1990 levels by 2020 would mean that our total greenhouse gas emissions were about 32 to 37 per cent below 1990 levels in 2020. We are looking at the detail of the Commission’s proposals to see whether we can be more specific. We are able to go further if we choose; we are now working with other member states, the European Parliament and the Commission to ensure that members will be able to identify a single, economy-wide target that applies to them. That would give us the clarity that the noble Lord, Lord Teverson, seeks. If he asks me anything else, I do not have any more answers.

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Lord Teverson: My Lords, I understand that. I thank the Minister for going that far. I point out that he is talking about the Kyoto greenhouse gas basket which we have been far more successful in reducing than carbon dioxide. The carbon dioxide target will be far more difficult to meet.

Lord Dixon-Smith: My Lords, I am grateful to the Minister, even if I am somewhat disappointed by his reply. I am disappointed because it is always possible for a Government in this situation to give a perfectly logical response saying that the amendment would not work. After all, I do not have the Government’s resources to help me to design amendments. I tabled the amendment to provoke an argument which I have succeeded in doing.

When all is said and done, we know perfectly well that we shall have quinquennial carbon budgets, with annual targets and so on beneath. There is no reason why we could not phase a marketing scheme to comply with the quinquennial targets. Of course, that was not in my amendment because I wanted to have the argument. I accept the point that the Minister makes that economies in some areas will be easier to make than in others. Of course, it is entirely reasonable and rational that where those economies can be made, both easily and economically, the attention should be focused. There may be other areas where that will not happen. I entirely accept that.

In that sense, my amendment is unsatisfactory from my own point of view, but I tabled it to stimulate a discussion. We need to think about this issue carefully. I shall read with considerable care and thought what the Minister has said. I am not certain that this should be the last word on the issue. For now I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Rooker: My Lords, I beg to move that further consideration on Report be now adjourned.

Moved accordingly, and, on Question, Motion agreed to.

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