House of Lords - Delegated Powers and Regulatory Reform

Select Committee on Delegated Powers and Regulatory Reform Second Report

APPENDIX 4: CLIMATE CHANGE BILL [HL]

Memorandum by the Department for Environment, Food and Rural Affairs and the Department for Transport

Introduction

1. This memorandum has been prepared by the Department for Environment, Food and Rural Affairs and the Department for Transport and relates to the Climate Change Bill published on 15th November 2007 ("the Bill").

2. This memorandum contains a summary of the Bill's main provisions and identifies delegated powers.

3. In preparing this memorandum, we have benefited greatly from the observations made by the Delegated Powers and Regulatory Reform Committee (which we will refer to as "the Committee") in their contribution to the Joint Committee inquiry into the draft Bill.[15] We are grateful to the Committee for their assistance in the scrutiny of the draft Bill, which has helped improve the approach taken to the delegation of powers.

4. In their memorandum to the Joint Committee inquiry, the Committee made six points relating to the delegations proposed in the draft Climate Change Bill. Taking each of these in turn:

Alteration of carbon budgets

Paragraphs 68 to 77 below set out the approach to the amendment of carbon budgets, which has been revised since the draft Bill was published including to take account of the observations made by the Committee;

Emissions from international aviation and shipping

The Committee suggested that the affirmative procedure was a more appropriate approach to the power to define "international aviation and shipping". The Committee also noted that the exercise of this power would be likely to be constrained by the United Kingdom's international obligations as well as ordinary public law principles. For these reasons, the department remains to be convinced that the negative resolution procedure is not the most appropriate procedure in this case;

Carbon credits and carbon debits

The department has strengthened the parliamentary scrutiny of these powers to reflect the comments made during pre-legislative scrutiny, including those given by the Committee. To provide further reassurance, we have provided that the Secretary of State must also seek and take into account the advice of the Committee on Climate Change before making the first set of carbon accounting regulations, to ensure independent and expert advice and provide further reassurance as to the robustness of the basic accounting framework;

Trading schemes - appropriateness of the delegation

Paragraphs 151 to 190 below set out the approach taken in the revised Bill, and the steps which have been taken to strengthen the independent input into and parliamentary scrutiny over the exercise of these powers;

Trading schemes - "significantly more onerous"

We note that following pre-legislative scrutiny of the draft Bill, the Joint Committee was content with the appropriateness of this language. Paragraphs 191 to 194 give further explanation as to why the department remains to be convinced that this provision needs amendment

Trading schemes - enforcement provision

Paragraph 170 below set out the department's approach in this area, which has been revised since the draft Bill was published including to take account of the observations made by the Committee.

Summary of the main provisions of the bill

5. The Bill is divided into six Parts:

Part 1 Carbon target and budgeting
Part 2 The Committee on Climate Change
Part 3 Trading schemes
Part 4 Impact of and adaptation to climate change
Part 5 Other provisions
Part 6 General supplementary provisions

Part 1: Carbon target and budgeting

6. Part 1 of the Bill gives the Secretary of State a duty to reduce the net UK carbon account for the year 2050 to 60% below the 1990 baseline. The term "net UK carbon account" is defined in clause 22.

7. It also requires the Secretary of State to set "carbon budgets" representing UK emissions for five year periods, taking into account emissions reductions or increases for which the UK is responsible and which are to be credited or debited (measured by a system of carbon units) to the net UK carbon account, beginning with the period 2008-2012. Part 1 of the Bill includes a duty on the Secretary of State to report UK emissions levels to Parliament, and to report on the measures the Government will take to meet the objectives in Part 1.

8. Part 1 includes provision on how to calculate whether the target for 2050 has been met and how carbon budgets are to be set. It requires that the carbon budget for 2018-22 is set in a way that is consistent with both the 2050 target and the Government's target to reduce emissions by between 26% and 32% by 2020. It allows for emissions of other greenhouse gases and emissions from international aviation or international shipping to be included in the Bill's targets and budgets at a later date. It makes provision for the amendment of certain aspects of Part 1 of the Bill in certain circumstances, and gives a duty to make regulations setting out what carbon units can be used to ensure that the net carbon account is within budget.

Part 2: The Committee on Climate Change

9. Part 2 of the Bill establishes a new independent non-departmental public body, the Committee on Climate Change ("the Committee"). Schedule 1 sets out the Committee's constitution.

10. The Committee is given duties to advise the Secretary of State on the levels of carbon budgets, and on the apportionment of effort between reductions in domestic emissions levels and the use of carbon units. The Committee must also advise on the amount of effort to be made by sectors of the economy in trading schemes, and other sectors of the economy.

11. The Committee is also given a function of making an annual report to Parliament on the progress that is being made towards meeting the objectives in Part 1 of the Bill. At the end of each budget period, the Committee must include in its annual report its views on how the budget was or was not met, and on action taken during the budget period to reduce UK emissions.

12. Part 2 also gives the Committee the powers it needs to deliver its advisory and reporting functions, and the Secretary of State and devolved administrations are given powers to make grants to the Committee and to issue guidance and directions to the Committee.

Part 3: Trading schemes

13. Part 3 provides the Secretary of State and the devolved administrations with a power to set up trading schemes relating to greenhouse gas emissions though secondary legislation. Trading schemes may limit activities that directly or indirectly lead to emissions of greenhouse gases (for example, cap emissions from a particular set of activities and allow trading of emissions within the cap), or they may encourage activities that directly or indirectly lead to a reduction in greenhouse gas emissions or the removal of greenhouse gases from the atmosphere.

Part 4: Impact of and adaptation to climate change

14. Part 4 gives the Secretary of State a duty to report to Parliament at least every five years on the risks of the impact of climate change and the Government's programme for adapting to climate change. It also places a duty on the relevant Northern Ireland department to lay a programme for adapting to climate change before the Northern Ireland Assembly,

Part 5: Other provisions

15. Part 5 makes provision for waste reduction schemes and contains amendments to the provisions of the Energy Act 2004 relating to renewable transport fuel obligations. Part 5 also contains a number of miscellaneous provisions.

Part 6: General supplementary provisions

16. Part 6 makes supplementary provision.

Clauses 40, 41, 62 and 63 and Schedule 3: General provision on Regulations and Orders

17. Before considering each delegated power in the Bill, it is important to note that clauses 40, 41, 62 and 63 and Schedule 3 make general provision in relation to orders and regulations. This allows other provisions to use simpler terminology where individual order or regulation-making powers are conferred.

18. Clause 62(1) makes the standard provision that orders and regulations under the Bill are to be made by statutory instrument. Clause 62(2) makes an exception for instruments to be made by a Northern Ireland department acting alone which are to be made by statutory rule.

19. Clause 62(3) applies to extend any power to make an order or regulations. It provides that an order or regulations may:

(a) make different provision for different circumstances or cases;

(b) include supplementary, incidental or consequential provision; and

20. The provision in paragraph (a) of clause 62(3) is a standard provision which accompanies many order and regulation-making powers. It puts beyond doubt the discretion afforded to the national authority in appropriate cases.

21. Paragraphs (b) and (c) of clause 62(3) make general provision about the scope of the delegated powers in the Bill.

22. Paragraphs (b) and (c) do not operate to expand the kinds of situation in which the powers may be used, or the procedure applicable to instruments made using those powers. It simply enables appropriate supplementary, incidental, consequential, saving or transitional provisions to be made at the same time as the exercise of the principal powers. This ensures that the national authority is able to ensure that any use of the powers can be done in a manner which is coherent and properly caters for the particular circumstances.

23. Clause 62(4) and (5) provides that any provision that may be made by order may be made by regulations, and vice versa. Clause 63(3) provides that any provision which may be made using the negative resolution procedure may be made using the affirmative resolution procedure.

24. These provisions have been included in order to reduce bureaucracy by allowing the powers in different parts of the Bill to be used in combination with one another. For example, clause 25(3) allows the Secretary of State to make regulations, using the affirmative resolution procedure, on the extent to which emissions from international aviation and shipping are to be counted towards UK emissions. Clause 25(2) allows the Secretary of State to define "international aviation and shipping" by order, using the negative resolution procedure. Without clauses 62(4) - (5) and 63(3) this would not be possible as orders and regulations cannot be combined in the same instrument and different parts of the same instrument cannot be made subject to different parliamentary procedure.

25. However, used together, clauses 62(4) - (5) and 63(3) would permit the Secretary of State to exercise both powers in a single statutory instrument by making regulations using the affirmative resolution procedure. These provisions do not allow the level of parliamentary scrutiny to be lowered in any case.

26. Clause 63(1) and (2) define, respectively, the procedures which apply when a delegated power of the Secretary of State refers to the "affirmative resolution procedure" or to the "negative resolution procedure". These definitions apply the two usual procedures as standard.

27. Clause 63 does not apply to the power to make trading schemes, as this is the one delegated power in the Bill which is available to the devolved administrations as well as to the Secretary of State. It is appropriate that where the Secretary of State exercises this power, it should be subject to scrutiny in both Houses of Parliament in the usual way. Where it is exercised by any of the devolved administrations it is appropriate that it should be subject to scrutiny in the relevant devolved legislature. Therefore the provisions in clause 63 need to be adapted to cater for this.

28. Clause 41 and Schedule 3 makes such provision. Part 1 of the Schedule defines what is meant by the "affirmative resolution procedure" and the "negative resolution procedure" where any one of the national authorities exercises this power alone.

29. Part 2 defines how these procedures are to operate where regulations are made jointly by more or one national authority acting together. The purpose of this is to ensure that each relevant legislature retains its ability to scrutinise the exercise of power by each of the national authorities.

30. Most notably, it provides that if the regulations were to be split into their constituent parts, and any of those parts would normally be subject to the affirmative procedure, then the whole instrument is to be subject to the affirmative resolution procedure. This enables provisions which would normally be subject to different levels of scrutiny to be contained in the same instrument, without lowering the level of parliamentary scrutiny applicable.

31. Where the affirmative procedure applies, the regulations may not be made unless the instrument has been laid before and approved by a resolution of each of the relevant legislatures.

32. Where the negative resolution procedure applies, nothing further must be done under the regulations if any of the relevant legislatures prays or resolves that the regulations be annulled. If that eventuality occurs, the instrument may be revoked by Order in Council.

33. Part 3 provides that where a trading scheme would fall partly within the legislative competence of the Scottish Parliament partly outside its competence, it can be made by Order in Council. Exactly the same procedural safeguards apply here as they would apply in relation to jointly made regulations. However the Order in Council procedure has been chosen here as the Scottish Government considers that for the joint exercise of powers which fall partly within their competence, Order in Council is the most appropriate route.

Part 1 — Carbon Target and Budgeting

Clause 2(1) (Power to amend the target percentage for 2050)

Power conferred on: Secretary of State

Power exercisable by: Statutory Instrument

Parliamentary procedure: Affirmative resolution

34. Clause 1(1) imposes a duty on the Secretary of State to ensure that the net UK carbon account in 2050 is at least 60% lower than the total emissions of targeted greenhouse gases in the UK in the year 1990 (the 1990 baseline). This duty underlies the whole of Part I of the Bill, in that carbon budgets must be set with a view to meeting this target for 2050.

35. Clause 2 provides a delegated power for the Secretary of State to amend the 60% figure by order. This Secretary of State may only exercise this power where:

(a) it appears to the Secretary of State that there have been significant developments in scientific knowledge about climate change, or in European or international law or policy, that make it appropriate to do so; or

(b) in connection with an order designating further targeted greenhouse gases, in pursuance of the power conferred by clause 19; or

The power is subject to the affirmative resolution procedure and may only be amended once the Secretary of State has consulted and taken account of advice from the Committee on Climate Change, and given the devolved administrations an opportunity to make representations (see clause 3).

36. The power would allow the Secretary of State to increase the 60% target in the Bill (that is, make it more onerous) or reduce it (thus making it less onerous). The Secretary of State may wish to increase the target, for example, if a new international agreement were reached for either the UK or other countries to reduce their emissions by more than is currently the case.

37. The Department considers that it is necessary for Part 1 of the Bill to be flexible enough to be able to adapt to a changing international framework (like a post-Kyoto international agreement) and to the latest scientific knowledge. This legislation is intended to be in place for decades to come, and changes in scientific knowledge and international agreements are likely to change over such a long period of time. The department considers that it would be disproportionate to require new primary legislation for any such changes.

38. The Department therefore considers it appropriate for the Secretary of State to be able to change this target in the limited circumstances referred to in paragraph 35 above, as it means that the legislation can respond to the latest developments while ensuring that the overall structure remains intact.

39. The power is also available in connection with an order made under clause 19 (power to include other greenhouse gases in addition to carbon dioxide) or with regulations made under clause 25(3) (power to include international aviation or shipping).

40. The exercise of either of these powers would have the effect of significantly changing the nature of the 2050 target. If emissions of other greenhouse gases or international aviation or shipping emissions were to be included in the targets, then it is possible that this could significantly affect the achievability of the target.

41. It could make it much easier to meet, and therefore appropriate to take on a higher target, or much more difficult to meet therefore making it appropriate to adopt a less stringent target.

42. Clause 2(1)(b) also provides a power to specify a year other than the 1990 to be the baseline year for the purposes of the 2050 target. This power is only exercisable where there has been a significant change in European or international law or policy which makes it appropriate to do so.

43. Changing the baseline against which a target is to be measured is potentially as significant as amending the target itself. At present 1990 is the year which international and European agreements customarily use as a baseline against which emissions of greenhouse gases are measured. 1990 has been used as the baseline for Part 1 of this Bill for that reason, as it significantly aids transparency if all targets are to be measured against the same baseline.

44. The department therefore considers it appropriate to have this power as, if international agreements were to move away from having 1990 as the baseline year, it is likely to be appropriate to do the same for domestic targets under his Bill. Because an amendment like this would be significant and would only be appropriate in these circumstances, the Secretary of State may only exercise this power where he considers that there have been significant developments in international or European law or policy which make it appropriate to do so.

45. However, as the target figure in clause 1 and the baseline year are very important to the budgeting system in Part I of the Bill, the Department considers that such an amendment should be done in a transparent manner and be subject to a high level of parliamentary control. The power is also therefore made subject to the affirmative resolution procedure.

46. In addition, the Secretary of State must also seek the advice of the independent and expert Committee on Climate Change before taking any decision, and must allow the devolved administrations at least 3 months to offer their views. When amending the target, the Secretary of State must also make a statement as to whether and how the devolved administrations' views have been taken into account in reaching a decision.

Clause 5(1)(c) (Power to introduce a post-2050 target or target range)

Power conferred on: Secretary of State

Power exercisable by: Statutory Instrument

Parliamentary procedure: Affirmative resolution

47. Clause 5(1)(b) requires that the budget encompassing the year 2050 be set consistently with the 60% target. Clause 5(1)(a) requires that the budget encompassing 2020 be set consistently with a 26-32% reduction against the baseline.

48. In addition, clause 8(2) requires that all carbon budgets are set with a view to meeting the target for 2050 and the 2020 range. Therefore, the overall trajectory of all carbon budgets will be strongly influenced by the requirement for the budgets for these periods to be set at certain levels

49. The requirement to have a system of carbon budgeting continues after 2050, but the level of the budgets is not constrained after this time, except by the UK's obligations under international law.

50. It is possible that as time moves on it will become desirable to set new targets further into the future, and that carbon budgets should be set with a view to meeting these new targets. Clause 5(1)(c) permits the Secretary of State to designate such new targets within the existing budgeting framework.

51. These targets may specify a specific percentage reduction (like the 60% reduction for 2050) or a range (like the 26 to 32% reduction for 2020) with which the budget for that period must be consistent.

52. The Department considers that it is appropriate that the Secretary of State should have power to designate such targets via secondary legislation because it allows the fundamental framework of Part I of the Bill to continue but for new long term goals to be added as time moves on.

53. This will allow the budgeting system to adapt over time to reflect the latest scientific advice, international obligations, and assessments of what levels of emissions reductions are environmentally desirable and technically and economically feasible. This power is important to ensure that the budgeting system continues to be relevant over time, and it would be undesirable to require new primary legislation for this purpose.

54. However, as the introduction of a new target or target range could have a significant impact on the continuing nature of the budgeting system, it is considered that the process for setting a new target should be highly transparent and should be subject to a high level of parliamentary control. The power is therefore subject to the affirmative resolution procedure.

55. In addition, the Secretary of State must also seek the advice of the independent and expert Committee on Climate Change before taking any decision, and must allow the devolved administrations at least 3 months to offer their views. When setting the target, the Secretary of State must also make a statement as to whether and how the devolved administrations' views have been taken into account in reaching a decision (see clause 7).

Clause 6(1) (Power to amend 2020 target range or post-2050 target)

Power conferred on: Secretary of State

Power exercisable by: Statutory Instrument

Parliamentary procedure: Affirmative resolution

56. Clause 2 permits the Secretary of State to amend the target for 2050 where

(b) in connection with an order designating further targeted greenhouse gases, in pursuance of the power conferred by clause 19; or

57. Clause 6(1) grants a similar power to the Secretary of State to amend the 26 to 32% range within which the budget encompassing 2020 must be set, and any other target or range set by the Secretary of State under clause 5(1)(c).

58. This power is subject to the same conditions which apply to the power to amend the target for 2050 in clause 2 (see clause 6(2)).

59. The same considerations that apply to the power in clause 2(1) apply to this power and it is therefore made subject to the affirmative resolution procedure.

60. In addition, the Secretary of State must also seek the advice of the independent and expert Committee on Climate Change before taking any decision, and must allow the devolved administrations at least 3 months to offer their views. When amending the target, the Secretary of State must take the Committee's advice into account, and make a statement as to whether and how the devolved administrations' views have been taken into account in reaching a decision (see clause 7).

Clause 4(1)(a) and 8 (Duty to set carbon budgets for budgetary periods)

Duty imposed on: Secretary of State

Duty met by: Statutory Instrument

Parliamentary procedure: Affirmative resolution

61. The Secretary of State has a duty to set the budget for each budget period, and must do so by order, subject to the affirmative resolution procedure.

62. One of the primary tasks of the Committee on Climate Change is to give independent, expert and authoritative advice on the level of budgets. It would not therefore be sensible for the level of budgets to be set on the face of the Bill before the Committee could be formally set up and advise on the most appropriate budget level.

63. It is therefore appropriate that these decisions be left to the Secretary of State once the Committee has been formally set up and is able to advise on the matter.

64. There are several procedural limitations to the exercise of this power. First, the Secretary of State must set the first three budgets by the end of February 2009, and all others at least 11 and a half years before the beginning of the budget period in question. This ensures that there is certainty around the UK's budgets in the medium term.

65. Secondly, before setting the budget the Secretary of State must obtain and take into account the advice of the Committee on Climate Change this ensuring that budgets will be set on the basis of independent expert advice.

66. As the level of budgets has the potential to have significant implications in relation to the economy and society more broadly, and is fundamental to ensure that the long-term target in clause 1 can be met, it is considered that it should be subject to a high level of parliamentary control. The power is therefore made subject to the affirmative resolution procedure.

67. In addition, in order to ensure that this decision takes full account of the action that can be taken by the devolved administrations to reduce emissions, the Secretary of State must consult the devolved administrations before setting the budget and give them at least three months to offer their views.

Clause 16(2) & (3) (Powers to amend carbon budgets)

Power conferred on: Secretary of State

Power exercisable by: Statutory Instrument

Parliamentary procedure: Affirmative resolution

68. Clause 16(2) and (3) permit the Secretary of State to amend carbon budgets in limited circumstances.

69. Clause 4(2) requires budgets to be set at least 11 and a half years before the budget period begins. Setting legislative budgets this far into the future is desirable in order to provide a clear and transparent framework within which public policy-makers, businesses and citizens can plan with confidence.

70. However, when setting budgets this far ahead it is plausible that the assumptions upon which those decisions are taken could change significantly during the intervening period. This could, for example, leave the UK in a situation where meeting a particular budget were no longer the most cost-effective way in which to reach its long term targets; or there could be a significant relevant development within the European or international context that would alter the assumptions on which basis a particular budget or budgets had initially been set.

71. The Secretary of State therefore has a power to amend a budget before the budget period in question begins but only where it appears to the Secretary of State that there have been significant changes affecting the basis on which the previous decision was made. Where those conditions do not apply, the Secretary of State may not amend the budget at all.

72. In addition, the Secretary of State may not amend the budget until and unless fresh advice from the Committee on Climate Change has been sought and taken into account. This will ensure that any such decision must be taken transparently and only on the basis of independent expert advice.

73. Furthermore, in order to ensure that this decision takes full account of the action that can be taken by the devolved administrations to reduce emissions, the Secretary of State must consult the devolved administrations before amending the budget, and must allow them at least 3 months to offer their views. When amending the budget, the Secretary of State must also make a statement as to whether and how the devolved administrations' views have been taken into account in reaching a decision.

74. The power to amend the budget for a period which has begun is even more limited. The Secretary of State may only amend a budget in these circumstances where there has been a significant change affecting the basis on which the previous decision was made since the budget period in question began.

75. This means that any changes which took place between the budget being set and the beginning of the budget period must be disregarded - as if they had justified a change to the budget, the Secretary of State should have made such a change before the period began.

76. In its evidence to the Joint Committee, the Committee noted that clause 13(5) of the draft Bill made it clear that it was possible to amend budgets after the budget period in question had ended and expressed the view that the case for such a power had not been made out. In the light of the Committee's views, this subsection has been removed from the revised Bill.

77. As noted in the commentary on clause 8(1), the level of budgets has the potential to have significant implications for the economy and society more broadly, and is fundamental to ensure that the long term target in clause 1 can be met. It is considered that this power should be subject to a high level of parliamentary control, and it is therefore made subject to the affirmative resolution procedure.

Clause 18(1) (Power to amend length, etc, of budgetary periods)

Power conferred on: Secretary of State

Power exercisable by: Statutory Instrument

Parliamentary procedure: Affirmative resolution

78. The Bill provides that Budget periods are to be 5 years in duration. This mirrors the fact that commitment periods under the Kyoto Protocol and the EU Emissions Trading scheme are also 5 years long.

79. The intention is that budget periods under the Bill should follow those set out in international and European law so as to ensure that the emissions are managed over similar time periods at international and domestic level. This will ensure that the relationship between domestic budgets under the Bill and the UK's international targets is as simple and transparent as possible.

80. However, binding targets under the Kyoto Protocol currently only extend to 2012 and it cannot be taken for granted that any future international agreement setting targets would run on a 5 yearly cycle. Should that not be the case, then it would be desirable to be able to change the length of budget periods and / or the times at which they start, in order to ensure that the periods under the Bill match those in international law.

81. Clause 18 allows therefore allows the Secretary of State to amend clause 4(1)(a) so as to alter the length of budgetary periods and the dates upon which they begin.

82. The power is limited in two ways. The first is that it may only be exercised for this purpose. If the international and European framework continues to adopt 5 yearly periods, then the Secretary of State may not exercise the power.

83. The second restriction is that the power may not be exercised in such a way to create a gap in time between budget periods altogether. So, for example, it could not be amended so that the first budget period ended at the end of 2012 and the second began in 2014.

84. It is appropriate to delegate this power to the Secretary of State so that any changes of this nature which are consequential upon changes which occur internationally or at European level can be made without the need to find parliamentary time for new primary legislation.

85. The power allows the Secretary of State to make consequential amendments to other parts of the Bill. This is necessary because many of the provisions of the Bill are based upon the assumption that budget periods will be 5 years long.

86. For example, it might be necessary or expedient to change the dates by which the Secretary of State sets the budgets; the dates by which the Committee on Climate Change must advise on certain matters; the dates by which the Secretary of State and Committee must make certain reports. Without this power, alteration of the budget periods could lead to the Bill no longer fitting together as a coherent structure.

87. While it is necessary to have this flexibility, the department considers the budget system to be crucial to the framework set out in Part 1 of the Bill and this provisions is therefore made subject to the affirmative resolution procedure. Furthermore, the Secretary of State must also consult the devolved administrations before exercising this power.

Clause 19(1)(b) and 20(1) (Power to designate a targeted greenhouse gas)

Power conferred on: Secretary of State

Power exercisable by: Statutory Instrument

Parliamentary procedure: Affirmative resolution

88. The essence of Part 1 of the Bill is to require the government to set binding carbon budgets, and to ensure that the net UK carbon account does not exceed those budgets. The budget itself is a limit on the amount of "targeted greenhouse gases". Clause 19 defines targeted greenhouse gas as carbon dioxide, and allows the Secretary of State to designate any other greenhouse gas as a targeted greenhouse gas.

89. In order to avoid dangerous levels of climate change, reductions in emissions of all greenhouse gases will be required. Including a wider basket of gases within the target would also allow for the most cost-effective abatement options to be considered across all gases. However, the department considers that it is necessary to focus first on carbon dioxide only. This is for three reasons.

90. First, this is where the deepest cuts need to be made. Carbon dioxide currently makes up around 85% of all UK emissions. Secondly, since 1990, the UK has had considerable success in abating emissions of other greenhouse gases, whereas carbon dioxide levels have remained relatively stable. Therefore a carbon dioxide only target initially will make sure that strong action is taken to abate these emissions. Thirdly, there remains considerable uncertainty about the potential to reduce other greenhouse gas emissions cost-effectively, particularly in the long-term.

91. In order to ensure that we are able to move quickly to include other greenhouse gases in our targets when the time is right, the Secretary of State has a power to add other greenhouse gases to the target in the targets in future. This is subject to a number of restrictions.

92. First, the Secretary of State must seek and take into account the advice of the Committee on Climate Change. This will ensure that any such decision would have to take account of independent and expert advice.

93. Secondly, the decision is subject to the affirmative procedure, thereby providing a high degree of parliamentary control. Finally, the Secretary of State must consult the devolved administrations prior to exercising this power, thus ensuring that their views are taken account of.

94. The Secretary of State may also make provision as to determining the amount of emissions for the year 1990. This is important as 1990 is the baseline year against which the target for 2050 is to be measured (see clause 1).

95. Clause 20(2) also makes clear that such an order may designate a different base year or base years for a greenhouse gas other than carbon dioxide.

96. This would be useful to make sure that there is consistency between the base years under the Bill and those adopted at international level. For example, under the Kyoto Protocol it has been agreed that the UK will measure reductions in emissions of carbon dioxide compared with a base year of 1990, but the Protocol allows the UK to choose to apply a different base year (1995) for emissions of hydrofluorocarbons, perfluorocarbons and sulphur hexafluoride. For the purposes of the Kyoto Protocol, the UK has chosen to apply a different base year for emissions of these greenhouse gases, and this clause allows for this to be reflected in the budgeting system under the Bill.

97. An order designating additional greenhouse gases as a "targeted greenhouse gas" may also make consequential amendments to the provisions of the Bill. This is a narrow power, but may be useful if for some reason the introduction of a new gas is not easily compatible with the existing framework of Part 1.

Clauses 21(2) and 22(2) (Power to make provision in respect of carbon units)

Power conferred on: Secretary of State

Power exercisable by: Statutory Instrument

Parliamentary procedure: Negative resolution (sometimes Affirmative)

98. The duty of the Secretary of State under clause 1(1) and 4(1)(b) is to ensure that the net UK carbon account is at or below a specific level. The net UK carbon account is defined in clause 22 as total emissions of targeted greenhouse gases in the UK, minus removals of targeted greenhouse gases from sinks; minus carbon units which are to be credited to the account; plus carbon units which are to be debited from the account.

Carbon units

99. Under the Kyoto Protocol, a number of tradable "units" exist including Assigned Amount Units ("AAUs"), Certified Emissions Reductions ("CERs"), Emissions Reductions Units ("ERUs") and Removal Units ("RMUs"). CERs and ERUs are granted to project participants who undertake projects which are shown to result in a reduction of greenhouse gas emissions. AAUs are the units which are granted to countries in order to meet their commitments.

100. All of these units are tradable meaning that a country with an emissions limitation target under the Kyoto Protocol may purchase any of these units from elsewhere in the world and count them towards meeting its target.

101. Units of this nature will also count towards reducing the net UK carbon account by "crediting" the account. The exact units which count for these purposes and the circumstances in which they are to be regarded as crediting the account are to be prescribed by the Secretary of State in regulations.

102. It is appropriate for this decision to be delegated to secondary legislation as it is necessary to be able to respond quickly to changes in the international framework as and when certain units cease to be available or new ones become available. For example, it is not clear at present whether the current system of AAUs, CERs, RMUs and ERUs will remain in place after 2012.

103. There are safeguards in place. The Secretary of State may only allow units to be counted if they represent reductions in greenhouse gases (like CERs), an amount of permitted emissions of greenhouse gases within a capped system (like an AAU or an EU ETS allowance) or a removal of greenhouse gas emission from the atmosphere (like an RMU).

104. Furthermore, the regulations may only allow units to count towards the net UK carbon account if regulations ensure that they then cease to be available to offset other greenhouse gas emissions. This ensures the integrity of the system by making sure that units cannot be counted twice.

105. The corollary of allowing units to count towards targets and budgets is that if emissions reductions do occur within the UK (for example by companies operating within the EU Emissions Trading Scheme) and those emissions are effectively exported abroad through the sale of units, those reductions should be added back onto the net UK carbon account. Part I of the Bill deals with this through the concept of "debiting" units from the account.

106. The circumstances in which a unit is to be debited from the net UK carbon account are again to be prescribed by regulations to reflect the fact that the system needs to be responsive to changes in the international accounting procedures. It is crucial that any changes of this nature can be made at short notice as there is a risk that any point at which there is a mismatch between national and international accounting procedures could cause a loss of environmental integrity in the scheme.

107. Again there are limits on this power in that the units specified in the regulations must represent reductions in greenhouse gases (like ERUs) or an amount of permitted emissions of greenhouse gases within a capped system (like an AAU or an EU ETS allowance) or a removal of greenhouse gas emission from the atmosphere (like an RMU).

Supplementary provisions

108. In addition to the requirement to specify what a credit and debit is and when they are to be taken into account, the regulations may also make provision establishing a scheme registering and tracking the movement of units.

109. It is very likely that a system of this nature will be required in order to ensure that there is transparency as to the types and amounts of units which are to be taken into account and to ensure that there is no double counting of units.

110. Such a scheme is likely to require a significant amount of detail which is very technical in nature and it would be disproportionate to require Parliamentary time to be spent on this. Furthermore it is possible that the detailed accounting mechanisms will need to be updated from time to time as the international framework changes.

111. It is likely that the registration scheme would need to be administered by a body, so the Secretary of State has power to confer functions upon an existing body to carry out this task, and to make appropriate modifications to enactments relating to such a body. Without this power, it would not be possible to pass this task to an independent body outside of central government.

112. In case it becomes inappropriate over time for an existing body to carry out this function, the Secretary of State also has a power to establish a new body precisely for the purpose of administering such a scheme.

113. In general, the provisions of these regulations are likely to be technical and administrative in detail and therefore uncontroversial. Subject to two significant exceptions, these regulations are therefore subject to the negative resolution procedure.

114. The first exception is the first exercise of the power, which is made subject to the affirmative procedure. The purpose of this is so that Parliament may acquaint itself with, and fully debate, the fundamental principles of the accounting structure that is to be created and satisfy itself that the basic framework for the carbon accounting regime is satisfactory. This is a change from the draft Bill, which has been made in response to the Committee's recommendation.

115. In addition, prior to the first exercise of the power, the Secretary of State must also seek and take into account the advice of the Committee on Climate Change, to ensure independent and expert advice and provide further reassurance as to the robustness of the basic accounting framework. This is also a change from the draft Bill.

116. The second exception is where the power is exercised to make modifications to primary legislation relating to a body appointed to administer the registration scheme. This is also made subject to the affirmative resolution procedure, thus ensuring that there is a high level of parliamentary scrutiny.

Clause 25(3) (Power to make provision in respect of emissions from international aviation or shipping)

Power conferred on: Secretary of State

Power exercisable by: Statutory Instrument

Parliamentary procedure: Affirmative resolution

117. At present, emissions from international aviation and shipping are not counted towards the targets or budgets in Part I of the Bill. Clause 25(3) allows the Secretary of State to make regulations providing for these emissions to be counted.

118. There is at present no international agreement on how responsibility for emissions from international aviation and shipping should be apportioned between countries.

119. However, it is likely that international agreement on this issue will be reached at some point in the future. When such agreement is reached it would be appropriate for the UK's share of international aviation and shipping emissions to be taken into account towards the budgets and targets set under Part I of the Bill. This clause allows the Secretary of State to include these emissions without having to find the parliamentary time to obtain new primary legislation.

120. The power is limited in that the Secretary of State may only add these emissions where there has been a change in international or European law or policy relating to aviation or shipping, thus meaning that the power can only be exercised where there has been movement on the issue at international level.

121. The regulations may make provision as to the exact period in which emissions from international aviation and shipping are to be taken into account. This makes clear that the regulations allow the Secretary of State to provide that these emissions are to be taken into account from some point in the future, or if partway through a budget period, may provide that those emissions are to be taken into account for the entirety of that period.

122. This clause also allows the Secretary of State to define the base year for these emissions. Under the Kyoto Protocol it has been agreed that the UK will measure reductions in emissions of carbon dioxide compared with a base year of 1990. Different base years may be applied for emissions of other greenhouse gases. It is plausible that international agreement might be reached that emissions from international aviation or shipping should be measured against a different base year, or average of a number of years. This clause allows for this to be reflected in the budgeting system

123. It is appropriate for this power to be delegated to the Secretary of State so that the system of budgets can be responsive to changes in the international systems. If such an agreement is reached it is likely that there would be strong justification to bring these emissions within the scope of Part 1 of the Bill as quickly as possible. The Department therefore considers that it would be disproportionate to have to seek valuable Parliamentary time in order to make new primary legislation bringing these emissions into the system.

124. However, the introduction of emissions from international aviation and shipping into the budgeting system would be a significant change and it is considered that it should be subject to a high level of parliamentary control. The power is therefore made subject to the affirmative resolution procedure.

Clause 25(2) (Power to define "international aviation or shipping")

Power conferred on: Secretary of State

Power exercisable by: Statutory Instrument

Parliamentary procedure: Negative resolution

125. As noted above, unless provided for by regulations under clause 25(3), international aviation and shipping are excluded from the scope of Part I of the Bill. This is in line with international agreements in this area.

126. Exactly which elements of aviation and shipping are to be regarded as "international" has changed from time to time in accordance with improvements in international carbon reporting practice, which is a constantly developing area.

127. It is therefore considered that it might be necessary for the Secretary of State to have power to clarify what is meant by international aviation and shipping from time to time as carbon reporting practice develops. This will allow the Secretary of State to ensure that what the UK is required to account for under Part I of the Bill is always in line with what it is required to monitor under international protocols.

128. The department notes that the Committee, in its evidence to the Joint Committee, suggested that the affirmative procedure would be appropriate for this power. The department accepts that this power will determine the scope of clause 25 as a whole and may prove to be a controversial policy area. However, the department continues to consider that the negative resolution procedure provides sufficient parliamentary scrutiny for this power.

129. This is a very limited power. For example, it would not be open to the Secretary of State to define "international aviation and shipping" as including all aviation and shipping as under the principles of public law, this would be an unreasonable exercise of the power. Furthermore, the Secretary of State will undoubtedly have to have regard to the manner in which international aviation and shipping is defined internationally. And it leaves the principle that only international aviation and shipping emissions should be excluded unchanged.

130. It is therefore considered that the negative resolution procedure should provide sufficient scrutiny in this case.

Part 2 — The Committee on Climate Change

Clause 28(4) (Power to extend period for progress report)

Power conferred on: Secretary of State

Power exercisable by: Statutory Instrument

Parliamentary procedure: Negative resolution

131. Clause 28 requires the Committee on Climate Change to lay before Parliament and the devolved legislatures an annual report setting out its views on the progress towards meeting the targets and budgets in Part 1 of the Bill. Clause 28(3) provides that reports must be laid no later than 30th June each year. Clause 28(4) allows the Secretary of State to extend the period during which the Committee's annual report on progress must be laid before the legislatures.

132. This power is mirrored by the power in clause 29(4), which allows the Secretary of State to adjust the date by which the Secretary of State must respond to the Committee's progress report each year (see paragraphs 139-146).

133. The power in clause 28(4) is included because the reporting dates in the Bill have been chosen to allow the Committee to consider, before making its progress report, emissions data made public by convention and under international and European Union reporting requirements.

134. The power would allow the Secretary of State to make appropriate adjustments to the date if the international reporting requirements were altered. If, for example that information were to become available later in the year, then it might make sense for the Committee to be able to delay its report until it has had the opportunity to see and consider that information.

135. Before making such an order, the Secretary of State must consult the devolved administrations so as to ensure that their views are taken into account.

136. The Department considers that the negative resolution procedure is appropriate because the Secretary of State is only given the power to extend the period in which a report must be given; the Secretary of State could not exercise the power so as to remove the Committee's duty to make a progress report. Furthermore, the power cannot be used to prevent the Committee from reporting earlier if it wishes. It simply leaves open the possibility of the Committee being able to delay its report should it wish to do so.

137. Given these limitations, the Department considers that it would be unduly burdensome to require a debate in each House of Parliament before an extension could be made to the relevant period.

138. Additionally, the Merits of Statutory Instruments Committee will scrutinise any order made to adjust the reporting period and would be able to report any order which it considers likely to be of interest to the House or to be inappropriate. Such scrutiny removes the possibility that an order made using this power could go unnoticed.

Clause 29(4) (Power to extend period for response to progress report)

Power conferred on: Secretary of State

Power exercisable by: Statutory Instrument

Parliamentary procedure: Negative resolution

139. The Committee on Climate Change is required to report annually on progress towards meeting budgets. Clause 29(1) requires the Secretary of State to respond to this report each year by 15thOctober. Clause 29(4) allows the Secretary of State to extend that period by Order.

140. The requirement on the Committee to make its annual progress report in the first place is contained in clause 28. Clause 29(4) requires that this report be laid before Parliament by 30th June each year, and allows the Secretary of State to extend this period by order.

141. The power in clause 29(4) to extend the date for the Secretary of State to respond is necessary because of the power in clause 28 to extend the period by which the Committee must report in the first place. If the power in clause 28 were to be exercised, thus allowing the Committee to delay its report, this may in turn make it necessary to extend the deadline for the Secretary of State to respond.

142. For example, it is plausible that the Committee might consider that it would like to delay its annual progress report until late September so that it could take into account certain information which would not have been available up until that point.

143. If this request were to be acceded to, it would be unreasonable to expect the Secretary of State to respond to that report by 15th October as it would not give sufficient time to properly consider the Committee's report. It is not in anyone's interests for the government not to have time to prepare a properly considered response to the Committee's progress report.

144. Indeed, the absence of this provision would lead there to be a strong motive for the Secretary of State to turn down any request by the Committee to extend the deadline for making its progress report beyond more than a few weeks. This is because to do so would make the Secretary of State's job of responding by 15th October much more challenging.

145. This is only a power to extend the period. It is not a power for the Secretary of State to avoid the duty altogether. It is therefore simply a power to add minor administrative flexibility. However, it is considered appropriate for this to be made subject to parliamentary control and is therefore made subject to the negative resolution procedure.

146. Before making such an order, the Secretary of State must consult the devolved administrations so as to ensure that their views are taken into account. This is particularly important as the Secretary of State must consult these administrations before responding to the Committee's report and it may be appropriate for the devolved administrations to contribute towards the response.

Schedule 1

Paragraph 1(4) (Power to alter the number of Committee members)

Power conferred on: Secretary of State

Power exercisable by: Statutory Instrument

Parliamentary procedure: Negative resolution

147. Paragraph 1(1) of Schedule 1 provides that the Committee for Climate Change is to consist of a person appointed to chair the Committee and "not less than five and not more than eight members appointed by the Secretary of State". Paragraph 1(4) gives the Secretary of State a power to amend, by order, those minimum and maximum figures.

148. This power has been included to allow the Secretary of State to adjust the membership figures in appropriate circumstances, for example if the Committee's workload increased or reduced or if a different balance of skills was required. The power recognises that the volume and type of work given to the Committee may vary over time. The Department considers that is not proportionate to have to take primary legislation to make such a simple adjustment to the Committee's constitution.

149. The Department considers that the negative resolution procedure is appropriate, because this is not so important an issue that Parliament's time should be taken up debating it. Additionally, instruments made using the negative resolution procedure are scrutinised by the Merits of Statutory Instruments Committee, and could be reported in appropriate circumstances. There are precedents for this approach - see for example the Natural Environment and Rural Communities Act 2006 (Schedule 1, paragraph 3 and Schedule 2, paragraph 3).

150. To reflect the fact that the Committee on Climate Change is to be a jointly sponsored body, funded by the Secretary of State and the devolved administrations, the Secretary of State may only exercise this power with the consent of all of the devolved administrations.

Part 3 — Trading Schemes

Clause 36(1) (Power to make provision for trading schemes)

Power conferred on: Relevant national authority

Power exercisable by: Statutory Instrument

Parliamentary procedure: Affirmative resolution

151. Clause 36(1) contains the most significant delegated power in the Bill. It enables the national authorities (that is, the Secretary of State and the devolved administrations) to introduce, by regulations, trading schemes relating to greenhouse gas emissions. The power is subject to the affirmative resolution procedure and is subject to a statutory requirement to consult. It should be read in conjunction with Schedule 2 to the Bill.

152. The system of targets and carbon budgeting in Part 1 of the Bill will not in itself reduce emissions. However, it will provide a strong framework within which the government will be required to manage emissions, for example by introducing new measures and adapting existing measures to ensure that emissions are reduced so as to stay within budgets. In order for the government to be able to deliver these measures, it will need new powers.

Trading Schemes

153. The use of trading schemes has the advantages of traditional regulation in giving a high degree of certainty of outcome, with the added benefit that they allow the market to determine how best to arrive at that outcome at the lowest cost.

154. Experience has shown that legislation establishing trading schemes[16] tends to be lengthy and technical. It has also been the case that regular amendments have been made to streamline the schemes. The Department therefore considers that the subject matter is best suited to be dealt with through secondary legislation.

155. The Secretary of State and devolved administrations already have powers to make trading schemes by delegated legislation under a number of different powers. Some of these powers are very general - most notably section 2 of the Pollution Prevention and Control Act 1999 - and some very specific. Clause 36 brings the elements of each of these powers together and supplements them with some additional flexibility to allow differing elements of each of these schemes to be combined within the same scheme. This will allow the government to choose the most appropriate element for each scheme making it easier to tailor each scheme to the needs of those regulated by it.

156. In the longer term it also allows the possibility for existing and new schemes to be rationalised and adapted so that they fit together more coherently. Under the existing more specific powers, this would be much more difficult.

Restrictions on the scope of the power

157. There are two main sources of restrictions on the scope of the power:

(a) a trading scheme must fall within one of the categories of scheme in section 36(2); and

(b) Schedule 2 contains a number of factors which must be included in a trading scheme; they vary with the type of scheme being made.

The two types of trading scheme

158. Section 36(2) introduces two types of trading scheme:

(a) trading schemes that operate by limiting or encouraging the limitation of activities that consist of the emission of greenhouse gases or that cause or contribute, directly or indirectly, to the emission of greenhouse gases;

(b) trading schemes that encourage activities that cause or contribute, directly or indirectly, to the reduction of greenhouse gas emissions or the removal of greenhouse gases from the atmosphere.

In this respect, the power is limited to a narrower purpose than the existing power in section 2 of the Pollution Prevention and Control Act 1999, which allows regulations to be made regulating activities which are capable of causing any environmental pollution or for the purpose of otherwise preventing or controlling emissions capable of causing any such pollution.

159. Trading schemes that operate by limiting activities include "cap and trade" schemes where total emissions for all participants are capped. Tradable allowances are issued to participants up to the level of the total cap. At the end of a trading period, each participant must have enough allowances to cover his emissions. The European Union Emissions Trading Scheme ("EU ETS") is a good example of an existing cap and trade scheme (transposed into UK law by regulations made under section 2(2) of the European Communities Act 1972).

160. A variant on the "cap and trade" scheme is the "cap and offset" scheme. Under cap and offset schemes, each participant has a capped level of activity (usually measured in terms of emissions). If the capped level of emissions is exceeded, the participant must offset his excess emissions by purchasing emissions credits, representing equivalent reductions of emissions elsewhere.

161. Cap and trade schemes and cap and offset schemes typically focus directly on emissions (like EU ETS) but need not necessarily do so. They may also focus on activities - such as the use of electricity or other forms of energy - which indirectly cause emissions. The voluntary UK Emissions Trading Scheme which ran from 2002 to 2006 covered both direct emissions, and the use of electricity, heat and steam (referred to as "indirect emissions").

162. The government has also recently announced that it intends to implement a new scheme - the Carbon Reduction Commitment - to apply to medium to large users of electricity. This scheme would similarly apply a cap and trade scheme to both direct and indirect emissions and it is intended that this scheme would be the first use of the power in clause 36.

163. Cap and trade schemes also have the potential to be applied upstream from the point of emission, for example by capping the supply of carbon intensive fuels. This would have the potential to provide a financial incentive for suppliers of alternative fuels which have a low carbon intensity.

164. These are notable gaps in the powers contained in the Pollution Prevention and Control Act 1999, as trading schemes made under that power may only be framed in terms of direct emissions.

165. By contrast, trading schemes framed with a view to encouraging lower-emission activities impose targets on participants. Certain activities generate certificates, which are tradable. At the end of each trading period, each participant must have enough certificates to meet his target. For example, the "Renewables Obligation" (see sections 32 to 32C of the Electricity Act 1989) requires electricity suppliers to source a specific, and annually increasing, percentage of electricity from renewable sources. The generation of renewable energy (either by a participant or by another renewable energy supplier) allows the scheme administrator to issue "green certificates" which can be collected or bought by participants as evidence that the obligation has been met.

166. The power would allow similar schemes to be set up encouraging other types of emission reduction activity. For example, the European Commission is mandated to examine whether the Energy Services Directive[17] should be amended to introduce a trading scheme for "white certificates" to encourage energy efficiency. The power could be used to implement such a scheme, or to set up a similar scheme in advance.

The required elements of each type of trading scheme

167. The table below sets out the requirements of each type of trading scheme, expressed by reference to what must be provided for in the regulations setting out the scheme:

Legislation Duty

Schemes limiting activities

Schedule 2, para 2 Must specify operating period or periods

Schedule 2, para 3(1) Must identify activities

Schedule 2, para 3(3) Must specify units of measurement

Schedule 2, para 4(1) Must identify persons to whom scheme applies

Schedule 2, para 5(4) Must not provide for allocation to be made in return for consideration

Schedule 2, para 6(3) Must ensure that allowances used by a participant for the purposes of a trading scheme cannot be used by the participant for any other purpose

Schedule 2, para 9(1) Must allow trading

Schedule 2, para 9(3) Must specify trading circumstances

Schemes encouraging activities

Schedule 2, para 13 Must specify operating period or periods

Schedule 2, para 14(1) Must identify activities

Schedule 2, para 14(3) Must specify the units of measurement

Schedule 2, para 15(1) Must identify persons to whom the scheme applies

Schedule 2, para 16 Must set a target for the total amount of activities and impose an obligation on each participant

Schedule 2, para 17 Must provide for the issue of certificates evidencing the carrying out of activities

Schedule 2, para 17(3) Must require participants to have enough certificates to comply with obligations

Schedule 2, para 17(4) Must contain provision for ensuring that certificates cannot be re-used

Schedule 2, para 16(1) Must provide for trading in certificates

Schedule 2, para 16(3) Must specify circumstances in which trading is permitted

168. Schedule 2 also contains a number of permissive elements which may be provided for in the regulations, and some of these are themselves constrained by requirements which apply if a particular policy option is chosen.

169. For example, paragraph 7 provides that if regulations made under that paragraph provide for the allocation of allowances, they must set a limit on the total amount of allowances to be allocated, and must require each participant to acquire a particular amount of credits.

170. Furthermore, paragraph 30 provides an option to create criminal offences, but - in response to the Committee's evidence - places restrictions on the mode of trial and maximum sentences which may be imposed.

171. These restrictions limit the power to make it appropriate only for making trading schemes. The power is not broad enough to introduce other kinds of measures to tackle emissions.

The breadth of the power

172. The trading scheme power is intended to be broad enough to enable the Secretary of State or the devolved administrations to make any trading scheme he considers appropriate, within the powers set out above.

173. Part 3 of, and Schedule 2 to, the Bill include a wide range of components which may be included in the regulations establishing a trading scheme. Of particular note are the provisions setting out how activities and participants may be identified - see clause 37 on the scope of "indirect" emissions, paragraphs 3 and 14 of Schedule 2 on the identification of "activities" and paragraphs 4 and 15 on the identification of "participants".

174. Part 3 of Schedule 2 sets out the powers in relation to the administration and enforcement of trading schemes. The Secretary of State is empowered to appoint an administrator (but not to create a new body to act as administrator).

Justification for the breadth of the powers within these limitations

175. A number of trading schemes currently operate or have operated in the UK:

the EU Emissions Trading Scheme[18]
the Renewables Obligation[19]
UK Emissions Trading Scheme[20]
Climate Change Agreements[21].

176. Section 2 of the Pollution Prevention and Control Act 1999 ("the 1999 Act") also enables the Secretary of State to establish trading schemes in relation to point source emissions. That power has been used, jointly with section 2(2) of the European Communities Act 1972, to transpose part of the Large Combustion Plants Directive[22] through a trading scheme in NO_x and SO₂ gases and dust[23].

177. However, the 1999 Act cannot be used to establish schemes capable of dealing with indirect emissions or to establish more sophisticated measures to encourage particular activities. For example, it could not be used to establish a scheme such as the proposed Carbon Reduction Commitment as this would target indirect emissions caused by the use of electricity. Neither could it be used, for example to establish a cap and offset scheme limiting the amounts of carbon-intensive fuel supplied by fuel suppliers.

178. Where other schemes have been established using primary legislation, it has proved difficult to find opportunities to amend the legislation where changes are required in the scheme rules and procedures. Such difficulties make it hard to coordinate schemes that will be useful to encourage a single carbon price.

179. The use of trading schemes is expected to increase as the pressure introduced by Part 1 of the Bill requires further reductions in emissions. Trading schemes are often technical in nature and it is expected that amendments will be required relatively regularly - and possibly more quickly - than is allowed by the timetabling for primary legislation.

180. Experience with the existing UK Emissions Trading Scheme (UK ETS) has shown that a successful trading scheme should be fully adaptable to the rapidly changing policy (including scientific), business and regulatory contexts and as a result of this, regular review and amendment (mainly of a relatively minor nature) will be both necessary for an effective scheme and would also be beneficial from a better regulatory point of view. The UK ETS rules have so far been amended on five occasions since 2002, and the regulations which implement the EU Emissions Trading Scheme have been amended or consolidated on six occasions since original transposition in 2003.

181. The power to make trading schemes in secondary legislation will allow a more responsive and joined-up approach to this area of regulation, and allow individual schemes to be better tailored to its individual circumstances. It will be easier to keep scheme rules up-to-date, effective and imposing no more regulatory burden than is necessary, and will reduce the amount of parliamentary time taken up with matters which may be of relatively low priority for Parliament.

182. But given the scope of the powers in Part 3 of the Bill it is, of course, appropriate that there should be procedural safeguards, and these have been included in Part 3.

Procedural safeguards

183. The department has noted the Committee's evidence that, although provisions such as this may be unsuited to primary legislation, there may be a need for additional scrutiny. We welcome the Committee's recognition of the difficulties in using primary legislation for these purposes. The department considers that the draft Bill already provided for a high level of transparency and scrutiny for regulations made under this power, but nevertheless we have sought to strengthen these provisions in order to address the Committee's concerns.

184. Clause 40(1)(b) provides that the Secretary of State must consult such persons likely to be affected by the scheme as he considers appropriate before making regulations under clause 36. Although full consultation is routinely carried out in accordance with Cabinet Office guidance, it is appropriate to make it a statutory requirement where powers such as this are to be used. This requirement will ensure that those affected by the scheme will have an opportunity to express their views before any regulations are made.

185. In addition, to provide further reassurance that these powers are being exercised appropriately, clause 40(1)(a) makes it a statutory requirement for the national authority to consult the Committee on Climate Change and take its advice into account before making such regulations. This means that the national authority would necessarily have to have regard to independent and expert advice when exercising the power. This requirement has been added since the draft Bill was published and provides a significant additional transparent check on the government's use of this power.

186. Furthermore, by convention the government routinely carries out a publicly available Impact Assessment before making regulations of this nature, thus ensuring that it is properly informed of the likely regulatory burden before taking such action. To ensure that the Secretary of State will have to fully take into account the impacts of the scheme, clause 40(2) states that the Committee's advice is explicitly required to include advice on any limit on the total amount of activities which is to be imposed under a scheme. This requirement will act as a further independent safeguard for participants.

187. Where appropriate, any regulations must be made using the affirmative resolution procedure - see clause 40(3). Following pre-legislative scrutiny of the draft Bill and consideration of the Committee's evidence to the Joint Committee we have expanded the list of situations in which the affirmative procedure is required, so that this level of Parliamentary oversight is necessary where:

a new trading scheme is created,
a scheme is extended to a new class of participants or activities,
its duration is extended,
an amendment would make the requirements of a trading scheme significantly more onerous,
a new offence is created,
new enforcement powers are conferred,
penalties are increased,
regulations amend or repeal primary legislation (as to which, see paragraphs 195 to 198 of this memorandum).

188. This clearly covers a broad range of regulations which could be made. The Department considers that it is clearly appropriate to make such regulations subject to the affirmative resolution procedure in the majority of circumstances, and for the relevant legislature[24] to be given an opportunity to debate the scheme in question.

189. There are, however, likely to be situations where the Department considers that it would be disproportionate to use the affirmative resolution procedure. For example, where a trading scheme has already been set up, it is likely that it will be necessary to make relatively small amendments to the administration arrangements and other rules of the scheme, such as the rules on what records must be kept.

190. In those situations the negative resolution procedure is appropriate. Where the regulations are made wholly or partly by the Secretary of State, Parliament will have an opportunity to scrutinise such amendments - the policy justification will be considered by the Merits of Statutory Instruments Committee - or to debate the statutory instrument.[25]

191. The department acknowledges the Committee's view that at times the question of whether regulations make the overall requirements of a scheme "significantly more onerous" will be a matter of impression and debate. However, we do consider that this distinction is useful.

192. One can think of examples of regulations which would make the overall requirements of a scheme more onerous, but the additional burden would not be significant. One example might be a requirement on a participant to send a document or record, which it was already required to maintain, to the administrator of the scheme once every year. The department considers that for such an amendment, the negative resolution procedure would be appropriate.

193. It is true that regulations made by negative resolution procedure could potentially be judicially reviewed on this basis and in such a case the relevant national authority would have to demonstrate to the court that the overall requirements of the scheme were not significantly more onerous. However in the converse situation there is no risk. The Committee will note that clause 63(3) means that it would be legally valid to opt for the affirmative resolution procedure even if on its face, the negative resolution procedure is appropriate.

194. The effect of this is that where there is any doubt as to the correct procedure, the Secretary of State or the relevant devolved administration making the regulations is likely to take a cautious approach and to opt for an affirmative procedure.

Clause 46 (Power to make consequential and transitional provisions)

Power conferred on: National authority

Power exercisable by: Statutory Instrument

Parliamentary procedure: Affirmative resolution

195. Clause 46 gives the national authorities[26] a "Henry VIII power" to amend, revoke or repeal any enactment he considers appropriate in consequence of making regulations under clause 36.

196. This power is being sought because there are a number of trading schemes in primary legislation or made using very narrow powers which might at some point be consolidated or replaced with schemes made using the new power. In those circumstances, it would be more convenient to make the appropriate revocation, repeal or amendment using secondary legislation because it would allow those consequential changes to be made at the most appropriate time and with suitable transitional arrangements.

197. This power will allow the burdens on business to be managed more effectively and will remove the need to make primary legislation to effect what would be minor or technical changes once the principle and contents of a new trading scheme have been debated and passed using the affirmative procedure.

198. The procedural limitations discussed at paragraphs 183 to 194 of this memorandum will apply to consequential amendments and repeals made under this clause; in particular, consequential provisions of this kind must be made using the affirmative resolution procedure, which is appropriate where primary legislation is amended or repealed using secondary legislation.

Part 4 — Other Provisions

Waste Reduction Schemes

Introduction

199. Clause 51 and Schedule 5 (which it introduces) allow for the making of waste reduction schemes, which are schemes to incentivise occupiers of domestic premises to produce less waste and recycle more of the waste they produce. Clause 51(1) provides for Schedule 5 to amend the Environmental Protection Act 1990. It does so by adding to that Act a new section 60A, which provides that a waste collection authority whose area is in England may make a waste reduction scheme in accordance with a new Schedule to that Act, Schedule 2AA. It is Schedule 2AA which details what a waste reduction scheme is and how it must be made.

200. Clause 51(2) provides that Schedule 5 may only be brought into force in accordance with clauses 52 and 54, which allow the Secretary of State to designate certain areas where waste collection authorities may make waste reduction schemes on a pilot basis. Following a review of the pilots and a report to Parliament, waste reduction schemes may subsequently be rolled out to all other areas of England, should the Secretary of State so decide.

Schedule 5, paragraph 1, inserting section 60A into the Environmental Protection Act 1990 (Power to make a waste reduction scheme)

Power conferred on: Waste collection authorities

Power exercisable by: Making a scheme

Parliamentary procedure: Not subject to Parliamentary procedure

201. Section 60A allows a waste collection authority in England to make a scheme in accordance with the waste reduction provisions, initially only if it is an authority in a designated pilot area.

202. The Department considers that it is appropriate to delegate this power to local authorities for two reasons. First, the decision on whether to make a scheme should be made by the local authority, as it will take effect only in that locality, and so democratic control should be at local level, not at Parliamentary level. Secondly, the nature and purpose of a scheme means that it must be tailored to its locality and population, and the local authority is the appropriate body to do so, in consultation with residents and other local stakeholders. Accordingly, the department has sought to provide local authorities with the flexibility they will need to establish the most effective scheme for their areas.

203. The exercise of an authority's power to make a scheme is limited by certain requirements and conditions, being:

the three conditions which it must meet before it makes a scheme (Schedule 2AA, paragraph 2);
the power of the Secretary of State to set a limit on charges (Schedule 2AA, paragraph 6);
the requirement that schemes must be revenue neutral (Schedule 2AA, paragraph 7);
procedural requirements which ensure transparency and good communication (Schedule 2AA, paragraphs 8 and 10);
a requirement to have an appeals mechanism (Schedule 2AA, paragraph 9); and
the requirement to have regard to any guidance issued by the Secretary of State (Schedule 2AA, paragraph 15).

Clause 52(1)(a) (Power to designate the area of a waste collection authority as a pilot area)

Power conferred on: Secretary of State

Power exercisable by: Statutory Instrument

Parliamentary procedure: Not subject to Parliamentary procedure

204. Clause 52(1)(a) provides a power for the Secretary of State to designate by order the area of a waste collection authority as a pilot area.

205. The Secretary of State may only make such a designation where an authority has submitted a proposal for a scheme which the Secretary of State has approved as being suitable for piloting one or more aspects of the waste reduction provisions. Following designation, the authority may make a scheme in accordance with the approved proposals.

206. The designation order must specify a time period for which the provisions are to have effect in the designated area.

207. The Department wishes to run pilots, as it recognises that waste reduction schemes could be controversial, and wishes to have firm evidence of their effectiveness before allowing them to proceed more generally.

208. The Secretary of State's power to designate pilot areas is limited by clause 52(2), which provides that he may not designate more than five areas as pilots.

209. The Department considers that it is appropriate to delegate this power to the Secretary of State as it would not be necessary for Parliament, having approved the provisions on what a scheme must and may do, to decide which areas should be made pilots; the assessment of proposed schemes can most appropriately be carried out by the Department as an administrative matter.

210. For the same reason, the Department does not consider that it is necessary to lay the order before Parliament. The consideration of the underlying proposals is not relevant to the choice of pilot area. In effect, the Secretary of State will simply be commencing the provisions in relation to particular areas; commencement orders are not generally subject to Parliamentary procedures, as they concern timing, not substantive policy.

211. Further, the decision on whether an authority wishes to seek designation is a local decision, not a decision for Parliament; accordingly, should the Secretary of State agree that the authority's proposals are suitable for piloting, the department considers that this should suffice.

Clause 54(2)(a) (Power to provide that the waste reduction provisions shall come into force generally)

Power conferred on: Secretary of State

Power exercisable by: Statutory Instrument

Parliamentary procedure: Not subject to Parliamentary procedure

212. Clause 54(2)(a) provides the Secretary of State with the power to provide by order that the waste reduction provisions in Schedule 2AA shall come into force generally across England on such date as the Secretary of State specifies in the order.

213. The Secretary of State may only make such an order following compliance with clause 53, which imposes a duty on the Secretary of State to lay before Parliament a report on the operation of the waste reduction provisions in each pilot area.

214. The report to Parliament must contain a description of each pilot scheme and how it compares with other schemes and a description of how the relevant enactments and guidance in that pilot area differed from those applying in other pilot areas and in areas not designated, and an assessment of whether a scheme has been a success. The Secretary of State's report must also review the waste reduction provisions in the light of their operation in the relevant pilot area or areas.

215. An order under clause 54(2)(a) would not be required to be laid before Parliament. Parliament will have already have scrutinised and approved the waste reduction provisions in Schedule 2AA during the passage of the Bill, so the Department does not consider that it will not be necessary for Parliament to approve the unchanged provisions again. Clause 54(2)(b), discussed below, allows for Parliament to scrutinise proposed changes to the provisions, if this is the case. The report to Parliament will provide an opportunity for Parliament to question the Secretary of State regarding the operation of the pilots.

Clause 54(2)(b) (Power to make amendments to the waste reduction provisions)

Power conferred on: Secretary of State

Power exercisable by: Statutory Instrument

Parliamentary procedure: Affirmative resolution

216. Clause 54(2)(b) gives the Secretary of State the power to make by order such amendments to the waste reduction provisions in Schedule 2AA as appear necessary and expedient in the light of how they operated in the pilot areas, and to provide that the provisions as so amended shall come into force generally on a date specified in the order.

217. Clause 54(3) provides that such amendments to the waste reduction provisions may include provision conferring power on the Secretary of State to make subordinate legislation.

218. The Department considers that it is necessary for the Secretary of State to have the power to amend the waste reduction provisions in order to be able to respond to the findings of the review of pilots required by clause 53. The purpose of having the pilot schemes is to test the success of different types of schemes in different areas, and so it is necessary to have the flexibility to amend the waste reduction provisions in the light of testing.

219. The Department recognises that a high level of scrutiny should be applied to proposed amendments to the waste reduction provisions. Accordingly, clause 54(5) provides that an order making amendments is subject to the affirmative resolution procedure.

220. Furthermore, the Secretary of State's report on the pilot or pilots will have been laid before Parliament before any such order is laid. This will ensure that Parliament is well informed about the way in which the pilot or pilots have operated before it scrutinises an order to make amendments to the provisions.

Clause 54(4) (Power to repeal the waste reduction provisions, if they are not brought into force generally)

Power conferred on: Secretary of State

Power exercisable by: Statutory Instrument

Parliamentary procedure: Affirmative resolution

221. Clause 54(4) provides that, should the Secretary of State decide not to make an order which rolls out the waste reduction provisions generally, he must make an order repealing the provisions.

222. The Department considers that it is necessary for the Secretary of State to be able to repeal the waste reduction provisions should he consider, in the light of his review of the pilots and his consequent report to Parliament, that the provisions should not be made available generally.

223. The Department recognises that Parliament, having approved the waste reduction provisions, must approve an order to repeal the waste reduction provisions. Accordingly, clause 54(5) provides that such an order is subject to the affirmative resolution procedure.

Schedule 2AA, (Power to amend by order paragraph 2(1) and (2) on paragraph 2(3) conditions for making a waste reduction scheme)

Power conferred on: Secretary of State

Power exercisable by: Statutory Instrument

Parliamentary procedure: Affirmative resolution

224. The Government wishes to impose controls on the discretion of authorities in devising a scheme, in order to ensure that their discretion is exercised properly. Accordingly, paragraph 2(1) sets out three conditions which a waste collection authority must have satisfied before it puts a scheme into effect, being :

(a) that a good recycling service is available to the occupiers of premises within the scheme;

(b) that the scheme takes account of the needs of groups who might be unduly disadvantaged by it; and

(c) that the authority has a strategy for preventing, minimising or otherwise dealing with the unauthorised deposit or disposal of waste.

225. Paragraph 2(2)(a) defines a "recycling service" as arrangements for the collection of recyclable domestic waste from premises separately from other waste, and paragraph 2(2)(b) defines a "good" recycling service as a service which meets the standards specified in guidance issued by the Secretary of State.

226. The Department considers that it is necessary to leave the definition of a "good" recycling service to guidance in order to allow flexibility for different localities, whose needs and facilities for recycling services will differ. The Department does not wish to be too prescriptive, as different authorities will have different ways of achieving "good" recycling, for example as to at what point materials should be separated for recycling.

227. Paragraph 2(3) allows the Secretary of State by order to amend paragraph 2(1) and (2). The Department considers that it is appropriate for the Secretary of State to have this power as it may be necessary to change these conditions in the light of experience. The Secretary of State may consider it necessary to add further conditions, or to make the present conditions more or less stringent. For example, evidence may show that it is possible to be more specific as to recycling standards or as to what a strategy for dealing with unauthorised deposit of waste should contain. Accordingly, the Department considers it appropriate to allow for this flexibility.

228. Nonetheless, the Department recognises the importance of Parliament scrutinising any proposed changes to the conditions, and therefore any changes to them are subject to the affirmative resolution procedure.

Schedule 2AA, paragraph 6(1) (Power to set a limit on the amount of any charge)

Power conferred on: Secretary of State

Power exercisable by: Statutory Instrument

Parliamentary procedure: Negative resolution

229. Paragraph 6(1) allows the Secretary of State by order to set a limit on the amount of the charge under paragraph 4 or 5 that may be imposed in respect of any premises in any financial year.

230. Paragraph 4 allows for an authority operating a scheme to require a charge in respect of the receptacles in which waste is deposited, while paragraph 5 allows for an authority to charge in respect of waste collected. The Department wishes to allow authorities to exercise their own judgement in setting the levels of charges to the level they consider will alter behaviour, but considers that the Secretary of State should have the power to impose limits on charges, if to do so is considered necessary at some future date.

231. The Department is unable at present to specify a maximum charge, as we require evidence from the pilots as the effect of particular levels of charge. However, the Department considers this to be in the nature of a reserve power, as, due to the revenue-neutrality requirement, they will be no advantage to authorities in setting higher charges than are necessary to change behaviour.

232. The Department considers that it is appropriate for such an order to be subject to the negative resolution procedure, as this is the usual procedure for this type of reserve power. The Department considers that it would be disproportionate to take up Parliamentary time with the affirmative resolution procedure. The Merits of Statutory Instruments Committee will be able to scrutinise the order and bring it to the attention of the House if they consider it necessary.

Schedule 2AA, paragraph 7(2) (Power to amend the requirement of revenue neutrality)

Power conferred on: Secretary of State

Power exercisable by: Statutory Instrument

Parliamentary procedure: Affirmative resolution

233. Paragraph 7(1) provides that from year to year, and taking one year with another, the aggregate amount of charges under paragraph 4 or 5 must not exceed the aggregate amount of the rebates or other payments under the scheme. This means that where the payment of charges is required, schemes must be revenue neutral.

234. Paragraph 7(2) gives the Secretary of State the power by order to amend paragraph 7(1). Paragraph 7(3) stipulates that any such order amending paragraph 7(1) may also make consequential amendments to paragraph 4(2) or paragraph 5(2), which provide that payments in respect of receptacles and amounts of residual waste need not be related to the authority's actual costs of providing receptacles or collecting the waste.

235. The Department considers that it is appropriate to give the Secretary of State the power to make such an order as, in the light of experience, it may be considered that the requirement of revenue neutrality should be altered in order to improve the effectiveness of future waste reduction schemes. For example, the evidence may show that less restrictive rules would be more effective in changing behaviour, or would be acceptable to occupiers, or would be more efficient administratively for authorities and occupiers.

236. The Department recognises that the revenue neutrality requirement is an important aspect of the provisions which the Government wishes to test through the pilot schemes. Therefore, the Department considers that it is appropriate that Parliament, should carry out scrutiny of any proposal to alter this requirement, so that any such an order is subject to the affirmative resolution procedure.

Schedule 2AA, paragraph 12(1) (Power to make provision as to administration of schemes)

Power conferred on: Secretary of State

Power exercisable by: Statutory Instrument

Parliamentary procedure: Negative resolution

237. Paragraph 12 gives the Secretary of State the power to make regulations as to the administration of waste reduction schemes. Paragraph 12(1) enables such regulations to make provision about:

how the amount of any rebate or other payment is to be determined;
how any such rebate or payment is to be given;
how any charge is to be determined; and
how any such charge is to be collected or enforced.

238. Paragraph 12(2) allows the regulations to provide that the administration of a waste reduction scheme may be integrated with the administration of council tax (and by sub-paragraph (2)(b) the regulations may provide for consequential modification of council tax legislation). Paragraph 12(3) provides further detail on this: in particular, the regulations may provide:

(a) for including material relating to the scheme in the council tax demand notice,

(b) for applying the procedure for appeals about liability to council tax to questions arising under the scheme, and

239. These provisions are to enable necessary changes to be made to council tax legislation. For example, an authority may be able to make savings by administering charges using the same machinery as council tax.

240. The Department considers that it is appropriate to give the Secretary of State the power to make such provision as may be necessary in order to permit schemes to operate effectively, whether as pilots or more widely if the provisions are rolled out generally, and to make improvements to the provisions in the light of experience.

241. The Department recognises that the detail as to charges, rebates or other payment, and how they may relate to council tax, is important to how schemes will operate and that Parliament should be consulted. Accordingly, the power to make such regulations is subject to the negative resolution procedure. The Department considers that it would be disproportionate to take up Parliamentary time with the affirmative resolution procedure. The Merits of Statutory Instruments Committee will be able to scrutinise the order and bring it to the attention of the House if they consider it necessary.

Schedule 2AA, paragraph 16(2) (Power to amend the definition of "domestic premises"

Power conferred on: Secretary of State

Power exercisable by: Statutory Instrument

Parliamentary procedure: Affirmative resolution

242. Paragraph 16(1) defines, amongst other terms, the term "domestic premises" used in Schedule 2AA. It is defined as a building or self-contained part of a building which is used wholly for the purposes of living accommodation, a caravan that usually and for the time being is situated on a caravan site, or a moored vessel used wholly for the purposes of living accommodation.

243. Paragraph 16(2) allows the Secretary of State by order to amend the definition of "domestic premises".

244. The Department considers it is appropriate to give the Secretary of State this power in order to allow flexibility to allow the definition to be reduced or extended in the future. The power to extend the definition will, however, be limited by the need to exercise it rationally; for example, the definition could not be extended to include commercial premises.

245. The Department considers that it is proper that Parliament scrutinise any change to the scope of this definition; accordingly, any order is subject to the affirmative resolution procedure.

Renewable Transport Fuel Obligations

246. Clause 55 and Schedule 6 amend Chapter 5 of Part 2 of the Energy Act 2004 which provides for the Secretary of State to set up a Renewable Transport Fuel Obligations scheme ("RTFO" scheme) by order (an "RTF order"). The Bill amends the way in which the RTFO scheme may operate and who may administer the scheme.

247. The Bill also amends Chapter 5 of Part 2 of the Energy Act 2004 which provides for the Secretary of State to set up by order a renewable transport fuel obligations scheme.

248. The amendments will:

(a) introduce a new power to replace the Administrator with a new Administrator, who may be the Secretary of State, and to transfer functions accordingly;

(b) amend the provisions which determine how sums received by the Administrator are to be dealt with;

(d) impose a duty on the Administrator to promote the supply of sustainable fuel which has a beneficial environmental effect; and

(e) set up an information gateway to allow disclosure of information by Her Majesty's Revenue and Customs to the Administrator.

Devolution arrangements

249. The powers introduced or modified by Clause 55 and Schedule 6 apply to the whole of the UK. Any RTF order or order made under the new powers introduced by Schedule 6 to the Bill will apply on a UK wide basis, and any necessary consultations with the Devolved Administrations will be undertaken when the powers are exercised. The devolution arrangements have not materially influenced the Department's decision regarding the provisions for delegated legislation.

Description and analysis of delegated powers

250. A new power to make delegated legislation is contained in paragraph 2 of Schedule 6 to the Bill. New powers for the Secretary of State to give directions to the Administrator are contained in paragraphs 2 and 3. Full details are set out below. This section of the memorandum describes the powers taken, explains their purpose, explains why the matter is to be left to delegated legislation rather than included in the Bill and specifies the Parliamentary scrutiny procedure provided for each power.

Schedule 6, paragraph 2 (New order-making power to replace Administrator

Power conferred on: Secretary of State

Power exercisable by: Statutory Instrument

Parliamentary procedure: Negative resolution

251. Paragraph 2 inserts new section 125C into the Energy Act 2004. This gives the Secretary of State a new power to appoint a person as the Administrator of the RTFO scheme in place of a person previously appointed and to transfer functions from the old Administrator to the new Administrator.

252. The new Administrator must be one of the following: the Secretary of State, a pre-existing statutory body or person (that is a body or other person established or appointed by or under any enactment to carry out other functions) or a body established by an order made under new section 125C.

253. An order made under new section 125C may establish a new body corporate to be appointed as the new Administrator of the RTFO scheme and, if it does so, may make any provision that may be made in an RTF order. This means that the order may make ancillary provision for appointing members of the body, for staffing the body, for expenditure, and to regulate the procedure of the body, and may make any other appropriate provision for purposes connected with the establishment or maintenance of the body. The order may also confer discretions on the Secretary of State, the body itself or its members or staff.

254. The order may also provide for the transfer of staff, property, rights and liabilities to the new Administrator under the order and in particular the order may provide for:

the transfer of any property, rights and liabilities to have effect subject to specified exceptions or reservations (section 125C(4)(a));
the creation of rights and interests (section 125C(4)(b));
the order to have effect notwithstanding anything which would otherwise prevent the transfer of the property, rights or liabilities (section 125C(4)(c)).

255. In addition the order may:

provide for anything done by or in relation to the old Administrator to have effect as if done by or in relation to the new Administrator (section 124C(5)(a));
permit anything being done by or in relation to the old Administrator at the time of transfer to be continued by or in relation to the new Administrator (section 124C(5)(b));
provide for references to the old Administrator in instruments or documents to be treated as references to the new Administrator (section 124C(5)(c));
dissolve the old Administrator if established by order under Chapter 5 of the Energy Act (section 124C(5)(d));
modify any enactment relating to the old Administrator or the new Administrator as the Secretary of State considers appropriate to facilitate the transfer (section 124C(5)(e)).

256. The last of these provisions is a power to amend primary legislation by order (a so-called Henry VIII power). The power is limited to such amendments as may be appropriate to facilitate the transfer of functions from the old Administrator to the new Administrator.

257. In addition it is provided that an order which provides for the transfer of staff must provide for the Transfer of Undertakings (Protection of Employment) Regulations 2006 to apply.

Justification for using delegated legislation

258. Use of delegated legislation for this purpose is in line with the approach adopted by the Energy Act which the Bill amends. The Energy Act (section 125) provides for the appointment of the Administrator by means of an RTF order. It is necessary for the appointment of the Administrator and the replacement of the Administrator to be left to secondary legislation because this gives the Government the greatest flexibility in identifying and appointing an Administrator or new Administrator with the right capabilities to administer the scheme. It also allows an appointment or replacement to be made more quickly than if primary legislation was needed.

259. The transfer of functions to the new Administrator is also appropriate for delegated legislation. The provisions to be made on transfer of the functions of the Administrator will depend upon the particular circumstances prevailing and cannot be ascertained in advance. Furthermore the detailed nature of the provisions which will be necessary upon a transfer make them suitable for secondary legislation. The new power will enable the Administrator to be changed and his functions to be transferred to give effect to the change without making or amending an RTF order.

Parliamentary procedure

260. The new order-making power is subject to the negative resolution procedure unless the order amends an Act of Parliament or an Act of the Scottish Parliament in order to facilitate the transfer of the Administrator's functions or it establishes a body corporate to act as the new Administrator. This will allow a new Administrator to be appointed as quickly as possible. There is no requirement for consultation because the nature of the power (to appoint a new Administrator and to transfer functions to him) is such that its exercise is unlikely to be controversial.

261. If an order made under the new power amends an Act of Parliament or an Act of the Scottish Parliament in order to facilitate the transfer of the Administrator's functions, it will be subject to the affirmative resolution procedure. This will ensure that Parliament has the opportunity to scrutinise and debate any proposed amendments to primary legislation which result from the transfer of functions to the new Administrator. In this case the new power is subject to the same Parliamentary procedure as the RTF order-making power under section 125 of the Energy Act.

262. If the order made under the new power establishes a body corporate as the new Administrator, it will be subject to the affirmative resolution procedure. This will ensure that Parliament has the opportunity to scrutinise and debate any proposal to establish a new non-departmental public body (NDPB). The new order-making power is subject to the same Parliamentary procedure as the power to establish by an RTF order a new NDPB to act as the first Administrator under section 125 of the Energy Act.

Part 6 — General Supplementary Provisions

Clause 64(2) (Power to add to the list of greenhouse gases)

Power conferred on: Secretary of State

Power exercisable by: Statutory Instrument

Parliamentary procedure: Negative resolution

263. Clause 64(1) defines the term "greenhouse gas" as six gases or groups of gases.

264. Clause 64(2) creates a power for the Secretary of State to amend the definition so as to add to the list of gases which appear in clause 64(1).

265. The list of gases currently in clause 64(1) are the gases which are recognised under the United Nations Framework Convention on Climate Change ("the UNFCCC") as contributing towards climate change. These are the gases which countries have committed to limit under the Kyoto Protocol.

266. However, over time it may be that scientific knowledge increases and it is possible that we could discover that other gases also contribute towards climate change. In those circumstances, it would be appropriate for the Secretary of State to be able to add these other gases to the list. This would have the effect that the Secretary of State could add the gas to the system of targets and budgeting under Part 1 of the Bill, and that national authorities could introduce trading schemes to reduce the emissions, or increase the removals, of the new gases.

267. The Secretary of State's power is limited in that a gas can only be added to the list if it appears to him that an international or European agreement or arrangement recognises that the gas in question contributes towards climate change. This ensures that any decision of the Secretary of State must be in line with international consensus.

268. Clause 64(4) provides that the power is to be subject to the negative resolution procedure. Given the technical nature of any amendment made using this limited power, it is not considered necessary to take up Parliament's time debating any order made by the Secretary of State. The Secretary of State would have to justify any decision to make an amendment in an explanatory memorandum laid before the Merits of Statutory Instruments Committee.

Clause 66(1) (Power to specify other agreements and arrangements constituting "international carbon reporting practice")

Power conferred on: Secretary of State

Power exercisable by: Statutory Instrument

Parliamentary procedure: Negative resolution

269. Clause 66(1) defines "international carbon reporting practice" as meaning accepted practice in relation to reporting for the purposes of the protocols to the United Nations Framework Convention on Climate Change ("the UNFCCC"). Clause 66(1) goes on to give the Secretary of State the power to specify alternative international agreements or arrangements which will constitute international carbon reporting practice.

270. This inclusion of this power foresees the possibility that the UNFCCC could be replaced with a different convention in the future. If so, the definition of "international carbon reporting practice" would be out of date, and primary legislation would be required to replace it.

271. Furthermore, it may be that monitoring protocols may become adopted under other international fora - for example it is conceivable that monitoring arrangements for aviation may be adopted under the auspices of the International Civil Aviation Organisation rather than the UNFCCC. The inclusion of the amendment power in clause 64 is intended to make any such amendment, which would be of a technical character, easier and less time-consuming.

272. Clause 66(2) provides that the power is to be subject to the negative resolution procedure. Given the technical nature of any amendment made using this limited power, it is not considered necessary to take up Parliament's time debating any order made by the Secretary of State. The Secretary of State would have to justify any decision to make an amendment in an explanatory memorandum laid before the Merits of Statutory Instruments Committee.

Powers to give Directions

Clause 34(1) (Power to give directions to the Committee)

Power conferred on: Secretary of State / national authorities

Power exercisable by: Not specified

Parliamentary procedure: None

273. Clause 34(1) confers a power on the Secretary of State, or in some case the national authorities[27], to give general or specific directions to the Committee on Climate Change as to the exercise of its functions. Clause 34(6) imposes a duty on the Committee to comply with any directions so given.

274. Clause 34(4) prevents anyone from giving the Committee directions as to the contents of any advice or report. In other words the Secretary of State or national authorities could require the Committee to report by a particular date, or to take particular factors into account, but may not direct it as to what it says when it does report.

275. The power to give directions to a non-departmental public body is an important but standard element of the body's constitution where it is independent but unelected. The power to give directions ensures that there is an adequate degree of control over a body which is accountable to the Secretary of State and the devolved administrations in relation to its use of public money. In practice, powers to issue directions to a body such as this are rarely used.

276. Clause 34(4) introduces a very important safeguard for the Committee's independence in the exercise of it primary functions of giving advice and making progress reports; clause 34(4) secures this independence by preventing any attempt by the Secretary of State to use the direction-making power to require the Committee to give particular advice or make a favourable progress report where the Committee would otherwise not wish to do so.

Clause 44(1) (Power to give directions to the administrator of a trading scheme)

Power conferred on: Relevant national authority

Power exercisable by: Not specified

Parliamentary procedure: None

277. Clause 44(1) confers on the relevant national authority a power to give directions to the administrator of a trading scheme. The administrator would be a person or body appointed to that role under the regulations establishing the scheme. Clause 44(3) requires the administrator to comply with any directions it is given.

278. A person or body's appointment as an administrator is likely to be accompanied by a grant in relation to its work in administering the scheme. It is important that the relevant national authority (that is, the Secretary of State or devolved administration who made the trading scheme) is able to maintain the proper degree of accountability in the administration of public sector delivery, and the direction-making power is an important safeguard allowing him to do that.

279. There may also be occasions where the national authority takes a different view to the administrator of, say, the law, or situations where the national authority's policy may differ from that of the administrator. In such situations it is appropriate that the national authority should have a power of direction - it is not of such paramount importance that administrators under trading schemes should be totally independent, as compared with the functions of the Committee on Climate Change. This is a common power - for example the Secretary of State and devolved administrations have power to direct the Environment Agency and Scottish Environment Protection Agency in their role as regulator and registry administrator under the EU ETS.[28]

280. The power is restricted in that it only permits the relevant national authority to issue directions in relation to the administrator's functions in its capacity as administrator of a trading scheme made under Part 3 of the Bill. The power would not allow the national authority to issue directions in relation to any functions which the body has under other legislation.

Schedule 6, paragraphs 2 and 3: Powers of Secretary of State to give directions to an RTFO administrator

Power conferred on: Secretary of State

Power exercisable by: Not specified

Parliamentary procedure: None

281. Paragraph 2 inserts new sections 125B(2) to (4) into the Energy Act 2004. It gives the Secretary of State the power to issue written directions to the Administrator as to how the Administrator exercises any powers conferred upon him under new section 125B(1)(a) or (b) (which re-enacts section 125(3)(a) and (b)) of the Energy Act to require information from transport fuel suppliers. It will allow the Secretary of State to direct the Administrator to collect information (for example relating to the volumes of fuels supplied or the environmental effects of renewable fuels supplied) within a specified period, using a format or methodology specified by the Secretary of State. The power includes power to revoke or vary any directions given.

282. The power to give directions to a non-departmental public body is an important but standard element of the body's constitution where it is independent but unelected. Paragraph 2 will give the Secretary of State the power to give directions to ensure that information is collected by the Administrator which is sufficient to enable the Secretary of State to monitor the effect of the RTFO scheme upon the environment, without overly burdening transport fuel suppliers. It will also enable the Secretary of State to set a standard format, methodology and timetable for the information requirement so as to enable the collection of meaningful statistics and to enable a fair comparison to be made between different fuels and different suppliers.

283. The power to give directions contained in paragraph 2 will be a reserve power, to be used only in the very unlikely event that it is needed to ensure that the Administrator imposes requirements which provide the Secretary of State with the necessary information and do not impose an excessive burden on industry.

284. The power is not subject to any Parliamentary procedure. Under the Energy Act an RTF order may empower the Administrator to set information requirements without Parliamentary scrutiny. One reason for this is that the requirements are likely to be complicated and technical. They may also need to be changed very quickly to take account of the emergence of new technologies or changes in supply chains for renewable fuels. The same considerations apply to the new power to direct; any directions given are likely to be complicated and technical and directions may need to be given or changed more quickly than would be possible if they had to be set out in primary or secondary legislation.

285. Paragraph 3 inserts new sections 126(6) - (8) into the Energy Act 2004. It gives the Secretary of State the power to issue written directions to the Administrator as to how the Administrator exercises any functions in connection with the counting or determination of amounts of transport fuel. New section 125A(1)(a) (which re-enacts section 125(2)(a) of the Energy Act) provides that an RTF order may confer powers and duties on the Administrator. Paragraph 3 will allow the Secretary of State to direct the Administrator to count amounts of transport fuel in a particular way (for example using a methodology specified by the Secretary of State). This will ensure that if an RTF order links the issue of certificates to carbon saving or sustainability, the Secretary of State can ensure that the policy is delivered by specifying the methodology to be used. The power includes power to revoke or vary any directions given.

286. The power to give directions to a non-departmental public body is an important but standard element of the body's constitution where it is independent but unelected. The power contained in paragraph 3 will be a reserve power, and in practice powers to give directions are rarely used.

287. The power is not subject to any Parliamentary procedure. Under the Energy Act an RTF order may give the Administrator powers or duties which can be exercised without Parliamentary scrutiny. One reason for this is that the exercise of a power to specify methodologies is likely to result in complicated and technical requirements. The requirements may also need to be changed very quickly to take account of the emergence of new technologies or changes in supply chains for renewable fuels. The same considerations apply to the new power to direct; any directions given are likely to be complicated and technical and directions may need to be given or changed more quickly than would be possible if they had to be set out in primary or secondary legislation.

November 2007

15 http://www.publications.parliament.uk/pa/jt200607/jtselect/jtclimate/170/170we04.htm Back

16 See for example the Greenhouse Gas Emissions Trading Scheme Regulations 2005 (S.I. 2005/925) which establishes the EU Emissions Trading Scheme in the UK; The UK Greenhouse Gas Emissions Trading Scheme 2002 which established the UK Emissions Trading Scheme. Back

17 Directive 2006/32/EC. Back

18 Established by regulations made under section 2(2) European Communities Act 1972 Back

19 Established under sections 32 to 32C Electricity Act 1989. Back

20 Established on a voluntary basis based on agreements between government and participants. Back

21 Established under Schedule 6 of the Finance Act 2000. Back

22 Directive 2001/80/EC. Back

23 The Large Combustion Plants (National Emission Reduction Plan) Regulations 2007 (S.I. 2007/2325). Back

24 Where the regulations are to be made by the Secretary of State, the instrument would be debated in both Houses of Parliament. Where they are to be made by one of the devolved administrations, it would be debated in the relevant devolved legislature. Where an instrument is made jointly by the Secretary of State and a devolved administration, the instrument is to be debated in both Houses of Parliament and in the relevant devolved legislature - see Schedule 3. Back

25 Where the regulations are made by a devolved administration, the regulations will instead be laid before the relevant devolved legislature. Back