APPENDIX 3: CLIMATE CHANGE BILL [HL]
Memorandum by the Delegated Powers and Regulatory
Reform Committee to the Joint Committee on the draft Climate Change
Bill
1. This memorandum responds to your invitation
of 1 May to the Delegated Powers Committee to contribute to your
Committee's scrutiny of the draft Climate Change Bill. We value
the opportunity to contribute to the pre-legislative scrutiny
of this draft bill and set out below an overview of our opinion
on the proposed delegations. In making these observations, I stress
that our opinion must not be taken to prejudge our position should
a bill be introduced: we will report to the House at that stage
on whether its provisions inappropriately delegate legislative
power or whether they subject the exercise of legislative power
to an inappropriate degree of parliamentary scrutiny.
2. We have been assisted by a memorandum by the
Department for Environment, Food and Rural Affairs about the delegations
in the bill.
Alteration of carbon budgets — clause 13(4)
3. Clause 13 enables the Secretary of State,
by order subject to the affirmative resolution procedure, to revoke
or amend an order under clause 4 which sets a carbon budget for
a budgetary period. Certain conditions must be satisfied (subsection
(3)) if the budget is to be amended after the date on which it
was required to be set has passed; and a further condition (subsection
(4)) if it is to be amended after the beginning of the budgetary
period. But it is clear from subsection (5) that it is envisaged
that the budget might be amended more than a year after the end
of the budgetary period. The memorandum does not explicitly refer
to this although it does emphasise the significance that budget
levels are likely to have for the economy and for society generally
(paragraphs 46 and 70). In view of these implications, we consider
that the case has not so far been made out for a power retrospectively
to amend a carbon budget after the end of the budget period.
Emissions from international aviation or shipping
— clause 15(2)
4. Clause 15(1) provides that carbon dioxide
emissions from international aviation or shipping do not count
as emissions for the purposes of Part 1, except as provided by
regulations under that section (which attract the affirmative
procedure). But the Secretary of State also has power under subsection
(2) to define by order (subject to the negative procedure) what
is meant by "international aviation or shipping". While
the exercise of the power is likely to be constrained by the United
Kingdom's international obligations (paragraphs 61 and 62 of the
memorandum) as well as ordinary public law principles, the order
will determine the scope not only of clause 15 as a whole but
also of the regulation-making power conferred by subsection (3).
Moreover, the extent to which the regime of Part 1 should apply
to international aviation may prove to be a controversial policy
area. For these reasons, we note that, if a bill were introduced
containing such an order-making power, we would suggest that the
affirmative procedure was appropriate for its exercise.
Carbon credits and carbon debits — clauses
16 & 17
5. Clauses 16 and 17 provide for "carbon
credits" and "carbon debits", tradable under the
Kyoto Protocol among countries which have set emissions limitation
targets. Clauses 16(4) and (5) and 17(2) to (4) leave the entire
provision for carbon credits and debits to regulations. The memorandum
asserts that the provisions will be technical in character and
will need to be flexible and responsive to changes in international
agreements (paragraphs 88 and 96 to 99). We regard this as persuasive
in terms of the delegation, but not necessarily the level of parliamentary
control. Regulations under clause 16 modifying enactments would
require affirmative resolution but all other regulations under
clause 16 would be subject to the negative procedure. In view
of the critical role to be played by carbon credits and debits
in the calculation of the United Kingdom's performance against
its 2050 target, and against its successive carbon budgets meanwhile,
if a similar power were to be included in a bill, we would recommend
that its first exercise should be subject to the affirmative procedure,
so that the House may be assured that the basic framework for
the credits and debits regime is satisfactory.
Trading schemes — Part 3 / clause 28
Appropriateness of the delegation and level of
parliamentary scrutiny
6. The process by which the United Kingdom is
to meet the budgets and the overall target set under Part 1 will
be by way of "trading schemes" governing particular
sectors of industry in their production or consumption of particular
materials (predominantly fuels) in the course of their business.
Provision for such schemes is to be left entirely to regulations,
and paragraph 109 of the memorandum rightly describes this as
the most significant delegated power in the bill.
7. The power conferred by clause 28(1) is in
the most general terms imaginable, albeit that the overall purposes
for which it may be exercised are set out in subsection (2)(a)
and (b), and the characteristics which might enable economic activities
to be included in a trading scheme are listed in clause 29(1).
Those characteristics too are very widely drawn. In addition,
Schedule 2 deals extensively with the kind of provision which
the regulations must contain, and the further provision which
they may contain.
8. In favour of the delegation, the department
emphasises the extensive and technical nature of the provision
which will be required (paragraph 112 of the memorandum), and
the need to accommodate different kinds of scheme for different
purposes (paragraphs 117 to 123 and 127) and for a flexible and
responsive regime (paragraph 134). It also refers to comparable
statutory regimes, in particular the Renewables Obligation imposed
on electricity suppliers under sections 32 to 32C of the Electricity
Act 1989, which is governed entirely by affirmative orders of
the Secretary of State under extensive powers conferred by those
sections. But the regime applies only to the electricity industry
whereas the schemes in the bill could apply to virtually every
sector of the economy and could significantly affect competition.
9. Despite the extreme breadth of this power,
we acknowledge that the likely number and detailed content of
trading schemes may make them unsuited to primary legislation,
so that some delegation of powers for their provision may be not
be inappropriate. We have yet to be persuaded however that
even the affirmative procedure provides a sufficient level of
parliamentary scrutiny and control over the exercise of such extensive
powers, given the possible consequences of such a scheme for economic
performance in the sector to be regulated. It may be desirable
to consider whether these orders could somehow be subject to more
thorough scrutiny than the current procedure provides.
"Significantly more onerous" —
clause 31(3)(d)
10. Under clause 31(3), regulations which create
a trading scheme are subject to affirmative resolution, as are
regulations which extend the participants or activities to which
a scheme applies or which extend the duration of the scheme. Subsection
(3)(d) applies the affirmative resolution procedure to regulations
which "make the overall requirements of a scheme significantly
more onerous". There will clearly be instances where it is
beyond any doubt that revisions to a scheme make its requirements
significantly more onerous, but there are likely to be other occasions
where the significance of a new burden imposed by regulations
is much more a matter of impression and debate. We do not at this
stage wish to recommend the affirmative procedure for every exercise
of powers under Part 3 of the bill, but we draw your Committee's
attention to the uncertainty of language in the current provision,
and the risk it carries of challenge, by way of judicial review
to regulations made under Part 3 using the negative procedure.
Enforcement provision — Schedule 2, paragraphs
22 to 25
11. Paragraphs 22 to 25 of Schedule 2 are about
enforcement provision which may be made in regulations governing
trading schemes. The memorandum contains no material which seeks
to justify the extent of these significant powers or the level
of parliamentary control attached to them. We would pay close
attention to these powers if they were included in a bill, and
in particular note that we would expect a strong case to be made
in relation to the following: a power to provide for intrusive
enforcement arrangements not subject to the affirmative procedure
(paragraph 22); a power to impose financial penalties where the
bill itself does not specify or contain a mechanism for determining
the maximum amount (paragraph 23); and a power to create offences
and specify penalties where the mode of trial and maximum sentence
are not provided for in the bill (paragraph 24).
12. Paragraph 25 enables, but does not require,
regulations to confer rights of appeal against decisions made,
civil penalties imposed and enforcement action taken under a trading
scheme. The provision for appeals to be made to the Secretary
of State is, in our opinion, inappropriate because the Secretary
of State has a clear interest in securing reduction in United
Kingdom carbon emissions and has the right under clause 33 to
give directions to those administering trading schemes. The Joint
Committee on Human Rights will no doubt have a view on the compatibility
of paragraph 25 with the Convention rights, in so far as it makes
it optional rather than compulsory for regulations to provide
for a right of appeal.
May 2007
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