Clause 25 — UK Domestic Effort

Climate Change Bill [ Lords] (Programme) (No. 2) – in the House of Commons at 7:33 pm on 18th November 2008.

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Lords amendments: 17A and 17B

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Photo of Joan Ruddock Joan Ruddock Parliamentary Under-Secretary (Energy and Climate Change)

I beg to move,

That this House
agrees with Lords amendments 17A and 17B in lieu of the words left out of the Bill by its amendment No. 17.

These amendments deal with domestic effort and use of overseas credits. This has been a key theme in our debates on this Bill. The Government absolutely agree with the importance of driving emissions reductions in the UK, and we have designed the Bill to provide a clear framework for action. It will ensure greater clarity for industry and households about our path towards a low-carbon economy, at the same time as sending a clear signal to our international partners about our commitment to tackling climate change.

The amendments on this issue, which I bring before the House today, further strengthen the Bill in this key area. Amendment No. 17A would require the Secretary of State to set in secondary legislation a binding limit on the use of carbon units for each budgetary period, taking into account the views of the Committee on Climate Change on the appropriate balance between domestic and overseas effort. This limit would also have to be set in the context of the requirement, which we introduced in Committee in the Commons, for the Secretary of State to have regard to the need for UK domestic action on climate change in considering how to meet the 2050 target or any carbon budget. In proposing a limit, the Secretary of State would also have to consider each of the matters in clause 11, which must be taken into account in coming to

"any decision...relating to carbon budgets".

With the exception of the first budgetary period, where the limit is to be set at the same time as the level of the budget, amendment No. 17A would require that the limit be set 18 months before the start of the budgetary period in question. This would ensure an appropriate limit could be set once the level of the budget was known, and the wider policy context, including the international situation, was clear.

Amendment No. 17A would also provide the important flexibility that particular units may be excluded from counting towards the limit. This would allow, for example, the exclusion of carbon units arising as a result of UK companies' participation in the EU emissions trading scheme from counting towards the limit. A limit on credits that affected the EU ETS sector by including emissions allowances sourced from participants in the scheme elsewhere in the EU would conflict with the UK's commitment to this key policy measure. This approach could also undermine the economic efficiency of the trading scheme by placing further requirements on UK-based participants that were not imposed elsewhere in the EU. Such a limit would also cause a real likelihood that we will find ourselves with inconsistencies or a lack of transparency, which would go against everything we are trying to do in this Bill. We need the flexibility to apply a limit that supports the certainty and transparency that we have tried to provide to businesses.

We propose that regulations under the new clause would be subject to the affirmative resolution procedure. That would mean that the Government's approach on the limit proposed, and the reasons for the exclusion of any types of carbon unit, would be fully debated in both Houses of Parliament at least once every five years.

Amendment No. 17B would supplement amendment No. 17A by specifying in clause 27 that any carbon units in excess of the set limit may not be counted towards the net UK carbon account. The amendment effectively puts in place the binding nature of the limit for the purposes of carbon accounting under the Bill.

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Photo of Charles Hendry Charles Hendry Shadow Minister (Energy and Climate Change)

We welcome the amendments with great pleasure. Their inclusion is a considerable asset to the Bill, and we hope that they will go some way to removing the remaining Achilles heel of the Bill: the fact that there was nothing to prevent 100 per cent. of our carbon reductions from being made on the international carbon markets, without the attendant economic benefits accruing to the United Kingdom. We are pleased that the Government have agreed that there will be a limit on the carbon units that can be purchased from abroad and that, in doing so, they will take into account the advice of the independent Climate Change Committee. We thought it quite appropriate that the Committee should be used in that way, and we are pleased that the Government have accepted that.

We have long argued that the Bill represents a crucial opportunity for the United Kingdom to lead the world not only in legislation but in a jump to a low-carbon economy, with all the benefits that that will bring. It is clear that United Kingdom leadership is helping to influence others. Today, President-elect Barack Obama said at a climate summit being hosted by Governor Schwarzenegger in California:

"My presidency will mark a new chapter in America's leadership on climate change that will strengthen our security and create millions of new jobs in the process."

He continued:

"We will establish strong annual targets that set us on a course to reduce emissions to their 1990 levels by 2020 and reduce them an additional 80 per cent. by 2050."

There should be great pride in this country that the new President of the United States is following a lead that has been taken here.

The amendment makes our domestic ambition clearer and acts as an important boost to those seeking greater investment certainty in the United Kingdom's green technology market. The facts and figures on the opportunities of the new energy economy will not be lost on Members. Globally the overall value added to the low-carbon energy sector could be as high as $3 trillion a year worldwide by 2050, and the green economy could employ more than 25 million people in jobs by that time. President-elect Obama says that he wants 5 million jobs in that sector in the United States. The question before us is how much of that new economy will be based in the UK. The lack of clarity that surrounded carbon trading in the Bill jeopardised Britain's opportunity to maximise its potential in that regard. The amendments are certainly not the answer to all our problems, nor will they herald a new economic age on their own, but they will give greater clarity and market certainty, and for that reason, we welcome their inclusion in the Bill.

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Photo of Steve Webb Steve Webb Shadow Secretary of State for Energy and Climate Change

Amendments Nos. 17A and 17B represent a small step in the right direction on the issue of domestic effort, but remain vague. Their lordships thought that at least 70 per cent. of the savings needed to be made domestically. Their Bill came to this House, and the Government got rid of that provision in Committee. The Bill went back to the other place, and they said, "All right, we won't do that, but there will at least be some sort of cap." I suppose that having some sort of cap is better than having none, but there is no indication in the amendments of what cap we are talking about—whether it is 50, 60 or 70 per cent.

We await the advice of the Committee on Climate Change, and as that is due in a few weeks I recognise that there is some advantage in flexibility. I want to stress, however, that this is not purely a technocratic issue—I am glad to see that the Secretary of State is in his place—where we just buy from the cheapest place, and assume that if we buy abroad or at home it does not much matter because a tonne of carbon is a tonne of carbon. National leadership is fundamentally important, and I am worried that his Department has started to say something profoundly concerning. When questions are asked about what Governments might do that would lead to emissions, such as airport expansion, coal-fired power plants or whatever, the answer from Ministers is that it does not matter because there is an overall cap. Heathrow expansion does not matter because aviation is in the emissions trading scheme—

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Photo of Steve Webb Steve Webb Shadow Secretary of State for Energy and Climate Change

The Secretary of State is shaking his head, but Ministers have said from the Dispatch Box that these things do not matter any more because there is an overall cap. It would be horrific if Britain were to send a signal to the world, through its decisions about airport expansion, coal-fired power stations or whatever, that we were doing such things while somehow expecting others not to do them and that it did not matter because of a cap. The relevance of that to amendments Nos. 17A and 17B is that if we simply think that we can emit like crazy, but buy it in, we are undermining not just the moral leadership to which Charles Hendry referred, but practical leadership. We cannot expect other people to cut emissions if we are not willing to do so ourselves.

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Photo of David Howarth David Howarth Shadow Solicitor General, Ministry of Justice, Shadow Minister (Shadow Solicitor General), Home Affairs 7:45 pm, 18th November 2008

Is there not another important point? As Charles Hendry said, the important thing is to create a new economy, and the question is: where in the world are we likely to get technical change of the sort that we need? Is it here in the developed world, or in the developing world? Surely the Government are not proposing a plausible strategy.

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Photo of Steve Webb Steve Webb Shadow Secretary of State for Energy and Climate Change

My hon. Friend is sitting behind me, but I guess he cannot read my handwriting from there. My second point was precisely that—I had written, "overseas credits bring 'wrong' technology". From a developmental point of view, there is a place for assisting developing countries to deal with carbon emissions in order to prevent them from going down a path of dirty technology. It is far better, however, to save carbon emissions at home. We can then put money into technology that will work in the developed world where the big emissions problem is. There is a strong case not to say that a tonne of carbon saved is a tonne of carbon saved and it does not matter where. If we save it at home we are spending money on technology that works in the rich world, which can be exported. That is good for the green economy, and helps the world to tackle its carbon emissions.

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R

Mr Webb actually said: "...overseas credits buy the 'wrong' technology"

Submitted by Richard Taylor

Photo of Colin Challen Colin Challen Labour, Morley and Rothwell

I wonder whether the hon. Gentleman's remarks should be addressed in some way—perhaps they are—to the Climate Change Committee, which will be protective of its independence. If it is to do its job seriously, he should not worry too much. Perhaps we will know the answer to the questions posed on 1 December. I ask him whether this debate is the right place to over-egg the pudding, or does he not have confidence in the Climate Change Committee?

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Photo of Steve Webb Steve Webb Shadow Secretary of State for Energy and Climate Change

I have a good deal of confidence in the Climate Change Committee, but that Committee does not make the decisions—the Government do. The question lies with that final link in the chain. I make no apologies for egging—not over-egging—this pudding because we need the Government to take the conclusions of the Climate Change Committee seriously. I hope that they will have listened to the arguments that we, and others, are making, and will come up with something tough on the need for domestic effort. Ministers have started to say that we can do all sorts of things because we live in an emissions-trading world and it does not matter. That is profoundly worrying. The Climate Change Committee may well be sound, as Colin Challen suggests, but Ministers are a little unsound on these matters, which is why I stress my point.

Amendments Nos. 17A and 17B offer marginal reassurance. I hope that when the Committee reports, the Government will take it seriously, as the hon. Gentleman suggests. I hope that the Secretary of State will ensure that Ministers do not ever say that something damaging to the environment does not matter because we can trade it away. It does matter. That is how Government are starting to talk, and I believe that it has to stop.

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Photo of Joan Ruddock Joan Ruddock Parliamentary Under-Secretary (Energy and Climate Change)

I shall address the comments of Steve Webb first. As he knows from many debates that we have had, it is our strong view that setting a binding limit in the Bill would send the wrong signal to our international partners about our support for a global trading market. The ultimate goal is to have a truly global carbon market, and that is particularly important given the ongoing negotiations on a comprehensive global long-term framework for action, which we hope will be agreed in Copenhagen in December next year.

The hon. Gentleman also needs to reflect on the Stern review, which showed that international emissions trading under binding caps plays a vital role in the global response to climate change. Lord Stern reaffirmed that during debates on the Bill earlier this year. He stated:

"Carbon trading has a very powerful role not only through cost but in that much broader and deeper context of putting a global deal together."—[ Hansard, House of Lords, 11 March 2008; Vol. 699, c. 1416.]

We are, and have been, determined not to set a limit in the Bill and not to undermine the European Union emissions trading scheme. No limit is specified in the Bill, but we are making provision for setting limits in secondary legislation. [Interruption.] The hon. Gentleman referred to the Lords amendments that had placed the 70:30 split in the Bill. I am merely reiterating the points that we have made earlier, and the reasons why we are not prepared to include that in the Bill.

The hon. Gentleman said that some Ministers were beginning to talk as though it did not matter what decisions were taken, but I must point out to him that all decisions matter. Throughout government, we have a commitment to work to ensure that sustainable development and climate change are considerations in all the decisions that we take. We have made it clear that our decisions, whether on the security of supply, which is incredibly important in terms of energy, or on issues such as the expansion of Heathrow, will have to take account of environmental conditions and environmental limits. That is the basis on which decisions will be taken.

Sometimes the hon. Gentleman speaks as though he expects our economy just to stop in some way because of our commitment to reductions in CO2 emissions. There will have to be growth in certain sectors, but what matters is how it is undertaken. The Government have made it clear that we are on track to move to a low-carbon economy. We know that doing so is in our interests, as is saving energy and being more energy-secure. He need only look at our renewables strategy to know that we have made a commitment, that we expect to produce many more green jobs as a consequence, and that that is clearly in this country's interest. For that reason, we can give assurances that a huge domestic effort will be made; indeed, we have a raft of policies in place to make that domestic effort.

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Photo of David Howarth David Howarth Shadow Solicitor General, Ministry of Justice, Shadow Minister (Shadow Solicitor General), Home Affairs

Is not the central point that creating a green economy requires enormous technical advance, and that it is the incentives the system sets up for that technical advance—not for the adoption of existing technologies but for new technologies—that really matter? That is why a domestic effort limit is so important.

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Photo of Joan Ruddock Joan Ruddock Parliamentary Under-Secretary (Energy and Climate Change)

I agree with what the hon. Gentleman says; there is no dispute between us. As I have just tried to say, we have made a commitment and we want to see a great change take place in this country. Many of us have argued for many years that environmental technologies—new technologies—can deliver huge benefits to our society while delivering new jobs and new skills.

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Photo of Colin Challen Colin Challen Labour, Morley and Rothwell

Does my hon. Friend agree that our concern is perhaps not so much with the level of the cap—I would prefer a high one—but about the quality of the credits that can be bought? There has been great debate about the quality of the clean development mechanism—CDM—credits that have been traded so far. Although I am very much in favour of a higher cap, I think that it is the job of an independent climate change committee to inform government about what it thinks is the quality of the credits that are available. There is no point saying that we will have a cap, and then spending 20 or 30 per cent. of the UK carbon account on useless credits.

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Photo of Joan Ruddock Joan Ruddock Parliamentary Under-Secretary (Energy and Climate Change)

I thank my hon. Friend for this contribution; I could not agree with him more, because this matter is tremendously important. Much criticism of the CDM has been made, some of which is entirely justified, but the Government have worked very hard to ensure that improvements are made. We believe that the mechanism is basically sound, but, as he said, this is about the quality of the projects. Some projects have been cheap and large, which was perhaps understandable in the early days but it was very controversial in the example of the HCFC-22 programme, which has now been halted. He rightly says that we need to be concerned about the quality, but there is no conflict on this matter. A big domestic effort will be made, as I have said, but we also see the value in being able to help, through the credits system, developing countries. Of course, they have a great need to deal with their own advances and growth, and they need to bring their population out of poverty at the same time as curbing the growth in their emissions.

I am grateful to Charles Hendry for the support that he has given at this final stage of the Bill, and, indeed, at many prior stages. What is so important about this Bill is its all-party support. When I was speaking recently to US staffers—a number of people from both Houses who have been very active on energy and climate change—I was able to surprise them greatly by telling them that there was all-party consensus in this country on this issue. They obviously regarded that as an important triumph for our state. We have been bringing everyone else on board.

The hon. Gentleman mentioned President-elect Obama. Of course, we have great hopes that his election will result in the sea change in US policy on climate change for which we have all been waiting for so long, and that it will make such a huge difference to the proceedings at Copenhagen. We are happy to accept the hon. Gentleman's congratulations to the Government on the UK's leadership —[Interruption.] I should have said the congratulations of all. He also invites us to take pride in this country. We can all take pride in this country and this particular achievement, and I thank him for his comments.

Question put and agreed to.

Resolved,

That this House agrees with Lords amendments 17A and 17B in lieu of the words left out of the Bill by its amendment No. 17.

After Clause 73

Lords amendment : No. 43A .

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Photo of Joan Ruddock Joan Ruddock Parliamentary Under-Secretary (Energy and Climate Change)

I beg to move,

That this House
agrees with Lords amendment No. 43A to its Amendment No. 43.

Lords amendment 43A to Commons amendment No. 43 was tabled by my noble Friend Lord Hunt of Kings Heath in the other place in response to a recommendation from the Delegated Powers and Regulatory Reform Committee of that House. The Government were happy to accept the Committee's advice, and the result is this amendment, which will ensure that any future regulations concerning the levels at which variable and non-compliance penalties are set will be subject to the affirmative resolution procedure, rather than the negative one.

Q uestion put and agreed to.

After Clause 77

Lords amendment: No. 48A.

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Photo of Joan Ruddock Joan Ruddock Parliamentary Under-Secretary (Energy and Climate Change)

I beg to move,

That the House does not insist on its amendment No. 48 and agrees with Lords amendment No. 48A in lieu thereof, the Commons being willing to waive its privileges in respect of the Lords Amendment.

Lords amendment No. 48A is a redrafted version of amendment No. 48, which was tabled by my hon. Friend Mr. Caton. I accepted this amendment on Report on the basis that technical aspects of the amendment may need further consideration and the benefit of parliamentary counsel's advice.

Lords amendment No. 48A would require the Treasury, which would act through the Office of Government Commerce, to produce an annual report on progress made towards improving the efficiency and sustainability of the Government estate. The report will specifically cover the steps taken to reduce the size of the civil estate, to achieve further efficiencies from the Government's existing buildings, to improve the sustainability of those buildings and to ensure new buildings procured are in the top quartile of energy performance.

It is absolutely right that the Government should lead by example. We must put our house in order if we expect others to take the necessary action to tackle climate change. That is why we have committed to take action that builds on the other commitments that we have made on improved sustainability. For example, Government Departments will be included in the carbon reduction commitment, which will incentivise the introduction of energy efficiency measures and the occupation of more energy-efficient office space. Departments are also subject to the targets for sustainable operations on the Government estate, which are reported through the chief executive of the Office of Government Commerce and the Cabinet Secretary.

To show our commitment to delivering further efficiency in the public sector, the Chancellor announced in the 2008 Budget our goal for all non-domestic buildings to be zero-carbon by 2019, and that move will be led by the public sector, which will achieve the goal one year earlier, by 2018. We have therefore put in place robust mechanisms that provide a strong role for the Office of Government Commerce as the Government office that leads on improving the efficiency and sustainability of the Government estate and operations.

Lords amendment No. 48A extends those mechanisms by requiring the Treasury to produce an annual report. As Members are aware, the amendment follows a private Member's Bill introduced by my hon. Friend Anne Snelgrove, which would have required central Government Departments to procure office buildings only if they were in the top quartile of energy performance. The procurement of new energy-efficient buildings is just one element of the strategy to reduce energy consumption on the Government estate, but we are fully committed to procuring buildings in the upper quartile of energy performance. The report will allow us to define the top quartile and to monitor the commitment through the introduction of energy performance certificates and display energy certificates.

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Photo of Michael Jack Michael Jack Conservative, Fylde 8:00 pm, 18th November 2008

Will the Minister clarify what she just said? Does the measure apply to the procurement of refurbished buildings as opposed to new ones?

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Photo of Joan Ruddock Joan Ruddock Parliamentary Under-Secretary (Energy and Climate Change)

I shall check—but I understand that we have been through that a number of times, and that we have said that the measure will apply to new buildings that are required. I shall make absolutely sure that I am correct to say that, but my understanding is that the measure will apply to the acquisition of new buildings.

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Photo of David Drew David Drew Labour, Stroud

Will the Minister also clarify whether the measure will include outsourced buildings? They are clearly run for the state, but by private companies. Will there be some pressure on those private companies, too, to have a zero-carbon approach?

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Photo of Joan Ruddock Joan Ruddock Parliamentary Under-Secretary (Energy and Climate Change)

My hon. Friend is obviously referring to existing buildings. I do not expect that we would in any way seek to deal retrospectively with such cases. That does not mean that we not very committed and anxious to do what we can to improve energy efficiency throughout the Government estate. Right hon. and hon. Members will appreciate that Governments have acquired over a long history a great many buildings that are probably the least efficient that we could find. There is a huge historical backlog when it comes to solving the problem— [ Interruption. ] Hon. Members are looking at the roof—and we all understand how difficult it is to be energy-efficient in such buildings.

We all need to be clear that the question of how to make such improvements is a major issue for any Government. We seek to make those improvements, and, of course, one of the easiest times to do that is when we attempt to procure a new building. At that point we would have real choices, although of course we would be keen to do what we could elsewhere.

Lords amendment No. 48A makes drafting changes to improve the clarity of the new clause. We have clarified the definition of "building" to ensure that it captures those buildings where energy performance is a relevant consideration, as well as defining the civil estate. No one has risen to intervene on that point, but it is strange to try to imagine a building where energy performance is not a relevant consideration. I have checked, and I find that that such a building would include tool sheds, snowplough sheds and a lot of places where the Department for Transport, in particular, houses all manner of vehicles. Those buildings are clearly unheated and are not cooled. They are the exceptions to the rule.

In order to allow the provision to be kept relevant and up-to-date, we have also provided an order-making power so that descriptions of buildings covered by the report can be changed over time. Any order would be subject to debate in both Houses.

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Photo of Charles Hendry Charles Hendry Shadow Minister (Energy and Climate Change)

I can already see Members lining up when the next private Members' Bills are announced to introduce one to extend these powers to cover the Government's snowplough sheds. I thank the Minister for her courteous and generous remarks. Credit should go to my hon. Friend Gregory Barker, who saw the Bill through Committee and beyond, and to my noble Friend Lord Taylor, whose spirit and approach in the other place were very similar to those of my hon. Friend.

It gives me particular pleasure to support the amendment, which, as the Minister has said, will legislate to ensure, among other goals, that new buildings brought into the civil estate are in the upper quartile of energy performance. At a time of record high energy prices, and given the impact that those prices have on poor families and small businesses, the importance of the Government leading the drive towards energy efficiency cannot be understated.

As the Minister said, the amendment started life as a private Member's Bill promoted by Anne Snelgrove. We gave our full support to that Bill. We have long argued that energy efficiency improvements are one of the keys to a reduction in short-term domestic emissions, as well as having a positive carbon abatement cost that will create new jobs and generate new wealth for our economy.

I want to take the opportunity to ask the Government to reflect on their record of energy efficiency to date across the civil estate. I think that they will agree that the statistics are not very encouraging. The Sustainable Development Commission's report found that nearly two thirds of Government Departments are not on track to meet their carbon emissions reduction targets. In fact, if the Ministry of Defence—which has achieved its own reductions, by selling off QinetiQ in particular—is discounted, all the public estate performance improvements are negated. Carbon emissions from the civil service estate offices have increased by 22 per cent. since 2006 and energy efficiency has worsened by 3.3 per cent. since 2006. In response to the report, the SDC chairman Jonathon Porritt, said:

"I find all this so depressing that I now hate having to comment on it. In fact, this year, I opted out of all media work around our report."

Mindful of those sobering facts and of the mountain that the Government have left for us all to climb to meet our ambitions, I am happy to see the amendment included in the Bill.

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Photo of Joan Ruddock Joan Ruddock Parliamentary Under-Secretary (Energy and Climate Change)

I thank the hon. Gentleman for his kind words. We have to accept the criticisms that have been made of us in the past by the chairman of the Sustainable Development Commission. I would hate ever to be the cause of depression for that fine gentleman, but we have put in place a number of new measures and have tied permanent secretaries to responsibility for that particular subject. The Office of Government Commerce is considering the introduction of national property controls, which will require Government organisations to develop business case justifications that address sustainability as well as efficient and effective building performance in respect of all new building acquisitions or leases. Such controls have already been shown to work successfully in London and the south-east.

I remind the hon. Gentleman of the carbon reduction commitment, which will also have an impact by covering Government buildings. Although there was undoubtedly justification for past criticisms, we want to improve things and to get them on track. We are committed to doing that. Everything about the Bill says that the Government are seriously committed to making the most significant CO2 emissions reductions now and into the future to help achieve that final target of an 80 per cent. reduction by 2050.

I believe that this is a groundbreaking Bill of historic significance. I very much want to acknowledge the support of other parties in this House, and of my many hon. and right hon. Friends who have helped us along the way. Indeed, they have pushed us to amend the Bill at many points, and it has undoubtedly become even better as a result.

Question put and agreed to.

Resolved,

That this House does not insist on its Amendment No. 48 and agrees with Lords Amendment No. 48A in lieu thereof, the Commons being willing to waive its privileges in respect of the Lords Amendment.—[ Joan Ruddock.]

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