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Climate Change Bill [HL]

Volume 697: debated on Monday 17 December 2007

House again in Committee on Clause 4.

23: Clause 4, page 3, line 6, after “budget”),” insert—

“( ) to set within each of the five years within a budgetary period an annual amount for the net UK carbon account (the “annual target”),( ) to set in every calendar year until 2044 an annual amount for the net UK carbon account for the year six years ahead (the “rolling annual target”),”

The noble Lord said: When we decoupled these amendments we did so in order to differentiate our proposals from those that we were debating before we broke off. It was not my intention to give the Minister a couple of hours to think about these two sets of amendments. Having said that, I am grateful for his response to the previous debate, particularly for his acceptance of the notion that the annual reporting mechanism might include measurements, as suggested by the noble Lord, Lord May. One might perhaps go on to say indices. From there it is a relatively short step to talk about indicators; in other words, milestones—annual milestones, as we were suggesting.

I hope I will not repeat too much of the previous debate because I want to give the Minister an opportunity to build on the answer he gave regarding that set of amendments. I do not want to repeat old arguments but a rolling target mechanism is a different creature with a different—and, I hope, more effective—weapon for the Minister to use in whatever position he might find himself in five years’ time. The amendments would set up yearly targets that were adjusted for the following six years and create a duty to meet those targets.

The mechanism in place for setting a rolling annual target in Amendment No. 30 is that the Secretary of State would set the target in accordance with the recommendation of the Committee on Climate Change and after it had been approved by resolution of both Houses of Parliament. Those two conditions would have to be met before the annual target was set. The other amendments stipulate that in the reports, annual and interim, rolling targets would be included.

We believe that rolling annual targets are the more appropriate way to have milestones. They offer flexibility and accountability. As mentioned above, the fact that targets were adjusted yearly would allow the Secretary of State and the climate change committee to take account of the multiplicity of variables that might affect the successful accomplishment of a target. That is not intended to give any Minister—or anyone else, for that matter—a way to shirk their responsibilities. On the contrary, the idea of having projections updated every year simply allows for targets to correspond more closely with scientific realities that affect the process of reducing climate change. Reduction in emissions does not follow a steady yearly pattern; all the speakers in all our debates have recognised that, and it is important that any annual milestone arrangement reflects it.

The risk is that if some great improvement is made at the beginning of five years—say, a group of old power stations is finally phased out—the Minister will be able to do very little for the remaining five years if he wishes and will still meet the target. That is not acceptable. In order for progress to be maintained, yearly evaluations, with an eye on how one year will affect the coming years, are essential. That would affect Ministers—and everyone else. I have altered my notes, because I am sensitive to the point made by the Minister that the Government are responsible for only 50 per cent of emissions. The response to the Bill, when it is enacted, will go way beyond Whitehall. Everyone will have a responsibility to see that the targets are met.

So, with yearly evaluations, Ministers and everyone else could be made more accountable. Actions to reduce climate change could then be assessed independently of some of the accidents of fate that might bring failure or success to a particular year’s budget. That system would allow for an organic assessment process that saw current efforts matched with their related future possibilities. Additionally, having rolling annual adjustments would ensure that projections on expected progress were carried over between Governments. By having the next six years assessed annually, there would be a continuity of the process of reducing emissions that was outside the sphere of everyday politics. No Government could blame their predecessor if the targets for the following six years were under constant scrutiny. That is a major tenet of our position on the Bill as a whole.

I am sure your Lordships are beginning to see that with rolling annual targets we would have yet another way to ensure that we were being as faithful to scientific advancement and analysis as possible while removing the ability of Ministers to avoid what we recognise is a great responsibility. At their core, indicative milestones would increase the pressure to ensure that measures were working early in the budget period and would detract from the ability of Ministers, or anyone else, to pass the buck. I beg to move.

Taking Amendments Nos. 23 and 24 of the noble Lord, Lord Taylor, together gives the impression that what he described previously as annual milestones are actually firmer than milestones, as the targets would become a duty for the Secretary of State not to exceed. Given the importance of the duty as spelt out in the first clauses of the Bill—the essential targets for 2050 and so on—the noble Lord’s amendments go far beyond what he disarmingly described in the previous amendments as important milestones but not hardened milestones. Those milestones would become a duty on the Secretary of State. While I sympathise with the general thrust of the noble Lord’s amendments, inserting that kind of pressure would go beyond that. If we return to this matter in due course, I hope a different way of framing the amendments could be found. The noble Lord might want to reflect on that.

We have covered this ground before. The rolling targets feed into the very nature of the targets. We support that. That targets on a yearly basis should be looked at is common ground. The noble Lord, Lord Woolmer, has pointed out that a duty is being placed on the Secretary of State but, as we know, under the Bill there is no sanction against the Secretary of State if a target is not met, a point that was raised at Second Reading and probably ought to be looked at again. That is the major problem we have with all these provisions.

The Minister said in response to the previous group of amendments that there might be certain issues that change, such as winter. I understand that certain aspects of trying to meet this year-on-year target will be difficult, especially in the area of energy generation. I was speaking to one of the energy companies this morning. Scottish and Southern Energy was talking about the type of power stations it will be looking at in the future. One of the problems all power stations have at the moment is that, although we are introducing a duty within the Bill, they have very little firm analysis of what type of power station regulation will allow them to build and what sort of return on investment will be achievable with differing government objectives. With carbon becoming one of the most important attributes, along with price and reliability, that we will have to consider when we discuss Ofgem’s responsibilities in the Energy Bill, there will be a problem with the targets since they cannot be met quite so easily on a year-by-year basis.

When we discussed this issue in the break—the Statements served a purpose—it was suggested that we could take out the milestones and consider an internal delivery path, a mechanism that already exists, to judge the trajectory. The Minister has made the point that this is a difficult area, but that is something we should discuss in looking at this area. Those targets would be set between year one and year five, and there might be—for such reasons as a nuclear power station coming online or the London Array becoming operational in 2012—a significant effect on the yearly basis. It comes back to the major problem we face with all of these: although some noble Lords have not agreed with our assessment of the five-year plan, there is enormous potential for drift for reasons that are outside the powers of the Secretary of State for Defra. This is one of the problems with bringing other departments in.

The Minister has given us an answer to the previous group of amendments. With the best will in the world, the amendments of the noble Lord, Lord Taylor, are not much different, so I do not think he will not get a different response. I very much hope that the Minister will take on board this internal trajectory idea. It is one way that internal targets could be met on a yearly basis, without being set in stone in the ways that cause the Minister some problems.

I spent much of last night reading the report of the Joint Committee and have listened studiously to today’s debate. The noble Lord, Lord Redesdale, used the word “drift”. What I am having difficulty in understanding is which disciplines will be exercised on government departments, officials and Ministers to ensure absolutely that we meet the objectives that Parliament will set when it ultimately carries this Bill. What will concentrate the mind of the Chancellor in setting the Budget, or of departmental officials in framing legislation for Ministers on the need for changes in environmental areas? The more I listen to this debate, the more I look to the words my noble friend used in replying to the previous amendment. He talked about toughening up the annual report. I hope that the reporting arrangements to Parliament set down what some might call milestones so that we can be assured that those disciplines are exercised on the people taking vital decisions.

Following on from that, I become quite concerned that we are rather overoptimistic about what this Bill will achieve. Of itself, all it does is put in place an administrative structure which will produce targets and budgets and, under regulations, can produce market mechanisms. The real changes that must take place probably have nothing to do with that. There will be immense technological changes. These will depend on regulations in an entirely different field. They will depend on financial incentives and a clear determination on the part of the Government that technology has to change. The whole energy industry has to change. We cannot use fossil fuels. That is a huge revolution in thinking, but if we do not have that, what we are writing into the Bill, and what the Government have already written into it, will be completely worthless.

This is part of the Minister’s reluctance. He has government responsibility in this field but not in the whole of that broad sweep of financial instruments and direct policy initiatives that will be required. I sympathise enormously with his position. The Minister will say that, of course, he speaks for the Government and that he will make absolutely sure. I am sure that the Government are already aware of this issue. We need to keep it at the back of our minds. Otherwise, we will fail.

I support the amendment of my noble friend Lord Taylor. I am equally concerned that targets may not be set correctly or, if somebody has a particularly good year, that the next year will be slacker. I would welcome rolling targets.

I am grateful for the Minister’s very helpful earlier response. In my comments I am trying to ensure that, when he goes back to reflect on it, he will perhaps include the other comments that have been made. In his earlier response, the Minister referred us to Clauses 28 and 29 and slightly implied that all was well because those clauses covered it. Indeed, those clauses put a duty on the committee to lay information before Parliament, but it does not mean that Parliament will debate it or have any influence over its outcome. Will the Minister look again at Clauses 28 and 29 to see whether they are strong enough?

I endorse what my noble friend said about scientific advances. Clearly there will be many in the years ahead. We cannot leave it for five years. These targets need to be adjusted. That is why I did not speak to the first group of amendments. I do not support the Liberal Democrats’ fixed approach but I support my noble friend in his rolling targets and therefore support his amendments.

I rise to support the comments of the noble Lord, Lord Woolmer. Indeed, you could argue that it is inconsistent to talk about indicative targets and then about a duty to fulfil them. Faced with such situations, it would be customary for a speaker moving an amendment to say that it was only a probing amendment. This goes a bit further than that, as the noble Lord, Lord Campbell-Savours, said. This is about the sort of mechanisms the Government need to have at their disposal to keep the pursuit of the Climate Change Act—as it will be when it is enacted—on course to meet that target. I make no apology for introducing these concepts.

The Minister is already half way there, as I said in my preamble. I said that he had accepted the notion of the noble Lord, Lord May, and what he was trying to say about measurement. Then one hears about indices and the way the scientific world talks about the dynamics of measurement. It is not, then, a great leap to start talking about predictive indicators. If you do not have a duty to try to fulfil the obligation to meet those indicators, there is no coercive power under this Bill to deliver what we are seeking. The Committee is in the position of having to bring forward amendments to give the Minister and his successor the opportunity to deliver what we all know this Bill is supposed to produce.

I am not entirely sure what the appropriate mechanism is to do what we are all trying to do, which is to keep this matter of carbon management right at the top of the agenda, making sure that it does not slip down and that people—particularly the Government—do not forget it. It might be worth bearing in mind that a number of large energy companies, when now considering projects and talking to their individual component parts, require not only a financial budget but an emissions budget. It might be worth asking the relevant departments, to which attention has been drawn in the discussion so far, to produce carbon budgets as well as financial budgets, simply to focus their attention on this problem.

I have no complaint about the decoupling. As the noble Lord, Lord Taylor, said, the Conservatives did not support the Liberal Democrats; I suppose that the Liberal Democrats did not support the Conservatives. I am the one who is being non-party political, because I am giving the same answer to both of them. The noble Baroness, Lady Byford, asked me to do precisely what I offered to do in the previous debate when I referred to Clause 28; that is, to take the comments away. I was not using the provisions as a defence for where we are now; I was saying that we will look at them again to see whether we can modify them to meet the points and desires expressed in this debate.

The noble Lord, Lord Taylor, referred to my saying that the UK does not have control over all the emissions. I should clarify that because I may have misled noble Lords. We have no control over the annual, year-on-year fluctuations in emissions from 50 per cent of the economy—I think that that is accepted—but the EU Emissions Trading Scheme covers half the UK’s carbon dioxide emissions. The Government set the cap for them over five years. Over the budget period as a whole, we have control over the emissions. Within the emissions trading system, however, as colleagues know, companies are free to vary their annual emissions provided that they meet their obligations over the period as a whole. The Government have no control over the annual emissions from UK companies within the trading system. That was the practical reason that I was giving. I was not saying that we have no control whatever—there is control over the five years—but we have no control at all over how the obligations are practically operated by companies.

As I understand it, companies could deal with their emissions by buying in from other people. There is no obligation on them to reduce their carbon emissions. Therefore we would have a paper exercise in the British economy’s production of carbon by which, even if companies had met their obligations and produced less through buying in, they would be producing more carbon, though offsetting it by buying other people’s trading.

That is precisely the case and the amendments would not take account of it.

I return to the amendments. The issue has been put in a slightly different way, and it is important for the next stage to know that the Government have a view on particular amendments. Last week, the noble Lord, Lord Taylor, said:

“These emissions vary from year to year, and five years is a sufficiently long period in which to get the feel of things without it being too short a period to be blown off track by seasonal variations that may occur”.—[Official Report, 11/12/07; col. 217.]

Those seem to us to be good arguments against annual targets. However, we would want to know—not necessarily today—how Amendments Nos. 23, 24, 30, 59, 69 and 72 would work and why they contain both legally binding annual targets and non-binding rolling annual targets. As I have said to noble Lords privately, this is a classic example of why this Chamber needs an overhead projector, so that we can see on a screen what we are talking about. It would make it easier to explain. Would the targets be the same, or will a Government be able to set two targets for the same year so that they could always claim that they were meeting one of them? If they could have two targets, you can be sure that that is what they would do. If rolling targets will be set each year, six years ahead, how will that work within the five-year budget framework? What will be the point of the rolling targets if they do not add any value? They may just be ignored. Furthermore, how would rolling annual targets fit in with the proposal in Amendment No. 36 for further interim targets in 2015, 2030 and 2040? Three targets may be applied in 2030, for example—the annual target, the rolling annual target and the interim target, which may each require different levels of emissions. These are practical points. Although we do not agree with the proposal in the precise way in which it has been put, we certainly want to take it away for consideration.

We do not believe that setting an arbitrary figure before the start of each year is the best way to ensure that the Government are accountable to Parliament and the public. The accountability provided by the Bill is attractive because it addresses the various difficulties that we have identified in annual targets. We may not have got it right; we would certainly want the climate change committee to look at it. As I have said, we recognise the demands for stronger annual accountability as expressed in these debates, and we will certainly take the issue away for consideration. Although I cannot guarantee to return to it in Committee, we shall put something to the House on Report.

I welcome the opportunity to discuss in further detail how we might come to a form of words which would amend the Bill in the way in which the Committee has expressed. In view of the Minister’s commitment to that style of action, I am happy to beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 24 not moved.]

25: Clause 4, page 3, line 8, at end insert “, and

(c) to ensure that the number of carbon units credited to the net UK carbon account for each year of a budgetary period does not exceed 30% of the difference between the 1990 baseline and the annual equivalent of the carbon budget.”

The noble Baroness said: I absolutely agree with the Minister about needing an overhead projector when discussing some of these issues. That is partly the purpose of my tabling Amendments Nos. 25 and 27, because I want to draw out from the Minister comparative answers to two questions on the differences we are discussing. We talk about a reduction in the carbon budget of, let us say, 30 per cent. We then think that we are at 70 per cent, but a large number of different issues are at play which I shall attempt to explain through my amendments. It would, as the Minister acknowledged, be much easier to explain the issues if one could visualise them as pie charts and so on, but I shall attempt to do so verbally.

These two amendments would tackle the question of how many offset credits can come from outside the UK. Amendment No. 25 would limit the proportion to 30 per cent of the difference between the annual budget and the original baseline. The limit would be 30 per cent of the reduction effort required to meet the target. In other words, for the Government to comply, 70 per cent of the target reductions must be achieved by reducing domestic emissions or by increasing domestic carbon sinks. To meet the 2050 target, emissions must be 42 per cent lower than they were in 1990. In other words, 70 per cent of the 60 per cent target—if that is what we settle for in the Bill, though I hope we do not and go instead for a higher target—must be achieved domestically. The other 18 per cent—that is, about 30 per cent of the 60 per cent—can be covered using carbon credits. Most of those carbon credits will probably be offset credits purchased either through the clean development mechanism or as EU allowances.

One of the reasons for moving this amendment is to draw out from the Minister an estimate of the costs. There are agreements both ways, but this could be an expensive business. The partial impact assessment suggests that it would be 25 per cent cheaper to offset one-third of the emissions from overseas than it would be to achieve the reductions domestically. Is that likely to be the case? This is an issue that we touched on the other day in Committee.

In 1990 the UK emitted 775.2 million tonnes of greenhouse gases in carbon dioxide equivalent, and in 2006 the UK emitted approximately 658.1 metric tonnes of carbon dioxide. If my maths is correct—though it may not be—domestic greenhouse gas emissions need not be reduced at all under the Bill in order to meet the Government’s targets. The Government could simply purchase carbon credits to cover the difference. In other words, if emissions were still at present levels in 2050, the Government could claim to have met their targets entirely by purchasing offsets. The price of a certified emissions reduction—the carbon unit created by the clean development mechanism of the Kyoto Protocol—is currently about $10 per tonne of CO2 emitted. In order to cover the entire target reduction in 2050, the Government would therefore have to spend some $4.6 billion. That would cover only a single year, whereas the Government would have to offset the difference between actual emissions and their carbon budget every year. To date, carbon emissions have been rising.

The second amendment is different, though I am sure that the Minister, with all the resources of his department, will be able to explain the difference better than I can. However, I will attempt to prove that I have tried to find the difference. Amendment No. 27 would place a limit on the number of international credits used, based on the size of the budget rather than the size of the target. In the short term that would lead in practice to more international credits being allowed. In the long term, however, it would lead to fewer. For example, in a 2020 budget with a 20 per cent reduction target—where the baseline equals 100—a 30 per cent target would lead to a limit on credits of six; that is, 30 per cent of 20 per cent of 100 equals six. And for Hansard’s benefit I should say that this is clearly written out in my notes. In a 2050 budget with a 60 per cent reduction target—where the baseline equals 100—30 per cent of the target would lead to a limit on credits of 18; that is, 30 per cent of 60 per cent of 100 is 18. In the short term, a limit on credits based on the budget would mean that the Government could cover a much greater proportion of targets using international credits. That is far more numbers than I need to use; maths has never been my strong point. The point of the exercise when examining these amendments is to see exactly what would be the effect of putting a cap on the international credits.

As the Minister said, this is a difficult issue to debate non-visually. It is also difficult to debate it without using exact figures, because it is difficult to prove the end point being reached. However, having worked through this several times, I believe that if we do not put a cap on these international credits we will not be able to arrive at a satisfactory position where we can measure our domestic achievement, maintain environmental credibility and demonstrate that the developed states are taking a lead. I am glad that Bali has set us on the road. However, by the time we get to 2020 we will have to have established clearly through our efforts that we have had the basic principle of supplementarity very much in mind. I do not envy the Minister’s having to reply to these amendments and hope he can draw out the difference between the two. I would be grateful to have that put on the record. I beg to move.

In light of the extraordinary complexity of the noble Baroness’s introduction to the amendments, noble Lords may be amazed that I rise to my feet at all and attempt to make one or two clarifying remarks. It is a great pity that the noble Baroness has raised the issue at this stage. It would have been easier and clearer if we had come to debate it when we got to Clauses 21 and 22, which define net credits and explain how the system is designed to work. Perhaps we will return to it on Amendment No. 111, which also addresses the issue by placing limitations over particular periods. Frankly, we will not get very far if we follow the line taken by the noble Baroness and seek to impose a great all-embracing limit on the UK target at this stage.

At Second Reading I addressed some of the issues and referred to important evidence given to the committee by my son, who dealt with these matters before it. He works for Climate Change Capital and has spent most of the past weeks in Bali at the conference. I am not sure whether that was for good or ill. He probably knows as much as anyone about the complexities of climate emissions trading and these issues. In his evidence he expressed that it was extremely difficult to form judgments about the exact percentages and figures that we should settle on at this stage. He suggested that when we moved on to the real as opposed to the draft Bill, we should make sure that the climate change committee was not just given the task of recommending the UK’s share of credits and ensuring that the UK made a full and adequate contribution to the reduction of climate change, but that it should be able to embrace the issue of the international contribution. My son spoke rather effectively and at some length about the importance of making sure that we got the contribution not just from industrial nations but from the rest of the world as well.

It does not matter in improving the environment where in the world we make the reductions. There are powerful arguments for ensuring that substantial contributions are made outside this country, arguments which I need not develop further now as I spoke on them at Second Reading. The conclusion that he and I came to, and indeed that the Joint Committee came to in its detailed consideration, was that these were exactly the kinds of issues that the climate change committee should look at year by year in evaluating the contribution being made by the UK. The committee should ensure that any imported credits were worth while and stood up to international and national evaluation of their value—that they were not just paper transactions or the kind of scams referred to by some critics but made really worthwhile contributions. The committee should also take account of the need to get a value for carbons in this country and in Europe that ensured that full potential was made of industrial development, and so on. This, surely, is exactly why we have a climate change committee.

My son is rather an expert on these matters and spends most of his life dealing with nothing else. If he feels that he is totally unable to arrive at the right percentage to put into any part of the Bill at this stage, I am quite certain that I have no right to form a judgment about percentages, and I am pretty confident—and I say this having heard the speech of the noble Baroness—that nor is she. All this talk about 70 per cent of this and 30 per cent of that and 18 per cent of this and that is meaningless, frankly, when debated in those terms in this House.

I strongly urge the Committee to follow the recommendations of the Joint Committee on the draft Bill, which spent a lot of time considering these issues. It reported on them in pages 30 through to 35, covering the whole issue of supplementarity and strongly urging that the Bill be amended,

“to give the Committee on Climate Change a duty to report annually on the use of carbon credits in the preceding year. In doing so, the Committee should be required to give an opinion on the robustness of the schemes under which these credits have been issued, the effectiveness of these credits in reducing global greenhouse emissions, and the transparency with which the Government has reported their use”.

We made other similar recommendations on the slightly wider issue of the Kyoto Protocol to which the noble Baroness referred.

I suspect that we shall return to this matter and I do not want to delay the Committee too long. I hope that we shall come back to it when we come to Clauses 21 and 22, which is the appropriate place to do so. We should look at the issue there and in the terms of the job that we are giving to the climate change committee, because it really is a ludicrous proposition that we in this House can come to sensible decisions about particular percentages applied in this extremely complex and changing situation.

I endorse very much the principle lying behind the noble Baroness’s amendments, particularly Amendment No. 27, and in only one respect do I depart from the views of my noble colleague on the committee, the noble Lord, Lord Crickhowell.

I came to the conclusion following our report, and having read more and having talked to a great number of people, that the heart of a successful Bill lies in the concept set out by the noble Baroness—and, indeed, the one that we shall discuss in the group led by Amendment No. 29. I discovered that very little is known by the Government about the present situation. As a result I have put down a Written Question asking the Government what the present indicative figures are for the purchase of carbon emissions. In a sense this amendment is the litmus test, for all the reasons set out by the noble Lord, Lord Dixon-Smith, just now. This is a very significant Bill, which will fail unless it is able to provoke very significant behaviour changes in this country. This is the area in which I depart from the noble Lord, Lord Crickhowell.

I think that it matters very greatly where each individual carbon emission is saved from. If we fail to alter our behaviours and somehow, by dint of our wealth or sheer cleverness, are able to push the problem overseas and make it one that developing countries effectively solve for us, we shall have failed, and this Bill frankly will have no real reason to be on the statute book. At that point, we may as well call it the “Carbon Emissions Trading Bill”, because that is what it will have become. I do not think that that is something that anyone in this House particularly wishes to see happen.

If I gave the impression that I did not think it mattered, that was not what I intended to say. Of course, I agree that we have got to make a very substantial contribution as part of this, but, with regard to CO2 emissions, it does not matter where they come from anywhere in the world. There are a lot of extremely good reasons why we should make a very substantial contribution. What I am saying is that I do not think that I am in a position, or this Committee is in a position, to say whether the cap should be 10 per cent, 20 per cent or 30 per cent. That is the issue that the climate change committee can recommend on in the light of the circumstances of the time, the price of carbon and all the other relevant issues.

I thank the noble Lord. I did not for one moment think that he did think that, but I felt it necessary to raise the point.

I urge the noble Baroness, when she reconsiders this matter before Report, to push the figure up from 30 per cent to 40 per cent. I believe that there has to be such a figure. I am grateful to the Front Bench for supplying us with briefing paper 5, page 2 of which reads:

“The Kyoto Protocol allows countries to use international emissions trading mechanisms to help meet their targets, provided that this is ‘supplemental’ to domestic action to reduce emissions (which must constitute a ‘significant element’ of the action taken by developed countries)”.

I wish that I could trust words such as “supplemental” and “significant”, but life has taught me that I cannot. That is the reason—certainly from my perspective—for insisting on a figure being in the Bill. I would rather that it was 30 per cent but I shall settle for 40 if that is what it needs to get this amendment through this House. I shall support that situation at Report.

My comments are in sympathy with those put forward by the noble Lord, Lord Crickhowell. This is a very important issue of how far the UK relies on its own reductions in carbon emissions and how much on bought-in credits from overseas. Clearly, there is a balance to be struck. There is a strong case in theory for achieving carbon emissions at lowest cost, wherever that is possible across the world. There is also a good argument for carbon trading being a mechanism by which economic resources are transferred to developing countries that are themselves achieving carbon emissions cuts.

On the other hand, it is clear that the primary focus of developed countries—and this is why the word “supplemental” was used in the Kyoto Protocol—must be on reducing their own carbon and other greenhouse gas emissions. That is vital for two reasons. First, it is only because we are driving down and are committed to driving down our own emissions that we will be the drivers of the new technologies that are then available to the rest of the world, be they new technologies in energy efficiency or renewable energy. The other is perhaps a more short-term thing, but at the moment we cannot be as sure as we should like to be about the robustness of some of the offsets that we can purchase from the other end of the world. Therefore, it is essential that the primary focus of the UK climate programme be on our own greenhouse gas emission cuts with only a supplemental role for bought-in credits.

In that context, I believe that the noble Lord, Lord Crickhowell, is correct to say that the details of that require more thought and that that is something that the climate change committee should look at and develop recommendations on. The appropriate amount of a purchase from overseas will change over time; it may be appropriate for it to be somewhat bigger in the very short term—in the first budget or so—because it is difficult to turn the ship quickly, but it should reduce over time. In that respect, I admired the ability of the noble Baroness, Lady Miller, to construct between Amendments Nos. 25 and 27 something which many of us when we first looked at the paper thought must be contradictory but which is a clever mathematical way in which to achieve that tightening over time. However, I worry that, if we accept the amendments, we would inadvertently make them far too lax.

For example, if we run the figures on Amendment No. 27, if the budget for 2020—the third of the first three carbon budgets—was at the lower end of the range suggested by the Bill at 26 per cent, so that the budget would be 74 per cent of the 1990 figure of 100 minus 26, the amount that we could buy in to achieve that would be 30 per cent of 74 per cent, which would be 22 per cent. In that case, we would have achieved 90 per cent of our reduction by a bought-in mechanism and, over 30 years, would hardly have cut our greenhouse gases at all. Therefore, the principle of the amendment is worth talking about, but the details have to be worked out by the committee. If one puts in place a set of figures without that detailed thought, there are two dangers. On the one hand, it is impossibly tight, but it also signals a willingness to buy in credits from overseas. That is what would be achieved by the 30 per cent figure proposed in Amendment No. 27.

I endorse the principle of the amendments and what was said by the noble Lords, Lord Puttnam and Lord Turner. It sounds as though the son of the noble Lord, Lord Crickhowell, is in favour of the principle even if he cannot decide on the relevant level. We clearly cannot simply deal with this problem by shuffling it off on to other countries. That is the important principle of the amendments. All countries will need to reduce their carbon emissions, but especially developed western ones. That is the focus of the amendments. Clearly, credits will be useful to developing countries, but we need to balance that if those countries are to be able to develop themselves. It is extremely important to bear that in mind. Therefore, we must give a strong direction to the climate change committee that these reductions must be largely in the UK and not simply by trading. That is why I support the principle of the amendments.

The noble Lord, Lord Turner, pre-empted aspects of what I was about to say. The noble Lord, Lord Crickhowell, is undoubtedly right that this is complex. He may well be right that, in the end, wherever the carbon cut occurs in the world is equal. However, there are a number of important political and technical issues that require us to take the principle of the amendment very seriously. If the outcome were, never mind the precise arithmetic of the 30 per cent, something like what the noble Lord, Lord Turner, said—that 90 per cent of our achievements as a result of following the precepts of the Bill were actually achieved overseas—that is not the Bill that we are selling to our own people and the rest of the world. If we were buying all the credits overseas, British citizens would be without the pressure on their way of life to adopt new technologies and new ways of doing things which keep us ahead of the game.

It is complex, because three different elements are intertwined. They are interrelated but not the same: there is the issue of trading; of our domestic target, which is essentially what is in the Bill; and our Kyoto commitments and the supplemental mechanisms that are provided under Kyoto. They do not all end up with the same result. The latter two, in this context, can be seen as mechanisms for achieving the first, but they are not the same and they are not the same answer. One could adopt a figure along the lines of the amendment without at the same time inhibiting trading or any new post-Kyoto international agreement.

The central theme of the Bill is that Britain is setting itself—its own industry and people—a target to make a significant contribution towards the problem of climate change. If we allow a situation under the Bill whereby our companies and institutions are buying those credits elsewhere, that central principle falls.

The noble Lord, Lord Crickhowell, may well be right: the exact figure and the way in which that is achieved may be best left to the advice of the climate change committee. The optimum figure will certainly change over time. Apart from anything else, if the whole economy is in the trading mechanism you cannot count these things twice; therefore you are at the end of the road. But at this stage of the Bill, whereas we may not actually agree on a percentage, the principle put to the climate change committee should be clear. There should be a limit on the degree to which we can meet said targets over the budget set out in the Bill by overseas credits, however we care to express that. Although we can all argue about the 30 per cent—we know that it will change over time and we accept that the climate change committee will make the recommendations—the principle raised by the noble Baroness, Lady Miller, should be included in the Bill.

The noble Lord, Lord Turner, admirably expressed what I was going to say, but I want to add one more thing. It is important to get the right balance between international credits and UK action for all the reasons that Members of the Committee have described, such as the decarbonisation—that is a dreadful word—of the UK economy. Furthermore, we will not exactly look like global statesman and leaders on the carbon front if we are not doing very much back home, and, at the moment, confidence in the green development mechanism is not where it should be in terms of the sorts of gases that it is reducing and the verification mechanism. In the early stages, there is an absolute need for a strong focus on carbon reduction within the UK as well as doing our bit for carbon reduction internationally.

I am not sure whether the target is the right one—there are two different targets for two different amendments in this group. The noble Baroness Lady Miller of Chilthorne Domer, admirably wrestled with the complications of the targets. The answer probably lies with the climate change commission—sorry, climate change committee: that was a Freudian slip that pre-empts a future amendment—but that worries me. The noble Lord, Lord Crickhowell, talked about year-to-year changes by the climate change committee. That is not the answer either. We have to find a way of giving a strong signal to British business and investors in British business that the Government are earnest about UK carbon reduction. However we do that, it needs to happen. Some strengthening of the role of the climate change committee in the Bill to make it clear that there is a requirement for it to report in that fashion and to make a strong recommendation to the Government along those lines would be of some assistance.

I was interested to hear interviews with the Secretary of State in Bali at the weekend because he endorsed an earlier amendment of my noble friend Lady Miller when she said that by the time we get to 2050, the 60 per cent reduction should be completely UK. The Secretary of State said that we are bold in the United Kingdom—I paraphrase that but it is what he said. We are putting through legislation that will ensure that Britain reduces its carbon emissions by 60 per cent on a statutory basis. That is what he said, but that is not what the Bill does. I wish it did but it does not. Because of international trading and the concept of a carbon account, we can get to 2050 and under certain circumstances not have reduced our carbon emissions at all. In fact, under certain circumstances, we could reach the 2050 target but miss it because we had been selling credits because our industry had decarbonised so much.

Does the noble Lord not accept that Parliament would not allow that? With annual reporting to Parliament and the debate in Parliament what he is saying is inconceivable.

What the noble Lord is saying is inconceivable because the annual debate in Parliament, discussions among Members of Parliament, decisions in Parliament on these matters and the work of the committee would prevent that happening. He is talking totally hypothetically.

I did indeed say that it would be in extremis, but the Bill does allow that. It is very unlikely that that would happen. I am not arguing that it would actually happen, but it could, within a very large spectrum, mean that any of those results, between what we emit now and what our target is in the future, could be possible, given the flexibility of the concept of the carbon account in this Bill. It is quite clear that those outcomes could be very broad. The principle of my own amendment, Amendment No. 111, that I also wish to talk to, is that we need to understand this difference. I am not completely against including a certain degree of trading within our targets for reduction—that is a practical and reasonable way forward. Again, I emphasise the point that if we say that we do not allow all credits and trades to count, that does not in any way stop those trades happening anyway, because they do happen. The EU ETS will carry on regardless, as will the flexible mechanisms under Kyoto and no doubt its successors.

What we are saying—this is absolutely core to what the Government themselves believe—is that there has to be, primarily, a reduction in carbon in our own economy, outside of any trading. To do that, we need to have that stated in the Bill itself. It is as simple as that. In my own amendment, and that of my noble friend Lord Redesdale, we have put two numbers. We have said 10 per cent up to 2020 and then 5 per cent. I am far less adept at mathematics than my noble friend Lady Miller. I had meant that to mean 10 per cent and 5 per cent of the total carbon budget, rather than the difference. These numbers are clearly things that we would have to be more clear and precise about, as we move through the Bill.

It is essential for the purpose of the Bill, for the reputation of the Bill internationally and for our leadership internationally that there should be a restriction—preferably one that gets tighter as time goes on—on how much we can include carbon trades within our carbon budget. That is the way that we will lead. That is the way to make it clear to the international community that there is no fudge factor—this is much bigger than wiggle room—and to say that really we are leading here. We need that to be in the Bill.

In terms of the view of the noble Lord, Lord Crickhowell, on targets, I am very reticent—I am not saying it is impossible—about delegating that entirely to a climate change committee. At the end of the day, it is up to politicians to decide on the right figure. It is not going to be just a technical calculation. It is not just a purely scientific calculation to work out what this percentage should be. I think it is one that is, to a degree, going to be subjective, and one that we should be able to make our own decision over, perhaps following advice. I would be disappointed if we did not have a number for the total proportion of credits actually in the Bill.

I am entirely of the view that we need to have a very strict internal limit. The question is how best to define it in the Bill. I also agree that we need to give the climate change committee a very clear direction and steer. That may take the form of saying that the figure of 60 per cent, if that is what it finally is, is an internal figure, rather than this complicated series of formulae that were introduced by the noble Baroness, which I think people would find very hard to comprehend or explain. I would prefer, if we are going to say that there has got to be a limit and a steer, to turn around and say that the internal figure has got to be a fixed percentage and that the climate change committee should take us in that direction. The noble Baroness, Lady Young of Old Scone, was right when she said that we have to give that steer and direction. What we are groping for is how we get there in a way that is clear. It is not a very good idea to have a Bill that sets out a formula that produces total incomprehension in the ordinary individual.

I thank the noble Lord for that intervention and I agree with much of what he says. I am not fully resolved on the mechanism myself. All that exists at the minute is part of the remit of the climate change committee, which says that this will be something on which it advises. I would certainly require there to be a restriction even if we decided later what it was. I believe we should make up our mind on that restriction before the Bill gets Royal Assent. This is a core area. It does not get in the way of carbon trading happening within the schemes that exist at the moment or those that will exist in the future. In terms of the UK’s leadership, and the Government’s and the Secretary of State’s desire to lead, a formula like this is essential.

I endorse much of what my noble friends Lord Turner, Lady Young and Lord Whitty said, as well as some comments made by the noble Lord, Lord Teverson. It does not matter to the world very much whether this clause exists or not. In principle, provided those reductions that are certified are indeed legitimately made, it does not matter globally. But it certainly does matter for the UK, both from the point of view of moral leadership and for the positioning of our industry. I would add that if we are doing this in the interests of supporting British industry and positioning it better for a low-carbon world, we need to do this in a considered and gradual way, so that British industry is not dually disadvantaged by comparison with its competitors in Europe. We believe that in the long term, this would be an advantage. But a lot of industry lives on a quarter-by-quarter, year-by-year basis. It would be important not to impose burdens that would unduly disadvantage it in the short term. I am sympathetic to the view of the noble Lord, Lord Teverson, that this is not entirely a matter for the climate change committee. It is a matter of broader government policy, basically positioning the country as a whole. Whereas the climate change committee’s views would be of interest and importance here, it is a government decision.

Before we started to debate these amendments, I was going to say that the amendments from the Liberal Democrat Benches are confusing, as they seem to contradict Amendment No. 8 to Clause 1, earlier tabled by the noble Baroness, Lady Miller, which was supported by the Liberal Democrat Front Bench. That amendment seemed to rule out carbon trading altogether, by confining our 2050 target to UK domestic reductions only. Now the Liberal Democrat Benches seem to have changed their mind and accepted that there is a place for carbon credits.

The Liberal Democrat Benches have been absolutely consistent. We are not in any way saying that there should be no trading. Trading will continue anyway, whatever goes on with the targets of this Bill. The amendment of the noble Baroness, Lady Miller, which we supported, said that by 2050, we should come down to zero trading in terms of counting it towards our emissions. But trading will continue anyway. The EU ETS just carries on trading; the flexible mechanisms of Kyoto will just carry on, whatever we use as a measurement here. We are being entirely consistent. We agree with trading entirely, but how much of it you can count towards a domestic target is a matter of political debate.

I thank the noble Lord for that intervention. I had thought that the idea was to confine the 2050 target to UK domestic use, although he may have said that there would be carbon trading on top of that. Be that as it may.

We believe that to put percentages in would be far too restrictive. However, if we were asked to pluck a figure from the air, what about 25 per cent? We have had 30 per cent, 10 per cent, and 40 per cent from the noble Lord, Lord Puttnam. We on these Benches do not know the right answer, and I do not think that we would get consensus in the Committee anyway. My noble friend Lord Crickhowell does not know, and he is an expert; I am not.

Well, my noble friend is certainly more of an expert than I am. The committee’s members are the experts, and they should decide. The Bill should have no restrictions in it, but should give the committee a steer on our thinking. Once the committee has looked at all the evidence, it should then say what percentage limits should apply.

The concept of allowing overseas credits to be used to reduce a country’s net carbon account is widely accepted internationally. There are already at least three international agreements for allowing foreign schemes and reductions to be used in reducing or netting off the UK carbon account—the UN framework, the Kyoto Protocol and the EU Emissions Trading Scheme—and no doubt others will be developed.

There are two types of international carbon credits. The first is where UK companies and entities can buy credits from those who emit less than their capped allocation, and the second is the funding of projects abroad, which will displace the growth of emissions from the developing world. UK companies that emit more in a given period than their allocated cap must buy sufficient credits to bring their net carbon account into line with their cap. They can buy credits from another company within the UK; that will reduce their net carbon account but increase the selling company’s, so that both companies stay within their respective cap allocations. Because those transactions take place in the UK, there is no change to the UK’s net carbon account. Alternatively, the company can buy its credits from another company outside the UK. That will reduce both the individual company’s net carbon account and that of the UK.

That carbon trading is already taking place. It allows participants to reduce emissions where it is cost effective to do so and to trade where it is cheaper for others to do so, therefore reducing emissions at least cost. The noble Lord, Lord Rooker, said last week that the European Commission confirmed this,

“finding that the costs could be reduced by a third through emissions trading”.

However, it is vital that the caps set internationally are robust. If not, the credits bought are likely to be from the most lax systems. If that happens, progress to reduce emissions will be slow.

The UK company can also help to pay for green projects in a developing country, as can the Government. The effect would be to reduce the net carbon accounts of the Government and the United Kingdom. But are those credits for overseas projects desirable? In my view, they clearly are. As the noble Lord, Lord Rooker, said on Amendment No. 8,

“it does not matter where on the planet the reductions take place, so long as they are proper reductions”.—[Official Report, 11/12/07; col. 185.]

I agree, but when I wound up on Second Reading I said:

“It is rather like the buying of indulgences ... While it is obviously worth while to contribute to the global battle against climate change”,—[Official Report, 27/11/07; col. 1207.]

that should not be allowed at the expense of taking the necessary actions within the UK. The noble Lord, Lord Puttnam, said a little earlier that it is like pushing the problem abroad. It is actually pushing the solution abroad; we have to find the solution in this country.

Pushing the solution abroad would convey entirely the wrong message. If the UK failed to reduce its own emissions by allowing too high a percentage of foreign credits, it would be a sort of “business as usual” approach. That theme is echoed by the Kyoto Protocol—it was referred to by the noble Lord, Lord Puttnam—which states that,

“the use of the mechanisms shall be supplemental to domestic action and that domestic action shall thus constitute a significant element of the effort made”.

“Supplemental” and “significant” suggest that a figure of well below 50 per cent would be acceptable.

At this point, I would like to say something about the reporting of the UK’s net carbon account. There is a need for full disclosure in the reporting of the reduction in emissions from one period to the next. By that I mean disclosure of how much of the change is due to the UK’s domestic emissions, how much is due to carbon trading—both of credits and debits—and how much is due to the taking of credit for developing-world projects. That would offer some transparency to the process. We have tabled an amendment to that effect, to which we shall come later.

What is the right percentage? We have lots of different ideas in the Committee today. Should it be the same percentage throughout the 42 years? That was referred to by the noble Lord, Lord Turner. There may be merit in tapering the percentage over the period. Initially, companies would need to trade carbon extensively until they got their own house in order. If they failed to do so and as their allocated cap reduced year on year, the cost of trading carbon would become prohibitive, until price forced them to take action. For an example of tapering, let us take the figure of 40 per cent suggested by the noble Lord, Lord Puttnam. You could have something like 40 per cent in the first 10 years, 30 per cent for the next 10 years, 20 per cent for the next and 10 per cent for the remaining. That example averages out at about 25 per cent for the 42 years, which is coincidentally the same figure as I plucked out of the air at the beginning of my remarks. However, if there is to be any tapering, it should be for the committee to decide.

It may well, but the climate change committee could decide on the mechanism for tapering in carbon trading. Buying indulgences abroad may increase as years go by but, by having a tapering mechanism in place, the whole thing would reduce.

I said earlier that we should not put a percentage into this Bill, as we would only be guessing. The setting of limits for carbon credits should be left to the committee of experts. Indeed, I understand that Brussels is currently looking at setting those limits centrally, so it would be entirely inappropriate for us to put a limit in the Bill before the EU had deliberated. Doing so would make our position inflexible—another reason why the setting of limits should, we believe, be delegated to the committee so that it can look at all the facts and evidence. We have tabled amendments to that effect, which we shall debate later.

We have had an interesting debate, although there is something very British about noble Lords queuing up to say how innumerate they are. We are all pretty numerate, but it is a matter of trying to explain the figures in a forum like our Committee, when we lack the good communications technology that the Committee on Climate Change will certainly have. I freely admit that we shall return to some aspects of this important debate, as some of your Lordships have said. The significance of this matter is such that I have here a speaking note of 11 pages; however, I shall start by sharing its very last sentence with the Committee.

One or two Members of the Committee have asked how the Government can prove that we are determined and committed to decarbonising the UK economy. From that point of view, the Bill needs more clarity. We will take that aspect away to see how we can modify the Bill to make it absolutely clear that we are committed to that decarbonisation. That is what underlies it: we are all agreed on trading. The only reason that people might oppose trading on principle might be if we are not committed to doing anything ourselves. The very last sentence of these 11 pages says that in view of the opinions expressed, we are certainly prepared to take the Bill away to see how we can clarify our commitment.

I do not propose to use all 11 pages; that was just to frighten your Lordships. However, I want to answer the discussion on the amendments which, as they were put to us, have been incredibly interesting in getting the debate going. It will also be useful for our debates on other amendments. Domestic action is crucial and, if I have not made this clear, I want to emphasise that we recognise the importance of reducing our emissions within the UK. We are committed to the international principle of supplementarity, which states that the use of international mechanisms should be supplemental to domestic action. The latter should, therefore, probably constitute the significant element in our efforts to meet our targets.

For example, the 2007 energy White Paper, Meeting the Energy Challenge, sets out an ambitious and far-reaching programme of action across the economy to reduce our own emissions. Our projections are that it would put us on track to reduce carbon dioxide emissions—through domestic action and the EU Emissions Trading Scheme—by between 21 and 26 per cent by 2020. We recognise that further action will be needed. However, as I have said before, a tonne of carbon is a tonne of carbon wherever it is emitted. The international trading has significant benefits in reducing the cost to the world as a whole in tackling climate change, by providing the finance needed for developing countries to move to a low-carbon development path. It also underpins the global system that we simply must have if climate change is to be tackled. The question that we must ask, therefore, is: how are we to get the right balance between domestic and international action to reduce emissions over time? We are talking about a fairly long timescale.

The amendments proposed would take different approaches to that balance. When debating and scrutinising a Bill, it can sometimes appear as though amendments to one part of the Bill are somewhat contradictory to those in other parts. That is easily done—I have done it myself when in opposition—and there is nothing wrong in it. We are here to scrutinise, so I make no point on principle that, because an amendment takes one view, a political party is therefore being contradictory or changing its mind.

However, I will deploy the amendments in turn. While the amendments take different approaches, we do not accept that they capture the complexity of the situation or the fact that this picture will change considerably before 2050. For instance, within the EU, surely we can expect the European Commission to come forward with proposals to change how the EU Emissions Trading Scheme operates? Meanwhile, internationally, as the Committee will be aware, discussions on the post-2012 framework have been taking place in Bali—and their outcome is difficult to predict.

Amendment No. 25 would place a limit on the use of carbon units of 30 per cent

“of the difference between the 1990 baseline and the annual equivalent of the carbon budget”.

Carbon budgets will get smaller over time, as we reduce emissions towards our 2050 target, so the difference between the 1990 baseline and the carbon budget will increase over time. This amendment, therefore, would mean that the number of carbon units allowed would increase over time. Under Amendment No. 25, if the 2050 target was set as at least an 80 per cent reduction, as many of your Lordships have proposed, this amendment would mean that the limit on the use of carbon units was higher than the budget itself. That is because the level of the carbon budget would be, at most, 20 per cent of the 1990 baseline in 2050, while the number of carbon units allowed would be 30 per cent of 80 per cent, which is 24 per cent of that baseline.

Amendment No. 27 would limit the use of carbon units to 30 per cent of the carbon budget, so, over time, as that budget got smaller it would mean that the number of carbon units allowed would decrease. As one of your Lordships has already mentioned, that is therefore the opposite approach to that taken by Amendment No. 25.

Amendment No. 111 would place no explicit limit on the quantity of carbon units that may be used; instead, it says that if we are going to use carbon units, no more than 5 or 10 per cent of them can be from overseas. In practice, the vast majority of carbon units credited to the net UK carbon account will come from elsewhere in the European Union and from the international carbon market. This amendment would, in practice, make it difficult for us to use any carbon units to meet targets and budgets. That may not have been the intention, but I am trying to explain the practical effect.

I now have about seven pages extolling the virtues of emissions trading schemes and their importance. I think everyone understands that they can have an importance, particularly in providing aid to developing countries. I will save these for other debates, showing that I have learnt a thing or two during the past 30 years while going through each House in succession.

None of this is to say that this debate is not important. We are all grateful to the noble Baroness, Lady Miller, for letting us have this crucial debate early in the Committee’s proceedings. The Environment Audit Committee in the other place looked at this very issue and concluded that,

“this must not become an ‘either/or’: the Government should ensure that the UK’s targets are sufficiently challenging that they drive decisive emissions reductions at home and abroad”.

We are already committed to looking at tightening up our 2050 target, as we said at Second Reading. There is a general consensus on that question. We all recognise the need to meet our international obligations under the principle of supplementarity, and we have every intention of doing so under this Bill. However, as your Lordships have said, the situation is complex and not the easiest to explain. That is why we are proposing and asking the Committee on Climate Change for each budget period on an ongoing basis to provide advice on the appropriate balance between domestic, European and international action. This is a flexible approach that recognises that the international climate change framework will look very different in 2050 from how it looks now—although I was taken by the point made by the noble Lord, Lord Oxburgh, on not leaving it all to the Committee on Climate Change in this respect: there are other aspects of this for business. The noble Lord made a telling point.

For those reasons we would like to take this concept away to see where we can clarify in the Bill—although I do not identify where that will be—that we are committed to decarbonising the UK economy. We obviously want to decarbonise the world economy at the same time, but the fact of the matter is that we do not want to do one of those things by hiding behind the other. That is the point that we need to come back on, and we are grateful for the debate initiated by the noble Baroness.

On this question of clarity, because I am a rather sad person, I looked up the Oxford English Dictionary definition of supplement and supplementary. It states clearly that it is to furnish a supplement or to supply the deficiency. If I heard my noble friend correctly, he helpfully said “the significant”, rather than “a significant”. This type of tautology frightens the life out of me. Will he help me with my slight crisis and go to the extent of using the words “the majority”? Would the Government be prepared to instruct the climate change committee that the majority of carbon savings would be achieved from domestic action? I stress that because successive Governments will come under the hammer on this. Getting behaviour change through will not be politically popular, but I am desperately trying to cling on to something here that ensures that the government of the day are required to take relatively unpopular actions for the benefit of the country as a whole and in the longer term.

That is a question to which, in all honesty, I should be able to say yes, but I cannot do that here tonight; I shall have to take the matter away and come back on it. I wanted to come back to the point the noble Lord raised. I do not normally follow notes and read out narrative. I have always said to officials, “If there are words that you want me to use precisely, put them in bold and I will use them”. This time around, I changed the words as I used them, because, conscious of the debate that I have just heard, I said—and I shall read it again—that,

“we are committed to the international principle of “supplementarity” which states”,

in bold letters,

“that use of international mechanisms should be supplemental to domestic action and that domestic action should therefore constitute a”—

I then said that perhaps it should be “the”—

“significant element of our efforts to meet our targets”.

So I am with my noble friend on that; it is a question of how we can do it in the Bill. I hope that I have said enough in this debate for my colleagues in the department—the climate change Ministers for whom I am masquerading as their spokesman on earth, while we still have one. We will take the issue away, because I shall have to come back with something solid that I can get the House to accept, otherwise it will force its will on the issue. We want to be practical about this and the answer to my noble friend that I should be able to give is “yes”, but I am in no position to do that tonight. I will go away and see whether I can come back with that answer.

I had not intended to intervene again, but I think that the recommendation of the noble Lord, Lord Puttnam, was soft and was not nearly tough enough. Supplementarity has been interpreted consistently by the European countries as meaning at least a half. That is where we are now. There is a general view that it must be a good deal tighter than that. I said that I do not think that we can decide on the exact percentage, but following what the noble Baroness, Lady Young, said earlier, we have got to give a clear steer to the climate change committee on this issue which cannot rest on the existing definition of supplementarity or the interpretation of it. It has to be tougher than that. I intervene only because, while I nearly always agree with my former chairman who chaired us admirably on the Joint Committee, for once he was not being tough enough. I would like to be a good deal tougher in giving our steer, however it is devised, so that the climate change committee, in coming to specific recommendations, understands perfectly that the international and the national issues must be taken into account, but the national issues must be a very substantial part of the contribution.

I was grateful for what the Minister said. This is a fearfully complicated, but essential, part of the Bill. My memory goes back to the issue of CFCs, when we had the distinct advantage of an international agreement. When I was in the Department of the Environment, British industry bleated at my door regarding the extra cost that it would face. The noble Lord, Lord Puttnam, is absolutely right. We all agree on this principle in this Chamber, but implementing it on the ground, when one has seen the results of Bali and that some countries are not signing up to targets, will be very hard for British industry.

Having listened to the debate, I am coming down in favour of the need, as politicians, for us to set a target in the Bill. That was not where I started from, but it must be made clear to British industry that we expect it to deliver, often when others will not deliver initially—I think they will catch up. We are going to ask Britain and British industry to take a lead with all the costs that that involves. As politicians, it is our duty to put something in the Bill, but I would like to back that up, rather like we did in Clause 1, by an “at least” and then leave it up to the Committee on Climate Change. As everyone in the Committee has said, this will change. In 10 years’ time we will be talking a totally different language from a different position, but we have to start this ball rolling now. I am grateful for what the Minister said; we should strengthen the Bill and put a figure in and, as my noble friend Lord Crickhowell said, give clear guidance to the committee.

I am immensely grateful to all noble Lords who have spoken, because they have eloquently expressed a principle that I did not express when I rather dryly introduced these amendments. The noble Lord, Lord Crickhowell, is quite right to say that their correct place would have been in Clause 22, but I really could not see how we could get through Clauses 5 to 21 without debating this important principle. I am extremely grateful to the Minister for his positive reply in recognising the principle and saying that the Government will take the issue away and look at how this might be incorporated in the Bill.

Several noble Lords, including the noble Lord, Lord Turner, the noble Baroness, Lady Young, and the noble Lord, Lord Oxburgh, spoke about the necessity of certainty for business. British industry will be floundering without that certainty. Will we in this House start to look at putting in a target as some sort of percentage as a starting point for the climate change committee or will we simply leave it as a principle? I am glad that we will have a break and that we can come back to Clause 22 for a second round even before Report stage.

For me, this was one of our most exciting debates because it has concerned an issue of immense principle. We are not talking about just British industry, but the international dimension, as my noble friend Lady Northover mentioned. I am very grateful to the Minister for his reply. It will not be easy to come up with either a percentage or a taper. I agree with the noble Lord, Lord Crickhowell, that this decision will not be easy to arrive at. Are we the correct people to take it? However, we are the correct people to set a principle and that is what we are moving towards.

Once again, I thank all noble Lords who have spoken and particularly the Minister for his positive reply. In the mean time, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

26: Clause 4, page 3, line 8, at end insert—

“( ) In the event of the net UK carbon account for a budgetary period exceeding the carbon budget the Prime Minister must, within three months, prepare a compliance action plan so that the shortfall is made up in the following commitment period, or identify other compensating actions to remedy the failure, after consultation with the Committee on Climate Change.”

The noble Lord said: Amendment No. 26 stands in my name and those of my noble friend Lord Caithness and the noble Lord, Lord Teverson. When I was in Moscow last week and my noble friend moved my amendment to Clause 1, the noble Lord, Lord Woolmer, said that taking a series of amendments in isolation from the others can create problems. I am afraid that here we cannot take the clauses and amendments in isolation. I am going to have to refer back to my original amendment which was proposed by my noble friend Lord Caithness. I do not intend to weary the Committee by going into it in too much detail because I am pretty confident that we are going to have to do that again at Report. None the less, some very interesting things were said. On reading the debate, I was puzzled by something that the noble Lord, Lord Rooker, said but I think I am now clear that it was either a misreporting in the Official Report or one of those slips of the tongue that we are all guilty of when we are speaking off the cuff. He said of the amendment which was then being debated:

“It seems to have been thought that the intention of the amendment was to address the perceived lack of enforceability of this requirement or duty to meet the targets and budgets in the Bill. It was not drafted for that purpose”.—[Official Report, 11/12/07; col. 163.]

As I drafted the amendment I was not at all sure that the Minister was the man to tell me what its purpose was. It was exactly the purpose but then I realised that the word “it” should have either been “the Bill” or “Clause 1”. It is clear from what he said subsequently that the noble Lord, Lord Rooker, was referring, as he had at Second Reading and as he did several times during his response to the debate, to the fact that Clause 1 was not a provision that was to be treated like going through a red light or over the speed limit and getting a fine. That is not the kind of penalty that is implied; the penalty is parliamentary opinion, the court of public opinion and the opinion of business. He made it clear that one of the prime objects of the drafting of Clause 1 had been to change the whole approach of civil servants, Ministers and the Government because they believed they were dealing with a legally enforceable clause.

The noble Lord, Lord Rooker, as he so often does because he does not always stick to the brief even when it is not 22 pages long, speaks with a degree of freshness and frankness that we all appreciate. He gave some very good reasons why it was not going to be enforceable in the way of being taken to judicial review and he gave a very clear description of the fact that this was going to be a question of a range of policies across government. It is exactly that kind of situation that the courts are not going to intervene in. They are not there to decide that policy is wrong, let alone that a great interacting set of policies has been wrong. They usually intervene only if they feel that the decision has been taken entirely in the wrong way or that there is a clear breach of a straightforward law. That is why unfortunate Home Secretaries in all Governments seem to fall foul, because they can be pinned down on a single provision concerning, say, immigration legislation or something of that kind. The Government’s intention is to change the whole approach of Government and make them think that this is a serious matter. I am a little sceptical, as was the Joint Committee, with the view that civil servants and Ministers will dramatically change their approach in this way. The Joint Committee was so concerned that we thought there must be some kind of procedure that would mean that the Bill had teeth if it was not going to be policed by the courts.

I was extremely careful about the way that I drafted that first amendment to link it to Clause 4 which sets out the arrangement for setting targets and budgets over five-year periods. My reason for wanting to link it clearly to Clause 4 is that we are entering a rather different area. While it is almost inconceivable that a duty to see that something happens in 30 or 40 years hence can be enforced, with five-year budgets you are talking about much more limited periods and you get the results quite quickly. I could even envisage circumstances arising from Clause 4 where the courts might be prepared to intervene. The Front-Bench spokesman for the Liberal Democrats—I cannot remember who it was—earlier referred to aircraft policy and airport policy. I can just conceive of a budget and target having been prepared. The Department for Transport, which does not always seem to be quite as interested in these issues as Defra, might come along with a new policy for building runways that might conceivably be held to be in breach of the statutory duty. But I would rest on that, which is why I have moved this amendment.

The Joint Committee, having expressed its doubts, took up the extremely valuable contribution of the noble Baroness, Lady Young of Old Scone, who, coming to the same conclusion that we needed some system of enforcement, came forward with a series of proposals and recommendations. The committee reached a conclusion on page 41 of its report that it had,

“a strong preference … to introduce a compliance mechanism within the Bill that will give both meaning and strength to the duty to ‘ensure’ by compelling the Secretary of State to redress any failure to meet a target or budget, where necessary through court intervention based on the compliance mechanism”.

We went on to follow the example provided by the Kyoto Protocol compliance procedure. That principle establishes that if,

“a carbon budget is exceeded … the excess emissions are deducted from the carbon budget for the subsequent period”.

In other words, since it is clear that they have failed to achieve their target, the Government have to come forward immediately with a detailed plan which they will put to Parliament as to how they are going to put it right in the immediate period that follows.

That is just one of the possibilities but one can think of others. The noble Baroness and her colleague Mr Clive Bates gave evidence to us on this subject on days 50 and 51 and elaborated on other perhaps even tougher possibilities, such as forcing the Government if they fail to meet their targets to purchase emission allowances on the international carbon market, investing in a domestic carbon reduction fund at an agreed price per tonne of carbon, and a number of other possibilities.

I have not elaborated on the other possibilities in my amendment. At this stage, I think it is quite enough simply to pick up the recommendation of the Joint Committee. However, if we are to have a Bill that has teeth, surely there must be a compliance mechanism. It is no good for the Government to say again and again that this is a legally enforceable Bill and that the courts will intervene and perhaps impose even tougher penalties than I am talking about. No one believes that. None of the outside interested bodies which strongly support the Bill believes that, and there is a real danger of everyone concerned being embarrassed when the world outside realises that we have no means of making this a legally enforceable Bill. Where will we be then, as we set our moral example to the rest of the world?

Therefore, I say that there is a compelling need for a compliance mechanism in the Bill. I do not say that the single solution that I have offered in the amendment is the final answer, although I go on to refer to other possibilities. When the noble Baroness, Lady Young, and her colleague came before the Joint Committee, I asked them to work up some more detailed ideas and to come forward with other specific recommendations on the way in which we might proceed down this road. I hope that in due course, if not today, we shall hear about some of those proposals. However, I urge the Government to accept the Joint Committee’s strong recommendation for a compliance mechanism. I beg to move.

I support my noble friend on this amendment. I was saddened by the Government’s response to the Joint Committee’s recommendations on this matter. The most that the Government managed to come forward with was the statement that they were proposing to amend the Bill to require the Government to explain in Parliament why they had failed to meet the carbon budget. However, that is not good enough. When one has a budget of this nature, it is unacceptable to say, “These are the reasons why we have not achieved it”, and then to sit down and do nothing about it. The whole point of the amendment and the Joint Committee’s recommendation was that something had to be done about it. The Government argued in their response that, if there were a compliance mechanism, it would be likely to weaken the statutory result from a judicial review. I do not think that that is right. I do not think that a judicial review will be very likely to happen under this Bill, for all the reasons given by my noble friend Lord Crickhowell. However, a compliance mechanism is necessary, just as it is with the Kyoto agreement, and it should be very simple. In it, the Government should set out exactly how they are going to remedy the situation in which they find themselves.

I want to intervene briefly. As I said before, I was not fortunate enough to be a member of the Joint Committee which produced this extraordinarily good report, but I have followed the debates fairly closely.

I, too, believe that there is a need for a compliance mechanism. What interests me is that the amendment talks about the budgetary period, and that period is not one year but five years. That being the case, if action were not taken at the end of the budgetary period, that would almost be negligent. One would have thought that there was an absolute responsibility to ensure that at least at the end of every budgetary period, irrespective of what had happened during the years comprising the budgetary period, we were on line to meet our long-term targets by 2050. Therefore, in principle, I accept the proposal in the amendment and I hope that, similarly, my noble friend can go down that route. He may argue with the wording to some extent because it implies a certain element of discipline in relation to the process by which the penalties, if I may call them that, might be introduced, but I am sure that he will find a way round that.

I put my name to the amendment because I also felt that there needed to be a positive outcome if budgets failed to be met, and this seemed to offer a very practical and focused way forward. As I think I have said before, it is very nice to think of the Secretary of State of the day being dragged away to the Tower of London because the targets have not been met, but that will not happen. Judicial review might happen but that process would not contribute greatly to what we want to achieve here, which is to ensure that we meet our longer-term targets. The amendment or something like it would do that very well; hence, I am very happy to support it.

I, too, support the principle of a compliance mechanism. I am very grateful to the noble Lord, Lord Crickhowell, for speaking so glowingly about some of the ideas that were put forward when we gave evidence to the Joint Committee. However, the nature of a compliance mechanism is not necessarily captured by this amendment, as we need something that will drive change.

We are a bit adrift from our trajectory for meeting current targets, and no amount of words of commitment to meeting targets will address that. Practical measures are needed, and that probably means new policy and perhaps new investment. That is why I thought that the proposition put forward in the evidence sessions to the Joint Committee that I helped to present was quite neat and cunning. I shall not go into it in great detail, save to say that under the proposed compliance mechanism, if the targets at the end of the five-year period were not met, the Government would have to buy enough international credits and make sufficient contributions to a domestic fund to meet the gap. In that way, we would be clear that new funding was going into the system to help to drive reductions. The most important thing there would be that a UK-based fund would be used to help to implement carbon reduction technologies within the UK faster than would otherwise have happened. Clearly, there would be a need to be fast because the target had not been met. The intention behind our proposition was to say, “Let’s find a way that asks the Government not just to report on what else is going to happen but to put their money where their mouth is and drive change for the future”.

I am sure that there are ways in which that could be worked up and elaborated on by those who are better at these things than I am. However, it seems to me that judicial review will clearly not be enough, and if one asks what the sanction is for non-compliance and judicial review is offered, that will clearly not do the trick. Therefore, if the sort of cunning proposal that I described is not the answer, we must put the Minister on the spot. The Secretary of State for the Environment and the Prime Minister are currently making very strong statements about the Bill being a legally binding provision, but can the noble Lord say how the Bill will be given teeth through a more effective compliance mechanism?

I add my support for my noble friend’s amendment. The Minister said that the Government are committed to decarbonising the UK economy but one needs to think back a little to the words of the noble Lord, Lord Campbell-Savours, and the fact that there is no sanction for this whole issue. In 30 years’ time when our children or, dare one say it, grandchildren are looking at this problem, if it is suddenly decided that the whole thing is a lot of rubbish and there is no sanction, they could just sit back and not implement any of it. That would be a very different day from today when all those who have spoken are convinced that something needs to be done.

These amendments place a duty on the Prime Minister and the reporting mechanisms to recommend ways of remedying shortfalls in carbon budgets. Our position is that the Bill does not have provisions for making plans on how to overcome the problems that might arise if the budgets are not met. We cannot be blinded by optimism, which is why we feel that the Bill needs to stipulate that a plan will be put together to remedy any shortcomings in the carbon account.

I speak to Amendments Nos. 87 and 93. The risk is that we will get behind. It stands to reason that, should the report find that the Government have done rather poorly in their attempts to reduce carbon emissions, a new strategy might be in order to take into account previous failures in efforts to get back on track. That would increase the transparency and open the Government’s action up to deeper parliamentary and public scrutiny. Any plan to remedy the shortfalls would involve an assessment of the reasons why the Government had not met the target. This fits into our more general theme of beefing up the committee and making the Bill more robust. A roll call of how we had missed targets would be inadequate to face the challenge of climate change appropriately. A duty to have a plan to remedy any shortfalls presented when the report is given would go some way to strengthening the Bill.

I am grateful to all noble Lords who have spoken in this debate. I suffer from the same disadvantage as the noble Lord, Lord Crickhowell, as I missed the previous day in Committee because I was otherwise entertained on the Dormant Bank and Building Society Accounts Bill. I recognise that these issues were discussed earlier in Committee and I have no doubt that we shall return to them again because the Committee shares a determination to have an effective Bill that brings about the points that the noble Baroness, Lady Young, emphasised. The Government share her reservations about what is being proposed in this amendment and will take on board what she said as a potentially fruitful line of inquiry.

In the previous Committee sitting my noble friend Lord Rooker agreed to look at whether another form of words could describe what we want to do here without weakening the Bill. The problem with the amendment moved by the noble Lord, Lord Crickhowell, and supported by other noble Lords is that the Government could be challengeable in law if it were thought that they were neglectful of their obligations, and there would be a risk of judicial review. Although other Members of the Committee indicated that that ought not to worry the Government unduly, it will worry them because the remedy would be at the discretion of the court. It may be that the court would do what it often does in these circumstances and would issue a declaration to force the Government to reconsider their action. However, we cannot rule out the possibility of the court making a more stringent order, such as ordering the Government to purchase credits to remedy the position. Although such sanction would certainly meet the objective of the noble Lord, Members of the Committee will recognise why the Government cannot take this proposal lightly. We are facing real issues in compliance although we entirely subscribe to the general wish articulated on all sides of the Committee.

As has been recognised on all sides of the Committee, we have strengthened the Bill’s provisions to ensure maximum transparency about whether a budget or target has been met. For instance, Clause 14(3) requires that if a budget has not been met the Secretary of State must explain to Parliament why that was the case. In addition, Clause 28(2) requires the Committee on Climate Change to set out in its report to Parliament its views on the ways in which the budget for a period was or was not met. The Bill therefore ensures that there is ample opportunity for scrutiny and debate if a budget is not met.

I have followed the debate very carefully and I was not intending to speak. However, unless I misunderstood him, the Minister has indicated in his response that the Government are not prepared to put stronger compliance mechanisms into the Bill because of the threat of judicial review. Are the Government no longer taking responsibility for driving the Bill forward as the noble Lord, Lord Rooker, indicated earlier that they wished to do?

My noble friend indicated that he wants to see the Bill and the policy driven forward. We accept the representations of the committee on that point. If it is suggested that the Government would not take sufficient action, the Bill provides that shortly after setting a budget the Government will have to publish a programme setting out how it will be met. We have already made it clear that it will be laid before Parliament. The Government will be under an obligation to make regular annual reports on progress to Parliament and to the independent Committee on Climate Change. It will be abundantly clear to everyone interested in these issues—and it is difficult to think of a person in the land who would not be interested in them—whether the net UK carbon account is being reduced. The Government will be in the court of the nation. An independent committee will identify any deficiencies and Parliament will express its views on these matters. That is bound to be an enormous commitment by the Government to effect the necessary change.

The noble Lord, Lord Crickhowell, was his usual modest self when presenting the amendment as one possible solution to what we all recognise is the difficult area of guaranteeing what has to be the result of effective action in many quarters. We are saying that we do not accept using the law and judicial review as mechanisms to solve the problem. As my noble friend said when these issues were previously discussed, we have taken on board the representations, which have been made again today, that we need to look at the provisions in the Bill for compliance.

I cannot understand why the Government are resisting this. Under the Bill the committee has only an advisory responsibility, and the Government can ignore the committee’s advice if they wish. If at the end of a five-year period there was a conflict between the committee and the Government about the action required, we might find that there was a shortfall irrespective of whatever recommendation the committee has made during that period. What mechanism would then exist to ensure that we went into the next period with a policy to deal with deficits from the previous period?

My noble friend may be underestimating the significance and power of the committee. While it is an advisory body, it will be the custodian of the nation in terms of the effectiveness of government policies and others in achieving the reduction in carbon count and therefore will have an immensely powerful role to play. Therefore, a Government who are effectively being arraigned before Parliament by the committee for having failed to run an economy that met the identified targets would be subject to severe sanctions. We are prepared to look at extending sanctions in addition to the powerful provisions that are already in the Bill. However, the Government cannot accept the strategy outlined in the noble Lord’s amendment for the reasons that I have identified.

I find that a curious and contradictory response. The noble Lord tempts me to go back to the debate that was held in my absence last week on the question of whether there is likely to be a judicial review. I shall resist that temptation in the knowledge that I will have the opportunity to address the issue at Report stage, and I certainly intend to take it then.

The noble Lord said that he envisaged the possibility that the courts would order the Government to purchase credits. That scenario is even more improbable than one in which they make a judgment about the legality or otherwise of the Government’s actions. But much more interesting was the noble Lord’s initial comment that he shared the reservations expressed by his noble friend Lady Young of Old Scone about my amendment. She welcomed the amendment but said that it was basically not adequate. She wanted to go further and have a tougher mechanism. Indeed, she referred to the very mechanism which I had just mentioned—that proposed by her colleague Mr Clive Bates to the Joint Committee. That mechanism would have required the Government to purchase credits and then to create a fund for domestic mitigation to reduce emissions in the domestic economy, and thus bring us back down to the domestic threshold. I thought it was a little unkind of her to chastise me for not having produced an amendment on those lines. I would have done so if I had had a suitable draft. Indeed, I asked in the committee for the Environment Agency to work up its ideas and bring forward a suitable amendment, and to include in its analysis what the consequences of the Government acting in this way would be for UK industry and for the performance of individual organisations and so on within the economy. I did not think that I had the skill to draft that amendment myself.

The Minister said that he did not think that my amendment was adequate and that the Government would consider whether they could come up with a tougher and more effective provision. They would be capable of drafting something along the lines proposed by the noble Baroness, Lady Young of Old Scone, so I look forward to their production of a tougher compliance mechanism. However, the more I listened to the noble Lord, the more confident I became that we must insist on including a compliance mechanism in the Bill. I shall certainly try to ensure that an even tougher set of ideas are included in any amendments that I propose at Report. For the moment, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 27 and 28 not moved.]

I beg to move that the House do now resume. In doing so perhaps I may suggest that the Committee stage do not begin again before 8.44 pm.

Moved accordingly, and, on Question, Motion agreed to.

House resumed.