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Energy Bill

The proposed new clause pertaining to an amendment to the EU emissions trading scheme and company reporting was debated in another place. We thought that we had gone a great way to reassure honourable Members on the other side in another place that it was not necessary. Let me see whether I can reassure the noble Lord tonight. The amendment is drafted with the aim of identifying the so-called windfall profits of companies participating in the trading scheme. Let me say a few words about the EU ETS—not many, I promise—before addressing the new clause specifically. As the Committee knows, the EU ETS was launched in 2005 and in its first phase, which ended last year in 2007, companies were allocated carbon credits that could then be traded. The carbon credits and trading system established a market for carbon. The scheme was very ambitious; some might describe it as revolutionary; and, let it be said, it faced some problems in that first phase, most of which got pretty wide publicity. For example, we recognise that generators have profited from the ETS. However, we in the UK and, I believe, in the EU generally, have learnt from those problems and are now attempting to improve the scheme from the experience that we have gained. Phase 2 began in January this year. It has reduced the overall allocation of carbon credits and raised the expected price for carbon from 2008 to 2012. It is currently at about €25 per tonne. In the second phase, the UK will auction 7 per cent of allowances to the large electricity producers. We are in discussion with the Commission about the post-2012 phase 3 of the scheme. We announced in this year’s Budget that we would auction 100 per cent allowances to the large electricity producers in phase 3. We believe that auctioning, as well as being the most efficient way to make allocations, will address the issue of windfall profits. I turn to the amendment. As the noble Lord will know, the amount of carbon allocations that companies receive is already published by Defra on its website. Likewise, the market price for the allocations is already published. Therefore, requiring the generators to publish this information would create duplication and an unnecessary administrative burden. The amount paid for the carbon allowances which generators buy from other EU ETS participants is not published, but is commercially sensitive information. The generators are not, for example, expected to publish the price they pay for coal, gas or oil, or the rates they pay their contractors, which we happen to believe—I hope that the noble Lord does, too—is absolutely right in a competitive market. Requiring suppliers to publish such information could lead to a distortion of the market. For those two distinct reasons—first, that some of the information, which is not sensitive, is already published; secondly, that that which is commercially sensitive should remain so—the amendment should be withdrawn.