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Greenhouse Gases

Volume 461: debated on Thursday 21 June 2007

6. What assessment he has made of the likely effect of the UK’s membership of the EU emissions trading scheme on future emissions of greenhouse gases. (144189)

The EU emissions trading scheme is a key part of our emissions reductions strategy. The scheme’s next phase will provide business with greater certainty, and we expect the scheme to deliver additional savings of 29.3 million tonnes of CO2 each year.

Will my hon. Friend ensure that the European Commission does not relax the tough national allocation plans in phase 2 and does its utmost to develop other schemes in other parts of the world, so that the EU is not alone in that particular approach to carbon reduction?

The Commission has already taken a robust approach to the phase 2 national allocation plans—NAPs—of member states, and I have no doubt that it will continue to do so. It is vital that we ensure scarcity in the market, and that is what will happen in phase 2. My hon. Friend is also right to point out the importance of the potential for linking the EU emissions trading scheme to other trading schemes that are being discussed in other countries. Certainly, the review of the directive that is taking place—in which we are fully participating—will allow that possibility. I want to see the growth of a global carbon market in the future, because that will be good for the world in limiting CO2 emissions. Carbon trading offers significant potential for low-cost carbon abatement.

A major purpose of the emissions trading scheme is to create a carbon price to guide long-term investment decisions. Will the Minister say whether the Government endorse the conclusion of the Stern report that the appropriate price would be of the order of £75 per tonne of carbon?

As a Government, we do not seek to set a particular carbon price—in a market mechanism, it is the market’s role to establish that. The Government’s role is to ensure sufficient scarcity, and that the market functions properly. The benefit of a cap and trade scheme is that setting a cap gives a certainty that carbon dioxide emissions are being controlled. The EU emissions trading scheme is a significant policy instrument because it covers about half of all Europe’s CO2 emissions. We want to make sure that it works even more effectively in the future.

The EU emissions trading scheme should play a part in helping Europe meet its commitment to derive 20 per cent. of total energy from renewable sources by 2020. However, the UK derives only 2 per cent. of its energy from renewable sources, and that is less than half the EU average. Does the Minister seriously think that existing policies give us any chance of getting anywhere near 20 per cent. in 13 years’ time?

Certainly, the UK is starting from a low base when it comes to renewables, and no one is under any illusion—the 20 per cent. target agreed across Europe is extremely challenging for the UK and for all EU member states. We will have to look at the division of responsibilities that will determine the target to be set for the UK, but I emphasise that the measures on renewables in the energy White Paper envisage a significant growth in that sector over the next 10 years.