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Earl Attlee: My Lords, I am grateful to the noble Lord for giving way. Is the Treasury providing extra funding for current operations in Afghanistan?
Lord Drayson: Yes, my Lords. The amount is £1 billion over three years. I want to rattle quite rapidly through some of the issues that have been raised about equipment, not least because it is my area of
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responsibility. I hope to give noble Lords detailed answers to the many questions that they have asked, but I shall do so quickly.
We heard from the noble Lord, Lord Levene, an excellent summary of the challenges that we face in defence procurement. This Government are taking a modern approach to balancing the conflicting pressures which the noble Lord clearly explained. We need to recognise the international environment with which we are faced in the defence industry, and we need to make judgments within a framework which is clear to our international partners, to the defence industry and to our Armed Forces. This Government stated in the Defence Industrial Strategy White Paper last year that the Armed Forces' needs come first. There are questions relating to industrial capability, and jobs are very important to the country. But we are absolutely clear about the importance of equipment to our Armed Forces and so, in the decision-making framework, we put the Armed Forces first, and we have stated that as our policy.
A number of concerns were raised about the Snatch Land Rover in Iraq and its alternatives—the noble Lord, Lord De Mauley, referred to the question mark over the RG-31. The noble Lord, Lord Astor of Hever, said that he has received a number of letters about this. I make it absolutely clear that when I answered the noble Lord's question earlier, the vehicle that I was talking about was the predecessor to the RG-31. It was also called the Mamba and it has been called the Mamba mark 2. The RG-31 offered today is the current version of that vehicle. After giving careful consideration to the matter, we judged the size and mobility of the vehicle not to be appropriate to the needs of our Armed Forces today.
The noble Viscount, Lord Brookeborough, raised a point about the review being announced and said that surely these things are kept under constant review. That is absolutely the case. Issues relating to the protection of our Armed Forces, including the provision of armoured vehicles, are kept under continual review. That sounds like a trite and easy phrase but, as Minister for defence procurement, I can tell noble Lords that it is carried out very thoroughly indeed. The way in which the Ministry of Defence goes about deploying its resources for science and technology and industrial purposes to provide our forces with the appropriate levels of protection is very impressive. But I have to tell noble Lords that I cannot go into these things on the Floor of the House. They go to the heart of the level of the threat that our forces face. I do my best in this House to give your Lordships a clear exposition of these issues but there are some areas that we just cannot go into here. If noble Lords agree, I shall be happy to offer them a briefing at the Ministry of Defence to give them an opportunity to understand that better. We are taking urgent action relating to the threat facing our forces in a number of areas. That action is already having an impact today and we expect to see its effects.
The noble Lord, Lord Garden, and the noble Viscount, Lord Brookeborough, raised the issue of helicopters. In response to a question posed by the
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noble and gallant Lord, Lord Inge, relating to Lynx and Puma, last week we announced an agreement with AugustaWestland both to provide additional helicopters in the form of the future Lynx and, importantly, to incentivise the company to improve the serviceability and availability of the helicopters that we fly today. That is an example of this Government taking real action to address the issues. Here is a company that has been motivated, through the placing of a new contract for new helicopters which we have to buy, to improve the way that its services provide spares to our existing helicopter fleet, and that will go directly to the heart of the serviceability of our fleet.
I shall write to noble Lords with updates on other areas of equipment and shall give clear details of the progress on the FSTA and FRES. However, in the remaining time, I want to touch on the issue of Trident. As a number of noble Lords have highlighted, my right honourable friend the Prime Minister has said that there will be a White Paper by the end of the year setting out the options relating to the potential replacement of the nuclear deterrent. The Ministry of Defence is actively working on those options, which will then be described to both Houses of Parliament; there will be an opportunity to debate them thoroughly. I am sure noble Lords will recognise the importance of decisions relating to the potential replacement of the nuclear deterrent and to the maritime industry.
The noble and gallant Lord, Lord Boyce, raised issues about the overall resource levels which were provided to our maritime fleet. I can confirm to the House that, this year, the resource levels have been restored to normal after a two-year period when resources were reprioritised for overseas operations.
My noble friend Lord Truscott asked what we are doing to build on those reforms, as regards our defence industrial strategy, in terms of research and technology. For the first time in a considerable period, we have increased the Ministry of Defence's research budget. We plan for it to rise in line with inflation over the next four years. We have also carried out a review of all of our defence research and technology and, later this year, we shall be announcing the results of that technology review.
The noble Lord, Lord Luke, asked a number of questions relating to defence housing. I shall write to the noble Lord with those answers, as I do not have time to go through them today.
In summary, our forces are busy. We recognise that and the significant challenges we face in ensuring that we respond to today's environment. We also face challenges on the pace of technological change in industry and ensuring that we provide our Armed Forces with the equipment that they need to do their job. We are addressing those challenges.
As we focus on these issues, I hope that we can build a consensus across the House because they are too important for party politics. Much can be learnt from the experiences of the past and I look forward to continuing this debate in the House. I am grateful to
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a number of noble Lords, in particular the noble and gallant Lords—former chiefs of staff—for sharing with me their wisdom and experience on these matters.
3.02 pm
Lord Inge: My Lords, I thank all noble Lords who have taken part in this important debate, which I have found educational. I have been struck by the number of issues raised by many Members. I hope the Minister listened very carefully, as a common theme ran through them.
On the point made by the noble Lord, Lord Owen, on the strategic direction of the war, I am not sure that I would want some great committee to be set up, but at least we should look at the strategic direction of the operations in Iraq and Afghanistan. The linkage between the two is enormously important. I did not agree with the noble Lord, Lord Dykes. I certainly did not intend to give the impression that there is a crisis in morale. I was saying that there are indications about federations and unions and that we need to listen to what is being said. The morale of the Armed Forces, despite the huge pressure on them, is fantastic. I am second to none in saying, "Thank you", to them for what they do.
I believe that the Minister will write to noble Lords about the Defence Procurement Agency and the reorganisation that has been taking place in the Defence Logistics Organisation. They are two very important parts to ensuring that our Armed Forces have the kit and logistic support that they deserve. Referring to what I said earlier, I have an idea about what we are trying to achieve in Afghanistan, but I am not clear how we shall achieve that. That discussion is still to take place.
The noble Lord, Lord Garden, talked about federations. My noble and gallant friend Lord Boyce asked me to ask the noble Lord whether those who have federations and unions have ever won. My final point is that adequate funding is the ghost that hangs over all that has been said. I thank noble Lords for taking part and I beg leave to withdraw the Motion for Papers.
Motion for Papers, by leave, withdrawn.
Emissions Trading Scheme
3.05 pm
The Minister of State, Department for Environment, Food and Rural Affairs (Lord Rooker): My Lords, with the leave of the House, I shall repeat a Statement made earlier in another place by the Secretary of State for the Department for Environment, Food and Rural Affairs. The Statement is as follows:
"Mr Speaker, I would like to make an announcement about our proposals for the second phase of the European Union Emissions Trading Scheme. Today we are announcing the level of our cap. In due course, we will present to the Commission our full and formal national allocation plan.
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"The case for tackling climate change, and the human contribution to it, is overwhelming. The scientific consensus is wide and deep, and the need for international and domestic action, across all aspects of economic and social life, is very strong. In the UK, we can take pride that we are projected to cut our emissions of greenhouses gases by 23 to 25 per cent from 1990 levels over the Kyoto commitment period. That is nearly double the level of the Kyoto targets. However, UK emissions of carbon dioxide are rising. We remain on track to meet our Kyoto targets, but we will, on current trends, fall short of our national goal of a 20 per cent reduction in CO2 emissions by 2010. Our challenge is to take action now to avoid the environmental but also economic and social costs of inaction.
"The EU Emissions Trading Scheme is the cornerstone of a Europe-wide drive to reduce emissions from high energy intensive sectors. It currently covers around 11,000 installations across Europe, and companies in the scheme in the UK account for some 45 per cent of UK carbon dioxide emissions. The Emission Trading Scheme gives a clear incentive to industry to invest in low carbon technologies of the future, but achieves carbon reductions at lowest possible cost.
"We are now in the second year of the first phase of the scheme. The results from year one have provided a first opportunity to judge allocation against emissions and most member states' caps for phase 1 do not provide the scarcity the scheme demands. The UK cap was 245 milliontonnes, and our system has worked well. The Government imposed the short fall in allowances on the electricity supply industry and all other sectors were allocated according to need. And, as intended, all but the electricity supply sector are living within their allocations.
"The Commission has used the information from the first phase to assess what member states' caps should be for phase 2 and set out indicative figures that require substantial cuts from most member states. Phase 1 was in many ways a trial period. Phase 2 coincides with the first Kyoto period (2008-12) and states which do not take the measures necessary within this period to reach their Kyoto targets will either have to purchase Kyoto allowances and credits from other states or will face penalties for missing targets.
"In March, in our consultation on the draft National Allocation Plan, we set out a range of UK reductions of emissions during phase 2, from 3 million tonnes of carbon to 8 million tonnes. At the time of consultation this was equivalent to a cap of 234 million to 252 million allowances a year, representing 234 million to 252 million tonnes of CO2.
"There have been important changes since we published the draft National Allocation Plan. Our projections for emissions in 2010 have risen by 3 million tonnes of carbon for the UK as a whole, and by 1.1 million tonnes of carbon for the installations covered by the EU Emissions Trading Scheme.
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"In these circumstances, we believe it is essential to make the maximum effort consistent with the range on which we consulted; in other words, reductions of 8 million tonnes of carbon per year below business as usual, equivalent to a reduction of 29 million tonnes of carbon dioxide. That is now, since the change in projections, equivalent to an annual allocation of 238 million allowances to UK installations covered by the scheme in phase 1. These figures may change slightly to reflect the expansion of the scheme and removal of those installations that emit the smallest amounts of carbon dioxide.
"We have looked carefully at the possible effects on business and consumers before making our final decision. Our intention is that, for industrial sectors, which include those most open to international competition, allocations should continue to be on the basis of need. In respect of electricity supply, however, the sector is mainly insulated from international competition and this sector's allowances could therefore be set at a lower level, and be subject to auctioning.
"Phase 2 of the Emissions Trading Scheme allows for a maximum level of auctioning of allowances of 10 per cent. We propose to set the level of auctioning in the UK at 7 per cent. Obviously, the final amount raised by the auction cannot be determined in advance, but it will be substantial.
"We will build on the trading scheme agreement and go further. We believe there is a major opportunity for the UK not just to invest in renewable energy, other non-nuclear low carbon technologies and energy efficiency, but also to build successful businesses in these fields. We will establish a new joint Defra/DTI environmental transformation fund, administered by my right honourable friend the Trade and Industry Secretary and myself, to grasp this opportunity. Final details of the scale and scope of the fund will be announced in the spending review for implementation, like the Emissions Trading Scheme, in 2008.
"The EU Emissions Trading Scheme is also linked to a global carbon market and has been a major driver in its development. Project credits—which are credits generated in developing countries through the clean development mechanism, or in other developed countries by joint implementation projects—may be used to help meet the caps set for operators. The use of these credits provides a driver for sustainable energy projects in the developing world and for technology transfer. However, member states need to ensure a balance between domestic and international effort. UK companies are already at the forefront of this market and we want that to continue.
"In the UK we are providing for the use of these credits to meet up to 66 per cent of the effort in phase 2. In effect, this means that 5.3 million tonnes of carbon—that is, about 19.5 million tonnes of carbon dioxide—from clean development and joint implementation projects can be used, which is
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equivalent to 8 per cent of the total cap. All installations in the UK may use project credits to meet emissions up to 8 per cent of their allocation.
"The EU Emissions Trading Scheme has an impact on electricity prices via the cost of carbon allowances. That cost is driven by the cumulative effect of all member states' decisions, not by the decision of any individual member state for the citizens of that country. Many factors drive electricity prices, including global fuel prices and the weather. But our estimate is that the impact of the proposal, relative to the phase 1 cap, will be a one-off rise in industrial energy prices in the region of 1 per cent, and approximately half that for domestic users.
"Our decision to set the cap at the top end of the range of effort on which we consulted sends a clear message that the emissions trading scheme is here to stay, that the Government are committed to making it work, providing clear, progressive rewards for a shift to low-carbon technologies, and that the UK is determined to maintain its leadership role on this issue. Today's decision will set us on course to deliver a 16.2 per cent reduction in emissions, against 1990 figures, by 2010. We said when we launched the climate change programme review in March this year that it was not the last word. We will use further opportunities, including the energy review and the environmental transformation fund, to help us move progressively towards our 2010 target.
"EU member states are required to use emissions trading as a means to deliver their Kyoto Protocol commitments for 2008 to 2012. The level of ambition that individual member states set for the reductions to be made by the sectors covered by emissions trading will be an important element in the price of carbon allowances. Now that member states will need to show that they are meeting their Kyoto targets, and with the Commission having phase 1 emissions data, the UK will expect to see more stringent caps enforced in phase 2. We will therefore encourage and support the European Commission in its efforts to ensure tough caps, to provide greater long-term certainty, to help the smooth running of the trading system, and to avoid potential competitive distortions. I spoke to Commissioner Dimas this morning to emphasise this point. It is important that, in the EU, we all push together for a trading scheme which delivers real emission reductions.
"Phase 2 also forms an important element in the broader consideration of our long-term carbon policy framework. Concurrently, my right honourable friend the Trade and Industry Secretary will next month be reporting the findings of the energy review, in which the Government are reviewing the UK's progress against the medium and long-term energy White Paper goals, including our 2050 carbon reduction goal, and the options for further steps to achieve them.
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"My right honourable friend the Prime Minister has made clear that climate change is a global problem that requires a global solution. This target for phase 2 will support the development of the global carbon market, and we will therefore continue to work with our EU partners to ensure that negotiations for future commitments under the Kyoto Protocol make clear and convincing progress. We will continue to work through the Gleneagles dialogue launched through the UK presidency of the G8 to search for consensus on the practical measures for tackling climate change. The case for taking action is overwhelming. The speed at which the world responds to that case will determine the effectiveness and the positive economic impact of our response. Today's announcement takes another step towards our long-term objective of a 60 per cent reduction in carbon dioxide emissions by 2050".
My Lords, that concludes the Statement.
3.17 pm
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