Clause 43

Climate Change Bill [Lords] – in a Public Bill Committee at 1:15 pm on 3rd July 2008.

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Trading schemes

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

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

It is a pleasure to serve under your chairmanship, Mr. Atkinson.

I want to press the Minister on trading schemes. Much of the detail that we will consider will be set out in regulations. Clause 43 defines the trading schemes, but does not specify which trading schemes will be introduced using the enabling powers in later clauses. The Minister will be aware that the Environment, Food and Rural Affairs Committee picked up on that and we were disappointed that more detail was not given at this stage.

My second point is that the clause could have gone a little further by stating how the national trading scheme for England will relate to the devolved trading schemes, and especially how the UK trading scheme will relate to the EU emissions trading scheme. Who is to rule on the compatibility of the two trading schemes? Will it be the Secretary of State? A little more meat on the bones would be very helpful.

Photo of Michael Weir Michael Weir Shadow Spokesperson (Trade and Industry), Shadow Spokesperson (Environment, Food and Rural Affairs)

It is a pleasure to serve under your chairmanship this afternoon, Mr. Atkinson.

I make a similar point to that of the hon. Member for Vale of York. The clause seems to give all national authorities the power to begin their own trading schemes, but it is not clear how they will interact with each other and, more crucially, the EU ETS. As the Minister will know, one of the early problems with the EU ETS was a fall in the price of carbon to a very low level. It is not clear how the carbon price would be dealt with in the various sub-national and UK-wide schemes, as opposed to the EU scheme. I am concerned that we might arrive at a situation in which the various schemes cover the same industry, but the price of carbon in each one may be different. That could cause problems for both the UK scheme and the EU scheme as a whole, and I would like some reassurances about how that will be dealt with. Obviously, the price of carbon will be crucial in making the EU—or any other—scheme work.

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

Thank you, Mr. Atkinson, and welcome to the sitting. It is a pleasure to be here.

Hon. Members have asked important questions. Carbon trading schemes, on which there is consensus, lie at the heart of the Bill, and their success should be judged on not just the EU scheme, but on similar arrangements, such as the previous scheme for sulphur dioxide and the very successful Montreal convention, which we recently celebrated 20 years of.

In answer to questions raised, it is important that carbon trading schemes are compatible and that there is an exchange mechanism so that we can roll out such schemes across the globe. Our long-term aim is to see the expansion of the ETS to cover more sectors and gases, but some sectors might not be appropriate for inclusion. The enabling powers in the Bill will provide the Government or devolved Administrations of the day with additional options to take domestic action in sectors that are unsuitable at the time for inclusion in the ETS. They will also allow them to take domestic action ahead of the EU when that is cost-effective and necessary to reduce UK emissions. We believe that that approach might also help sectors to prepare for inclusion. Any decision on the best policy instrument will take account of the UK Government’s objectives in the round. For example, we might wish to supplement the EU-level action and introduce our own policies to uncover inefficiencies and to support clean technologies. The powers here will provide them and the devolved Administrations with the opportunity to do that.

I am trying to create an architecture for carbon trading schemes that allows inter-exchange. It might be that prices will differ, in which case we would have exchange rates, would we not?

Photo of Michael Weir Michael Weir Shadow Spokesperson (Trade and Industry), Shadow Spokesperson (Environment, Food and Rural Affairs)

The Minister said that the schemes are meant for industries that are not appropriate for inclusion in the EU ETS, but it seems to me that the definitions would allow a national scheme to include industries that are in the ETS. In such a situation, would the ETS take precedence, or could industries find themselves operating in both schemes?

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

I see the hon. Gentleman’s point. It would be a question not of preference, but of a scheme’s operability. For the sake of argument, let us say that one established a scheme for bus companies to trade carbon credits and that a European bus trading scheme—for example, a sectoral scheme—was also in place. Those two schemes would have a relationship through, for example, independent auditing and buying and selling. At any one time, the price of carbon in the different scheme might be different.

If I interpreted the hon. Gentleman’s question correctly, he is worried that a Scottish bus carbon trading scheme, for example, might undermine the European ETS, if not set up correctly. That would not be possible because, as we were reminded by the hon. Member for Northavon, the architecture of the European ETS is based on units, not on countries. It would not be subservient any more or less than the pound in Scotland is subservient to the euro.

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

In answer to the hon. Member for Vale of York, clause 43 on its own provides for the enabling power for the Government or devolved Administrations to establish trading schemes. Powers to establish those schemes are provided later within the rules. At present, neither the Secretary of State nor Welsh Ministers have the power to establish such trading schemes through legislation. The Scottish Parliament can make trading schemes within its competence in Scotland. Interestingly, the Northern Ireland Assembly can make trading schemes within its competence in Northern Ireland.

Our aim is for each national authority to have the same set of powers without changing or upsetting the devolution settlements that are already in place. As the hon. Member for Angus said, the idea is to enable joint trading schemes to be made in secondary legislation, and that cannot be done at present.

Question put and agreed to.

Clause 43 ordered to stand part of the Bill.