Climate Change Bill [HL]

My Lords, I have a great deal of sympathy with the aims of the amendment but I will nevertheless argue that it would not be appropriate to include it on the face of the Bill. My sympathy is based on the fact that it is essential that the UK achieves cuts in its own emissions and does not rely on what the noble Lord, Lord Puttnam, has called the delusion of a get-out-of-jail-free card. That is important because it is vital that developing countries in total illustrate to the world what a low carbon economy is and what changes in behaviour, energy efficiency and the lower carbon sources of energy will be required for the whole world to achieve a low carbon economy and thus emission reductions. Indeed, the fact that we need to demonstrate that supports the argument of the noble Lord, Lord Puttnam, that it is not absolutely the case that a tonne of carbon saved in every country of the world is precisely the same. There is a value in hard emission reductions targets in developed countries because they will drive the changes in behaviour, energy efficiency and technology which will then be required across the whole world. It is important to realise that in the long term, when we look at the 2050 target, we probably have to work on the assumption that all of the emission reductions we will aim to achieve by 2050 will have to be achieved through domestic effort—not 90 per cent, not 95 per cent, but all. That is because by that time, all countries in the world, including those that are currently still at a low-income developing stage, will have to be on a strong downward emissions path. Although it will make perfect sense to allow trading between ourselves and other countries if the whole world is in cap and trade systems, we have no basis for assuming that we will necessarily be a logical net buyer of emissions credits at that time rather than emissions seller. We therefore have to design our long-term climate change programme on the assumption that we must drive changes in behaviour, energy efficiency and the source of our energy such that it will be possible by 2050 to achieve the reduction target—be it 60 per cent or 80 per cent—entirely through domestic effort. That may not be how we do it, but we have to design our policy on the assumption that that may be what occurs. While it is the long-term reality that that is what we have to achieve, there is a potentially significant role to be played through emissions trading in the shorter term. Where there are opportunities to reduce emissions at much lower costs elsewhere than in the developed countries, it makes sense for us to take advantage of those opportunities. There is a vital need to help spur the development of low-carbon economies in developing countries. That needs resources; and a flow of finance from trading is one of the potential ways that those financial resources will be achieved. There is therefore a role for trading, and the appropriate extent to which the UK relies on the buy-in of credits is therefore a subject that requires detailed attention. It is also an issue which becomes more complex the more one thinks about it. For example, there are several different categories of buy-in of credits to which it would be possible to have a different attitude. Under the EU ETS, there are buy-ins of credits entirely between private players within Europe. We cannot set that as a policy variable because it is the product of a set of private decisions. One could argue—although I am not necessarily doing so—that we should be more relaxed about that sort of buy-in because it is entirely within Europe and is therefore part of an overall developed economy which is achieving reductions somewhere and which is therefore driving the technologies that we need. There is also the possibility of purchases of clean development mechanism emission credits on a direct Government-to-Government basis. However, those are not ““get out of jail free”” cards because they have a cost attached to them. Given that they would cost the Treasury real money, we have to believe that there would be some Government unwillingness to sanction a large number of them. Finally, there is the complexity that the EU ETS will probably allow some purchase of credits from outside the European Union in phase 3. This suggests that one of the most important things we have to influence is not necessarily our own targets for buy-in from outside, but the buy-in rules which exist from the EU ETS. All of that indicates that this is an appropriate issue to be handed to the Committee on Climate Change for detailed consideration and the provision of a robustly independent recommendation on the issue. However, I realise that my own confidence in the robust independence of the committee is based on insider information and that other noble Lords cannot, by nature, be so confident. I also recognise that even if the committee recommends a certain approach, government could choose not to accept that recommendation. I therefore recognise that noble Lords may wish to ensure that there is something in the Bill which makes sure that the level of domestic effort is significant. However, I am concerned that, as written, the specific form of the amendment is not the best. It could have some unintended consequences, because it does not set a minimum level of UK domestic effort—it sets a minimum percentage. That could mean the following. Imagine two recommendations that the climate change committee might choose to make. In one, we recommend that there should be a 19 per cent domestic cut in emissions and in addition a 7 per cent buy-in of credits from the rest of the world. In another, we recommend a 20 per cent cut in domestic emissions and a 10 per cent buy-in from the rest of the world, for an overall reduction of 30 per cent. Under the rules of the Bill if amended by Amendment No. 106, the first, 19 per cent plus 7 per cent, would be legal. It meets the 26 per cent total amount and the 70 per cent constraint. The second recommendation, 30 per cent—that is, 20 plus 10 per cent—would be illegal, because although it meets the 20 per cent minimum constraint, it does not meet the 70 per cent minimum from domestic effort. But anybody who is concerned about the success of the Bill for the climate would have to prefer, in percentage terms, 20 plus 10 as a reduction to 19 plus 7. The problem has arisen from writing the amendment by reference to Clause 4(1) rather than to Clause 5(1). If it defined an absolute minimum reduction in the domestic amount, rather than a percentage of the total reduction, it would be more effective.