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EU: Emissions Trading System (EUC Report)

I thank the noble Lord, Lord Sewel, for his excellent introduction and the members of the European Union Committee on the revision of the European Union’s emissions trading system. I thank in particular those who have spoken today, including my noble friend Lord Ullswater. He said that it is fairly incestuous that members should turn up and speak because they have been on a European Union Committee, but I am very happy to be here today. I spent the first six years of my time in this House serving on European Union committees, which was a very good apprenticeship for the Front Bench. It teaches you patience, if nothing else. My party warmly endorses this report, which is mainly in line with the Conservatives’ publicly stated position. We fully support the EU ETS and agree that the scope needs to be enlarged to progressively cover more economic activity. There have been some excellent questions. Every day, I learn something more about this subject. I was obviously delighted to listen to the noble Lord, Lord Browne of Madingley, who brings such experience to our debates on this subject. I, too, would like to ask some questions. I will try to keep them brief because we have been here a long time. We have all had a very nice time, but I am sure that the Minister is ready to deal with us all. In reference to the EU ETS, the committee states that, ""the fledgling scheme has yet to demonstrate that it can deliver the substantial greenhouse gas emission reductions that will form the yardstick of its success"." Does the Minister agree with this assessment, and what changes does he advocate implementing to make real inroads into reducing greenhouse gas emissions and prove the worth of the scheme? It is evident from the committee’s report that it anticipates the European Union eventually facing stark trade-offs between maintaining the environmental integrity of the ETS and extending its reach. Therefore, it would be good to know what discussions the Minister has had with his European Union counterparts over this potential trade-off. What measures does he think he can put in place to ensure that the ETS reaches its full potential without jeopardising its integrity? Provision has already been made for the inclusion of aviation in the ETS from 2012. However, no such provision has been made for shipping. As we heard from the noble Lord, Lord Teverson, and my noble friend Lord Ullswater, the committee’s report highlights that action needs to be taken on shipping, and its inclusion should be delayed until no longer than 2013 for the largest emitters in this sector. Does the Minister agree, and will the Government make a similar provision to include shipping in future UK carbon budgets? On allowances, one of the major flaws of the pilot phase in 2005-07 of the EU ETS, as we have heard, was the overallocation of free permits. In the second phase, the number of free permits was reduced by 5 per cent and the auctioning of allowances increased. The proposal for the next phase is to put in place 100 per cent auctioning for the power and CCS sectors by 2013, as we have heard today. The committee seemed to be of the opinion that while a shift towards full auctioning is a positive step, derogation should be permitted to those with particularly fossil-fuel-intensive energy sectors, and we wonder if the Minister is in alliance with that view. The committee agreed with the UK Government that it would be inappropriate for the European Union to prescribe how auctioning revenues were spent. That said, the committee stipulates that member states should invest considerable funds in climate-change-related measures. What is being done to ensure investment in and the protection of certain sectors, such as carbon capture and carbon storage? Again, I congratulate the noble Lord, Lord Sewel, and the members of the committee on such a good, solid report. It included plenty of analysis of the future options of the ETS and the need for reform for the next phase. We agree with the way ahead, but it will need strict policing, auditing and those mechanisms. We have heard twice today about the fiscal audit that will be necessary. That is true, but having served my time on the European Union Select Committees, chaired the National Consumer Council for six or seven years and spent a lot of time in the EU working with the member states, I know, although it is difficult to accept, that how we behave is not necessarily how all the other members are going to behave. This subject is particularly complicated. It is not familiar to people, and it is not delivered in a language that they can understand. We are therefore in danger of alienating them from these discussions. Those who know Kipling’s poem "Norman and Saxon" will know how important to the British people are the words "fair dealing". Fair dealing is something the British people understand and stand by; they will put up with pretty well anything else. The worry with the European Union, certainly for enforcement, is always that this is not a level playing field. If we are going to build confidence in saving our world, and if we are going to take our people with us, we should encourage more of these reports to be written in a language that can be taken up by the press in such a way that the general public are not frightened or confused but can actually understand what we are saying.