My Lords, the establishment of the European Union Emissions Trading Scheme, which is the world's largest market for trading CO2 allowances, is indeed a notable achievement. There are clearly lessons to be learnt from phase 1 of the scheme, which finishes this year. We have already taken account of some of those lessons in completing the United Kingdom's national allocation plan for the second phase, from 2008 to 2012, which will also inform the forthcoming review by the Commission of the trading scheme directive.
My Lords, I am very grateful for the Minister's reply. He will be aware that the White Paper issued a couple of weeks ago made it clear that the Emissions Trading Scheme is the carbon price instrument of choice and a key component in the UK's policy framework to fight climate change. Given the weight that the Government are putting on the Emissions Trading Scheme, are they confident that, in the new round, the national allocations not just to the UK but to the other countries involved in the scheme will be sufficiently tight to bite, rather than, as happened in the first round, allowing an increase in carbon emissions and substantial subsidies to some of Europe's big energy producers? Are they also confident that the system can be policed sufficiently well to prevent the fraud and cheating that has appeared in the first round? In particular, given that the system is to be linked to the UN's clean development mechanism, are they confident that the CDM certificates issued under that scheme actually relate to schemes that promote clean energy and a reduction in carbon emissions?
My Lords, the noble Baroness asked an awful lot of questions there—rather more than two. It is true that phase 1 of the scheme has been a learning exercise; everyone accepts that. Lessons have been learnt from phase 1 and incorporated into phase 2. The United Kingdom has a clean pair of heels on the issue of allowances. We were the only country not to have adjustments. It is clear that there have been defects in the scheme, as is shown by the price of carbon. Yes, there have been allegations about the clean development mechanism not quite working. There was a long piece about that in one newspaper last week. A new official has been appointed on behalf of Defra to the board of the CDM and we expect the board to take account of these issues. This is an ongoing process. It is the first time that there has been such an inter-country trading scheme and phase 1 is certainly a learning-by-doing process.
My Lords, is not the Minister aware that the emissions trading business has been widely exposed to have become the biggest scam on the planet, most recently in a very thorough and excellent investigation published in last Saturday's Guardian, which I am sure is a newspaper close to his heart?
My Lords, I referred in my previous answer to some of the allegations made in that fairly long article. They are serious and specific allegations, especially against Ernst & Young. Those will clearly have been drawn to the attention of those responsible for the clean development mechanism. They need investigating and it is appropriate for the board to do that. That is what it is in place for. It is a United Nations body; following Kyoto, that is its role. But to say that this is the biggest scam on the planet is, frankly, extravagant language.
My Lords, is the Minister aware of the research that was noted in the very same Guardian newspaper last week showing that Heathrow Airport is set fair, if all its polluting emissions, not just CO2, are taken into account, to become the biggest single polluter in the country, above Drax power station? Does he agree that, in view of that and the continuing concern about aviation’s contribution to emissions, it is time that the Government reviewed their policy on the expansion of airports in this country?
My Lords, one of the gaps in phase 1 was aviation, which has been debated in this House on more than one occasion, to my recollection. It is our intention to incorporate aviation into phase 2, and we expect decisions from the Commission by directive later this year. Obviously the matter is complicated, because planes take off and land in different countries. My understanding—I will get advice on this if I am wrong—is that any future development at Heathrow must maintain the same carbon footprint as is there now. It will not be allowed to increase the carbon footprint. Whether its carbon footprint will be greater than Drax’s, I do not know; I will have to take advice on that. I do not have that Guardian article in front of me, although I have all the others.
My Lords, there have been recent reports in the press that the aviation industry is complaining that the entry into the trading scheme might lead to a reduction in the growth of aviation, but is not the whole point of the trading scheme to reduce the amount of carbon emitted by aeroplanes, and does the Minister support the objective of reducing the numbers of flights?
My Lords, the intention behind the scheme is to change people’s behaviour, both in business and as individuals, in the long term. Obviously this is consequential as the money flows through the system. We have no intention of stopping people having holidays, but it is better if they can use the train rather than fly. It would certainly be nice if all the leaders of the G8 went home by train—well, not all of them, obviously; it would be a bit difficult for some of them. It would set an example. Our intention is not to stop people having holidays but, overall, to reduce emissions from aviation.