Climate Change: Carbon Budgets

My Lords, the Government recognise that the challenge presented by climate change is enormous in both scale and urgency, as I know the vast majority of your Lordships are keenly aware. The scientific consensus is unequivocal: the global climate is warming and this is caused primarily by human activity. The impacts of climate change are already being felt. That is why the House passed the Climate Change Act last year. As noble Lords will be aware, the Act establishes the world’s first long-term legally binding national framework to reduce emissions and support the UK’s transition to a low-carbon economy. It shows our commitment to playing our part in global efforts to tackle climate change. One of its core provisions puts in place a system of five-year carbon budgets to set the trajectory towards our long-term targets—to reduce greenhouse gas emissions by at least 80 per cent by 2050 below 1990 levels, and to reduce them by at least 34 per cent in the period 2018-22. The Act also established the independent Committee on Climate Change, whose primary role is to advise government on the level of carbon budgets and monitor progress through annual reports to Parliament. This cycle of reporting plays a fundamental part in holding the Government to account in relation to their budgets and targets and providing a challenge to the action taken by the Government to meet them. The Government very warmly welcome the committee’s first progress report entitled Meeting Carbon Budgets—The Need for a Step Change. This report makes an important contribution to the debate on how successfully we can make the transition to a low-carbon economy in the UK. The Government are considering the report in detail and we will lay a response before Parliament in January, but I hope this evening to give a broad outline of the Government’s position, and I welcome the opportunity to listen to the debate and to respond to the points made. We agree with the committee that a step change is needed in the pace of emissions reductions. In calling for a step change, the report recognises the importance of the Government’s UK Low Carbon Transition Plan, published in July, in setting out how we will meet our budgets, through emissions reduction policies in each sector of the economy. Indeed, the committee’s report describes the transition plan as "ambitious" and "very comprehensive". The committee identified a number of areas, including in the power sector, buildings and industry, and transport, where it considers that further policy detail is needed to meet the ambition of the transition plan. We broadly agree with its assessment, and much of the work that it recommends is in hand. For example, the six draft national policy statements were published for consultation in November. These clearly set out how we will ensure that low-carbon and renewable power can be brought to the level necessary to make the right contribution towards our carbon budgets. Our framework for the development of clean coal announced on the same day establishes the most environmentally ambitious set of coal conditions of any country in the world. These commitments clearly fulfil the action on coal recommended in the committee’s report. It also identified the potential impact of the recession in our performance towards meeting the first carbon budget. I agree with the committee that the recession will lead to lower emissions than would otherwise have been the case. But emissions reductions in the recession are no substitute for the permanent reductions that we need to decarbonise our economy and meet our 2050 targets. So, I can say categorically that there will be no let-up in our policy efforts because of the recession. We have the right framework in place—through the transition plan—and it is important to note that the plan will not be put off-track by the recession. As well as the impact of the recession on emissions, the report recognises that the credit crunch has limited the finances available for renewable energy. I do not underestimate the impact of the credit crunch on lending to low-carbon energy projects, and the Government have acted to protect investment during the downturn. The Budget 2009 announced more than £1.4 billion in additional targeted support for the low-carbon sector, and last month a new lending scheme was launched by the European Investment Bank and partners that will facilitate investment of up to £1.4 billion in onshore wind projects over the next few years. Of course, we will continue to monitor the support required by the sector to see whether additional instruments may be needed. The committee also concludes that the recession will result in a significantly lower carbon price in 2020 than previously projected, and recommends considering measures to strengthen incentives for low-carbon investments. The current carbon price is relatively low as a consequence of the downturn, but there are some risks that should not be ignored in attempting to manage the carbon price. Our view remains that the best approach is to set the right long-term regulatory framework. Under the revised EU Emissions Trading Scheme directive, the EU ETS cap will fall by a fixed percentage every year after 2013. That gives the long-term signal that investors look for, and EU leaders are committed to reviewing and tightening the cap further as part of a new global climate agreement at Copenhagen. I agree with the committee that the EU Emissions Trading Scheme is not enough on its own to support all the investment in low-carbon electricity generation that is needed. We are taking action now to support or facilitate the low-carbon trinity of renewables, nuclear power and clean coal. I have already described our clean coal framework and the importance of the energy national policy statements in speeding up planning decisions on low-carbon energy developments. We are also working to ensure that access to the electricity grid is not a barrier to new low-carbon generation, particularly for offshore projects. By June of next year, we will introduce enduring new grid access arrangements. Improving the energy efficiency of homes and communities is a crucial part of our strategy for tackling climate change. It already brings benefits by reducing fuel bills and reducing our reliance on imported energy. We have already delivered large volumes of low-cost measures such as loft and cavity-wall insulation through our carbon emissions reduction target—an obligation on energy suppliers—but we will need to ramp up delivery to meet our carbon budgets. I note that the Committee on Climate Change has acknowledged that, and the significant delivery challenge that we face. Transport, too, has a major role to play in meeting carbon budgets. That was underlined in the committee’s report. Alongside the transition plan, we published Low Carbon Transport: A Greener Future, which sets out our strategy for reducing emissions from transport. We reckon that it will reduce domestic emissions by about 14 per cent by 2020, compared to 2008, in the period 2018-22. Another important issue in the committee’s report was the establishment of a suite of indicators in key sectors of the economy, which the committee will use to monitor progress. Those indicators will be very important in ensuring that we understand what extra effort may be required to keep on track, to meet the budgets, and where in the economy it is needed. We welcome that approach, and will be following a similar approach in our own progress monitoring as we develop our plans for managing carbon budgets within the Government. As set out in the transition plan, the Government are putting in place a strong internal mechanism to manage carbon budgets across Whitehall, so that all parts of the Government do their bit. A point made strongly to me by energy companies and others is that decisions made now on energy and other infrastructure are likely to affect our emissions for the next 30 or 40 years. That is why we are already looking beyond 2020 to our 2050 target, and in spring next year we will publish a 2050 vision setting out the path to a low-carbon economy by the middle of the century, which will complement the transition plan to which I referred. That will include looking at where we need to accelerate development of particular technologies. My comments so far have focused on what the UK has to do to reduce its own emissions. But of course, this always has to be considered in the context of the global challenge. That is why the conference currently taking place in Copenhagen, which formally started yesterday, is so important. All the developments since July 2009 show that publication of the UK Low Carbon Transition Plan was not the end, but the beginning of a process of implementation of new policies which deliver greenhouse gas emission reductions. The Government are fully committed to making the comprehensive strategy set out in the transition plan a reality. In doing so, we look forward to working with the Committee on Climate Change. In introducing this debate, I pay tribute to the committee and its members for the outstanding piece of work that they have undertaken. As I said, we will respond formally to the report in the new year. In the mean time, I beg to move.