Clause 5
Climate Change Bill [Lords]
2:15 pm
Phil Woolas (Minister of State (Environment), Department for Environment, Food and Rural Affairs; Oldham East and Saddleworth, Labour)
I just thought of another reason why I was hoping for inspiration.
It might help if I point out to the Committee that about half of UK emissions are already covered by the European trading scheme. The big emitters are already there, so to respond the important question asked by the hon. Member for Vale of York about surety for business investment, we have some experience to build on. In a sense, it is a chicken and egg situation. A large part of the benefit of a carbon market is that it creates investment opportunities. The private sector is going to have to provide 85 to 90 per cent. of world finance for the low-carbon world economy, and the carbon markets are there to incentivise, as she accepts. Although one is never as sure as one would like to be, the great advantage to business of the Bill and the approach of five-year budgets is that they provide certainty. That we can talk about the position 15 years ahead and rolling on provides that certainty. That point has been supported by businesses in the consultation and during consideration of the draft Bill.
I will lay out briefly the reasons for the timetable, which will answer the question the hon. Member for Northavon asked. The first reason we chose that timetable is to dovetail with international time scales. The first budget period, 2008-12, runs concurrently with the first commitment period under Kyoto and the second phase of the European Union emissions trading scheme, so it makes sense from that point of view. I will not go into the reasons why five years is preferred to one—I think there will be some debate on that later.
There is another reason that is not in my speaking notes, but that is important. It is not a retrospective decision: we will take the measurements that were already reported under Kyoto and build those into the budget, but what starting in 2008 does is provide an absolute guarantee to business, to the markets and to everyone else that there has not been a political fix in the period. If we were to preannounce what the first budgetary period was going to be, everybody would shift their organisation in such a way as to get the best advantage. Theoretically—it could not happen because of the ETS—a company could switch off the power for a couple of weeks in winter to show a much lower baseline. That is a theoretical example, as I said, and I have nobody in mind, but that could be a problem and we want to avoid it. That is the answer to the hon. Gentleman’s question.
One of the strongest parts in the Bill—an aspect on which there is a very strong consensus—is found in this clause and the related clauses on the creation of carbon budgets. With our European partners, we are world leaders in this field, and I have been delighted to note the development of carbon budgets, or the research to prepare for them, elsewhere. I am pleased there is consensus. I hope I have answered hon. Members’ questions adequately.