Reporting on greenhouse gas emissions by Export Credits Guarantee Department
(1) The Export and Investment Guarantees Act 1991 is amended as follows.
(2) In section 7 after subsection (1) insert
(1A) The annual report shall include an assessment of the direct and indirect contribution of greenhouse gases to the climate from those projects falling into Category A, High Potential Impact or Category B, Medium Potential Impact of the Export Credits Guarantee Department Case Impact Analysis Process for which arrangements were entered pursuant to sections 1, 2 or 3 in that year..[Mr. Hurd.]
I beg to move, That the clause be read a Second time.
I shall be brief, both because I know that the Committee is keen to get on and because events have unfolded in respect of the Governments response to the new clause since it was tabled. The new clause, which was tabled in my name, has distinguished cross-party support, including from an ex-Labour climate change Minister. Our short debate will take us back to the issue of disclosure.
We spoke at length about the need, or otherwise, for large British companies to disclose their emissions. The new clause would extend that principle to the public sector, which should be a beacon of best practice. The new clause focuses on one particular Government agency: the Export Credits Guarantee Department.
Most of us recognise that the ECGD plays an extremely important economic role in facilitating UK exports. Over the past five years, it has supported more than £12.5 billion of UK exports. No one would underestimate the importance of its role to the economy in underwriting risks that others are not prepared to underwrite. However, a growing number of people in this House and outside, most notably the WWF, are concerned that the process that the agency works to has inadequate transparency and accountability.
The ECGD has been allowed to operate in a way that is semi-detached from the Government, and it is not entirely in tune with the priorities that the Government attach to the environment and the battle against climate change. For some months, we have been campaigning to reform this important agency and to drag it out of the shadows so that it more effectively considers its impact on the environment.
The agency is not particularly big, when measured in terms of the number of people who work for it, but it has tremendous clout, particularly when it is connected to other export credit agencies around the world. The annual value of capital goods that are exported with finance from the club of OECD-based ECAs is estimated to be between £30 billion and £40 billion. The 2003 report on the agency by the Environmental Audit Committee, which first expressed concerns about the degree to which the agency supports and is seen to support the Governments agenda on the environment, noted that some 10 per cent. of exports from large industrialised economies are facilitated by ECAs.
A non-governmental organisation calledbelieve it or notECA Watch has estimated that, worldwide, ECAs support twice the number of oil, gas and mining projects as all the multilateral development banks combined, and half of all new greenhouse gas emitting industrial projects in developing countries have some form of ECA support. The point that I am trying to make is that we should not think of the issue in terms of one relatively small Government agency. The agency has real power to drive change, especially if it is seen to take a lead on the way in which ECAs around the world work.
The underlying issue is that to date the ECGD business book, if we can call it that, has been focused on carbon-intensive industries. To give that some context, defence and carbon-intensive industries, including aerospace and fossil fuel developments, typically make up more than 75 per cent. of ECGDs customers.
The problem is that the evidence accumulated by WWF and others suggests that there are inadequate processes within the ECGD regarding the rules for assessing projects for their impact on the environment. When rules exist, their application appears to be discretionary, and more than half the business is focused on defence and aerospace, for which no such rules exist. Surely it is time, given the context of a Government who take great pride in their leadership on climate change and the importance that they attach to the climate change agenda, that the agency is brought up to date and seen to be consistent with the Governments priorities elsewhere.
We are pressing for reform of the agency. In parallel with this Committees deliberations, the Environmental Audit Committee has launched a second inquiry into the agency to explore some of the concerns that have been expressed. We have campaigned for amending the Export and Investment Guarantees Act 1991 so that governance of this agency is reviewed and reformed, and to give it the requirement to have a more explicit regard for climate change in how it does business and in the processes by which it makes decisions.
The ECGD should have its own targets, as other agencies do, and it should be leading the shift towards low-carbon finance, rather than continuing to be so heavily weighted towards financing carbon-intensive industries. Frankly, I am sure that the Minister will share my surprise that a £50 million fund that is ring-fenced within the ECGD to facilitate investment in the export of low-carbon technologies has not been deployed at all. As far as I understand it, only about 2 per cent. of the business book of the ECGD is focused on what we might call new technologies. That seems to be a wasted opportunity in the context of a British Government who are seeking to position the British economy as a leader in the low-carbon future. We need everyone to pull in the same direction.
Finally, and this point is most relevant to the new clause, the agency should be transparent and should disclose the emissions that result from the decisions that it makes. There seems to be little practical argument against that because the agency has confirmed to me that it collects the data from what it calls the high-impact projects that it facilitates, and there appears to be no practical difficulty in collecting the data from the medium-impact projects.
What we are asking for goes with the grain of what seems to be happening in the international market, with OPEC and ECOSIM, which I know are slightly different from the ECGD, apparently disclosing the details of emissions that result from their decisions. There really seems to be no practical argument against disclosure.
I am delighted to hear, although I have yet to see the hard proof, that we are pushing on an open door in this context, because I understand that the Government accept the principle of the new clause, but they prefer not to action its intention through amendments to the Bill. Instead, they would prefer to make the change in a different way. I am thus being asked to take things on trust, pending what I understand to be an imminent announcement from a Minister, perhaps next week. I will listen to the Ministers response very carefully.
In the interests of brevity, I do not intend to repeat the arguments that my hon. Friend has powerfully made. I will simply reiterate that the ECGD wields a power and influence that is well above its level of financing for private sector projects. Ignoring the effects of carbon-polluting activities that are directly supported by the UK Government fundamentally undermines the rationale of establishing a climate Bill to reduce the contribution of the UK to global man-made climate change. I thus wholeheartedly endorse my hon. Friends comments.
Indeed we do, and that is what we are looking for. Ultimately, we need a far more ambitious strategy right at the heart of the Government, not just at the ECGD. As my hon. Friend the Member for Ruislip-Northwood hopes, now is the time for the Government to get serious about matching ambition with action. I hope that the Committee supports the principles behind the new clause.
I also lend my support to the measure, which was expertly moved. I see the name of the Chair of the International Development Committee, my right hon. Friend the Member for Gordon (Malcolm Bruce), attached to the amendment. I have a sneaking suspicion that my hon. Friend the Member for Twickenham (Dr. Cable), in his characteristically iconoclastic fashion, would rather abolishor somethingthe ECGD. However, for as long as it continues, I can see no reason, particularly because of the global leadership factors that the hon. Member for Ruislip-Northwood mentioned, why we should not have comprehensive reporting of the sort that he suggests. The Liberal Democrats thus support the new clause.
Congratulations are due to the hon. Member for Ruislip-Northwood on tabling the amendment. It is always nice when there is a champagne moment in a Committee, and we have reached such a point, because the Government have listened to the arguments made by the hon. Member for Ruislip-Northwood and, incidentally, those of the right hon. Member for Gordon and the right hon. Member for Scunthorpe (Mr. Morley), and faced with the array of arguments, we have decided to announce that we agree with the proposal.
I confirm here and now that the ECGD will report emissions from high-potential-impact cases from this financial year and will inform applicants in respect of its support for medium-potential-impact cases that they will be required to provide information on their emissions. That information will be published from the financial year 2009-10. My hon. Friend the Minister for Energy will confirm the details of that arrangement shortly. The Environmental Audit Committee is looking at this matter.
As the hon. Member for Ruislip-Northwood mentioned, in line with the approach on better regulationnot having regulation when it is not necessaryit makes sense to achieve the effects of the new clause without legislative change. This is a fast-moving field, so it would be a shame if the ECGD was not able to maintain its position as the leader of the pack in the world because it needed, at some point, to change an Act every time new developments occurred. This announcement makes the ECGD the first export credit agency in the world to report systematically on emissions from projects that it supports. That is a good example of how we can lead the way.
Let me just cover the high potential impact cases. Starting with the financial year 2008-09, ECGD will publish on its website, in respect of each financial year, estimates of the greenhouse gas emissions as follows: first, it will publish estimates on those projects for which ECGD has provided support in that financial year that fall into category Ahigh-potential impactas determined in accordance with the ECGDs case impact analysis process statement; secondly, it will publish estimates for those projects with greenhouse gas emissions that exceed the threshold used by the International Finance Corporation, as described in its performance standard; and, thirdly, it will publish estimates when the value of the goods and services supported by ECGD exceeds a sum, which is equivalent at the moment to about £8.2 million, to the threshold set out in the OECD council recommendation on common approaches on environment and officially supported export credits.
On medium-potential-impact cases, there is more good news for the hon. Gentleman. From 1 January 2009, ECGD will collect data on greenhouse gas emissions as follows: first, it will collect data from projects that it has provided support for that fall into category B, as determined in accordance with the case impact analysis statement. It will collect data from projects with emissions that exceed the threshold used by the International Finance Corporation, as described in performance standard 3 and when the value of goods and services, supported by ECGD, exceeds the special drawing rights threshold set out in the OECD common approaches policy statement. Those are the thresholds that are used on a multinational basis.
The argument is very strong. It is important that this countrys export credit guarantees are supporting our international efforts, as has been said. That is why the Government are pleased to make this announcement. In the interests of pursuing this policy immediately, I respectfully ask the hon. Gentleman to withdraw the new clause.
A champagne moment indeed. I thank the Minister for that extremely detailed reply. I know that he and his Department dance with the angels on this issue. I also know that the ECGD reports directly to the Department of Business, Enterprise and Regulatory Reform, about which many of us are more sceptical when it comes to its commitment to this agenda. Because I have done business with the Minster before, I accept at face value what he says and what he has read out. We will consider the detail of the proposal with great interest. We note that the ECGD continues to demand flexibility on how it does that, and that it avoids that being done on a statutory basis or on any amendment being made to the Act that governs it. That causes us some concern. However, on the basis of what I have heard, I beg to ask leave to withdraw the motion.