‘(1) Emissions of greenhouse gases from international aviation or international shipping do not count as emissions from sources in the United Kingdom for the purposes of this Part, except as provided by regulations made by the Secretary of State.
(2) The Secretary of State may by order define what is to be regarded for this purpose as international aviation or international shipping.
Any such order is subject to affirmative resolution procedure.
(3) The Secretary of State must, before the end of the period of five years beginning with the passing of this Act—
(a) make provision by regulations as to the circumstances in which, and the extent to which, emissions from international aviation or international shipping are to be regarded for the purposes of this Part as emissions from sources in the United Kingdom, or
(b) lay before Parliament a report explaining why regulations making such provision have not been made.
(4) The expiry of the period mentioned in subsection (3) does not affect the power of the Secretary of State to make regulations under this section.
(5) Regulations under this section—
(a) may make provision only in relation to emissions of a targeted greenhouse gas;
(b) may, in particular, provide for such emissions to be regarded as emissions from sources in the United Kingdom if they relate to the transport of passengers or goods to or from the United Kingdom.’.
Amendment (a) to Government amendment No. 7, in line 13, leave out from ‘Kingdom’ to end of line 15.
Amendment (b) to Government amendment No. 7, in line 13, leave out from ‘Kingdom’ to end of line 17.
Amendment No. 81, in clause 30, page 16, line 9, leave out from ‘passed’ to end of line 11.
Amendment No. 82, in clause 30, page 16, line 11, at end insert—
‘(5A) Regulations under this section must provide for emissions arising from the transport of goods to the United Kingdom to take account of all stages of the journey of those goods to the United Kingdom from their point of origin, where any part of that journey has been by sea or through the Channel Tunnel.’.
New clause 1—Emissions from international aviation or international shipping
‘(1) Emissions of greenhouse gases from international aviation and shipping shall count as emissions from sources in the United Kingdom for the purposes of this Part from 1st January 2013, as provided by regulations under this section.
(2) The Secretary of State may by order define what is to be regarded for this purpose as international aviation or international shipping.
(3) An order made under subsection (2) is subject to affirmative resolution procedure.
(4) The Secretary of State may make provision by regulation as to the circumstances in which, and the extent to which, emissions from international aviation or international shipping are to be regarded for the purposes of this Part as emissions from sources in the United Kingdom.
(5) Such provision may be made only in relation to emissions of a targeted greenhouse gas and in making such provision the Secretary of State shall have regard to international carbon reporting practice.
(6) Regulations under this section may make provision—
(a) as to the period or periods (whether past or future) in which emissions of the targeted greenhouse gas are to be taken into account as UK emissions of that gas, and
(b) as to the manner in which such emissions are to be taken into account in determining the 1990 baseline in relation to those periods.
(7) They may, in particular—
(a) designate a different base year, or
(b) designate a number of base years, and to provide for the emissions in that year, or the average amount of emissions in those years, to be taken into account as if part of the 1990 baseline.
(8) Regulations under this section are subject to affirmative resolution procedure.’.
Amendment (a) to new clause 1, in line 14, at end insert—
‘(5A) Regulations under this section must provide for emissions arising from the transport of goods to the United Kingdom to take account of all stages of the journey of those goods to the United Kingdom from their point of origin, where any part of that journey has been by sea or through the Channel Tunnel.’.
Robust, not long, Mr. Cook. There is no reason why the debate cannot be short. The arguments have been rehearsed in the other place and during pre-legislative scrutiny. The Liberal Democrats have long campaigned for the existence of pre-legislative scrutiny. I have never seen a correlation between the amount of time spent on such scrutiny and the amount of time spent in Public Bill Committee, but I live in hope.
Government amendments Nos. 6 and 7 aim to clarify the Bill’s language, while also working, of course, within the spirit and the intent of the amendments made in the other place. They replace
“international passenger travel and imports or exports of goods” with
“international aviation or international shipping”.
Let me explain why.
As amendment No. 82 recognises, one possible way of defining these emissions is by reference to “the transport of passengers or goods”. However, there are, of course, other ways—I argue better ways—to define those emissions, which we do not want to rule out inadvertently. That is why I want to revert to the broader language of
“international aviation or international shipping”,
which is established terminology within the United Nations and the European Union, as the right hon. Members for Suffolk, Coastal and for Penrith and The Border will, I hope, recognise.
“define what is to be regarded...as international aviation or international shipping.”
This power was originally part of the Bill, but it was removed in the other place. It is a useful supplementary part of the Bill’s framework. It allows us to clarify what we are talking about when we refer to:
“international aviation or international shipping” emissions, and to update that definition as necessary. For instance, and this is a very important point, the definition would be updated if there were—I hope and expect that there will be—an international agreement on how to allocate emissions to individual countries.
Finally, the other place set a deadline of within five years of Royal Assent for the Secretary of State either to include international aviation and shipping emissions in the UK’s targets under the Bill or to explain to Parliament why that has not been done; it was an opt-out rather than an opt-in, if I can put it that way. Given the importance of securing international agreement on those issues, we remain concerned that setting an arbitrary deadline risks being perceived negatively by our international partners. However—I look to my hon. Friend the Member for Bury, North at this point—given the strength of feeling in the other place and elsewhere on this issue, the Government are prepared to accept the duty to act within five years, either by including those emissions in our targets or by reporting to Parliament to explain why that was not possible—in other words, the opt-out rather than the opt-in.
If I may, let me briefly set out what clause 30(4) does, as amendment No. 81 would remove it. We believe that it is necessary, because it clarifies that the Secretary of State’s ability to make or amend regulations on this issue does not end once the five-year period from Royal Assent has elapsed. It ensures that the Secretary of State can still make regulations or amend regulations that have already been made.
If after, say, eight years, there was international agreement on a different way of allocating emissions between countries, which does not preclude an international agreement before that time, clause 30(4) would allow us to amend our regulations to reflect that agreement, but only after an affirmative vote in both Houses. Alternatively, if we wanted to make some minor and technical changes to our existing regulations, as is bound to happen at some point between 2013 and 2050, clause 30(4) clarifies that that is possible.
Let me also briefly set out the three key reasons why the Government feel that we cannot set a date for including those emissions. First and most importantly, we all agree that these are global issues and that a global solution would be the best way forward. Let me reassure the Committee that the United Kingdom is at the forefront of international discussions and proposals to address that point. We are also starting to see progress with both the International Civil Aviation Organisation and the International Maritime Organisation in the United Nations talks. Indeed, it was my right hon. Friend, the Secretary of State who successfully proposed at European Union level that aviation and shipping be included within the targets. If we are to succeed, we will need to persuade other countries that there is no hidden agenda and that we are not trying to force something on them now for narrow economic or political reasons. What we are trying to do is forge a global solution in the best interests of the international community as a whole, recognising that we are talking about global emissions that affect our domestic circumstances and not the other way around. That will be made much more difficult if we have a domestic deadline for deciding what the UK’s fair share is.
As hon. Members know, there are several possible ways of splitting emissions between countries. For some countries, the methods provide radically different answers. Independent analysis carried out for the Government that examined different methods found, for instance, that one of the models gave Belgium, a distinctly trading nation, more than 29 times as many emissions as under the other model. Denmark got more than five times as many, while Sweden got less than half. Such differences carry huge potential economic implications.
It is not simply a case of picking the right methodology. Suppose in 2011 or 2012 we were nearing international agreement, with the UK playing a leading role in the discussions. Then, for entirely domestic reasons, we were forced to choose a particular methodology for calculating the UK’s emissions for “international aviation and shipping”. How would that go down with our partners? Would that not give ammunition to those states—there are many—that do not want to see progress on the issue. They could say that we, the UK, were driven not by genuine desire for global agreement but by domestic concerns.
Secondly, it is not impossible that we could reach international agreement through the United Nations framework convention on climate change, the IMO or the ICAO. The best way to deal with international aviation or shipping emissions is through a sectoral approach—my personal view is that that is the most likely outcome—rather than allocating emissions to individual countries. In fact, that is one of the proposals that we are already discussing. We are already starting to see it at the European Union level, where it is likely that under the ETS aviation emissions will be allocated to airlines rather than to individual member states. Once in the EU ETS, aviation emissions will be capped, and any increase will have to be met by reductions elsewhere. Any reduction in aviation emissions would simply lead to emissions going up somewhere else, which is how emissions trading works.
The honest answer to that question is by December 2009. There is pressure for an agreement—remember that all countries are facing the issue, but what is important is that it is part of the UNFCCC. However, I take the hon. Gentleman’s point—the bottle-half-full approach may be seen to guarantee that we are not dependent on international agreements, but I will come to my arguments against that in a moment.
Before the Minister leaves that point, I have a concern with that approach. If the emissions attach to the airlines, then the airlines would be penalised by passing through a European Union airport. International flights could simply bypass the European Union, which could penalise our competitiveness. That has been put to us by the CBI.
The hon. Lady is right. That is the issue with an international agreement. That is the ultimate interdependency. Just as I have argued that a global agreement is the best option, the next best option is a European Union agreement and after that national definitions, which I believe would cause all sorts of problems.
I point out that today my right hon. Friend the Secretary of State for Communities and Local Government has outlined the agreements by local authorities on their performance indicators. Many of those local authorities—across the political spectrum, I am delighted to say—have adopted the CO2 emissions target within their area. How are we to allocate them? Are we to say to Hillingdon, because it is the host to Heathrow airport, that all the emissions resulting from the economic of the airport should be assigned to Hillingdon borough council?
I shall choose a better example relating to my hon. Friend the Member for Southampton, Test. Will all the shipping in and out of Southampton be ascribed to Southampton city council? I can see arguments in favour of that, but it would be unfair to the people of Southampton. It is not a trite point; it is an important one. We all want an international agreement, but it is a question of how one defines where the emissions should be allocated. The Government are not trying to duck that. The essence of our policy is that all emissions should be based on science, and I cannot argue for carbon markets or for a cap-and-trade system unless I argue for science. It is a matter of how we allocate.
There is no guarantee that it is possible to calculate what is a UK emission, or the emissions of any other individual countries. Surely what matters is what action is taken to tackle the contribution that the aviation and shipping sectors make to climate change. It does not matter to me whether that action is taken at national, European or international level. Of course, we have a leadership role, which the Government’s proposals recognise, but working towards that agreement should be our priority. We must recognise that what we agree internationally could be completely incompatible with national emissions targets, so we should not prejudge that issue now.
I conclude my remarks by saying that, as was recognised in the other place, these issues are very complex, but more importantly, they are very significant. We have already said that with respect to international aviation emissions, we expect to take a decision on whether to include those emissions in our targets well before 2013. We have already asked the Committee on Climate Change to look at that as part of its first task.
There are significant practical questions. That is why, for instance, the Committee’s work plan, which is available publicly on the Department for the Environment, Food and Rural Affairs website, states:
“One possible answer is that it may be much easier if attempted at EU rather than national level.”
For instance, what is the UK share of emissions? How would that work alongside aviation’s current inclusion in the EU ETS? Would one have two systems running alongside each other, and if so, how would that work?
Shipping is an even more complex question. Neither I nor the Government are trying to duck the issues. Ships can go for many months without refuelling, and they can also take on fuel from tankers in international waters. Based on fuel sold within the UK, shipping emissions have declined over the past 10 years. By any other measure, however, shipping in and out of the UK has increased over that period, so how does one account for that?
Finally, especially if we are acting alone, what of the risk of perverse impacts, which hon. Members often point out when they scrutinise Bills? What of the problems such as planes and ships filling up elsewhere and arriving with a heavier fuel load, or of air traffic simply diverting from Heathrow to Amsterdam or Paris, or of ships docking at Rotterdam and their cargo being driven here by truck? All those scenarios could increase emissions rather than reduce them.
I look forward to the debate on these points, but I ask the Committee to accept the good intent and practical implementation policies behind the Government amendments.
I want to share with the Minister something that, as a representative of Felixstowe, which is now Britain’s largest port, I am worried about. I am concerned not only about the emissions per tonne of diesel, but the quality of the diesel that is used. We, in the European Union, have been slow in saying that ships that use filthy diesel are not allowed to dock. I am not talking about whether they take that on board, but just that they should not be allowed to dock. We need to reduce the direct air pollution effect of ships, which is very strong—as anyone with a coastal constituency in this country knows. I am not criticising the Minister, but it is interesting that he should have given all the different examples, but did not refer to that. Such action would have a dual effect. It is something that we could do, and it is a matter that the Government could lead on in the European Union. Proportionately, Britain is more affected by the filth from dirty ships than any other country in Europe. Can we not take that on board?
I am grateful to the right hon. Gentleman. With your indulgence, Mr. Cook, I wish to make another point. We are also a world leader in engine design and manufacture. The most efficient ship engines in the world are our military ship engines. For reasons not primarily to do with emissions, but with refuelling Type 55 frigates, I highlight Rolls-Royce. I mention that because part of the supply chain is in Oldham, East and Saddleworth. I shall stop there, hoping that the Oldham Evening Chronicle correspondent has noted that important remark.
The right hon. Gentleman is correct. I am trying to ensure that we have a verifiable emissions capping regime and recognise its global nature, that we give UK plc competitive advantage, when we can, and that we do not unduly punish the UK. I think that I am right that 30 per cent. by volume in his example of trade between the UK and the European Union comes through Felixstowe dock, which is significant. I used the Heathrow and Southampton examples but, given that my hon. Friend the Member for Southampton, Test is about to intervene, I suspect that Southampton is bigger than Felixstowe in volume trade.
I regret to say that Southampton is not bigger in volume trade than Felixstowe, but obviously the quality of trade is better.
The right hon. Member for Suffolk, Coastal has cited the example of dirty diesel. There are also other factors relating to what shipping carries, how efficiently it carries it, and over what distance. Given that 95 per cent. of what we consume comes into this country via ports, notably Southampton and Felixstowe, we are concerned about what is coming in and going out on ships, too. What is the value per mile travelled, for example?
Do the ships, when in port, give back the electricity that they are consuming when they lie idle? Can they be plugged into the port when they are in dock? If that were part of the package, Southampton would make an interesting net contribution, as would Felixstowe, from the power source of ships lying in port. Will my hon. Friend be considering those matters when examining the contribution made by shipping in respect of CO2 measures?
My hon. Friend’s intervention illustrates the complexity of the matter. The Government are not trying to dump the issue. We have argued—above all countries in the European Union—that, of course, aviation and shipping emissions should be included in a scheme. Given the importance that we place on the cap-and-trade system and carbon trading, it would be nonsense for us not to do so. That does not disguise the fact that there are the complexities to which my hon. Friend has referred.
Let me mention some further items to consider. Should we look at emissions from the transportation of goods to the UK at all stages of the journey? Ships that dock in Southampton may well be carrying goods, including passengers, from one country to another—they may be dropping off at Southampton, taking on new cargo and moving on elsewhere.
I suspect that the whole Committee is trying to include aviation and shipping in a pragmatic way, so let me point a way forward. There are already international rules on how to calculate the emissions from, for example, journeys through the channel tunnel. If the electricity is generated on the French side, the emissions belong to France; if the electricity is generated on the UK side, they are our emissions. I am trying not to score a point, but to show the difficulties. The alternative approach, which we will discuss later, risks double counting. We also have the problem of the administrative burden. How do we ascribe goods where part of the journey was by sea? Would we need to examine every single journey of every single ship and aircraft? Huge uncertainties and data problems need to be considered.
The Government’s approach meets the objective of those who are rightly campaigning for the inclusion of aviation and shipping emissions in the Bill and the international agreement. Let us move forward on the best basis.
I am more confused now that the Minister has moved the amendment than I was before. In his amendment, is he saying that the Government could introduce regulations that apply to aviation and shipping and remove the other aspects of international transport? He referred briefly to trucks, which surely provides an opportunity for us to charge, for example, the Dutch and German hauliers who come in with full tanks of more polluting diesel that is cheaper than in the rest of Europe. Currently, they can undercut domestic hauliers, who cannot compete with their prices, on cabotage. I am slightly concerned that by including aviation and shipping, but putting it out to the long grass—longer than five years—he is also excluding railway and road transport. Is that the purpose of his amendment?
Certainly not. I accept the hon. Lady’s point, but the framework that we have put forward is the best one from the UK plc point of view, and that it also achieves our objectives. Government amendments Nos. 6 and 7 work within the spirit of the changes to the Bill made in the other place. As I hope the hon. Lady recognises, we have considered that matter, which is backed up by statements from my noble Friend Lord Rooker. Those changes set a deadline of five years from Royal Assent to either include those emissions or to report to Parliament on why it has not been done. I am trying to say, “Okay. You’ve got a point. We need to include them and give surety to industry and the public that they are included, but can we have five years to reach an international agreement?” If we do not do that, we will have to explain why that is the case to Parliament and decide where to go from there. That is my proposition and I hope that the Committee will accept amendments Nos. 6 and 7.
Order. I need to clarify something. I am anxious to preserve the tolerant, friendly, brotherly, and almost comradely exchanges that are taking place, which I do not want to impinge on adversely, but I must draw a distinction between interventions and speeches. Some interventions have been very long, and speeches have then taken up and made the same points that were made during the interventions. Will hon. Members try to analyse their interventions and speeches.
I hear what you say, Mr. Cook, and will do my best to comply.
It is vital that aviation and shipping in the broadest sense are included in this Bill. Despite the surfeit of amendments, and amendments to amendments, it is important to note—I am grateful for what the Minister has said—that a great deal more unites the parties in Committee than divides us, although there are differences of opinion nevertheless. We all agree on the necessity of including carbon pollution caused by aviation and shipping in our national carbon budgets. We all agree that that is, unfortunately, a process far easier said than done, which is why we have reluctantly agreed on the necessity of a four to five-year delay before including aviation and shipping properly in the carbon budget.
We have also come to the conclusion that it is right to agree with the Government that they should be able to define exactly what constitutes emissions from aviation and shipping and to say under what circumstances those emissions should be counted as arising from the UK—the Minister explained that point very well in his speech. However, due to the seriousness of the issue, which goes to the heart of the Bill, I want to reiterate for the record the scope of the problem.
Aviation is the fastest growing source of greenhouse gas emissions in the United Kingdom and many advanced economies throughout the world. In the unlikely event that the UK’s 2050 target remains at just 60 per cent., current forecasts project that emissions from aviation will be equivalent to 26 per cent. of the total UK carbon allowance. That is why people are right to be alarmed at the role of aviation, not because of what it is emitting now, but because of its potential to dominate the carbon economy landscape by 2050. If we end up going for an 80 per cent. reduction target under current growth rates, aviation could account for more than 50 per cent. of the UK’s total annual carbon budget by 2050. To say that that would put extreme pressure on other sectors of our economy to meet our budget targets would be a massive understatement, even before we begin to consider the additional impact of the multiplier effect of releasing heat-trapping gases at high altitudes.
In its 1999 report, “Aviation and the Global Atmosphere”, the intergovernmental panel on climate change put the multiplier effect at two to four times the actual emission because of the effect of being emitted at high altitude. If that is taken into account, aviation emissions account for well over the total of the UK’s allowance by 2050, assuming a reduction target of 80 per cent. That paints a dramatic and horrifying picture, but it shows the key role that solving the problem would have in achieving a reduction in our national carbon emissions. I believe that we can ultimately solve the problem.
As the Minister has said, emissions from shipping are trickier for two main reasons. First, shipping emissions are far more difficult to calculate, primarily because aeroplanes, by and large, carry fuel for only one trip at a time to keep their weight to a minimum, but ships are not constrained in that way and often refuel every few weeks. Furthermore, ships can refuel in many parts of the world, few of which have a proper carbon accounting mechanism. The second reason why shipping is more problematic to calculate is that while it is still a significant polluter, it is by far the most carbon-efficient method of international freight transport. The comparative figures that I have seen show that sea freight emits between 30 to 90 g of CO2 per tonne of freight per kilometre. Road freight, on the other hand, emits between 130 to 190 g per tonne per kilometre.
While shipping must internalise its carbon pollution costs, we must ensure that we do not, through well meaning but poorly designed legislation with unintended consequences, offer a perverse incentive to more carbon-intensive modes of transport, such as road freight, over the more efficient movement of goods by sea. For example, if shipping becomes heavily regulated inappropriately, there might be an incentive to have ships dock at Rotterdam or, worse, Istanbul, and then drive across the continent and into this country via the channel tunnel. That was the reasoning behind the Conservative amendments in the other place that changed aviation and shipping to the broader term, “international trade and transport”. We want further to enhance the existing clause through the addition of amendment No. 82, which would require the assessment of emissions to take into account all stages of the goods’ journey to the UK from their point of origin.
By maintaining trade and transport as it is, and by adding amendment No. 82, we wish to prevent the system of measurement being skewed in favour of more carbon-intensive methods of transport, which could happen if shipping and aviation were included without reference to other modes of transportation. Let me give some practical examples. If oranges exported from Spain to the UK were sent over on lorries, only the short leg of the journey by ferry would be included in the UK’s carbon allowance. If they were sent by sea, the whole journey would be counted, making the carbon cost much more expensive. We would therefore create a significant incentive for the use of road freight over sea freight, despite its being many times more carbon intensive. If national emissions trading schemes exist in the transit states, then the disincentive to use road freight should be strong enough.
Has the hon. Gentleman taken into account the fact that even when goods arrive in the UK by sea, there may be a number of circumstances in which that freight is then subject to short sea shipping—one has to say that very carefully—around the UK? That means that a number of other ports are used for the ultimate destination of something that has already arrived in the UK. Therefore, additional measures relating to shipping within the UK have to be taken into account.
I have taken that into account in the amendments, but the hon. Gentleman has made a sensible point. Obviously, if national emissions trading schemes are in existence through the transit states, there would be a disincentive to use freight transport. Effectively, what we are saying is why take that risk and not give clarity when we can close that loophole here and now. If we introduced our system before some or all of our neighbouring European transit states, Britain would be perversely incentivising the movement of goods away from direct shipping and towards a more polluting alternative. Clearly, if we were leading by example, we would not want that perverse impact.
Similarly, if one imports goods from China, the best way, both in terms of cost and the environment, is for the container to be shipped directly to the UK. Yet, if we specifically mention aviation and shipping in the Bill without reference to other means of importing goods, it could make economic sense to ship only as far as Rotterdam and then move the goods by lorry into the UK to minimise the amount of carbon officially being counted. The Conservative party believes that it is correct to stick to the current wording of “international trade and transport”, because it takes in more than aviation and shipping. We are not against aviation and shipping—completely the reverse—but the term should be stretched more broadly. We would prefer our amendment No. 82 to be included, rather than returning to the previous definition of aviation and shipping.
The opt-out in clause 30 should be removed. Although it requires a report from the Government about why they were incapable of preparing the requisite regulations within five years, which would provide an incentive for them to avoid embarrassment, the fact that the alternative to having to find a solution exists at all gives the whole process a degree of uncertainty that should not be present.
My party has said all along that the Bill must give business and the market long-term certainty and clarity. Maintaining the uncertainty about whether trade and transport emissions would be included in five years’ time does not give that clear market signal that the private sector needs and deserves. That is why we have tabled amendment (b) to the Minister’s amendment No. 7. Moreover, I am happy to speak in support of the proposed change in the reporting deadline, as included in new clause 1. It makes good sense to have the new regulations laid out before setting the second five-year budget period, because, depending on the pace towards Royal Assent, if we are to stick to the existing five-year reporting period, the necessary clarity of trade and transport may not be set until 10 months into the second budgeting period. In the interests of common sense and market clarity, resetting the deadline to 1 January 2013 is a wise decision that would be welcomed by the private sector.
I suppose that I should start by welcoming the progress that has been made. The Government seem to have been taxiing up the runway, but some of the Minister’s remarks suggest that the plane may be stalling before take-off. As well as welcoming the need for the inclusion of aviation and shipping, which we welcome, too, the Minister seemed to be creating a long list of possible excuses and reasons why this is a complex area with various technical stages. Of course, it is complex; nobody is arguing that it is not. Almost all calculations of emissions are complex and there are complexities to be overcome. However, that is what the Government, the National Audit Office and many others are struggling with in terms of finding accurate reporting mechanisms. These are obstacles to be overcome, not excuses not to be prepared.
As the hon. Member for Bexhill and Battle has said, the reasons are clear. Aviation and shipping are important according to the Government’s own figures from 2006. The fuel sold to the aviation and shipping industries produced 42.8 million tonnes of carbon, representing 7.6 per cent. of the UK’s total emissions. Although the hon. Member for Bexhill and Battle has rightly pointed out that, in the long term, if those emissions are rising and all others are stabilising, reducing or being reduced through energy efficiency, the proportion of the whole will be even greater—possibly in excess of 20 per cent.—and even removing 7.6 per cent. of the UK’s current emissions would start to undermine the long-term carbon budgeting process.
That point has been strongly reinforced by a number of Select Committees. For example, the Environmental Audit Committee, on which I am honoured to sit, concluded that,
“While the draft Bill contains provisions that allow these emissions to be included in the future, we recommend that they be included immediately...There already is an internationally agreed methodology for attributing and recording these emissions as memo items to national Kyoto accounts; the Government should simply use this to track these emissions within the UK's carbon budgets.”
I should be grateful if the Minister, in his closing remarks, were to respond to the EAC’s draft report, which made that point. A similar point was made by the Select Committee on Environment, Food and Rural Affairs, which stated:
“these emissions are already reported to the UN as a ‘memo item’...The inclusion of the UK’s share of emissions from international aviation and shipping will have significant implications for the validity of the 2050 target.”
Generally, the rationale for amendments Nos. 6 and 7 was that they were about technical tidying up and rewording where necessary, which we are used to in Government amendments. Most of that looks reasonably innocuous, but I am beginning to be persuaded by the argument advanced by the hon. Member for Bexhill and Battle on terminology. Moving from
“passenger travel and imports or exports of goods” to specific references to “aviation or international shipping” highlights the precise problem that the Minister has mentioned. Such an approach might exclude road freight and therefore lead to perverse results whereby goods that might have come in by air are transferred by an even less carbon-efficient form of transport—road freight. Perhaps our noble Friends knew what they were doing when they came up with the phraseology in the current text. If the Bill goes back to them, they might want to look at it again.
In Government amendment No. 7, we see the mysterious subsection (3)(b), which I shall describe as the parachute clause because it would enable the Government to get out of the five-year obligation altogether by laying before Parliament
“a report explaining why regulations making such provision have not been made.”
That means not bringing the matter to a vote in Parliament, or amending legislation, but simply laying a report explaining why they have failed to do that. That is not acceptable.
There are clear reasons why aviation and shipping have to be in at the earliest opportunity. Various arguments to the contrary have been put forward, such as that international agreements are ongoing and that we are developing ways of measuring these things at an international level, but that has not stopped the Government from pioneering other well-regarded legislation or policies on climate change. The emissions trading scheme was a UK initiative before it was part of a wider international scheme, and only this week the Government made an announcement on the definition of “carbon capture ready” in terms of new power stations. That is being worked on at the EU level, but we hear that the Government have come up with a definition in advance. It is quite possible for UK Governments to be pioneering in that respect and to lead rather than follow.
Clearly, new clause 1—I shall be interested to hear what the hon. Member for Bury, North says about that measure in the context of the Government’s amendments—would effectively achieve the same thing as the amendments to Government amendment No. 7, so I am inclined to be sympathetic on that.
The Minister has set out some strange arguments against the non-Government amendments. He has said that our forging ahead would somehow give other countries the impression that we were trying not to forge an international agreement, but to force something on those countries. Of course we are trying to forge an international agreement—no one doubts that in the slightest—but we are also trying to step up the pace and lead by example. I cannot see how the construction of a truly comprehensive budget for the UK would in any way undermine the development of international negotiations or agreements. If, as the Minister said in response to my intervention, a truly comprehensive sectoral agreement on aviation and shipping was in place by 2009, which is what he has said he hopes for, I would be completely astonished, but very pleased. However, even if that were the case, it would simply be another factor to take into account when setting our carbon budget.
Timing is quite important, because if we do not bring aviation and shipping in at the earliest stage, let alone if we allow that move to be delayed for longer than five years, the industries that have to be included in the carbon budget will be not be on a level playing field. They will have to make adjustments to their business plans and practices and take account of a new decarbonising economy, while airlines and others will not have to make those adjustments. Those in industries that are subject to quite rigorous international competition, such as the aluminium industry, might justifiably feel aggrieved that one of the most dangerous emitters of all was getting away relatively scot-free.
Is the hon. Gentleman aware that industries such as the aluminium industry are already seeking exemptions from the European scheme at the next stage of the EU ETS discussions? Indeed, there has been talk of the German automobile industry looking for such exemptions. If aviation and shipping are not included, will not that send the wrong message and have an effect when we come to discuss the details of that scheme?
The hon. Gentleman makes an extremely valuable point—that is exactly right. If we send out a signal that it is possible to opt out or to include oneself in the small percentage of industries that will not have to make fundamental changes, we will undermine the UK’s progress towards a decarbonising, low or even zero-carbon economy. In the meantime, of course, it would make a difference to the other sectors covered by budget. Whether aviation and shipping are included makes a difference to the emissions budgeted for in housing, energy generation and so on. If those emissions are included, and there is an international agreement on the methodology by 2009, all well and good, but that will alter the carbon and energy reductions that have to be delivered in housing under the UK budget. It is vital, therefore, that we have a truly comprehensive carbon budget, which is what our amendments are designed to achieve.
Let us imagine the nightmare scenario in which, in five years’ time, the Government have failed to work out how that is to be done, despite all the expertise at their disposal and the fact that they are calculating those emissions already as a memo item for the Kyoto protocol, as pointed out by Select Committees. What will the situation be? Under the Government amendments, the Secretary of State could simply slide a quiet report before Parliament—just before a recess probably—and get away with a few negative media stories, and that would be it! In such a nightmare scenario, we would want the Government to be held fully to account and to amend legislation in the full glare of parliamentary scrutiny and publicity, because they would have let down their overall carbon reduction plan.
The Minister and others have set out the context of the serious issues underlying the inclusion of aviation and shipping extremely well. I shall speak briefly, therefore, to new clause 1, and comment also on Government amendment No. 7. Although the arguments have been well rehearsed over the past 12 months, I think that we have moved on considerably from the initial debate on the draft Bill last year, and it is heartening to see such an overwhelming consensus on the inclusion of aviation and shipping.
It is worth stressing the urgency of that inclusion, given the likely increase in aviation and shipping emissions in years to come. The hon. Member for Bexhill and Battle spelled out the figures for aviation and shipping. My understanding is that, as of 2006, they officially represent 7.6 per cent. of our total emissions. Aviation, in particular, is one of the very few areas of the economy where emissions are growing, and growing rapidly. Of course, the official figures understate the reality for two reasons. The calculation for shipping, which is based on fuel purchased in the UK, is an underestimate because ships will tend largely to refuel overseas where fuel is cheaper. Secondly, on aviation, we do not take into account the impact of radiative forcing, which could multiply emissions by anything up to a factor of four.
There is no disputing, however, that the measures before us are very complex, and I still struggle to get my head around many of the measurements, the different formulae that could be adopted and the different impacts that that could have on the UK. I also struggle to understand precisely the way in which the ETS and our climate change legislation will work. However, in a sense, that does not matter, because just as there is consensus on the need to include aviation and shipping, there is consensus on the complexity and a willingness to cut through it.
The value of new clause 1 lies not only in the fact that it is quite explicit about including aviation and shipping, but in the fact that it sets a start date—1 January 2013—in advance of the second carbon budget period, whereas Government amendment No. 7 and the Government’s current commitment do not allow for that. The earliest date on which they would consider the inclusion of aviation and shipping would be after the start of the next carbon budget period. There is, of course, a way around that, as there was a way around the previous contentious issue concerning the choice between 60 per cent. and 80 per cent., which is to adjust the date. However, we will come on to that a little later.
The other advantage of new clause 1 is that it would do away with the provision for the Government to provide a report if they are unable to meet the five-year deadline. The Minister described that as an opt-out; whether it is an opt-out or a cop-out I would not wish to say. There is a growing consensus that that is not the ideal way forward. There is an analogy to be made with the earlier debate about the 60 per cent. or 80 per cent. choice. The Government’s argument is that we cannot push the issue too fast because of the complex interrelationship with international negotiations, and that pushing it too fast would cause problems. We did not make that argument when publishing the Bill in the first place, although the Bill is moving forward the international debate significantly, and nor did we make that argument in recognising that there needed to be a target for 2010 and 2050. If we accept the argument that it is absolutely legitimate for the United Kingdom to be the first country in the world to publish such a Bill, and that that actually advances the cause of international agreement by setting tough targets for 2020 and 2050, it is logical that the argument for including aviation and shipping by a set date, preferably in advance of a second carbon budget period, is perfectly valid and convincing.
In drawing to a close—I do not want to delay the Committee—we know that the figures are there because the Government collect the figures for aviation and shipping. First, will my hon. Friend the Minister tell us why those figures cannot be published alongside the first carbon budget: not only the figures for bunker fuels purchased in the aviation and shipping sectors, but figures showing how they relate to the calculation of emissions? What is the argument against doing that? I think that it would generally help the debate along. Secondly, will he comment on the fact that the date that he is proposing—five years from Royal Assent—will almost inevitably be after the start of the second carbon budget period? Could he not consider an alternative before Report?
Thirdly, we understand that it may not be possible to introduce the change by 1 January 2013—there may be overwhelming arguments against and there may be a total failure to move the international agreement process forward. Does he accept, however, that rather than have the opt-out of the Government simply producing a report to say why they had not met the deadline, if we fixed the date in the Bill now, there would still be the possibility of amending it to reflect the stalling of international negotiations in the parliamentary Session of 2012-13?
I agree with much of what has been said by the hon. Members for Cheltenham and for Bury, North and I will support the new clause if it is pressed to a Division. Much has been made in Committee about the 60 per cent. target and the views of the Royal Commission for Environmental Pollution, which is the argument for why the target should be included in the Bill. It is worth remembering, however, that that target assumed the inclusion of both aviation and shipping, and that if they are not to be included, the target should be higher. It is the question of the target that really concerns me.
The inclusion of aviation and shipping is, of course, contentious. We are told that the proportion of emissions is relatively small at 7.6 per cent, but it is rising rapidly and, as has already been said, no account is taken of the fact that aircraft release emissions at high altitude. I draw hon. Members’ attention to the Government’s final impact assessment, which states at paragraph 3.2.41:
“Emissions of greenhouse gases from international aviation and shipping represent an increasing proportion of total global greenhouse gas emissions. Emissions from aviation in particular are increasing at a faster rate than emissions from other sectors.”
The point that concerns me, however, is the passage in paragraph 3.2.42 that states:
“If these emissions were to be included, the Government may wish to revisit the level of the targets to ensure they remain both ambitious and achievable, balancing the need to reduce emissions with the need to avoid excessive economic or social cost, and consistent with international progress.”
I would not necessarily argue with that, but it brings me back to a point that I made when speaking to several other clauses: we are in danger of constantly revising the target, whether it be 60 per cent. or 80 per cent. On the basis of that statement, if the Government get more information and decide to include aviation and shipping, they may alter the target.
As I have made clear, my concern is that we are setting a target that is supposed to be for 2050, which is a long way away. It will be the guiding light to where we need to go. I have referred to the need to vary carbon budgets within that period—that is perfectly sensible—but I am concerned that in several places in the Bill there is provision for the long-term target to be altered. We have it again in this clause.
It would seem much more sensible to set a target now that includes aviation and shipping, and that will not need to be altered in the future. If we start to alter the target, we risk alienating the public, who will become cynical if politicians continually change it. The public will think that they are changing it to suit their own ends rather than as a serious attempt to tackle climate change.
I appreciate what the Minister says about the complexities of including aviation and shipping. There is the further complexity of where the ships come from and where they are flagged, which may be another consideration. I do not think that there is any chance in the near future of reaching an international agreement that would be much more preferable. Rather than the UK being seen as pressing ahead and trying to impose something on the international community, I suggest that including aviation and shipping would, in fact, show leadership in pushing forward the issue.
There is a real chance of drift. In four or five years, the Government, whoever they may be, might come back and say, “We cannot quite manage it,” and the target will drift for another few years. It could take a long time for things to come to any sort of fruition, and, again, there is the danger of the overall target being reduced.
I would argue most strongly that we need to deal with the matter quickly and to include aviation and shipping in the target that we set. The hon. Member for Bury, North suggested that we have a report from the Climate Change Committee before Third Reading. I suggest that it be asked to consider this point.
I notice that in the briefs prepared for this Committee, and even in the Government’s final impact assessment, that there are various suggestions on how to calculate the target. I was struck by the fact that the assessment quoted a Department for Transport report that identified the need to increase the 60 per cent. target by 4 per cent. on the assumption that aviation was included in the European Union emission trading scheme. That should be taken into account and, at the very least, added to the initial target.
I echo the point made by the hon. Member for Cheltenham that industry needs a level playing field. Many industries will find it hard to meet the reduction targets that we will ask them to meet. I shall not repeat what I said about the ETS in an intervention, but there is a real danger of slippage if we allow one or two industries not to be included in the long-term, overall target that is an important part of the Bill.
I shall be brief. First, I declare an interest. My business helps a company that is bringing forward the latest advances in modern ships to operate in an effective and environmental way.
May I suggest that there is a good reason, which has not so far been mentioned, for the content of the new clause? For precisely the reasons that the Minister gave, it would be of huge help if the Government sought to find what would be the best way for them out of the problems that this complex matter creates. In other words, part of the reason why we find it so difficult to get an agreement is because everybody uses precisely the arguments that the Minister used. I use them myself. They are good arguments because they are true—it is not that we are inventing things. This is a complicated matter.
There would thus be a huge advantage if the British set an example by saying what they would do along those lines. Far from embarrassing our colleagues, that would begin to make people able to discuss the real issue, which is not whether, but how. Unless there is a “how” on the table, we shall go on discussing the matter vaguely and saying, “Oh yes, of course we should do this, but it is very difficult.” If we at least create a matrix that gives some basis for discussion about such issues, we will have moved on significantly, and rather than making the problem more difficult, we will have made it easier.
I agree with the amendment, because it puts the Government in the right position and sets an example. If the Minister finds it impossible to accept the amendment and, for reasons that I cannot imagine, the hon. Member for Bury, North does not press the new clause to a Division—that has occasionally happened before, so I must take it into account—it would help the Committee hugely if the Minister committed himself to that preparation and said that even if the Government did not bring it forward, they would bring the facts forward, show the ways in which such a thing might be done, illustrate and present it publicly, and start now so that when they get to the date on which they are forced to do something, at least Britain will have gone down all the alleyways and byways and shown what might be done to bring that together. That would bring us significantly forward from where we are at the moment.
Secondly, I hope that the Minister might be prepared to say that it is important for us to stop treating aviation and shipping as if they were two industries that have a God-given right to be treated separately. The hon. Member for Angus has done the Committee a valuable service by making that key point. I am tired of the aviation industry suggesting that it must somehow be treated separately because the public will not accept the same treatment for aviation as they accept elsewhere. That is not on. We must treat everything from the point of view of climate change and what makes a difference. If aviation is, as it seems, not only increasing but particularly damaging, I am afraid that it must be treated alongside the rest of industry. If, after deciding that, the Government conclude that for a temporary period particular arrangements must pertain, at least they would do so within a proper comparable context. If they never get to the point of considering that, those industries are left out and begin to believe that they will go on being able to defend their being left out.
Thirdly, and briefly, there is a huge amount of movement in the shipping industry. Some of the best shippers want to make the best of a very good case and are thinking seriously about better engines, better fuel, and setting higher standards. The Government could encourage that by showing that they were serious about rewarding people, which is what will happen if shipping is brought within the system. That would help a great deal, and I hope that it would, importantly, enable us to bring forward something else, which I shall set out.
I have always been suspicious about the measurement of steaming time. I know that in Southampton and elsewhere many shipowners talk about the cost of carrying goods further round the coast. It is always cheaper to unload them and carry them by road. If we concentrate on carbon emissions, reduce them and start to charge for them properly, we may find that the old figures change and that it may be more sensible to have two stops because of the reality of the impact of the carbon emissions of sea-going craft. I do not know that, but until the Government do the work, none of us will know.
I commend the new clause to the Committee. I would love it to be put to the Committee because, were it to be pressed by those who proposed it, it would be accepted. If it is not pressed, it will not be accepted, and I hope that, as a secondary course, the Government might be prepared to go down the route that I have suggested.
I remind my hon. Friend that there was a very strong recommendation from the Environmental Audit Committee on this subject. I hope that he will take that into account.
My hon. Friend is a member of that Committee and she is right to remind me about it. Let me bring us more down to earth. We are debating how we can account for aviation and shipping emissions and I will run through the answers to the questions.
First, I will clarify the point made about reporting emissions under UN guidance. The UK, along with all other signatories to the UNFCCC, is required to report on emissions from sales of aviation and shipping bunker fuels—crudely put, that means fuels that are sold or purchased in the UK. On a global level, it does not matter where the fuels are sold. We get a figure of what the global emissions are and that is what matters. Suffice to say, the data are not completely robust. I point no fingers at any particular country, but hon. Members will understand what I mean.
The UNFCCC permits a range of methodologies for calculating those sales on a sliding scale of provision. However, that method of allocating emissions is not totally reliable, as planes and ships routinely tanker fuel from countries with lower fuel prices. That is particularly a problem with respect to shipping. Ships on international routes have a significant degree of choice about where they take on fuel. They will generally do so where the fuel can be obtained for the best price, and that includes tankers that are moored in international waters. Therefore, any attempt to calculate the UK’s shipping emissions on the basis of UK bunker fuel sales will significantly underestimate our contribution and overestimate that of other countries. My point is that I am trying to capture more than I would have to if I took the purest stance.
Similarly, with aviation, it is not apparent how such measures would work alongside the already inclusive nature of aviation in the European Union ETS. It is not clear how two systems could be operated alongside each other, with one system allocating emissions to countries on the basis of fuel sold, and the other allocating emissions and carbon units to airlines on the basis of which country they were based in. There are obvious risks of double counting or a system that is over-complex and burdensome. That is why, when the European Union ETS rules are finalised, we will ask the Committee on Climate Change for its advice on methodology.
The first question asked by my hon. Friend the Member for Bury, North was about why we cannot publish the figures for aviation and shipping emissions alongside the carbon budgets. He makes a good point. We already report those figures to Parliament, and they are published each year, as is required under the Kyoto agreement.
A number of questions were asked by the hon. Member for Bexhill and Battle, who made the valid point that industry needs certainty that emissions will be included within five years. I agree with his premise, but I say that committing now to including emissions as suggested would not provide certainty, but quite the reverse. There would be no certainty about how we would define the UK’s share of emissions or what the implications would be. There would be no certainty about the effect on aviation. Let me repeat that the Bill is not about measures to address emissions, but how we account for them.
I am puzzled by the Minister’s remarks. As both Select Committees pointed out, there is already a methodology for accounting for international emissions from aviation and shipping. Both Select Committees suggested simply taking the total and using it as the interim measure. The National Audit Office also has a methodology for calculating exact emissions from aircraft on the domestic front that is based on the nature of the aircraft and the pattern of the flight, rather than on trying to work out where every ounce of fuel came from. Is not the Minister making a bit of a meal of it?
Yes, but the hon. Gentleman must accept that in the fight to cap global emissions, one has to have a global agreement. Entering into a methodology now would have significant impact on our carbon budgeting, and UK decisions in policy would not be part of an international agreement. We could end up not only cutting off our nose to spite our face, but—if I can extend the metaphor—cutting off the nose of global emissions, to spite that. That is my simple point. I am not trying to wriggle out of this. The hon. Gentleman made that point on Second Reading, from both a standing and a sedentary position. With respect, the UN simply provides a method, not an agreed method. That method is hotly contested by countries around the world.
The last time that I looked, the Kyoto protocol was an international agreement. Will the Minister tell the Committee whether the methodology that we used to calculate our memo item on Kyoto is significantly different from that of any other country?
The hon. Gentleman’s point is right. How we report our emissions is agreed under Kyoto. That goes back to the point that, from a global perspective, if we measure bunker fuel sales, we get a global total. That does not amount to an agreement between countries that their share of the emissions calculation should be based on bunker fuels. That, in my view, is naïve. If one goes to Rotterdam, where approximately 30 per cent. of shipping fuels are sold, of course the Dutch Government are prepared to report that, as a report under the UNFCCC agreement. Were there a request to take on the cap consequential on that in the European Union trading system, the Dutch—who, I would argue, along with the UK, are possibly the most environmentally progressive country in the world—would not agree to that.
The hon. Gentleman is right to say that the reporting method is agreed, but I make the simple point that that is not the same as the allocation between countries being agreed. He is going to push his policy anyway, and I respect him for that, but I want him to accept that point. It is analogous to asking Southampton, Felixstowe or Hillingdon to take on board, within local authority caps, the total emissions generated from trade through Southampton, Felixstowe—I will throw in Liverpool and Merseyside, for the benefit of the Liverpool Echo—or Hillingdon. I hope that hon. Members see my point.
Just for the sake of clarification, does my hon. Friend accept that nothing in new clause 1 would require the Government to accept irreversibly a particular method for calculating emissions now, and that the purpose of new clause 1 is simply to advance the process of international negotiations? He fully accepts that this is a complex matter and that the current method that the UK uses may not be the one that is finally agreed.
New clause 1 is sensibly drafted. By including both international aviation and shipping emissions in the targets and budgets under the Bill from 1 January 2013, if I have read it correctly, the Secretary of State would have to
“have regard to international carbon reporting practice.”
Later on, clause 86 defines the reporting method that I have mentioned. As I say, the Secretary of State would have to have regard to that carbon reporting practice or any other such EU or international agreements as may be specified. So I take my hon. Friend’s point, which that is why it is a more difficult argument for me to put.
Let me finish my argument, if I may. My hon. Friend’s second question was why have a date five years after Royal Assent that falls in the second budget period? I am very keen to emphasise that the Government amendment requires us to include emissions or to report to Parliament within five years, not at the end of five years—we could take a decision earlier. Why have we chosen that phraseology? The answer is that the Lords suggested that date and that framework and we are seeking to work within their amendment. In other words, I am trying to be consensual and once again I am learning that that is not always the easiest policy to pursue.
The hon. Member for Bexhill and Battle asked whether we should use a multiplier for aviation emissions. As I have said, the key point is that there are considerable scientific uncertainties about this issue. The Environmental Audit Committee looked at this issue as part of its scrutiny of the draft Bill and it concluded—I hope that my hon. Friend the Member for Stoke-on-Trent, North will back me on this—that we should not go down that road. In case it is needed, my hon. Friend has a copy of the EAC report in front of her. Therefore, we intend to follow the international practice of not having the multiplier.
The EAC concluded that, due to the significant uncertainties in this area, which are widely accepted by commentators, we should use the internationally agreed methodologies in this area. They do not include any radiative forcing index or multiplier in that regard.
I was specifically asked by the hon. Member for Vale of York about road and rail on the point that was made about the channel tunnel. Of course, there are already clear international rules on how to allocate road and rail emissions to countries, but there is no such international agreement in relation to international air or sea travel.
“If the regulations on shipping are not sophisticated enough...it might prove economical to have goods driven across much larger stretches of land and then simply loaded on to ferries to make the Channel crossing, when a large ship could have delivered the goods to England with a fraction of the carbon footprint.”—[Official Report, House of Lords, 4 March 2008; Vol. 699, c. 1015.]
That was the point that the hon. Member for Bexhill and Battle made, and that is exactly the type of risk that I am talking about. In the case of aviation, we would also need to be clear on how a UK system would fit with aviation’s inclusion in the ETS, which we expect to start in 2012.
Let me finish my point on aviation; I think that the hon. Member for Bexhill and Battle will accept the logic of my argument. Once the ETS rules are agreed—and I expect they will be—we will ask our Committee on Climate Change for detailed advice on whether there is a methodology that works and that is compatible with both the EU ETS rules and the wider international context. We will also ask what the impact of adopting that methodology would be. We expect to be in a position to take a decision on whether to include international aviation emissions in our targets ahead of the start of the second budget period in 2013.
My argument is that there is strong agreement—the United Kingdom has pushed this point—to include aviation and shipping. We base our whole policy in the international arena on the idea of cap and trade and that means one has to base emissions on science—on actual emissions, not on some political fix. Our policy and the political pain that I acknowledge that we are going through on this point—I am the recipient of many thousands of communications on this matter—is not based on our desire to avoid the inclusion of aviation and shipping simply because we wish to exempt those sectors. We take our position because we wish to ensure that aviation and shipping are included in a practical, pragmatic way that can include those sectors, that leaves open better possibilities for international agreement and that is fair to the other sectors within our economy. In an appeal to my hon. Friend the Member for Stoke-on-Trent, North, I could mention ceramics, but I could equally appeal to Southampton, Felixstowe or elsewhere. We need to act pragmatically, and I urge the Committee to support that policy.