Clause 78

Climate Change Bill [Lords] – in a Public Bill Committee at 4:49 pm on 8th July 2008.

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Power of Ministers and departments to offset greenhouse gas emissions

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

I beg to move amendment No. 27, in clause 78, page 36, line 43, after ‘acquire’, insert

‘and dispose of units or interests in’.

Photo of Peter Atkinson Peter Atkinson Conservative, Hexham

With this it will be convenient to discuss Government amendment No. 28

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

Having failed to persuade the hon. Member for Cheltenham of the force of my argument, I will attempt to redeem myself by seeking consensus on amendments Nos. 27 and 28. These are minor, technical amendments. Clause 78 allows the Government and the devolved Administrations to purchase carbon units which, at the moment, is not allowed. Those could be used to help meet the targets in the Bill or to offset emissions from the central Government office estate.

I will explain the underlying legal position. The purpose of the clause is not to give Ministers and Departments the power to buy and dispose of carbon units—they can already do that under general law in the same way that I and other hon. Members have the inherent power to buy and sell things. We do not need an Act of Parliament to give us that power. However, if this Bill becomes an Act, the purchase of units could become a source of significant and ongoing expenditure. By convention, parliamentary approval through such a clause is needed to authorise such expenditure. The position is slightly  different for the Welsh Ministers who, unlike other Ministers, have only those powers conferred upon them by statute and the clause is necessary for that reason.

Amendment No. 27 broadens that power and allows for the acquisition and disposal of carbon units and interests in carbon units. Interests in carbon units includes the ability to enter into futures contracts to acquire units at a later date based on a fixed price at the date of the agreement. It also provides the power to dispose of carbon units or interests in them, and will ensure that the UK and devolved Ministers have the power to buy and sell carbon units or contracts relating to them. That power exists anyway and this is not a debate about first principle. However, given that the power to acquire them is expressly mentioned, it made sense to put the point beyond any doubt.

Photo of Martin Horwood Martin Horwood Shadow Minister (Environment, Food and Rural Affairs)

I will speak briefly. I sense that the amendment was not drafted in the Department for Environment, Food and Rural Affairs, but that it might have originated somewhere rather closer to No. 11 Downing street. It has the sniff of Treasury bean counting about it. When considering the pros and cons of offsetting, the Treasury has been remarkably immune to environmental arguments. However, at the prospect of Ministers squirreling away funds for their disposal outside of Treasury control, it has suddenly become interested.

This is an interesting amendment that may be technically and legally necessary and I shall not oppose it. I would be interested to hear the Minister’s response on its origins and the rationale for it in relation to the Treasury.

Photo of Gregory Barker Gregory Barker Shadow Spokesperson (Environment, Food and Rural Affairs) 5:00 pm, 8th July 2008

I understand from the Minister that the clause is an enabling clause that allows the Government and the Departments to buy carbon credits to offset their emissions. If my reading of the amendment is correct, it enables Departments to sell carbon credits, as well as purchase them. That might be a rather cursory summary, but if that is the principle behind the amendment, we support it.

A few questions still need to be answered. First, the amendment will add to the ability to dispose of carbon credits the power to acquire them. This might simply be a matter of legal language, but will the Minister explain if anything is meant by disposing of the units, other than selling them? If the Government had the power to dispose of them in some other way, such as by nullifying or invalidating them, that could seriously affect the carbon market. If Departments had the power to acquire and invalidate units of reductions, it could cause a level of uncertainty in the carbon markets and contribute to unwanted volatility in the price of carbon. Will the Minister be clear that by “dispose” he exclusively means sell?

Similarly, Government amendment No. 28 seems superficially innocuous. If it simply clarifies that when the Treasury buys units, it owns them, it seems wholly reasonable. However, that poses an interesting question about what the Treasury’s involvement in the carbon market will be. Is it the Government’s intention to trade in carbon units? Will amendment No. 28 give the Treasury the power and scope to intervene in the carbon markets in a similar fashion to the way it speculates on gold? As hon. Members know, the Treasury’s speculation on gold  has cost the country billions and billions of pounds. Indeed, the decision to sell gold reserves has cost the Treasury more money than any single financial decision by any Chancellor on record.

If amendment No. 28 will open the door to similar speculation in the carbon markets, we will have to address it in more detail. Perhaps the amendment is not even required for that. Will the Minister clarify whether the Treasury has the power or the intention to trade—or speculate, as some of his old Labour colleagues might say—in the carbon market? If the amendment is for clarification only and the Minister can assure the Committee categorically that it is not even the thinnest end of a very thin wedge that could lead to speculating in the manner of the gold reserves, I apologise for being alarmist. I am sure hon. Members share my concern, given that the stakes are so high.

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

The biggest single retrograde decision by a Chancellor was the decision, as advised by the then right hon. Member for Witney, to join the European exchange rate mechanism at an unsustainable level against the express support of the vote of the national executive committee of the Labour party. The point about gold is that one has to look at what was done with the money in the meantime. It may well have been used to better purposes.

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

We invested in the economy of the United Kingdom to great effect.

Knockabout aside, the hon. Member for Cheltenham is scrutinising the Bill effectively. The Treasury, like any other Department, already has the power to buy and sell carbon units just like any other person. However, I am advised that the answer to his question is that the Treasury means the Lord Commissioners of the Treasury. They are not a corporate body. Amendment No. 28 will make it clear to a buyer of units that they can buy units from the Treasury even though it is not a corporate body. The hon. Gentleman is right that this is a technical provision.

The first question from the hon. Member for Bexhill and Battle was sensible, but I thought his second ridiculous. In answer to his first question, the term “dispose” is about selling, but in certain circumstances it could also mean cancelling—just to complicate matters. For example, if the country had reduced its emissions beyond what it was required to do, and had surplus carbon units, under clause 16, the Government could bank those units into the next period—remember the debate about banking or borrowing over periods—or sell them to another country. That is the basic principle. It could involve cancelling, but in practice it means selling.

Amendment agreed to.

Amendment made: No. 28, in clause 78, page 37, line 8, at end insert—

‘( ) If the Treasury acquire such units or interests in units, until they are disposed of they shall be treated as held by the persons for the time being constituting the Treasury.’.—[Mr. Woolas.]

Clause 78, as amended, ordered to stand part of the Bill.

Clause 79 ordered to stand part of the Bill.