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Consumer Emissions (Climate Change) Bill [HL]

Volume 716: debated on Friday 15 January 2010

Second Reading

Moved By

My Lords, the issue of carbon emissions has been a big topic of discussion both globally and within the House over the past few weeks and months as part of the whole debate on global warming and what the UK and Europe’s contribution should be to solving the problem. In 2008 this House discussed and Parliament passed the Climate Change Act, on which the Government had all-party support. The Government were very proud of their leadership in making carbon targets and budgets legally accountable and this has indeed been seen internationally as an important bit of legislation. As we would expect, it has also very much concentrated on the carbon emissions created by the production reflected in the UK’s gross domestic product. That is very much in line with the Kyoto process and the definition provided under the Rio agreement and Kyoto protocol. That definition excluded aviation and shipping—we will leave that aside for the moment—but included the carbon emissions produced by an economy as part of producing goods, services and various production processes.

So if electricity generation creates carbon emissions, those emissions will be counted, and other areas will be treated in a similar fashion. However, what is not often realised is that that is only one way of looking at carbon emissions within an economy. It is not necessarily the best way but it is an important way. However, there are other methods, one of which is what this Bill intends to introduce, relating to emissions caused by the consumption within an economy. Many would think that in terms of environmental responsibility, that is a much superior indication to production. I shall not go into the argument at great length about which is best; I am simply saying that we should also include consumption within our measurements and give it similar weighting in government action and targets.

What are carbon consumption emissions? Very simply, they are a national economy’s emissions as traditionally measured. However, we then remove the emissions connected to our exported goods and services while including the emissions caused by our imports of consumer and industrial goods and services used within the UK economy. That is the difference. One of the main reasons why I am bringing the Bill forward is that not only is that an equally important way of looking at the issue; there is a significant difference between the two. I shall come on to that later.

Specifically, within the context of the Climate Change Act, the Bill gives equal weight to carbon consumption emissions and to production emissions. So in terms of responsibilities of government, one is now repeated for the other, particularly as regards setting targets and budgets, consultation and reporting back to Parliament.

This is a very simple, short Bill and one that I hope the Government will see as being an important move forward in this area. I stress that the Bill does not cover individual carbon consumption. There is no move towards personal carbon budgets, which is a whole different area that has been discussed in this House on a number of occasions. Neither does the Bill replace the traditional Kyoto-based ways of measuring carbon footprint that we have in the Climate Change Act. Why is this area important? The Government undertook research through Defra that looked at this whole area, and a report was produced in 2008. It has also been looked at by a number of international climate economists. Dieter Helm of Oxford University is an authority in this area. Both reports are highly persuasive. The Defra report considered the position in the United Kingdom in 2004 and came to the conclusion—I was surprised by the accuracy with which the figures can be worked out by academics—that the consumption emissions of the United Kingdom economy were some 37 per cent higher than our production emissions. Professor Dieter Helm, looking at the figures for 2003, and taking the trend from the 1990 baseline which is used in the Kyoto Protocol, saw that although United Kingdom production emissions decreased over that period by some 15 per cent in excess of our 12.5 per cent Kyoto target, as regards the consumption level, they have actually gone up by 19 to 20 per cent, and no doubt by even more.

That means that by just looking at our carbon footprint in the traditional way, we are highly underestimating what we as an economy and as a society are contributing towards global carbon pollution. The carbon consumption measures start to look at and account for areas such as offshoring. Why is there a big difference between trends of carbon consumption and carbon production? It is because British industry is more and more service-led and we offshore a lot of our dirty industry. Our imports increasingly come from developing countries, particularly China and India. Imports from China have a particularly high carbon content. Although we may pat ourselves on the back, as we often do, and certainly the Government do, in terms of our national performance, in reality we are living in a completely different manner in terms of the way that the planet can cope with our consumption in the United Kingdom. Neither of the various ways of looking at Britain’s contribution to the fight against global warming is perfect. However, it is absolutely clear that we need to look at both and not just one. This Bill is about giving equality to both those measures. That is particularly important because I believe that this way of looking at carbon footprint will become more important internationally. Certainly, its profile has been raised considerably. I should like to see Britain lead in this area, as it has led in its climate change legislation, and this is one of the ways that we can do it.

I should be particularly interested to hear the Minister give us the Government’s opinion on the divergence between the two figures and the two trends and to hear whether they will refer these matters to be considered in greater detail by their own Climate Change Committee. I should also be interested to hear their views on how they see the future of such indicators within the international context. I am glad to say that when the Defra report was published in 2008, the Environment Secretary Hilary Benn then said that,

“as we move to a low carbon economy, we must help businesses and individuals to understand and reduce the environmental impacts of the products and services they produce, sell or consume, wherever in the world they are made”.

That is an endorsement of this way of thinking and this move in terms of how we look at these issues, which I very much welcome.

Last month the Copenhagen accord was reached following the Cop 15 conference, which took place in Copenhagen and which we debated at great length yesterday. One of the areas of hope that came out of the lack of agreement or the light agreement that was reached at the conference, which we hope will be corrected in Mexico City at the end of this year, is that it gives an opportunity for new ways of looking at these issues, perhaps more equitable ones, particularly as between the developing and the developed world. I should like the United Kingdom be in the lead in looking at carbon consumption emissions as an important indicator in this area. I beg to move.

My Lords, I support the Bill, and most particularly the direction that it takes. It is not a step change but it is an important incremental development on the existing measure that this House put through a little over a year ago. I happen to believe that if we are to meet our eventual 2050 targets, we will have to embrace the concept of personal carbon budgets or personal carbon credits. Although I am not sure that I will live to see them, I have no doubt whatever that this House will pass a Bill at some point to make that a fact of all our lives.

We had an excellent debate yesterday on Copenhagen. I think what the outcome at Copenhagen tells us is that a comparative failure at international level puts a lot more pressure on both the local and the individual commitment to carbon reduction. It also puts more pressure on the quality, transparency and accuracy of reporting. The noble Lord, Lord Teverson, has just referred to that. When you alter the criteria for success in a situation like this, you can change the outcome quite radically, and often for the better. Let me offer an example of this, which may sound a little odd although I do not think that it really is. The Olympic medal table will be much discussed in 2012. The present use of gold, silver and bronze as the sole criterion of national success is very manipulable. Noble Lords will remember that there was quite a hoo-hah between ourselves and the Australians over who came fourth in Beijing. The dispute is very simple in its origin: if you apply five points to a gold, three to a silver and one to a bronze, you get a different result than if you apply three, two and one. That is not a good place to be for the Olympics and it certainly would not be a good place for the collection of information on carbon savings. I have recommended the following to the IOC. It should look more closely at the personal best achieved by each competitor at the Olympic Games. In the end, what counts for an athlete is their personal best. You cannot ask for more from an athlete on the day than that they deliver a personal best. If you make an accounting of the personal bests, you might get a very different competitive table. You might well find that Costa Rica is the most successful country, or Honduras or Saudi Arabia. You would get a very different table. That would establish which nation was making the most progress in the field of athletics and it would be a very important and interesting indicator. That is why I think this Bill offers a direction in which we begin to unwind and look at things in a more radical, in one sense, but also more sensible way.

I wish to offer two examples of what is happening that illustrate why the direction the Bill takes is important. One is from schools and one from communities. Ofsted produced a report in May 2008, from which I shall cite just two lines. It states that,

“most of the schools visited had limited knowledge of sustainability and work in this area tended to be uncoordinated, often confined to special events rather than being an integral part of the curriculum”.

Two years after the report was published, we find that secondary school teachers know nothing of the Sustainable Schools and the Eight Doorways agenda. Surely we need a form of reporting that makes it impossible for a school not to be able to announce—and, indeed, celebrate—its carbon savings. We do not have that at present.

Another example lies within communities. I touched on this briefly in yesterday's debate, but it is worth saying a little more. On Wednesday this week, the residents of the small Hebridean island of Eigg won part of a £1 million green energy prize after building their own renewable electricity grid and slashing their carbon emissions by a third in a year. An article in the Guardian goes on to explain exactly what they were dealing with several years ago and how they succeeded in tackling that crisis. Another small community energy and transport project in the Brecon Beacons cut CO2 emissions in 155 homes and four community buildings by 20 per cent in a year, while an energy efficiency project run by volunteers in Shropshire cut CO2 outputs from 460 homes by 10 per cent. These schemes may be tiny, but they are tiny triumphs. Unless, as quickly as possible, we find our way to a measurement system that celebrates and allows individual communities and individuals effectively to compete to see who can do the best in this extraordinarily vexed and difficult area, we will not make the savings or the progress that we need and deserve.

The Bill introduced by the noble Lord, Lord Teverson, makes two things possible. It makes the figures for emissions reduction more honest, thus helping to frustrate the disinformation campaign of the climate denial industry. It also creates a far greater sense of connectivity for communities and individuals in assessing their success and failure in meeting tangible and verifiable reductions. For those reasons and others, I commend the intentions of the Bill.

My Lords, I, too, welcome the Bill put forward by my noble friend. Obviously, and unfortunately, given the parliamentary timetable, it probably will not go forward to the statute book, but it is a welcome addition to the ongoing debate that the 2008 Act did not finish— I would say that it was the beginning of the beginning.

There is an interesting point of debate in the Bill, because from talking to a large number of people involved in this area, I know that there is an enormous amount of difference of opinion as to how, what and from where you should measure. The Carbon Trust deals with “whole of life”. Other people think that the “polluter pays” principle should be that you measure only the carbon that you actually use. That is a real problem. It stems from the fact that when we talk about the fact that we live in a carbon economy, we make a fundamental assumption that we are talking about cost. Of course, cost and carbon are two completely separate things.

We have a trading scheme that is based on cost, but in a carbon economy, all we are saying is that for any action within the carbon economy, a certain amount of CO2 is released into the atmosphere. That is the basis of the Bill. If we take, say, the cost of T-shirts in a supermarket in this country, it can be very low indeed. However, if you take into account the carbon costs of their being made inefficiently in a foreign country and transported half way around the world, the real cost of the cheaper T-shirts might be far higher than the cost indication.

We will have to move forward on measuring carbon. We cannot do it on a cost basis; we will have to come up with a baseline that works out how much carbon is associated with every product that we buy. That is an important issue, and one that I have been banging on about for several years.

I have a scheme, which I hope to bring to fruition, based on carbon units, which means that services and products would have a carbon label that would indicate how much carbon went into that product. Firms could easily use that system, because all that they would be doing would be measuring the amount of carbon dioxide that they are responsible for and adding it to whoever provided the good to them. That would get around some of the problems of carbon value from overseas. If a good was produced in China, in exactly the same way as the international labour laws work, you would track back and ask the producing company to give you a carbon value for that product before you bought it. It would be an interesting system, because it would indicate to companies that they would have to buy not just on cost but on carbon value, because there would be a risk to their product having a very high carbon value.

A classic example of that is cement. Cement can have dramatically different carbon values. A lot of people say that one way that we could measure carbon is by a traffic light system, as we do for food. However, in the same way that the traffic light system for fat does not work for cheese because, unfortunately, cheese is coagulated fat, so it will always be red, it does not matter what type of cheese you use, so cement has a very high carbon value, so it would always be red. However, the difference in the carbon content between two brands of cement can be enormous. That is important, especially if you are using a large amount of cement in the construction of a building. That would deal with one of the real issues that we are trying to address in all our discussions: a change of behaviour.

The Bill has set the target of 60 per cent but then—the noble Lord, Lord Puttnam, must be given credit for this, because he gave away the mechanism in the 2008 Act—the climate change committee set the target at 80 per cent. We will never meet that 80 per cent target until people start to realise that that is 80 per cent of the carbon that they as individuals, not just we as a country, use. That is a real problem. We cannot do that until we can start to understand how much carbon is associated with all the products and services that we use. Until we have a way to deal with that, it is very difficult for individuals to work out the amount of carbon that they are using.

A classic case in point is going through the exercise of carbon footprinting. It is very difficult to take a carbon footprint accurately because there are so many unknowns. That is true even for food, on which I did quite a lot of work. You have to try to work out the carbon value of all the inputs, such as fertiliser. Until last year, there was no company that would give you an accurate reading for the amount of carbon involved in fertiliser, and fertiliser accounts for, we think, 15 per cent of the carbon involved in agriculture. Even if you do a carbon footprint, it is based on assumptions. I believe it will be possible, quite soon, to introduce systems throughout the economy in which companies are asked to produce carbon figures and, when they sell a product or service, to give the carbon value for the next person to add, exactly like VAT, until it goes to the consumer. That will allow anyone making a purchasing agreement to work out the carbon value of the product or service they are buying. It will create a massive change in behaviour.

This Bill is useful because it highlights one of the areas about which we have no knowledge. My problem, which the Government will also face, is that we do not, as yet, have the evidence base to achieve some of the reductions we are trying to undertake. Until we put that in place, many of the assumptions that we are making could be wildly inaccurate.

My Lords, I congratulate the noble Lord, Lord Teverson, on introducing this Bill and thank him for explaining it. In this parliamentary Session, we are having a flurry of Bills and debates around targets in all sorts of areas and this Bill simply adds to them. While we on these Benches fully agree that reducing carbon emissions is a critical element of meeting our 2050 target, we do not agree that drawing this Government’s focus any further away from the policies that will make that possible is helpful.

The UK has signed up to many targets around climate change, most of which this Labour Government have singularly failed to meet. It is clear that yet another target will not lead to the step change that the Committee on Climate Change identified was needed in Labour’s commitment to reduce carbon emissions. Instead, we need meaningful policies. We need proper incentives for consumers to improve the energy efficiency of their homes, such as our plan for a green deal for householders. We need proper information to be made available to consumers about energy-efficient appliances so that they can make the right choices and, as we have been calling for for years, we need to get smart meters rolled out to domestic households as soon as possible.

There is another aspect of the Bill with which we simply cannot agree. The requirement for the Government to take responsibility for carbon emissions produced outside this country would be extremely difficult to measure, let alone influence. Climate change figures are already hotly debated, so let us imagine the disagreements over which of the dozens of measurements to use when costing the total carbon footprint of a television built in Japan with parts made in China.

Such a measure would also be counterproductive in relation to the reduction of global emissions. Yesterday, the noble Lord participated in a long and interesting debate about the successes and failures of Copenhagen. The deepest disappointment came from our failure to persuade some developing countries of the opportunities that a move to a low-carbon economy will offer. Quite understandably, many countries are worried that they, the countries least able to afford such measures, are being expected to restrain their growth at huge cost to compensate for the extravagance of richer, more developed countries. We should be encouraging greater industry links with those countries in order to drive investment forward in their infrastructure and working practices. We need to work with those nations to build mutually beneficial agreements that allow for economic growth while simultaneously reducing carbon emissions.

I have not been very encouraging about the Bill, so I end on a more positive note. The noble Lord, Lord Teverson, is quite right in the fundamental principle behind the Bill, which is that the answer to carbon emissions lies with the consumer. The role of government must be to free companies to respond to the growing demand for low-carbon goods and services. Unfortunately, the Bill does not do that and I am afraid that we cannot support it. However, this has been a useful debate.

My Lords, I thank the noble Lord, Lord Teverson, for bringing forward this Bill, which has generated an interesting and stimulating debate in your Lordships’ House. I also thank all noble Lords who have taken part. The noble Lord, Lord Teverson, will know that, in accordance with normal practice, the Government do not normally support or oppose Private Members’ Bills in this place. We make no exception in this case. I think that he will be able to tell from what I have to say that the Government have some reservations. He will have some indication of how we feel about the Bill, which may not be that far removed from the position of the Official Opposition.

We recognise the importance of the impact on emissions of the whole life cycle of the products that we consume. There is great value in working to understand better and to address consumption emissions, as that enables people and companies to recognise where and how greenhouse gases are emitted in the supply chain and thus where and how best to take action to mitigate them. The increasingly global nature of supply chains means that there is a more and more complex picture of where in the life history of a product the emissions actually arise. Some of these life-cycle stages are more accessible to government-led interventions to reduce emissions. Others are very much closer to the way in which individual businesses work within their supply chains. This issue is clearly highly relevant for businesses, which need to identify the impacts of their whole supply chain in whichever part of the world they operate.

The Government’s sustainable consumption and production programme is working to identify and to help to reduce life-cycle carbon and other environmental impacts that are associated with UK consumption, wherever in the world those impacts occur. As well as evidence gathering, the programme looks at tackling embedded emissions through product supply chains—for example, through collaborative road mapping with a small number of industry supply chains. This is complicated work, which means engaging with the principal players in a number of sectors to develop new approaches for reducing environmental impacts at the crucial life-cycle stages. Some of the pilot work has been very encouraging—for example, in building up new forms of collaboration across the supply chain for clothing. This sectoral approach is in its early stages, but it offers a potential model for future collaborations along many other global supply chains.

Another contribution made by our sustainable consumption and production programme is in helping businesses to develop the technical tools to identify where they need to focus effort. A key example of this is the technique of carbon footprinting, through which a business can measure the greenhouse gas emissions of its products across their whole life cycle. This enables it to address the hot spots of its supply chain, wherever in the world they are identified. The UK has played a leading part in developing these tools. The Government and the Carbon Trust worked with the British Standards Institution to pioneer a methodology for carbon footprinting—PAS 2050—which has attracted international interest. It is now likely that a global standard will be agreed, which will enable the major global supply chains to target greenhouse gas reductions across their operations.

Similarly, our work on behaviour change is helping to improve consumers’ understanding of the whole life-cycle impacts of the products and services that they demand and to encourage more sustainable purchasing practices. Examples include DECC’s Low Carbon Communities Challenge, which was announced in the low-carbon transition plan and launched in September 2009, and Defra’s greener living fund and action-based research pilots.

In spite of the work that we are already doing to understand better and to address the emissions that are embedded in the products that we consume in the UK, we have a number of fundamental concerns with the approach proposed in the Bill. Indeed, we share many of these concerns with the noble Earl, Lord Cathcart, and I will expand on them further.

First, the approach in the Bill of setting a target for emissions on a consumption basis is not consistent with the methodology for measuring and allocating the responsibility for emissions to individual countries that is enshrined in both the international architecture and the Climate Change Act. Under the UN Framework Convention on Climate Change, the Kyoto Protocol and European emissions reduction targets, countries measure and report their emissions on a production basis. All greenhouse gases emitted on the country’s territory are covered, regardless of where the goods and services to which they relate are consumed. UK emissions are published annually on this basis as national statistics and in accordance with international practice. Indeed, a real strength of the Act is that the targets and carbon budgets that it contains operate in a way that is consistent with European and international climate change policy.

Our second concern is that measuring and reporting emissions on a consumption basis would require that we take into account emissions embedded in the goods and services that we import into the UK but exclude emissions resulting from the production of goods and services that the UK exports. This would be an extremely complex thing to do and has scope for major inaccuracies. Estimates have been made in the past of UK emissions on a consumption basis—the noble Lord, Lord Teverson, referred to these—including in a government-sponsored study by the Stockholm Environment Institute, which was published in 2008, but we do not currently report our emissions regularly on a consumption basis. It would be extremely difficult to agree internationally a mechanism for allocating consumption emissions to different countries.

We accept that the Stockholm Environment Institute’s estimates give an indication of a trend in carbon dioxide emissions relating to UK consumption, as they are in line with other similar studies, are based on accredited national and international sources and have been subject to a range of sensitivity tests. However, they can be viewed only as indicative, as the emission factors used are disaggregated to just four broad world regions and a limited number of product categories.

The Stockholm Environment Institute has separately made estimates of the UK’s total carbon footprint, including estimates of other greenhouse gas emissions besides carbon dioxide, such as methane and nitrous oxide, which are the main types of other greenhouse gases. These estimates are generally regarded as being much less reliable and they need to be treated with caution. In addition, the Stockholm Environment Institute’s calculations give only a very broad indication of the UK’s consumption share of a region’s production emissions. Efforts made by individual trading partners to improve the emissions intensity in a particular supply chain of importance to the UK will not show in the estimates, unless they are significant enough to affect the average for the region as a whole. In this sense, we do not consider that the estimates are sufficiently reliable for use in monitoring performance or setting targets, as proposed in the Bill.

Analysis of consumer-based emissions shows the importance of agreeing an effective international treaty that includes the main developing countries. This stands the best chance of achieving the reductions of greenhouse gases needed to limit the global temperature increase to 2 degrees Celsius. As my noble friend Lord Hunt of Kings Heath explained in his Statement to this House last week on the Copenhagen conference, and as he repeated in our excellent debate yesterday, the Government consider that the outcome of Copenhagen was disappointing in a number of respects. We share the view of my noble friend Lord Puttnam in that regard. However, it is also our view that the accord agreed at Copenhagen represents significant progress on which we can build.

In response to the question about the Government’s position on consumer emissions in the international context, we consider that it would almost certainly be impossible to agree internationally on a mechanism for allocating consumption emissions to different countries, and there might well be challenges under the international trade regime. Offers of mitigation targets currently announced are all on a production basis.

To give the impression of moving to a consumption basis could be very damaging while we are working with developed and developing countries to encourage them to table high-ambition mitigation offers by the end of January, and while we are continuing to work through 2010 to turn the Copenhagen accord into a legally binding treaty. Establishing an international consumer-based mechanism would be impossible because of the lack of a political agreement, on this approach and the lack of agreed methodologies to make the necessary estimates. No countries or trading blocs currently measure and report along those lines. The additional uncertainty introduced in the negotiations would be very damaging to the prospects for achieving a legally binding agreement, and there might well be challenges under the international trade regime.

In our view, the best way to provide an accurate account of all greenhouse gases, globally, is to reach a broad international agreement on a production basis with commitments for developing as well as developed countries to reduce emissions, according to their capabilities. For the first time, the Copenhagen accord will see developing as well as developed countries subject to measurement, reporting and verification of their mitigation actions through submission of their national communications every two years.

A further concern is that our ability to introduce policy measures to address consumer emissions—emissions from the production of goods outside the UK—is limited when compared to our ability to develop policy responses for reducing the emissions that occur within the UK. Perhaps that is why the Bill introduced by the noble Lord, Lord Teverson, does not include a duty to report on progress towards meeting the target, in contrast to the duty in the Climate Change Act for the Government to produce a report setting out the proposals and policies that will be used to meet the carbon budgets. It is also why our sustainable consumption and production programme is focused on changing patterns of consumer behaviour and on collaborative working with industry supply chains, rather than on setting what could be seen as potentially inaccurate and misleading targets.

The noble Lord, Lord Teverson, raised the question of whether it would be possible to ask the Committee on Climate Change to look at the issue of embedded emissions. Our view is that the committee has more than enough work to do in the next year to keep it busy. This includes the next annual progress report, which is due in June, and its advice by the end of the year on the level of the fourth carbon budget, as well as a report on low-carbon research and development and advice to the devolved Administrations. As I have explained, measuring and reporting emissions on a consumption basis would clearly be an extremely complex, time-consuming thing to do, with scope for major inaccuracies.

I hope that this has clearly established why we are concerned about proposals for legally binding consumer emissions targets. None the less, I thank all noble Lords for their speeches and I thank the noble Lord, Lord Teverson, for introducing his Bill. No doubt we shall be hearing more on this subject in the future.

My Lords, I thank the Minister for his response and I am grateful for the general acclaim for my Bill around the Chamber, although perhaps my hearing is not so good these days and I did not quite hear it accurately. This has been an important debate and I thank all the Benches for participating.

To summarise, I take the point made by the noble Earl, Lord Cathcart, absolutely. Any climate change policy has to be built around achieving action. I agree with him that that is where the emphasis needs to be placed. However, what I would say is this. One of the easiest ways for the United Kingdom to meet its carbon reduction targets is to send offshore even more of its manufacturing and high-carbon-based industry. It could then meet the targets but not have an iota of an effect on total carbon emissions and thus on global warming. That is the nub of the issue and lies at the heart of this approach. I was not suggesting for a minute that the whole of the Kyoto process should change overnight; I was suggesting that this is something that we could lead on.

I am disappointed that the Government will not follow up on their excellent work through the Defra/Stockholm Environment Institute report and measure carbon consumption figures in the future on a trend basis. That would at the least have been useful, but I hear what has been said. I ask that the Bill be read a second time.

Bill read a second time and committed to a Committee of the Whole House.