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On Amendment No. 145, I should say at the outset that household emissions are crucial, as the noble Lord indicated. In 2005, emissions from the residential sector represented 23.8 per cent of overall UK greenhouse gas emissions. It is interesting that since 1990 the sector’s emissions have reduced by 7.4 per cent. That is a significant change, so there are moves under way.
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Amendment No. 145 would require the Committee’s advice to include specific consideration of the contribution to the carbon budget to be made by the domestic sector. Again, we think that that approach would be unduly restrictive by requiring the Committee on Climate Change to provide advice specifically concerning the domestic household sector. Instead, we consider a more suitable approach will be to allow the Committee on Climate Change to be free to provide advice on the effect of the carbon budget on any sector of the economy and we have tabled Amendment No. 144 to that effect. While we agree with the need for greater sectoral transparency, we cannot support the amendment, which proposes an approach that we consider too restrictive. It could be argued that it does not enable us to make brave enough decisions. We hope that the Committee on Climate Change will, in its wisdom, turn its attention to these issues at a time that it thinks appropriate.
We believe that government Amendments Nos. 54, 141 and 144 take a much more robust approach to the issue. They provide greater clarity and transparency concerning the effort that individual sectors will need to make to help ensure the budgets and targets in the Bill are met, while maintaining the flexible approach that we believe is essential to the Bill. Unlike Amendment No. 20 in this group, Amendment No. 144 places a duty on the Committee on Climate Change to identify the potential for emissions reductions in a particular sector or sectors when providing its advice on the level of the carbon budgets. Under government Amendment No. 54, the Secretary of State must explain how the proposals and policies for meeting budgets and targets are expected to affect different sectors of the economy. This will make a demonstrable difference to the Bill and will ensure transparency in how individual sectors may be expected to help deliver the targets and budgets. Together, Amendments Nos. 54 and 144 will ensure that all interested parties, be they business groups, the wider public or Parliament, can clearly see how the budgets and targets may be met through specific sectors.
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Our aim with the amendments is to ensure that the Bill maintains a flexible approach for the Committee on Climate Change. We do not think that it would be helpful to set out in the Bill which sectors should be reported on. It is more appropriate to ensure that the Government and the Committee on Climate Change are able to make a reference to any sector or group of sectors they consider most important in the policies to meet the budgets and are able to take account rapidly of changes in technology. Priority between sectors can change for the Committee on Climate Change and the Government. Parliament will not be far behind; the level of information and advice in Parliament on technology changes is far superior to what it used to be. So there needs to be that flexibility.
Our amendments would ensure a forward-looking process for the Committee on Climate Change in providing advice and for the Government in setting out how the proposals and policies for meeting the budget may affect the different sectors. This would not be an option; the information would need to be provided but—and this is the difference—it would also be flexible in that we are not laying down which sectors should be covered or requiring the targets to be set for them. That may sound like a damp squib, but it is not intended to be. Our aim is the same and I think that we share the way that we want to travel. We want the flexibility and we do not want the rigidity. We certainly want the information on the sectors, but we want the flexibility to be able to change between the sectors and not be held to a target that we might not want to pursue because it will be laid down and we will be measured against it. But in terms of value for money, pound for pound, if some new technology comes along, we will want to move resources into getting reductions in another sector. That is why we want the flexibility—there is no principled objection just because the amendments have come from the Opposition.
Lord Dearing: My Lords, will the Minister clarify a point? I thought that he was saying that the committee would be able to give advice on any sector, but Amendments Nos. 54 and 144 are limited to sectors of the economy, which would exclude the household sector. Will the Minister clarify whether he intends that the committee should have the opportunity to look at households? That is of the essence, since they account for about a quarter, plus another 10 per cent through passenger transport. It is such an important area. It is in no way restricting the role of the committee to add it; it gives the opportunity to do more than the Government had intended. We and the economy need such an opportunity.
Lord Rooker: My Lords, I am not going to give an interpretation on my feet, but the domestic sector is so large, with 20 million-odd dwellings in England alone, that it has to form a part of the economy. What people use in their homes in terms of fuel, insulation and lighting is an enormous part of our economy. It may not be the productive economy in terms of energy utilities, transport or manufacturing, but it is a part of it. I will take advice on this; I am not putting
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The Earl of Caithness: My Lords, before the Minister finally sits down, will he answer my question of whether the analysis of the committee, when it looks at this sector by sector, will be publicly available?
Lord Rooker: My Lords, I think the answer is yes. We are talking here about way beyond freedom of information. The principles have to be clarity and transparency simply because, for these brave decisions that some Minister will have to come forward with to change the way that we live, you will need all the information that you can get. That has to be the case.
The Duke of Montrose: My Lords, we have had an interesting debate around this subject. As the noble Lord, Lord Teverson, said, we must thank the noble Lord, Lord Dearing, for bringing things down to the personal level. If the whole policy that we are pursuing is to have success at all, we will have to be able to enlist the whole population as we go along. The question is whether we can enlist them by tying this down in the Bill, or whether we are going to be challenged in a different way to keep their enthusiasm going.
I confess to it springing up in my mind—this shows how far back I go—that as a very small boy when the war effort was on, suddenly there was a great flap in the house and we had to gather up all the spare aluminium saucepans and send them to some Minister, because they were going to help build aeroplanes. I do not think that they did build very many aeroplanes, but everyone suddenly felt very involved, as if this was to be our great contribution. In some ways, that is the type of thing that we will have to keep going. How we go about it is still a very big question.
I feel from the Minister’s reply that the Government have perhaps not fully evaluated the introduction of the element of competition. Business understands the element of competition, and the population understand football matches and the competition there. We have even seen that our Armed Forces have benefited greatly from being in competition with each other. Whenever there is a juxtaposition of one or two of the services or regiments, they love to compete. If sectors are given targets, they could compare through their five years how each sector is doing on meeting its target and find some incentive in that way.
The Minister’s reply did not quite take into account that we are banking on the climate change committee being made up of intelligent beings, and we are merely introducing enabling measures. We are not saying in the Bill what the sector should be. We are not saying that the sectors and their targets should be defined between now and 2050. Presumably, they would be reviewed at least on a five-year basis, allowing for updates, or there may be other ways in which they can be updated. We are just interested in producing enabling measures, leaving it up to climate change scientists to lay down exactly what use they want to make of them.
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Amendment, by leave, withdrawn
The Earl of Caithness moved Amendment No. 22:
(1) In the event that it appears from the annual statement of UK emissions (required by section 12) that the net UK carbon account for a budgetary period will exceed the carbon budget, it is the duty of the Secretary of State to prepare and lay before Parliament within three months a preliminary compliance action plan containing proposals and policies to ensure that the excess is made good during the following budgetary period.
(2) In the event that the final statement for a budgetary period (required by section 14) shows that the net UK carbon account for the period has exceeded the carbon budget, the excess amount must be deducted from the carbon budget for the subsequent period; and it is the duty of the Secretary of State to lay before Parliament within three months an action plan containing proposals and policies (which may include the purchase of carbon units up to the limit advised by the Committee on Climate Change in accordance with section 17) to ensure that the UK carbon account does not exceed the revised budget for the budgetary period and takes account of the target for 2050.”
The noble Earl said: My Lords, the amendment inserts a new clause relating to a budget compliance mechanism. I referred to this amendment when I was speaking to Amendment No. 2 because they are linked.
To start off, I would like to say how grateful I am that the Government have moved slightly towards us. It is a rather strange situation when a lot of us who are moving amendments are speaking to government amendments that come afterwards. It is not normal, but it is rather fun to do it that way, and we say to the Government that we welcome their amendment. However, it is a rather peely-wally one that does not nearly go far enough. Government Amendment No. 81 refers only to Clause 14. In what period does the Minister expect the corrective action to take place? In his amendment it says only that,
- “the Secretary of State must lay before Parliament a report setting out proposals and policies to compensate in future periods for the excess emissions”.
It does not say in what timescale that has to happen. There is a real lack of urgency and specificity in his amendment.
There is another fault with the government amendment. The final statement for a budgetary period under Clause 14 need not be laid before 31 May in the second year following the end of the period to which it relates. By the time the Secretary of State publishes his action plan to remedy the shortfall, it will be so far into the budgetary period that it may be very difficult to remedy that shortfall during that period. The scenario of falling behind is compounded.
That is why the amendment in my name and that of my noble friend Lord Crickhowell is superior to that of the Government. In our subsection (1) we refer to Clause 12, which covers the annual statement that,
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- “must be laid before Parliament not later than 31st of March in the second year following that to which it relates”.
It gives early warning signals for any non-compliance. Therefore, we have divided our compliance mechanism into two parts. First, there is the preliminary plan initiating action to try to prevent the shortfall. Then there is the fall-back position, which is the final action plan, imposing a duty to correct during the following budgetary period—and that period will be almost complete by the time we know what the problem is.
We have drawn our amendment widely so that it can include carbon units that can be purchased. It will allow the Government flexibility to limit the timescale for correction. If you cannot purchase units, trying to resolve the problem of falling behind the target will be much harder. I commend our amendment to the Minister, and I hope that this time he will say, “Yes, you are right. I will take it away and improve our own amendment”. I beg to move.
Earl Cathcart: My Lords, we support the amendment tabled by my noble friend and, indeed, we are pleased to see that the Government have taken this matter on board and tabled another amendment to a similar effect.
Both amendments provide for corrective action if targets are not met. However, Amendment No. 22 has the benefit of requiring action as soon as it appears that things are slipping and refers to what should be done if,
that targets will not be met. So, if things are going wrong after year 2 or 3, corrective action can be put in place immediately, rather than, as in the Government’s amendment, Amendment No. 81, corrective action taking place only after the five-year budget period. My noble friend Lord Caithness said that the date in the Bill was 31 May in the second year following. That seems a long time before anything can actually happen. That is an unfortunate aspect of the Government’s amendment. I would be grateful if the Minister would have another look at this and see if he can combine the best parts of both amendments, so that corrective action can take place anyway at an earlier stage than that proposed in the Government’s amendment.
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Lord Teverson: My Lords, for this legislation to be successful, it must require the Government to set the right policies to meet the targets, which the Bill does not do. We have been concerned about five-year budgetary periods purely regarding targets, and it takes a long time for policy measures to make a difference in this area. It is rather worse than when a supertanker changes direction. There have to be requirements in the legislation for the Secretary of State to start to take action if it looks like targets will be missed. That is precisely what the noble Earl’s amendment would do.
It is absolutely right that it should not be a historic reaction. The leads and lags are so long in this area. If we are waiting for 18 months before we know what the score is and it takes us perhaps another two years—perhaps six months to work out the policy
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Like the noble Earl, I welcome the Government’s change towards this policy; but, for us on these Benches, the key thing is not what targets and enabling powers are in the Bill but what government policy is in it to meet the targets and change the nature and degree of carbonisation of the UK economy.
Lord Woolmer of Leeds: My Lords, in order to understand the implications of the amendment and others in relation to carbon budgets, we need to remind ourselves what we mean by the “net UK carbon account” because that is another phrase meaning the budgets. The noble Lord, Lord Teverson, in a couple of interesting papers that he has not referred to—I am sure that he will—makes a useful point, although I am not entirely in agreement with the rest of his analysis, which is that sectors within the EU Emissions Trading Scheme cannot possibly exceed their net carbon account, because that is the allocation given to sectors that can make up for that allocation by buying credits or, if they exceed targets, by selling credits. So the net carbon account for sectors in the UK that trade in the European trading scheme have a net carbon account that is set in discussions with the European Commission and the European trading scheme.
Therefore, when we are considering whether there is a shortfall or an excess of a net carbon account, we are talking about sectors that do not come under the EU Emissions Trading Scheme; we are not talking about all sectors. My noble friend may correct me on that, either now or later, but it is an important matter. Noble Lords may think that this might apply to the energy production industry—electricity, gas, nuclear or whatever—but by definition it cannot, nor will aviation, once it is included in the EU Emissions Trading Scheme. The net carbon account figure cannot be exceeded because it is simply the amount emitted minus or plus the amount of credits borrowed. It is important that noble Lords recognise that they are not talking about the whole economy, but certain selected sectors—for example, I imagine, the automobile industry and emissions from vehicles or emissions from households.
We are talking about a particular part of the economy. When noble Lords talk about remedial action, we are talking not about the whole economy but about the sectors that do not fall within the EU Emissions Trading Scheme. If, as I hope—I am sure other noble Lords do too—over the next 50 years the EU ETS is expanded and other countries agree to
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Lord Teverson: My Lords, that relies on the Bill staying as it is and international trading being limitlessly allowed towards the UK carbon account, which at this point we do not necessarily accept.
Lord Woolmer of Leeds: My Lords, at the moment—for ever, as far as I can see—we have no alternative in the EU Emissions Trading Scheme. We cannot tell companies in this country that they cannot buy unit credits from elsewhere in Europe. The noble Lord, Lord Teverson, is shaking his head. In the EU ETS the Government cannot prevent companies buying credits if they are exceeding the budget that they are allocated. If the scheme expands beyond Europe, that will become an issue. My expectation is that any such agreements will be negotiated by the European Union, not by this country. The terms on which credits can be bought or sold would depend entirely on those international agreements. It is inconceivable that if an agreement were made to expand the EU ETS to include say, America or Australia, it would be on the same terms. It is difficult to imagine that it would be otherwise.
Lord Rooker: My Lords, let me make it clear at the outset on Amendments Nos. 22 and 81 that I fully accept that we are aiming at the same goal to strengthen the Bill’s framework. I hope that I can put some meat on to that in my brief remarks.
We have discussed previously how the targets and budgets under the Bill will bite on the Government. As we have already said, we believe that by putting the duties into law we are giving them constitutional significance that will inform every level of decision-making. It remains the case that any failure would carry the risk of judicial review with a remedy at the discretion of the court.
The Bill’s existing provisions ensure maximum transparency on whether a budget or target has been met, which means that there would be a considerable penalty in terms of parliamentary opinion—and in the court of public opinion—if it had not been met. However, we have carefully considered the suggestions made in Committee that the Bill itself should prescribe an automatic penalty in the event that the Government miss a budget. I do not wish to undermine the Bill’s existing framework, so the transparency provisions and the option for judicial review remain, but I am proposing a more specific addition to that armoury.
Government Amendment No. 81 therefore requires that in the event of the net UK carbon account for a budgetary period exceeding the carbon budget, the Secretary of State must lay before Parliament a plan setting out proposals and policies for making up the shortfall in the carbon budget. The plan must be published as soon as reasonably practicable after the final statement for the budgetary period is published. Moreover, as with the existing proposals and policies
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Before I come to Amendment No. 22, it is worth responding to a couple of points made by the noble Earl when he asked about the timetable for taking action required by the government amendment. Under the Government’s proposals, we obviously hope that the budget will not be missed but, if it is, the Government of the day will be under enormous public and parliamentary pressure to make up the shortfall as soon as possible. We must leave it to the Government of the day to take those decisions.
The noble Earl also asked why the Clause 14 report will not be published until 17 months later. It appears that this is the earliest that the information will be available. The emissions figures for the last year of the budget period will not be available until 15 months later, which leaves only two more months for the Government to buy credits and so on to meet their targets. That is the reason for the 17 months.
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