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Energy Bill

I am delighted that the noble Lord, Lord Teverson, is in favour of the EU ETS scheme, which I am sure represents his party’s views. Having spent the past three or four weeks on the European Union Bill, I would have been extremely surprised if it did not. I am grateful to the noble Lord for moving his amendment. With a motivation similar to that of Amendment No. 54, which was brought forward yesterday, we believe that this proposed new clause is drafted with the aim of eliminating the windfall profits of the companies participating in the trading scheme by auctioning 100 per cent of allowances to the large electricity producers. I hope that the noble Lord will forgive me if I do not go back to that discussion and the background I gave at some length—well, not at that great a length—of the EU ETS. As I said in my response, the Government announced in this year’s Budget that they would auction 100 per cent of allowances to the large electricity producers beyond 2012 in phase 3 addressing the issue of windfall profits. This is our negotiating line in Brussels. The noble Lord will be pleased to hear that we are pressing hard for the directive to accommodate this domestic policy. Given our commitment to 100 per cent auctioning in the UK, we would adopt the maximum permissible level of auctioning in the third phase. However, the Emissions Trading Scheme directive is EU policy and the details of phase 3 are yet to be negotiated, so we would not want to pre-empt it with domestic legislation on this issue now. Moreover, we believe the proposed amendment would add perhaps unnecessary legislation on top of the EU directive, which would not be very good in the practice of better regulation. Members of the Committee will recall that avoiding pre-empting EU legislation and legislative duplication are consistent themes. We have already spoken of the dangers in relation to priority access for renewables, and during last week’s proceedings we discussed an amendment that sought to duplicate an EU principle of law on non-discrimination in the chapter of the Bill on the renewables obligation. Furthermore, while we are pushing for 100 per cent auctioning for electricity producers in phase 3, we should not be seeking to act unilaterally on this. I hope that the noble Lord would agree with that. As such, we would want to retain flexibility for future phases. I repeat that we remain committed to the principle of auctioning and to pushing for 100 per cent auctioning for the power sector in Europe. However, we also believe strongly that in the multilateral and long-term arena of climate change and in the EU ETS the principle of climate change in one country is a difficult issue in a global environment, and success depends on multinational agreements. It is prudent to retain some flexibility in policy terms at a national level, which is something that the proposed amendment, which I believe to be a probing amendment, would not allow. I hope that I have given the noble Lord some reassurance that the Government are committed to achieving the goal that he believes in. We do not think that the amendment is needed, and so I ask him to withdraw it. I am afraid that I cannot help the noble Lord, Lord Jenkin, as much as he would like me to. The note that I have in front of me states that the issue he raises—a good issue, of course—is a matter for the Treasury. It may well be that in his long and distinguished career, he has seen, or even had to use, such an argument himself.