Clause 5

Climate Change Bill [Lords] – in a Public Bill Committee at 2:00 pm on 26th June 2008.

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Carbon budgets

Question proposed, That the clause stand part of the Bill.

Photo of Anne McIntosh Anne McIntosh Shadow Minister (Environment, Food and Rural Affairs)

I am mindful of your strictures, Mr. Atkinson. I refer the Minister to my earlier comments and to the point raised by the CBI. Clause 5 deals with the setting of five-year carbon budgets, on which we all  agree, and the setting by 1 June 2009 of three consecutive carbon budgets for three-year periods. The CBI broadly supports that. The Federation of Small Businesses also supports it, but commented:

“The balance between economic growth and environmental legislation must be maintained because only by increased investment in research and development by the private sector will we find solutions to the problems of climate change.”

The CBI says that it wants a credible framework within which to work towards a low-carbon economy, and it believes that the interim target and rolling carbon budgets could help by giving the right balance of certainty and flexibility. It goes on to say that

“alongside the risks, the shift to a low carbon economy offers the UK a unique opportunity to develop innovative environmental technologies of the future and prosper in new, multi-billion-dollar world markets—but only if research funding is better co-ordinated and prioritised.”

Today, at Innovation, Universities and Skills questions, the Minister for Science and Innovation announced, in response to a question, a multi-million pound research programme for delivering the building of a low-carbon economy.

In the interests of joined-up government, can the Minister give the Committee an assurance today that he is going to satisfy the points raised by business, through the Federation of Small Businesses and the Confederation of British Industry, that targets will be set? His own final impact assessment, to which I referred in relation to previous clauses, and page 17 of the Stern review suggest that industrial sectors with high-energy intensive production exposed to international competition are probably going to face the most adverse impact on output and employment.

I am trying to support what the Minister is doing, but can he satisfy business that there are going to be measures whereby the environmental targets that he is expressing in the Bill are balanced by some degree of inducement to change behaviour, perhaps by using alternatives to fossil fuels, and encourage less intensive energy burning of fuels generally? In trying to change business behaviour through the carbon budgets imagined in clause 5, is it the Government’s intention to use the moneys that they have set aside to encourage businesses to change their practices in that way?

Photo of Steve Webb Steve Webb Shadow Secretary of State for Environment, Food and Rural Affairs 2:15 pm, 26th June 2008

I have a staggeringly brief question.

The first carbon budget will be set in 2009 for the five-year period 2008-12. It took years of study to work that one out. Will the Minister say more about why the first set of targets partly relates to history? Clause 5(1)(b) states that the duty of the Secretary of State is to ensure that the carbon account does not exceed this figure. He obviously cannot exercise that duty historically, because there are no levers he can pull. Why does the period not start in 2009?

Photo of Phil Woolas Phil Woolas Minister of State (Environment), Department for Environment, Food and Rural Affairs

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.

Question put and agreed to.

Clause 5 ordered to stand part of the Bill.