The future viability of the emissions trading scheme depends on the cap that is set and whether the cap-and-trade scheme is as good as the cap. The overwhelming variability is the reason for the failure up to now and is much more important than currencies.
Mr. Morley said that the EU's work on, for example, water directives, producer responsibility directives and landfill directives provides a solid platform on which to build. However, as we look forward, it is clear that we must tackle key issues if the EU is to continue to be a credible voice on climate change.
The problem is not ambition or rhetoric. The Montreal protocol or the Kyoto protocol would not have happened without the EU's leadership. We have a set of unilateral targets that do not lack ambition. We have action plans for energy efficiency and we have developed key market mechanisms. The challenge is effective delivery, and honesty about the backdrop of collective failure to reduce emissions, not least in this country. Important issues relating to delivery need to be tackled if the voice of the EU is to continue to be heard in the United States, China, India and Brazil—key players in the debate.
I want to identify three paramount issues. The first is the future of emissions trading. As a Conservative, I strongly believe that the market will deliver the most effective solutions, but I strongly agree with Stern that the market failure to put an effective price on carbon needs to be corrected—that is a necessary condition of any global solution to the problem. Emissions trading is the policy tool of choice to deliver that price and we are at a pivotal moment in developing it. Other countries are considering the EU scheme, and the harsh fact is that it may have been successful in proving some mechanics but it has failed comprehensively in its core mission of reducing emissions. Clearly, reform is needed.
There is growing consensus in this country about the core elements of that reform. We set out some ideas in the quality of life report and the Government have presented their ideas. There is growing consensus on the need to reinforce the principle that the polluter should pay. That means ratcheting down free allowances and ratcheting up auctions. There is consensus about the need to reduce the political risk that is attached to the process and I believe that that means developing a consistent and transparent methodology for determining caps and any allowances that are not auctioned. It means expanding the market carefully. The key priority is to include aviation on terms that bite.
Secondly, I would like more urgency from the EU and the British Government in levering the single market to drive up product standards. There is an enormously important opportunity to engage developing countries because we effectively import many emissions, which are embedded in the products that we buy from countries such as China and Japan. There is a great opportunity to build on the success in labelling and efficiency standards for refrigeration and extend it to other matters. We should consider what is happening in Japan and Germany on taking a new approach to product design and standards, setting minimum rolling standards. Rolling standards mean a dynamic process whereby today's best standards become the minimum in future, in an agreed time. There is therefore a constantly dynamic process of improvement. That is good for Government because it does not involve any public money, good for industry because it creates a competitive environment in which it can get ahead and make itself more efficient, and good for consumers because it will give us a wider range of efficient products. That is a logical extension of what the EU should be doing—levering the single market.
Thirdly, I want to consider the opportunity for the EU and the member states to do more together. It is clear from the development of technology that much goes on in small silos, including carbon capture and storage, concentration of solar power and long-distance ultra-high voltage power lines. Those technologies are enormously important matters on which member states should work together if we are not to lose the commercial market opportunity to the United States and other countries.
I am not referring only to technology. European buildings are three times more energy efficient than those in China. If one considers that China will move 400 million people from the country to the city in the next 30 years and that, in that process, it will build more than half the new buildings in the world, one realises the importance of our exporting expertise in architecture and design to China to ensure that those buildings are as energy-efficient as possible. I never hear the Government talk about that.
Other opportunities include common approaches to phasing out subsidies to the fossil fuel industry, and to procurement. The Government spend £150 billion a year of taxpayers' money through direct and indirect procurement and that presents a massive opportunity, which is not being taken, to drive market change. All that is in the interests of building on the single market and helping us to shape a new age when we can no longer rely on fossil fuels.
As a Conservative, I want Britain to express a positive voice in pressing Europe to take the opportunities because that is in our collective and national interest. We should act in the name of anyone who is under 40 because I firmly believe that there is no greater threat to the security, prosperity and well-being of those under 40 than an increasingly unstable and dangerous climate.