Climate Change Bill [HL]

My Lords, I accept that this is a complicated part of the Bill. I shall stick to my notes and will deal with it in two parts. Amendments Nos. 186A to 186D would amend the powers to make trading schemes under Part 2 of Schedule 2. This part is defined broadly in paragraph 12. Schemes can encourage any activities which reduce greenhouse gas emissions or which lead to the removal of greenhouse gases from the atmosphere. If the noble Duke’s concern is that a particular type of beneficial activity could inadvertently be excluded from a trading scheme, I hope that I can offer him that reassurance. An example of such a scheme is the renewables obligation, and this scheme places obligations on electricity suppliers to supply a certain amount of their power—currently 6.7 per cent of total supply, rising to 7.9 per cent from 1 April—from renewable sources, such as wind or hydro-electricity generation. Part 2 of Schedule 2 is designed to allow schemes like the renewables obligation to be made in secondary legislation. These schemes encourage an activity by setting an overall target and enabling it to be met at least cost by allowing participants to trade with one another to meet their obligations. Paragraph 15(1) requires that the regulations directly or indirectly identify the scheme participants. It is, of course, vital that the participants are identified in the scheme rules to ensure that all those to whom it applies are aware of the requirements it places upon them; they may be included in the consultation process required by Clause 40. Amendment No. 186A would remove this basic but important element of the powers, and for that reason, the Government cannot accept it. Together, the effect of Amendments Nos. 186A to 186C would be that a scheme would have to contain details of a procedure by which participants would be authorised to carry out approved activities. Given that schemes under Part 2 of Schedule 2 are meant to encourage certain activities, we are not sure why separate authorisation and approval processes are required. I have listened carefully to what the noble Duke is seeking to achieve with these amendments, but Schedule 2 as drafted already provides the flexibility for the provisions that he is looking for. Paragraph 15(2) provides that participants may be identified by reference to any, or any combination of, criteria, so again this leaves it open for particular activities to be included in trading schemes, if that is desired. Paragraphs 17 and 19 of Schedule 2 already allow the relevant national authority to control what activities qualify for certificates and set out the circumstances in which trading is permitted. For example, this could be a process like that in place to determine the types of renewables that are eligible under the renewables obligation. We believe that these paragraphs will enable suitable safeguards to be put in place to ensure that participants and activities are controlled appropriately, while maintaining the flexible approach in these powers overall. If it is felt to be beneficial to include particular types of activity in a trading scheme, the Bill as drafted provides sufficient scope to allow this. On that basis, we cannot support the amendments. The noble Duke made a point about the Government being opposed to bottom-up schemes similar to joint implementation. The UK Emissions Trading Scheme, which ran from 2002 to 2006, was a voluntary domestic emissions trading scheme. Thirty-two direct participants opted into the scheme, representing a variety of organisations from energy intensive industries to the service sector, and encompassing both public and private sector companies, including the likes of BP, British Airways, Lafarge, Marks & Spencer and the Natural History Museum. By committing to reduce emissions, organisations were able to bid at auction for a proportion of the £215 million available as an incentive payment over the lifetime of the scheme. Together, direct participants agreed to reduce emissions by £3.96 million tonnes of carbon dioxide equivalent by 2006. However, the results in 2006 show that direct participants achieved emission reductions of more than 7 million tonnes of carbon dioxide against the baseline since the start of the scheme in 2002. This shows that opt-in schemes do work, which is why we have included Part 2 of Schedule 2. I hope that reassures the noble Lord that we are keen to provide appropriate incentives to reduce emissions. Amendment No. 186D would add a new paragraph to Schedule 2 to allow the regulations to make provision for participants who undertake activities which reduce emissions or remove greenhouse gases from the atmosphere to receive credits that they can count towards their trading scheme obligations. I can assure the noble Lord that Part 2 of Schedule 2 will already allow that kind of provision to be made. In addition, paragraph 19 allows a suitable level of control over trading, while paragraph 20 allows interchange with other schemes where that is appropriate. I hope that, with those reassurances, the noble Duke will see that the objectives of these amendments are already provided for in the Bill as drafted, and I hope that he will not press his amendment.