Examination of Witnesses (Question Numbers
260-279)
Dr Terry Barker and MS
ANNELA ANGER
8 OCTOBER 2008
Q260 Baroness Sharp of Guildford:
Can I take you back to the question which I posed to you which
was the use of the CDM and the JI mechanisms. You implied in your
paper that these were given too freely, that we were using them
too freely at the moment.
Dr Barker: Yes.
Q261 Baroness Sharp of Guildford:
This in a sense is a slightly different issue. We take on board
the point that you have made that it is a global problem, but
to some extent what you are implying is that we have really got
to get our act together here in Europe.
Dr Barker: Yes.
Q261 Baroness Sharp of Guildford: And the danger
of cheating by importing CDMs from the Third World is considerable.
Dr Barker: Yes. If we just take the question
from the point of view of Europe and set aside the potential benefits
of large amounts of money going to China et cetera, look at the
scheme and give an answer as an economist, not a political answer,
then I would want to look at the benefits of domestic action because
that is what we are talking about. Is it domestic action or is
it action in China? There are very large benefits of domestic
action; I have mentioned some of them, in the literature it is
called co-benefits of greenhouse gas mitigation, and that is the
fact that air pollution is reduced and people's health, animal
health and plant health is improved because there is less dust,
there is less low-level ozone et cetera et cetera. There is a
lot of work on this that has been done and there is a lot of literature,
so that is one important benefit of European action.
Q263 Baroness Sharp of Guildford:
But you can argue that the benefits are greater in China than
in Europe.
Dr Barker: They may be, but we are restricting
ourselves to Europe in this respect so actually Europe brings
that co-benefit which you would not get if it goes on in China.
Of course, many more people might benefit in China but I am restricting
myself to Europe at the moment. So there is that benefit, but
the next one is that the higher the action at home the greater
the revenues from the auctions and therefore the more potential
there is to develop the European economy as a low carbon economy,
as the exporter of many low carbon technologies and products to
the rest of the world. That is a very good strategy, especially
in times of global depression and recession. I could go on in
that vein, there are many other benefits from domestic action
which actually mean that people are seriously thinking about it.
Of course, turning to the political benefits, they are from political
leadership taking action.
Q264 Baroness Sharp of Guildford:
We understand that. The verification of CDMs and so forth.
Dr Barker: That is a big problem, obviously,
a huge problem; I am not sure we want to get on with that but
it is a big problem.
Ms Anger: We need to have harmonised
rules in the EU for verification and to rotate verifiers, because
now every country can do what they like to do and they have different
ways of doing things. In Germany verifiers are private persons;
even someone like me or Terry can be a verifier but not a company;
in some countries they are companies.
Q265 Chairman: Does the technology
exist to really track down on the verification side—say
a European Member State that may be arguing that it ought to have
a more generous target than it is going to be landed with at the
moment and the government of that Member State might be tempted
to be a bit slack in policing what is going on; can they be caught?
Ms Anger: There is a problem with state
aid. By using the new proposed way of dealing with emissions trading
under Phase Three there will be harmonised allocation rules. So
the Member States cannot support their own companies because the
allocations will be done at the European Commission level. There
is no way of helping your own companies any more as this was the
case with Phase One. There is literature out there showing that.
Q266 Lord Cameron of Dillington:
You can actually measure the amount of carbon dioxide being emitted,
can you? I mean, if I am an auditor in these matters I can go
along to a factory and say this is what you are emitting.
Ms Anger: No, you cannot really measure
the actual tonnes of CO2. It is down to calculating how much fuel
you burn and then according to the carbon content of the fuel
the CO2 emissions calculated.
Q267 Chairman: If the government
of Ruritania, which is a Member State of the European Union, thinks
"My God, if we follow what the Commission says our industry
is going to be absolutely decimated so we will carry on emitting
at the level that we are emitting at the moment and just tell
lies"; can we stop them? Is there a way of saying you are
cheating?
Ms Anger: They cannot cheat any more
because the European Commission will decide how many allowances
will be given to Member States.
Chairman: The only thing the European
Commission can do is to say "This is your target". It
has been known in other sorts of regimes and programmes of the
EU for Member States not always to tell the truth.
Baroness Sharp of Guildford: You must
realise we are the Committee that scrutinises what goes on in
the agricultural area.
Lord Cameron of Dillington: And fisheries.
Lord Plumb: Black coal.
Q268 Lord Cameron of Dillington:
If you cannot measure it, which is what you were saying earlier,
how can you audit it? That is the problem, is it not?
Ms Anger: To verify it basically they
look at the way the calculations are done.
Chairman: We will see the Commission
about that one.
Q269 Lord Cameron of Dillington:
Can I go on about the external credits? I was just wondering what
your thoughts were about the Phase Three proposals to have very
restricted external credits if there is no international agreement
and to increase it by 50% if there is. Again, what do you think
of the quantitative and qualitative restrictions being placed
in this way?
Ms Anger: If there is no international
agreement then basically the companies can bank only their credits
to Phase Three,
Q270 Lord Cameron of Dillington:
From Phase Two.
Ms Anger: From Phase Two, yes.
Q271 Lord Cameron of Dillington:
That is unfair to new industries, is it not?
Ms Anger: It is unfair. I am working
on aviation and it is unfair to the aviation sector as well because
they will enter in the last year of Phase Two and they are not
able to bank their credits for the future, or as much as the other
industries will be able to do.
Q272 Lord Cameron of Dillington:
Do you know the extent of the problem; how many past credits are
there going to be, is it a huge amount?
Ms Anger: Again, it depends on the carbon
price, and it depends on the state of the economy.
Q273 Lord Cameron of Dillington:
So now may not be a problem.
Ms Anger: No.
Chairman: We can look at that again this
afternoon.
Q274 Lord Cameron of Dillington:
What about domestic offsetting in the non-ETS sectors, do you
think this should be avoided and do you want to expand on that?
Dr Barker: That is a really bad idea
and I think it is motivated by weakening the whole scheme. The
problem with having extra and using it outside the main scheme
is that it just weakens the scheme. I could explain it in a paper
but I am afraid I have got a bit tired now after all this.
Q275 Lord Cameron of Dillington:
If it is reducing the overall carbon emissions is there anything
wrong with it?
Dr Barker: It weakens the scheme. It
is because there is an overall cap on the whole lot and the cap
is weakened by this extension. If the cap was not weakened then
it would be different, but it is.
Q276 Lord Cameron of Dillington:
It stops them addressing their own problems is what you are really
saying.
Dr Barker: Yes.
Q277Lord Wallace of Tankerness: Is that one
of those issues about the scope of the scheme and the sectors
covered by it and are there any obvious emissions that you think
ought to be addressed as we move to Phase Three?
Dr Barker: That is in fact quite a difficult
question because, as you will appreciate, the emissions trading
scheme only covers around 50% of emissions so the other half is
basically small-scale transportation and dwellings. What we want
to do is decarbonise the economy and it is a question of which
sectors go first and all this sort of stuff. It is clear that
with the emissions trading scheme covering particularly electricity
it is right that that should go first, but it now seems clear
to me that transport systems should go pretty much there—perhaps
it should go second. The reason for that is that the lifetime
of cars and many vehicles is very short—not aeroplanes and
trains but certainly cars—which means the whole stock can
be turned around in ten or fifteen years. If they are on the point
of shifting the stock already without a carbon price, which they
are, then the carbon price which would come out of the emissions
trading scheme for example, would do the job, and then the market
itself would work in decarbonising the car stock. That is how
I would address the question you are talking about. Looking at
the question from the point of the home economy—there is
the global economy but then coming down to the European or the
UK economy—we need to see which are the most appropriate
sectors and what should be the targets for those sectors rather
than doing it from the point of view of the emissions trading
scheme and not seeing what is outside the scheme and what would
be more efficient to be done outside the scheme.
Q278 Lord Wallace of Tankerness:
In your paper you also emphasise the importance of linking up
with other non-EU schemes.
Dr Barker: Yes.
Q279 Lord Wallace of Tankerness:
That could actually increase the efficiency overall of the scheme
and our vision of a global scheme, but you also indicate for obvious
reasons that if you are going to do that there has got to be quite
a strong fit in terms of comparability. Given what you said at
the outset of your evidence about the very high level you think
we should be aiming for, do you anticipate that we would be able
to get common ground on a wider basis if we went to some of the
higher targets that you were referring to?
Dr Barker: Yes, I think so. We do regular
projections to the year 2100, so we are looking at the long term
development of such schemes and we would compare different emissions
trading schemes with currency unions and how they long they take
to develop, and of course we have seen globally currency unions
develop dramatically over the last 100 years and—let me
rephrase that and say over the last 50 years because I do not
want to go back to the gold standard and all that stuff—I
think we would see similar developments in joining the trading
schemes together after the cost of hedging. If a scheme in the
United States is, say, only $3 per tonne of CO2 and the scheme
in Europe is €13 per tonne of CO2, there is obviously a disparity
and something is going on. It may be much cheaper to reduce emissions
in the United States or it may be they have got far weaker targets,
we do not actually know without a study, but if there was some
kind of coherence between them then there would be great benefit
in reducing emissions in the United States first and then doing
the ones in Europe second except for the air quality issues and
various other issues to do with the advantages of European domestic
action. In a way my answers to each of these questions come back
to the same kind of point and same kind of world view.
| 
