Climate Change Bill [HL]

I should say at the outset that we accept the spirit of one of these amendments, which I shall come to in due course. Amendments Nos. 167 to 168A relate to limits on the amount of carbon units, whether international or European. The Bill allows participants in UK trading schemes to use emission reductions delivered through European or overseas trading schemes towards their domestic obligations. This allows UK trading schemes to be linked to other trading schemes across the world. That is fully consistent with the development of a global carbon market, which will help to strengthen the global response to climate change. However, Amendments Nos. 167 and 168 would place limits on this and reduce the flexibility to develop domestic trading schemes that have the best outcomes for cost-effective emission reductions, which could therefore lead to increased costs to UK business both now and in the future. An example of how this power may be used comes from the carbon reduction commitment, which proposes the conditional use of credits from the EU Emissions Trading Scheme but purely as a safety valve to prevent the CRC allowance price rising to undesirably high levels. Other trading schemes established under the Bill could target other sections of the economy, operate in different ways and have different linkages to trading schemes elsewhere, whether within the European market or more widely. Our view is that the right approach—the Government always have the right approach—is to keep our options open at this stage. That makes sense. We are in uncharted waters here and it would be quite wrong to limit ourselves. If there is to be a limit on the use of units from the EU or from overseas in a domestic trading scheme, the best way to proceed is to have this debate when this House and the other place discuss individual future schemes, as they will. Indeed, the Bill requires both Houses to approve any new trading schemes. On Amendment No. 168A, we have previously discussed whether there should be limits on the contribution that European and international credits can make towards the UK net carbon account. I undertook to consider that issue, which we are doing throughout government. I assure noble Lords that Whitehall is abuzz with packages of ideas flowing from your Lordships’ five days of debates so far. It will be no different today. The volume of paperwork being generated is enormous. I hope to bring good news in due course. We do not see why any limit for the national net UK carbon account as a whole should be set through regulations making trading schemes under Part 3 of the Bill. This has the potential to be confusing and we are not sure what value this part of Amendment No. 168A would add. The amendment would also require any such limit to be approved by the Committee on Climate Change. As we have previously discussed, Clause 40(1) requires the Government to seek the advice of the Committee on Climate Change before making any regulations under Part 3. This is an important safeguard, which relates to all the matters set out in Schedule 2, so we see no reason to single out the possible use of overseas credits in trading schemes as Amendment No. 168A proposes. Amendment No. 167A would require new trading scheme regulations explicitly to state the amount of units from schemes abroad that may be counted towards the net UK carbon account. We accept the spirit of the amendment, which seeks to provide further transparency regarding the extent to which the UK uses international credits to meet its target. However, it is not clear how the wider question relating to the UK net carbon account as a whole is linked to the establishment of an individual trading scheme. In addition, Clause 12(6) already requires the Government to report annually on the number and type of carbon units that have been credited to or debited from the UK carbon account. In effect, Amendment No. 167A would do no more than replicate what is in Clause 12(6), if we have understood it correctly. Not only do we agree with the spirit but we agree with the practicality and the desirability of having something such as this in the Bill. I hope that, if I have got that right, noble Lords will not press these amendments.