Climate Change Bill [HL]

moved Amendment No. 25: 25: Clause 4, page 3, line 8, at end insert ““, and (c) to ensure that the number of carbon units credited to the net UK carbon account for each year of a budgetary period does not exceed 30% of the difference between the 1990 baseline and the annual equivalent of the carbon budget.”” The noble Baroness said: I absolutely agree with the Minister about needing an overhead projector when discussing some of these issues. That is partly the purpose of my tabling Amendments Nos. 25 and 27, because I want to draw out from the Minister comparative answers to two questions on the differences we are discussing. We talk about a reduction in the carbon budget of, let us say, 30 per cent. We then think that we are at 70 per cent, but a large number of different issues are at play which I shall attempt to explain through my amendments. It would, as the Minister acknowledged, be much easier to explain the issues if one could visualise them as pie charts and so on, but I shall attempt to do so verbally. These two amendments would tackle the question of how many offset credits can come from outside the UK. Amendment No. 25 would limit the proportion to 30 per cent of the difference between the annual budget and the original baseline. The limit would be 30 per cent of the reduction effort required to meet the target. In other words, for the Government to comply, 70 per cent of the target reductions must be achieved by reducing domestic emissions or by increasing domestic carbon sinks. To meet the 2050 target, emissions must be 42 per cent lower than they were in 1990. In other words, 70 per cent of the 60 per cent target—if that is what we settle for in the Bill, though I hope we do not and go instead for a higher target—must be achieved domestically. The other 18 per cent—that is, about 30 per cent of the 60 per cent—can be covered using carbon credits. Most of those carbon credits will probably be offset credits purchased either through the clean development mechanism or as EU allowances. One of the reasons for moving this amendment is to draw out from the Minister an estimate of the costs. There are agreements both ways, but this could be an expensive business. The partial impact assessment suggests that it would be 25 per cent cheaper to offset one-third of the emissions from overseas than it would be to achieve the reductions domestically. Is that likely to be the case? This is an issue that we touched on the other day in Committee. In 1990 the UK emitted 775.2 million tonnes of greenhouse gases in carbon dioxide equivalent, and in 2006 the UK emitted approximately 658.1 metric tonnes of carbon dioxide. If my maths is correct—though it may not be—domestic greenhouse gas emissions need not be reduced at all under the Bill in order to meet the Government’s targets. The Government could simply purchase carbon credits to cover the difference. In other words, if emissions were still at present levels in 2050, the Government could claim to have met their targets entirely by purchasing offsets. The price of a certified emissions reduction—the carbon unit created by the clean development mechanism of the Kyoto Protocol—is currently about $10 per tonne of CO2 emitted. In order to cover the entire target reduction in 2050, the Government would therefore have to spend some $4.6 billion. That would cover only a single year, whereas the Government would have to offset the difference between actual emissions and their carbon budget every year. To date, carbon emissions have been rising. The second amendment is different, though I am sure that the Minister, with all the resources of his department, will be able to explain the difference better than I can. However, I will attempt to prove that I have tried to find the difference. Amendment No. 27 would place a limit on the number of international credits used, based on the size of the budget rather than the size of the target. In the short term that would lead in practice to more international credits being allowed. In the long term, however, it would lead to fewer. For example, in a 2020 budget with a 20 per cent reduction target—where the baseline equals 100—a 30 per cent target would lead to a limit on credits of six; that is, 30 per cent of 20 per cent of 100 equals six. And for Hansard’s benefit I should say that this is clearly written out in my notes. In a 2050 budget with a 60 per cent reduction target—where the baseline equals 100—30 per cent of the target would lead to a limit on credits of 18; that is, 30 per cent of 60 per cent of 100 is 18. In the short term, a limit on credits based on the budget would mean that the Government could cover a much greater proportion of targets using international credits. That is far more numbers than I need to use; maths has never been my strong point. The point of the exercise when examining these amendments is to see exactly what would be the effect of putting a cap on the international credits. As the Minister said, this is a difficult issue to debate non-visually. It is also difficult to debate it without using exact figures, because it is difficult to prove the end point being reached. However, having worked through this several times, I believe that if we do not put a cap on these international credits we will not be able to arrive at a satisfactory position where we can measure our domestic achievement, maintain environmental credibility and demonstrate that the developed states are taking a lead. I am glad that Bali has set us on the road. However, by the time we get to 2020 we will have to have established clearly through our efforts that we have had the basic principle of supplementarity very much in mind. I do not envy the Minister’s having to reply to these amendments and hope he can draw out the difference between the two. I would be grateful to have that put on the record. I beg to move.