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Climate Change Bill [HL]

3.15 pm

The Minister of State, Department for Environment, Food and Rural Affairs (Lord Rooker): My Lords, I beg to move that the Bill be now further considered on Report.

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

Clause 36 [Trading Schemes]:

Lord Woolmer of Leeds moved Amendment No. 183A:

The noble Lord said: My Lords, it is agreed on all sides of the House that the Bill as it stands would permit the introduction of personal carbon allowances and trading on those or similar schemes, if the Government of the day were so minded, without fresh primary legislation. My proposition in summary is as follows: personal carbon trading allowances could be introduced under the Bill. The Government would not consider so introducing them because the implications of personal carbon allowances would be so great. However, so far they have not explained how else they would introduce personal carbon allowances. The Liberal Democrats have said, as I understand it, that not only are they in favour of personal carbon allowances but they would use this legislation to introduce them, were they ever in a position so to do. The Conservatives were silent, on balance, on where they stood. So the Front Benches of all three main political parties in this Chamber have talked about whether to use this legislation to introduce such schemes. My proposal is that the nature of a scheme based on personal carbon allowances would be so substantial in its ramifications, so significant, that fresh primary legislation should be introduced rather than introducing it on the back of this Bill with the enabling provisions that it permits.

I do not wish to enter at all into the argument for or against personal carbon allowances. That is not the burden of my argument. Your Lordships may be in favour or against personal carbon allowances or trading in them. My argument is solely that the implications are so substantial, whether you are in favour of or against those schemes, that primary legislation is required. First, and very briefly because these matters were discussed in Committee, I will touch on some of the issues involved in personal carbon allowances.

Essentially these are allowances of carbon emissions—rations, quotas, permits, call them what you will—that would be allocated in some way to individuals. Would it be to all individuals, or just adults? Would children have more or less than adults? Would people get more or less in rural or urban areas, in the north of Scotland or the south of England? Who would get what? Would they be allocated free or would people have to in some way bid for them at auction? An independent body would need to be

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established to set the cap for the total amount of emissions that people were allowed to buy and to take the important decision about the emissions allowance allocated to each individual.

The question arises of what goods and services would be included. If you bought a gallon of petrol, presumably you would have to hand over some of your carbon allowance, at least in theory and principle. Presumably, that would apply also to the purchase of gas, electricity, oil, coal, diesel and flights. Which flights would be caught? If you go from London to Dubai to Delhi and back again, would you hand over emissions allowances just for the London to Dubai leg, or for London to Dubai to Delhi, or all the way back again? How many carbon emissions allowances would each purchase use up? Would everybody get the same allocation? Would they be allocated to everybody just the same? If that were the case, what would be the effect on the distribution of income and living standards between people? How would we treat visitors to this country? How would we treat people who are here for a few months, weeks, days, or people who leave halfway through the year?

How would these allowances be traded? Would people be able to trade and to buy and sell them? The presumption is that they would. I have seen a proposal that people would have something like a bank card or a debit card and a trading account like a bank account, and that when they bought and sold things their account would be credited or debited. How would this relate to the 15 per cent to 20 per cent of people who are known to have problems thinking ahead about how to use their money and handle their finances? People would have to think ahead very carefully about how much of their carbon allowance they wanted to use over the following 12 months. How would people work this out? I am not talking about the sophisticated Members of your Lordships' House but people who demonstrably have problems thinking ahead and budgeting.

How secure would such accounts or debit cards be? How would you prevent fraud and scams occurring, particularly if people are buying and selling? How would you know that you were buying an accredited emissions allowance and that it was not a scam? Every purchase of a qualifying commodity, good or service made by an individual would be recorded and the records would be substantial. Many people are concerned about identity cards and this would raise many of the same issues.

What would be the position of illegal immigrants—people in the black economy? How would they obtain these cards so that they could buy fuel? It would not be a question just of whether you can pay for your gas and electricity; you would have to hand over a ration or quota, which would have been allocated to you. You have to own that in some way.

Defra commissioned a study, referred to by the noble Baroness, Lady Miller, by the Centre for Sustainable Energy to look at many of these matters. Pages 25 to 27 of the report consider the issues that would arise if these schemes were introduced. The relevant passage is headed:

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I shall not read them all out because there are so many, but the relevant headings are:

That is, would it actually work? What would it cost? What would be the effect on equity and justice? What would be the distributional impacts? The study states:

There is no doubt that if the Government of the day were minded to introduce personal carbon allowances it would raise an enormous range of issues which, I am sure, both Houses would want to debate fully, and not as regulations but as primary legislation. It might be said, “Don’t worry, no Government would ever do this”. The Government’s answer so far is that the Bill has those powers but they think it inconceivable that the powers would be so used. I suggest that that is not a very good basis on which to conduct legislation. The Government have for some time been conducting a careful examination of whether to pursue personal carbon allowances and trading. This is not a hypothetical possibility; even the present Government are actively looking at it

If the Government are looking so carefully at personal carbon allowances and a trading system based upon them and say that it is inconceivable that they would use this legislation to introduce them if their studies suggested it, what would they do? Do we have an assurance that they would introduce primary legislation? If that is the case, there should be no difficulty in accepting my amendment, which ensures that this Bill could not be used to introduce personal carbon allowances. However, if the Government say that they would still prefer to keep provision for this in the Bill, I suggest that that confirms my concern.

I say again: I do not argue for or against personal carbon allowances and trading on them, but simply that they should not be enabled under this Bill. The Liberal Democrats said in Committee with, it is fair to say, a degree of vigour, that they were in favour. However, looking back at the record, it is not entirely clear whether they are in favour of personal carbon allowances in principle or whether they would use this legislation to introduce them if they had the opportunity. It is a very important distinction. The Conservatives were not, it is fair to say, prepared to be led by the Liberal Democrats. I think that the noble Lord, Lord Taylor, said that he did not want to lead us anywhere in particular on that evening.

You could argue that the amendment is unnecessary because the Bill does not already facilitate this. Yes it does. You could argue that the amendment is unnecessary because no Government would ever use the legislation to do introduce such schemes—that is the Government’s proposition—but that is not a very good basis for undertaking legislation, particularly when the Government are actively investigating the possibility and one of the Opposition parties is saying enthusiastically that it would do so. You could argue, as I do, that the issues are so substantial that the potential for bringing in

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personal carbon allowances and trading under the powers in this Bill should not be there. I ask your Lordships to reflect upon those matters. I beg to move.

Baroness Carnegy of Lour: My Lords, it seems to me, having listened carefully to the noble Lord, Lord Woolmer, that the nightmare world that he has described as possible, should personal carbon allowances be introduced—whether by the Liberal Democrats or anybody else—makes the amendment essential. I hope that your Lordships will accept it.

Baroness Miller of Chilthorne Domer: My Lords, in Committee I spoke from the Back Benches to my amendment on this interesting issue. I welcomed the fact that Defra was funding a study into it and that the RSA and another think tank, the IPPR, were also doing studies into it. There is a lot of interest in whether some form of personal carbon allowance would be one of the mechanisms that could help us in the fight against climate change.

3.30 pm

I fully recognise that there will be difficult issues to be addressed, which is exactly why in-depth studies are being undertaken, but I do not agree with the picture painted by the noble Lord, Lord Woolmer of Leeds, which he has clearly transmitted to the noble Baroness, that it would be a nightmare. He is shaking his head because he agrees with me, I think, that it would not be a nightmare world, but that there are substantial difficulties to overcome.

I do not want to go over all the arguments again this afternoon that I made in Committee in favour of at least looking seriously at personal carbon allowances and saying to the Government that there are communities, particularly transition towns, which are committed as communities to lowering their carbon usage. There are places that would really welcome being able to trial this when the current studies are complete. I am sure that there would be difficulties, but it is possible that this would actually be welcomed not by the people that the noble Lord, Lord Woolmer, envisages—perhaps most of us in your Lordships’ House fly more than we should so we would be very badly off under personal carbon allowances—but by the very people who he said would have difficulty in coming to grips with them. I do not think that they would have difficulty, because if such allowances were introduced, it would need to be in a very simple form.

It would be a very bad move to go through legislation such as this, which is aimed at enabling things to happen, with a red pen, removing all the things that the Bill would make possible. The Government are right in not bringing forward their own amendment specifically to exclude personal carbon allowances, but I fully accept that far more studies need to be undertaken before any pilots such as those that I mentioned are undertaken. I ask the House not to agree with the noble Lord, Lord Woolmer, and delete what may be a useful tool in the future.

Lord May of Oxford: My Lords, I have sympathy with the arguments put by the noble Lord, Lord Woolmer, but on the other hand, as I have said before, this is a Bill for the long term. In World War 2 we had rationing—or, rather, you had; I was an infant in

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Australia—and I am sure it was difficult, but at the time it was necessary. It is not clear, as we approach the middle of the century—which is what the Bill is looking at—that we will not be in a position where something of wartime immediacy and urgency will be needed. For that reason I am certainly not urging that we put in the Bill something that says, “We will do this”, but I find it odd that we should put in the Bill something that says, “We won’t do this”. That is why I hope that the amendment will not end up in the Bill.

Lord Lea of Crondall: My Lords, I shall take a similar line to the noble Lord, Lord May. At a conceptual level, there is nothing wrong with the idea of a ration book. In the Stern report, the global carbon account conceptually gives us one tonne each around the world. Therefore, in some conceptual sense, we can buy the 90 per cent of the African units that Africa does not need at the moment. It is a redistribution from the rich to the poor, which is a point that I will make on my later amendment. When it comes to a personal allocation that is administered by ration book, like during the Second World War—I remember the sweet ration—it is a leap into a totally different sphere. It would be counterproductive to lose sight of the value conceptually of everyone being entitled to one tonne of carbon and going down the road of the amendment, but I am very pleased that my noble friend Lord Woolmer has enabled us all to clarify the position.

Lord Turnbull: My Lords, I support the noble Lord, Lord Woolmer. We are talking about something that operates like a carbon tax at consumer level, a CAT rather than a VAT. If you are going to do that you have to integrate it into the rest of the tax system. The feature of VAT is that it is a cascade tax in which you net off all the tax you paid at previous stages. With this arrangement we have no safeguard, so when you buy your litre of road fuel tax will already have been paid on it. On the subject of flights, we have passed an amendment bringing aviation within the scope of the ETS and so levying a charge on aviation. Are we then going to have something on top of that? It then has to be integrated into the social security system. I see no logic in paying my elderly mother-in-law a heating allowance and then requiring her to pay something on top of that. Conceptually, you could do all this at the consumer level, but what you cannot do is have hybrid systems.

Why on earth does this need to come anywhere near this House? The Bill is for the longer term and it does not have to include everything we might possibly want to do over the next 50 years. There is plenty of time for people to develop the scheme, study it further, publish a White Paper, Green Paper or whatever, and then to come forward with legislation. I cannot understand why there needs to be anything at all which says whether you do it or not. There needs to be no mention whatever of this possibility. This possibility can arise by all sorts of other schemes in the course of the next 42 years and I think that is the way we should deal with it.

Lord Swinfen: My Lords, I am in favour of the noble Lord’s amendment. It would be extremely difficult to produce a fair system of allowances. Take, for

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instance, two identical houses next door to each other, both with exactly the same insulation value. One is occupied by a single individual and the other is occupied by a family of two parents and, say, three children. The family with the two parents and three children could well have five times the allowance of the single person, assuming that the children get the allowance as well as adults. There is also the case of the allowances that will be required by people who are ill—chronically sick—who need additional heating and people who are disabled who need additional heating. There is also the fact that as one gets older, one feels the cold a great deal more. I am sure Members of the House will have noticed that. Elderly people will also need a greater carbon allowance. There is also the fact of travel to work and travel to buy one’s daily necessities. If you live in a town, very often your work is close at hand and you can walk there. You do not need a carbon allowance for it. You may need a shoe leather allowance, but no Government are going to bring that forward. If you live in the country a mile and a half from any public transport, as I do, you need your own vehicle to go to get food and to go to work. Even though I attended your Lordships’ House today using the train—public transport—I did need the car to get to the station and on to the public transport. It is going to be virtually impossible to produce a fair system of individual carbon allowances even if one takes no notice of airline flights divided between pleasure and business. I support the noble Lord and will support him in the Lobbies should he divide the House.

Lord Teverson: My Lords, we should remember here that the amendment of the noble Lord, Lord Woolmer, is about whether personal carbon allowances should be allocated under this Bill. It is not about the question of whether personal carbon allowances are a good or bad thing. From the Liberal Democrat point of view, getting more decision-making on climate change down to individual level—whether it be through smart meters, education or other means—has to be a good thing. As individuals we must take part of the responsibility for a planetary problem.

We are not saying that personal carbon allowances are Liberal Democrat policy. I was interested that the leader of the Official Opposition, I believe, raised this for public discussion in relation to aircraft and air miles—that is where it really became a public debate. I assure the House that the next Liberal Democrat Government will not introduce personal carbon allowances through this legislation. The amendment of the noble Lord, Lord Woolmer, is correct. The proposal would be such a change to the way in which we operate in this country and it should not be done through this legislation. This whole area is being looked at and personal carbon allowances should be explored further. The policy should not be implemented through this Bill.

My Lords, what came into my vision was the inability at one general election of the Liberal Democrats to explain their policy on local income tax; the idea of them trying to explain their policy on this at an election before the Liberal Government come in almost borders on preposterousness; but there we are.

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I am grateful to my noble friend for returning to this matter. It is not straightforward. My view is that it would be a rash and brave Minister who sought to introduce personal carbon allowances through this Bill at any time. I can imagine the debates and difficulties of doing so through secondary legislation; that is a complete non-starter. I say that as a parliamentarian rather than as a Minister.

My noble friend asked a key question: if we are not going to do this through the Bill, why do we not use specific exclusion? There is an answer to that. When we dealt with this in Committee, my noble friend Lady Morgan of Drefelin set out the Government’s position: that we do not envisage using the powers in this Bill to introduce a personal carbon trading scheme, but we are, as is known, in the process of gathering evidence better to inform us on the whole issue of personal carbon trading. One can see how complex that would be if one wanted to go down that road; all the issues raised by my noble friend and others would have to be covered.

We would prefer not explicitly to rule out personal carbon trading for now—in relation to this Bill—for two main reasons. The first is that the initial pre-feasibility work has not yet reported; the long-term framework of the Bill means that personal carbon trading in future may represent a useful tool. That involves the Bill’s long-term framework. In no way do I imply that the Bill will be used to do that but that long-term framework may give birth to other bits of primary legislation; there is no question about that.

The second concern with this amendment—or any other amendment that is intended to rule out personal carbon trading—is that it might inadvertently have a broader effect. Personal carbon trading is a difficult concept to pin down, as we discovered in our short debate, and doing so in legislative terms would be incredibly complicated. If we tried in the Bill explicitly to exclude it we might in addition mistakenly exclude something else that we would not want to exclude. For example, the focus on individuals in this amendment may result in a business, which happened to be trading as a sole trader, being excluded from a trading scheme that was not in fact a personal carbon trading scheme. In the proposed carbon reduction commitment, participants will be identified on the basis of their electricity consumption. If this amendment were accepted, there is a risk that a sole trader could be exempted from the carbon reduction commitment.

3.45 pm

We also understand the concern in many quarters about the potential for personal carbon trading to be introduced through secondary legislation. It is a major concern but, as far as I am concerned, it will not happen. As I said, it would be a brave and a rash Minister who sought to do that. That is not to say, because of the long-term nature of this Bill, that there cannot be a connection. The framework of the Bill goes to 2050 and therefore these issues will have to be debated. However, we have stated consistently that we do not intend to use the powers in the Bill to introduce personal carbon trading. I make it absolutely

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clear that personal carbon trading will not be introduced through the Bill. In addition, the Bill contains significant checks before a new trading scheme can be introduced—obviously the provision is there for trading schemes. These include the thorough parliamentary scrutiny and the affirmative procedure required for every new scheme, as well as consideration of the advice from the Committee on Climate Change.

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