Schedule 2
Climate Change Bill [Lords]
1:30 pm
Martin Horwood (Shadow Minister (Environment), Environment, Food & Rural Affairs; Cheltenham, Liberal Democrat)
The amendments follow on from our previous debate, with a similar theme of interoperability. They seek to replace the rather vague wording in paragraph 3(5)(b) with more specific wording specifying that not only should regulations be introduced to set out the method by which the amount of reductions are to be measured and calculated, but they should bear
“as close a relationship as possible to the actual emissions of the activities to the which the trading scheme applies.”
One would hope that that would be an unnecessary measure, but practice tells us otherwise.
A wonderful variety of carbon and energy reduction schemes is developing. We have the ETS, climate change agreements and the carbon reduction commitment, and in another context there are renewables obligation certificates. However, the problem with that complexity is that perverse results start to emerge. The interplay between the last two schemes that I mentioned—renewables obligation certificates and carbon reduction commitment —is causing a few problems in the commercial, private sector.
The carbon reduction commitment is rather a misnomer, as it incentivises not the reduction of carbon, but the reduction of energy use. It is valuable as an energy efficiency measure, but it has one serious flaw as it assumes that all energy coming into an enterprise is at the grid average, and that there is an equal need to reduce energy across all of a company’s activities, no matter what the power source.
In some cases it is difficult to pin down the source of energy, but in other cases it is rather easy. I cite a domestic example. I have a solar-powered radio in my flat in London. [Hon. Members: “Hear, hear.”]. Very sound, I know. I never plug it in and it is powered entirely by the solar panel on top of the radio. I leave it on all day—discreetly, so as not to disturb my neighbours—and it is a useful security measure, especially if our addresses get published. It quietly plays all day while the sun is shining. There is no reason for me to practice energy efficiency, turn it off and reduce the amount of energy that I use, as it is powered from an entirely renewable source that does not compete with any other energy source and is completely carbon free.
There is an exact parallel in commercial enterprises where companies have on-site renewables, which, in some companies, are becoming highly significant. BT is, I think, the biggest and most impressive example so far, although an hon. Member quoted Lily Allen’s recording studio as another, and BT gets 30 per cent. of its energy from its own on-site renewable energy generation. The carbon reduction commitment treats that in the same way as energy coming from Drax or Kingsnorth or any other of those fossil-fuel intensive energy sources.
The Renewable Energy Association, BT and others would love to claim renewable obligation certificates for that renewable energy. That produces a problem of double counting or even double subsidy, whereby the same carbon reduction gains credit in the ROCs scheme and in the carbon reduction commitment. I acknowledge that there is a problem, and I would not entirely endorse the Renewable Energy Association’s optimistic lobbying on that front. However, it is clearly unfair that enterprises cannot at least exclude the energy generated entirely from a renewable source from the carbon reduction commitment scheme, so that it would effectively be neutralised and at least would not count as coming from a dirty source.
That is why it is important that the scheme design is changed or the rules amended so that in future, as in the clause, schemes are designed to pay close attention to carbon emissions. They should not be simply plucked out of a broader agenda such as energy efficiency, as that may not be appropriate. Various companies have raised that serious point about what is clearly an anomaly in the current scheme, which the amendment is designed to tackle.