Climate Change Bill [HL]

My Lords, I, too, welcome the fact that the noble Lord, Lord Stern, has joined our discussions. As well as reading his report, I commend to noble Lords his Ely lecture to the American Economic Association. The middle third is pretty difficult for people without a PhD in economics, but the first and final thirds make excellent reading. It also explains very clearly why the amendment passed in this House to set a 2 degree limit is flawed. We will come to that on another occasion. On Second Reading I expressed concern about the use of credits. There are two possible reasons for this. Was I endorsing the moral view, expressed by the noble Lords, Lord Teverson and Lord Puttnam, that we should set a minimum effort that had to be achieved domestically? Or was I taking the view that the theory of a tonne of carbon being a tonne of carbon is basically sound, but its implementation is flawed? I was expressing the second view. If it really were the case that, for significantly less than it would cost in the UK, we could achieve a global impact by the use of credits, I do not see why we should prevent ourselves doing so. Incidentally, I do not believe that this is a real problem. If we are going to reduce our use of carbon, per unit of GDP, not by 60 but by 80 per cent or 90 per cent, there is no way that we will be able to do it simply by buying credits. In the end, the whole thing will go away. We will never get to per capita emissions of 2 or 2.5 tonnes per head simply by buying our way out. There is a kind of fallacy running through some of this debate, which is that the use of credits is a ““get out of jail”” card, a costless, rather immoral, way of sliding out of our obligations. These things cost money. Enterprises that buy them will find themselves at a strategic disadvantage. An enterprise that is heavily dependent on the purchase of credits will be under tremendous pressure to reduce its use of credits over time. It can use this only as a temporary measure. The use of credits has just as much impact and is just as much of an incentive to improve energy efficiency as not using them and doing it oneself. It is a powerful mechanism in its own right. There are two approaches. One is to set a minimum amount for domestic effort; the other is to allow credits to be used freely. If we do that, there is the whole question of validation, which has not yet come up. We have to make sure that the credits being purchased are genuine in two senses. First, they must reduce CO2. Secondly, they must be genuinely additional. Suppose we set up a scheme that incentivises loggers to reduce logging and an area is designated. This will be useless if they simply go outside that area and continue logging. I believe that the better course is not to have a limit of this kind. There is no evidence that 70 is the right figure, or that 60 or 80 are right. We have no idea. To set a figure at this stage would be a serious mistake. This is clearly what the climate change committee is being established to deal with. At the same time, we need to make a much greater effort to ensure that the quality of the credits being traded represent a genuine reduction in CO2 emissions. Again, that is an area where we could look to the Committee on Climate Change for advice.