Climate Change Bill [HL]

My Lords, I will get off on the right foot. Subject to the government amendments being approved, I am always happy to look at their technical drafting, in answer to my noble friend, who speaks with the experience of chairing the Joint Committee. First, I apologise for the length of my response. A lot of key points have been made, and I am keen to explore why we think the opposition amendments are not a good idea and to get that across in a way that I hope the House will accept. We had a detailed discussion in Committee on annual accountability, when I tried to explain the problems inherent in setting single-point annual targets, whether or not they were legally binding. We have looked again at the arguments presented in that debate, and it is clear that there is a good deal of common ground about what we are trying to achieve. That is to say, annual transparency and accountability about progress towards meeting the budgets are crucial for all of us, and some indication of the Government’s expected trajectory for reductions over the budget period would help in providing this. It is important that there is no divide between any sides of the House on that. I note that the Bill already provides a strong annual accountability framework through a number of its existing provisions. Every year, the Government must publish a statement of emissions for the previous year. The climate change committee must then report to Parliament on progress towards meeting the budgets, and the Government respond to the committee’s report. Since our helpful discussions on this issue at Committee stage, we have considered ways in which still greater clarity can be provided about how the accountability framework will work in practice, because it has to work in practice. I will come to those shortly. First, I want to look at the opposition amendments. Amendment No. 16 would require the setting of both an annual target and a rolling annual target in terms of the net UK carbon account. Amendment No. 18 makes the annual target set under the first paragraph of Amendment No. 16 legally binding. However, the rolling annual target, set under the second paragraph of Amendment No. 16, would not be legally binding. We have to ask: how is it possible to have two separate targets for the same thing in the same year? Let us take the year 2009. The Government would be required to have both a legally binding annual target and a rolling annual target that would not be legally binding. That looks like a recipe for total confusion. Amendment No. 21 would mean that the Government could set both the legally binding annual target and the non-binding rolling target only at the level recommended by the Committee on Climate Change. Again, these amendments would cut the Government out of the equation, which is another reason why we cannot accept them. The more fundamental problem with the opposition amendments is that we simply think that a single-point annual target does not work. It is too blunt and inflexible. Instead, the Government have tabled proposals that have at their heart government Amendment No. 49, which requires that the report on proposals and policies to meet budgets should include an indicative range for the trajectory of emissions over the budgetary period. We believe that the idea of an annual indicative range is superior to proposals for an annual single-point target. As I said in Committee, emissions can fluctuate from year to year for a variety of reasons, many of which, such as the weather, are out of the Government’s direct control. There is also an inevitable uncertainty between the forecast of the impact of a given policy and actual emissions, again for reasons that may be beyond the Government’s direct control. We need a system of annual accountability that can deal with these real-world fluctuations and uncertainties but which still provides sufficient clarity about progress to ensure that the Government of the day can be held to account appropriately. We believe more generally that single-point targets, whether annual or rolling, are too inflexible and are likely to lead to regular false alarms. Instead, setting out an indicative range for the net UK carbon account for each year of the budget period combined with greater clarity about the timescales for policies to take effect, as required by government Amendment No. 53, will ensure that the Government of the day can be properly held to account for progress during each year of the budget period, not just at the end of the period. Within the package of government amendments, Amendments Nos. 67, 68, and 70 are consequential and relate to the annual statement of UK emissions required under Clause 12. These amendments require that the annual statement must give total amounts of carbon units credited to or debited from the net UK carbon account for each year, rather than for the budgetary period in which the year falls, and totals of the net UK carbon account. Without this information, there would be no way of measuring progress against the indicative trajectory. Since tabling these amendments, I have been asked what my expectations are for the range. How will it work and how wide is it likely to be? Those are critical questions if an indicative range is to provide the right balance between the need to take account of the likely variation in emissions from year to year and the need to provide a robust framework against which to assess annual progress. Clearly, a range will not fulfil its function effectively if it is so wide as to be meaningless. Therefore, we need to look at the likely effect of the main factors creating uncertainties about annual emissions. One factor is, as I have mentioned, the weather. UK emissions are sensitive to variations in the temperature above or below the average. There will be increased use of heating, for instance, in a particularly cold winter and increased use of air-conditioning in a particularly hot summer. Population growth is another factor. The Office for National Statistics provides annual revisions to population forecasts that directly affect projected emissions. If the number of UK households goes up, UK emissions are likely to increase. There is also the question of policy uncertainty. Not all policies deliver the exact emissions savings that we expect when we design them. Some will deliver more, others less. Variability in emissions as a result of these factors can be seen clearly in the UK’s annual inventory since 1990. For example, if you look at figures for emissions of all the Kyoto greenhouse gases, you see that the reduction was 6.5 per cent in 1996 but 14 per cent in 1999, against a 1990 baseline, with emissions for surrounding years being somewhere in between. There is also the wider European and international context. Around half our emissions are already capped by the EU Emissions Trading Scheme, which operates on a multiyear basis. Actual emissions in any one year could therefore differ from our assumptions because companies have decided to bring forward or put back their emissions or abatement action as a result of changing carbon prices or other economic factors outside the Government’s control. Referring again to historical figures, we can see that in 2004-06, when emissions trading was introduced, the effective reduction in the UK’s net carbon account from the 1990 baseline almost doubled. This demonstrates the potentially significant effect of introducing big new policy mechanisms. As the international framework develops, other mechanisms may come on stream over time that will also influence our level of flexibility in how we reduce emissions. The range will also need to change over time as, for example, our understanding of the underlying factors behind UK emissions trends improves. It is not possible at this stage to put a definitive figure on how wide the range will need to be because of these factors. However, we believe that we are looking at a variation in single-figure percentages overall. That is as accurate as we can get and is not pie in the sky. We are looking at single-figure percentages rather than tens of percentages. We cannot see that it would need to be a great deal wider than that. Obviously, I accept that that is a broad estimate and that more detailed work needs to be done. However, we believe that that represents a much better way forward, which will reflect the nature of reality rather than the spurious precision of a single-point annual target. I regret that I have had to give such a lengthy response to this issue. In summary, we have problems with the practical effects of the opposition amendments. I say the practical effects and I genuinely mean it because I have been on the other side as well. Sometimes you want to do something but, if it is impractical, it is not right to put it into legislation. It may not be accepted that this is impractical, but I hope that I have explained that it is. Indeed, the noble Lord, Lord Turnbull, reinforced that point. I also believe that, as a whole, our proposals for an annual indicative range provide for even greater transparency on an annual basis about the Government’s expectations and progress while also maintaining the flexibility that we need in the five-year budgetary period. We are at one on that. We want to have that annual accountability within the five-year period, but the question concerns how we go about doing that. Finally, I do not believe that the points made in favour of annual targets outweighed the problems that those targets would bring, or that such targets would add value beyond the proposals that we have brought forward. Obviously, our amendments are as a package designed to achieve the objective in a practical way. I hope that I have made the point that the opposition amendments are basically impractical. We are trying to achieve the same thing. I ask noble Lords to consider their position and not to press their amendments.