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Carbon Budget Order 2021

Volume 812: debated on Thursday 10 June 2021

Considered in Grand Committee

Moved by

That the Grand Committee do consider the Carbon Budget Order 2021.

Relevant documents: 1st Report of the Secondary Legislation Scrutiny Committee (Special attention drawn to the instrument)

My Lords, I beg to move that this draft order, which was laid before the House on 21 April 2021, be approved. The UK was the first country to enter legally binding long-term carbon budgets into legislation, introduced in 2008 as part of the Climate Change Act. Carbon budgets are set with a view to meeting our target of reducing the UK’s net emissions by at least 100% by 2050. So far, five carbon budgets have been set in law, setting our decarbonisation path through the last decade and the next.

This statutory instrument sets the sixth carbon budget, which will limit the net amount of UK greenhouse gas emissions for the period from 2033 to 2037. The Government are proposing to set the sixth carbon budget at 965 million tonnes of carbon dioxide equivalent, which would reduce greenhouse gas emissions by 78% by the 2033-37 budgetary period, compared to 1990 levels. This is in line with the latest science as the level recommended by our statutory expert advisory body, the Climate Change Committee, and is endorsed by the devolved Administrations.

This is a highly ambitious target and marks a decisive step towards net zero by 2050, achieving well over half of the emissions reductions required between now and 2050 in the next 15 years. It builds on the momentum of our new nationally determined contribution under the Paris Agreement to reduce emissions in 2030 by at least 68% compared to 1990 levels—the highest reduction target made by a major economy to date.

For the first time, the sixth carbon budget will also incorporate the UK’s share of international aviation and shipping emissions; an important part of the Government’s decarbonisation efforts will be to allow for these emissions to be accounted for consistently. We will bring forward the necessary legislative proposals to include these emissions formally, which we aim to do as soon as practicably possible and within one year.

Setting the level for carbon budget 6 is an important step on the path to meeting net zero but we recognise the need to put in place clear actions to meet it. Once the budget is set in law, we will bring forward further policies and proposals. The net-zero strategy, to be published before COP 26, will show how we intend to meet this ambitious target as well as our nationally determined contribution along the way, setting out the Government’s vision for transitioning to a net-zero economy by 2050.

We have already seen the effects of climate change on our planet. Without further preventive measures, this will only get worse. The arguments for decisive action are overwhelming and the consequences of inaction stark. It will lead to rising temperatures and sea levels, extreme weather, damaged ecosystems and reduced productivity of crops. Co-ordinated global action is critical to cutting emissions and mitigating the potentially catastrophic effects on the environment and economies across the world.

The sixth carbon budget demonstrates the UK’s continued leading role in tackling climate change. This target ensures that we are acting consistently with the Paris Agreement temperature goal: to limit global warming to well below 2 degrees centigrade and pursue efforts towards 1.5 degrees centigrade. Importantly, it will allow us to call credibly on others to increase their own efforts, including at this year’s COP 26 summit.

Our ambition to protect the planet goes hand in hand with supporting economic growth across the UK. Between 1990 and 2019, we have grown our economy by more than three-quarters. At the same time, we have cut emissions by more than 40%—again, faster than any other G7 country.

The UK continues to be world-leading in tackling climate change: for example, more than quadrupling renewable electricity generation since 2010, with low-carbon electricity overall now giving us more than 50% of our total generation. The net-zero transition has huge potential to support jobs in low-carbon industries, building on the Prime Minister’s 10-point plan which will mobilise £12 billion of government investment, and potentially three times as much from the private sector, to create and support up to 250,000 more green jobs by 2030.

The sixth carbon budget is a further demonstration of this Government’s dedication to the green industrial revolution and positions the UK as a global leader in green technologies of the future, such as carbon capture and hydrogen. We acknowledge there will be significant costs in reaching this target, but it is clear the cost of inaction is much higher. The Stern review estimated the impacts of unmitigated climate change to be equivalent to 5% to 20% of global GDP.

The net-zero transition also brings significant benefits and opportunities, such as economic growth and jobs in new green sectors, reducing air pollution, enhancing biodiversity and reducing the risks of catastrophic climate change. We expect costs to continue to fall as green technology advances, industries decarbonise and private sector investment grows. Setting the sixth carbon budget will provide a clear signal to businesses, investors and the international community on our efforts to decarbonise.

We understand that ambitious plans across all sectors of the economy are needed to reach our targets. These plans will build on strong recent progress, such as the Prime Minister’s 10-point plan, as well as sector strategies such as the Energy White Paper and the Industrial Decarbonisation Strategy. We will bring forward further bold proposals in the coming months, including a comprehensive net-zero strategy to cut emissions and create new jobs and industries across the country, going further and faster towards building a stronger, more resilient future and protecting our planet for this generation and those to come.

I conclude by stressing the paramount importance of the sixth carbon budget in our efforts to cut emissions and strengthen our strong climate leadership ahead of COP 26. I hope noble Lords will support the statutory instrument. I commend this draft order to the Committee and beg to move.

My Lords, I am pleased to follow my noble friend and to thank him for his clear and concise explanation of the Carbon Budget Order and, in particular, for what he said about the ambitions that will support it by way of decarbonisation strategies and the promotion of a green industrial revolution. These are tremendously important.

As a Conservative, to go all the way back, I was Margaret Thatcher’s last director of research. I am proud of the fact that the Conservative Party has been for 30 years, with perhaps the slight exception of George Osborne as Chancellor of the Exchequer, consistently promoting a clear understanding of the necessity of tackling climate change and delivering on challenging climate change objectives.

I want to make a point about delivery. As paragraph 115 of the impact assessment states

“the policies required to meet the sixth carbon budget levels are as yet undecided”.

All the things that my noble friend referred to are tremendously important and I thoroughly subscribe to the need for us to deliver on carbon capture and storage. I just know, from personal experience, that we spent 20 years trying to deliver that with a commercially sustainable design. We need to deliver new nuclear generation and the limitations we have on that at present are obvious to all. We need to deliver on much more efficient energy storage and hydrogen capacity, and a strategy that enables us to convert to hydrogen in many of our transport systems. All those things are tremendously important and we cannot operate without them; at the same time, we are going to need dramatic fiscal incentives, and those are the points to which I want to refer.

My noble friend Lord Young of Cookham quite rightly pointed in a previous debate to the anomaly of our subscribing to challenging, ambitious decarbonisation targets while at the same time maintaining a freeze on fuel duty. We cannot carry on like this. In a previous debate in Grand Committee, I talked about the necessity of, for example, giving stamp duty relief on energy-efficiency measures in homes. I hope we will see something done on that, because the green homes grant did not work, which is the point we were making at the time.

On 19 May, we had the first auction under the UK Emissions Trading Scheme. I will focus on the importance of developing that as a basis for our decarbonisation strategies and creating a powerful fiscal incentive for decarbonisation. Clearly, this can work; we have seen in the power generation sector that the carbon price support at £18 per metric tonne has enabled us to drive out coal from power generation, but it is not set at a level that will enable us to reduce and eliminate gas-fired, fossil fuel-fired power generation. We need to increase the carbon price support level.

If we are serious about this, we need to accelerate the process of phasing out free allowances under the emissions trading scheme. We need to ensure that the ETS cap on carbon emissions each year is sustaining downward pressure. At the moment, it is in fact set at a higher level than the carbon emissions levels in 2019 and 2020. We must go further and faster. We should raise the floor price from £22; without much notice being taken, the Chancellor raised it from £15 to £22 back in November. We must continue to raise it.

The likely result of all these measures is that we will have a substantial increase in carbon price under the emissions trading scheme. Our industry cannot sustain that unless we have international alignment and, if necessary, carbon border adjustments. The European Union is presently—next week, I think—issuing further detail on its planned legislation for a carbon border adjustment. In the G7 and our international negotiations, it is more important for us to align carbon pricing and the emissions trading schemes than to align corporation tax rates. That is where we should be putting our effort in Carbis Bay. If we can bring other leading economies—mostly notably the Americans, but the Chinese have not yet committed—to an aligned emissions trading scheme, we can escape the trap of carbon border adjustments, which would lead to an endless succession of non-tariff barrier arguments between countries, interfering with free trade.

We really have to see the UK take a lead in the months ahead. We took a lead in Europe on the emissions trading scheme; we must now take a lead alongside Europe and, more importantly, the United States and other leading economies, in creating a carbon pricing and emissions trading scheme which is applicable and effective globally—ideally without carbon border adjustments, but we must legislate for them if necessary.

My Lords, it is a pleasure to follow my noble friend Lord Lansley, 30 years on from when we were both working for Margaret Thatcher. I was Minister for Energy, making a series of energy transition speeches, launching the first non-fossil fuel obligation order. Indeed, this issue has been about for many decades.

There are three issues relating to this order that I would like to draw to the attention of the Grand Committee and the Minister. The first, covered in the outstanding report from the Secondary Legislation Scrutiny Committee, focuses not on the carbon budget which, as has been noted, brings a welcome addition in the form of the inclusion of emissions from international aviation and shipping; instead, it emphasises the need for a much clearer policy framework to clarify government thinking on the policies that will be needed to deliver this and other carbon budgets.

I would be grateful if my noble friend the Minister could confirm when the Government intend to publish the net-zero strategy and say whether it will cover cross-departmental policies to include a significant electrification of sectors such as transport, heating and industry; the continued decarbonisation of the power grid; substantial improvement to energy-efficiency measures in all sectors; large-scale deployment of low-carbon hydrogen carbon capture and storage and GHG removal technologies; increased switching to low-carbon fuels, such as hydrogen or biomass in sectors that are hard to electrify, such as industry, heavy transport, aviation and shipping—to which he referred—and implementation of available abatement options across all sectors that deal with natural resources, for example through afforestation and low-carbon farming practices.

Without such policies—and I appreciate that a number of them have already been touched upon and announced, but not comprehensively, in advance of Glasgow—we will not be able to reach net-zero emissions by 2050. I am sure that my noble friend the Minister will appreciate that for the Committee to agree to this order it is always preferable to be able to review and analyse the mechanisms to be deployed to meet its admirable objectives. In a sense, without that, the order is exposed as a worthy objective but of no further consequence.

As part of that analysis, the second issue that I wish to raise with the Minister is exploratory in nature and follows on from the comments made by my noble friend Lord Lansley. There is no doubt that the increase in atmospheric CO2 and other greenhouse gases is the greatest challenge that the world faces and it is truly global. CO2 respects no boundaries. The CO2 emitted in the UK will have exactly the same impact in, say, India as that produced locally and vice versa.

Many informed experts, including Sir Dick Olver and Simon Ayers, propose that a collection of leading nations promote a global scheme of capped production allowances, co-ordinated not at the level of emitters, which burn fossil fuels for their specific processes, but at the levels of producers of fossil fuels by reference to GWP content. The production allowance is to be progressively auctioned or levied by a periodically updated fee so as to deliver the cap. As has been very clearly stated by my noble friend Lord Lansley, to succeed this has to include the US, China and the European Union. Whichever form of policy we implement, it has to be global.

I believe that producer-level action has a number of clear and significant advantages and think we should still closely study them. One advantage is that the constituency is relatively constrained. There are some 100 global dominant producers; emitters number orders of magnitude higher. Another advantage is that producers are predominantly global and this would therefore facilitate global adoption. They or their customer chains are inescapably engaged with global trading and financial, consumer and political networks, which provide leverage to secure universal producer participation without the contravention of Paris sovereignty principles.

The advantage is the realisation of substantial production allowance proceeds at the international level whose allocation can incentivise participation in a scheme for the developed world as the least-cost route to securing our future and proceeds to selectively mitigate the impact of the carbon price. The developing world would see significant net inflows under such a scheme as proceeds are eventually allocated likely by population. Finally, producer nations would assist with the inevitable social and economic cost of economy adaptation. The production-level cap on carbon pricing ensures comprehensive, uniform application and no leakage for hard-to-monitor emissions. It is still worthy of consideration while we move forward with the revised European scheme and our response to it. I would appreciate hearing today from my noble friend the Minister whether there is an appetite for a production-level cap on carbon pricing.

Finally, and in raising this issue I declare an interest as chairman and partner of Buckthorn Partners LLP, which invests in the energy transition space, there is real concern that with the impending ban on gas-fired boilers in new-build properties from 2025—which is, as we always counted in the run up to the Olympics Games, only a matter of 180 Mondays away—an important requirement is to move to heat pumps.

Yet if you run a spell-check on Taylor Wimpey’s latest annual report, there is not a single reference to heat pumps in the document. That is not a criticism of Taylor Wimpey; it applies across the board to many of our leading housebuilders. Even the Department for Business, Energy and Industrial Strategy states that

“in many cases the up-front costs of low carbon technologies, such as heat pumps, are currently higher than the technologies they replace.”

So if we are going to end gas in new builds, what are the alternatives that are cost-competitive and practical, overcoming a broad range of barriers, including technical, market-pricing, behavioural, regulatory and socio-political? I would very much appreciate it if the Minister has any observations on this and can cast light on these questions because they will be critical to any new home standard guidance that the Government are looking to work on and will no doubt publish in the near future.

My Lords, it is an extraordinary indication of the priorities of this place that we are considering, briefly, for one hour, with just half a dozen of us taking part, one of the biggest budgets that this Parliament has ever imposed on the British people. The nonchalance with which we embark on breathtakingly complex technological projects and impose those burdens on our fellow citizens I find extraordinary.

The impact assessment states that the cost of this budget will be £651 billion. Can the Minister confirm that that is on top of the costs of the previous five carbon budgets? I will not question the reliability of those figures. They are clearly as uncertain as they are huge and depend on as yet non-existent technologies coming on-stream, and I do not recall any large projects, from Channel Tunnel to HS2—you name it—that has ever come in on time and within budget. Why we should assume the huge array of projects comprising this sixth carbon budget will come in within the sort of cost estimates we have here, I do not know.

Ultimately, all those costs will fall on households—£41.1 billion a year, we are told. That is £1,500 per household per year. Most of those households earn a good deal less than we in this place do. It means that they will have to replace their cars with more expensive cars and dispose of their existing fossil fuel cars for a fraction of what they would otherwise get. It means they have to replace their fossil fuel boilers with heat pumps, at great cost and before they have even had to insulate their homes to ensure that they get a reasonable level of heat, though probably nothing like what they were getting when they relied on gas. It involves us doubling the electricity-generating capacity in this country so that fossil fuel power can be replaced by electric power.

What about the benefits? They are put in this document as even greater—more than £900 billion, as I recall—but none of those benefits will be enjoyed by the people who are paying the costs. The Minister quoted the noble Lord, Lord Stern, as saying that the cost of doing nothing was, I think he said, “equal” to 5% of GDP; actually, he said that it was “equivalent to” 5%.

However, that is taking costs over centuries ahead and smoothing them over the years, regardless of the fact that most of those costs will not accrue for centuries. Even in the most pessimistic forecast by the noble Lord, Lord Stern—the 95th percentile worst forecast—the cumulative costs of doing nothing are less than the cumulative benefits of the early stages of the warming of the climate until beyond 2200. So nobody in this century will benefit from postponing global warming. People in future centuries will but, again, according to the figures from the noble Lord, Lord Stern, those people will be many times better off than us; even the inhabitants of Africa will be better off then than we are now, and that is taking into account the impact of climate change on biodiversity and the environment as well as the market costs of its impact on the economy.

The cost-benefit analysis rightly says that there is a consensus among scientists that we are experiencing global climate change and that this is predominantly due to carbon dioxide and other warming greenhouse gases. That is true; no one disputes that. It then goes on to refer to “catastrophic consequences”. There is very little in the IPCC reports that suggests that there will be catastrophic consequences. If I thought that doing little or nothing or taking a more moderate approach would put at risk the existence of the human race—as Extinction Rebellion implies by its very title—or even cause its immiseration, almost no cost would be too great to avoid that.

However, the IPCC does not say that. In fact, in its economic chapter, it states:

“For most economic sectors, the impact of climate change”—

that is, if we do nothing—

“will be small relative to the impacts of other drivers … Changes in population, age, income, technology, relative prices, lifestyle, regulation, governance, and many other aspects of socioeconomic development will have an impact on the supply and demand of economic goods and services that is large relative to the impact of climate change.”

So, we talk ourselves into fear, claiming that it is based on science, and ignore the main body that we set up to provide us with evidence and forecasts.

Will it be economically and politically possible to put these things through? Initially, the answer is of course yes because the costs will be in the future, but that future is rapidly approaching. I remind noble Lords that every time the cost of trying to mitigate climate change becomes a political issue—be it the gilets jaunes in France, when Macron wanted to put a few extra pence on the cost of diesel, the impact in Holland, where a party that did not even exist became the largest in the municipal elections because it opposed the costs of climate change, or Australia, Canada—Ontario and so on—the public have reacted against the burdens that we so nonchalantly impose on them. I hope that we think twice, thrice, even four times, before we go ahead.

My Lords, it is a privilege to follow such experienced and distinguished noble Lords. I declare my interest in agricultural technology as set out in the register.

The monsoons will shortly start in south Asia. Traditionally, the arrival of the monsoons begins with a festival to celebrate nature and express gratitude for all that the planet gives us, but things are different now. As the climate has changed, so has the mood on the subcontinent. Sadly, the rains that give sustenance have become floods that take lives. So as we think about our carbon budget today, we are reminded of those living with the real effects of climate change around the world.

Our carbon budget is part of an international balance sheet. For us to achieve net zero, carbon offsets must work too. Despite a false start a decade ago, this time round, the voluntary carbon market can be a real success. For this to happen, we need to make some improvements—and quickly. Currently, the entire system of carbon offsets is extremely complex and needs specialist advisers and consultants to navigate it. This desperately needs to be simplified, standardised and made accessible so that income from carbon offsets can directly benefit those changing their practices—particularly those using nature-based solutions and those in low-income countries. This must be done without compromising the quality of credits; the Taskforce on Scaling Voluntary Carbon Markets has proposed a very good set of core carbon principles, which are a useful framework to verify credits. The verification and validation of carbon savings also need to be digitised so they can be rolled out at scale.

We must also recognise that the voluntary market is voluntary, and the institutional investors driving it must be supported. We must fully support the voluntary carbon market. Does my noble friend the Minister agree that we have a duty to make sure that this market works for everyone?

My Lords, I thank the Minister for his clarity in introducing this order. I welcome it, the ambition it sets out and the decision to follow the Climate Change Committee’s recommendations—particularly its recommendation to include the UK’s share of international aviation and shipping. I was concerned that that was not included in the order before us; I am grateful for the Minister’s reassurance that it is simply because of differing statutory deadlines. He said in his letter to me that it would be laid in due course, which was a worryingly vague term, but he has given some clarity today. I thank him for that.

We urgently need to address these issues, not least around aviation. On that point, we are still awaiting the publication of the Government’s net-zero aviation policy. However, the Climate Change Committee has already told us that adequate airport capacity already exists to meet the future levels of demand that are compatible with a pathway to net zero. Does the Minister agree that, until the Government have developed their net-zero strategy for the sector—including a national strategy for airport capacity—the only responsible approach is to impose a moratorium on all airport expansion? If he does not agree with that, can he explain how we can have any chance of meeting the sixth carbon budget unless we are able to take the decisions that are consistent with it?

As I said, the Liberal Democrats very much welcome the ambition of these targets, but we remain concerned that the Government seem much more ambitious about target-setting than they do about action-taking. I do not know whether I am becoming more conservative in my old age or the noble Lord, Lord Lansley, is becoming more liberal, but I agreed with every word—I was going to say almost every word—he said. He will be pleased to know that quite a lot of it is in the Liberal Democrat manifesto.

The noble Lords, Lord Lansley and Lord Moynihan, made the point that delivery is key now. We have had a whole series of target-setting. We have the net-zero target, which I welcome. We now have the 78% target by 2035; we had the 68% target by 2030. These are all good things to point towards. However, they are worthless if we do not actually take action to get there. The noble Lord, Lord Moynihan, said that, without that action plan, they are nothing more than a worthy objective—I agree. It is good to have worthy objectives but it is important to have action.

I agree 100% with the noble Lord, Lord Lansley, that fiscal incentives are absolutely critical. We have to start shaping our fiscal system to take into account what is the biggest economic and existential threat to us. We cannot just keep putting it off. We cannot keep taking decisions that are entirely contrary to the targets we set. The consultation on air passenger duty that the Government have embarked on is completely the wrong approach. We should be reflecting much more along the lines that have been taken in France: they are restricting domestic flights where train journeys can get you there within two and a half hours, I think it is. We should place that on all carbon-emitting domestic flights but we should have an exemption for all clean technologies. That would also be a way of advancing clean technologies in the aviation sector.

We cannot go on with a situation where, in 2016, we scrapped the net-zero carbon homes standard. Again, I agree with the noble Lord, Lord Lansley, that one of the good things about climate change policy in this country is that it has been, in general, cross-party. The one real exception was George Osborne’s occupation of the Treasury where, despite a guarantee that they would be the greenest Government in history, throughout the time of the coalition Government, the Treasury was the major obstacle and a lot of promises were made in that regard. I am glad that we have moved on from that time, but we must get back to what should have been the 2016 target.

As the Climate Change Committee points out, since then, we have built a huge number of houses that are going to have to be retrofitted. That makes no sense at all. We have to tackle the building sector. I know the complications and difficulties in that, but we must learn from the mistakes we have made in the past and not keep repeating them. I know that the Minister agrees on that. I suspect that the Treasury is again the problem. The stamp duty relief that the noble Lord, Lord Lansley, mentioned is an idea that must be implemented. We must get on with this stuff to give people incentives; even then, it will be very difficult.

I agree with the noble Lord, Lord Lilley, on one point, if not on many others: that there is a nonchalance about how we are going about this. We must get on with this and we have to be clear about what it means.

This morning, I was speaking to sixth-form students at a Roman Catholic girls’ school. Among the many questions they asked was, “When are adults really going to understand the urgency for action?” I hope that the Minister will understand the urgency for action, not just target-setting.

I am grateful to the Minister for introducing this order today. It is not a moment too soon. We are in the midst of a climate and environmental emergency, and all steps to meet the challenge are welcomed and encouraged.

The strengthening and development of policies are clear imperatives and follow the pathway of Labour’s ground-breaking Climate Change Act 2008. The Conservatives slowed momentum following the majority Cameron victory in 2015 with the result that the UK is no longer on track to meet the fourth and fifth carbon budgets for the years 2023-27 and 2028-32. This carbon budget—the sixth, for 2033-37—necessarily has to reset the pace. I am grateful to the Climate Change Committee for its purposeful determination in recognising the problems and coming forward with robust recommendations. Inevitably, the Government’s slow realisation and slow pace mean that this budget demands deeper and more stringent action to get the UK back on track, not only to meet the old targets but to meet the new pressing targets and the international obligations of the Paris Agreement 2015.

I congratulate the Government on resetting the targets and legislating for net zero by 2050. Following the recommendations of the Climate Change Committee, this order is the next step towards determining that pathway by setting the carbon budget—the maximum volume of greenhouse gas emissions that can be emitted —for the period 2033-37.

Let us recognise that although this is a small step, it is a crucial one. Now the Government must bring forward their policies and proposals for the UK to achieve this. That means the Government must close the existing £22.4 billion gap in net-zero spending, according to Green Alliance, for the duration of this Parliament. They cannot do this through wishful thinking or self-congratulatory soundbites. This is the decisive decade for climate action. The substantial majority of UK emissions must be cut by the end of the 2020s, as the world must get to net zero well before 2050.

The CCC’s recommendations include a more ambitious scenario of 87% rather than 78% reductions by 2035, based on greater public engagement and faster innovation, which reflects the urgency of the situation and the nation’s capacity to respond. Gaps must be filled. I am grateful to the CCC for recommending for the first time making international aviation and shipping—responsible for 10% of UK emissions by 2018 figures—now subject to domestic inclusion in this budget, and to the Government for finally recognising this clear imperative.

Net zero will involve big changes to everybody’s daily lives. The UK can reach the target and stem climate change only with the support of the public, companies, business, the Government and all their agencies, and the devolved Administrations. I thank the International Energy Agency for its international net-zero pathway modelling on a global scale, identifying the annual additions of renewable energy needed, the energy efficiency increases necessary and the technology that is ready or near to market. It recognises battery and energy storage as vital areas for urgent development.

The Government must come forward with far more than a scattergun 10-point plan. Carbon Brief has recognised that, while the UK has committed £8 billion to green recovery this year, Germany has invested £38 billion and France £31 billion, and the US has committed $1 trillion to green initiatives under the President’s green infrastructure plan. The totality of the scattergun 10-point plan promises only £54 billion of public and private investment over the next 10 years put together. Green Alliance estimates that policies announced in 2020 will lead to only 26% of the reductions necessary to get the UK on track to meet its 2030 target.

At the time of the scattergun 10-point plan announcement in November 2020, the Government had a plethora of missing strategy documents which will be needed to map out the necessary policies within a framework to produce a comprehensive agenda so that industry and the public can respond. With the CCC’s recommendations now accepted and enacted in this order, the Government must issue these policy statements as soon as possible.

I thank the Minister for responding with the Government’s energy White Paper and the industrial decarbonisation strategy. Clearly, this order necessitates urgency for the net-zero strategy, which will need to be supplemented by the transport decarbonisation plan, the hydrogen strategy and the heat and buildings strategy, among other things such as a public engagement plan, discussed in your Lordships’ House recently. The Government have promised the necessary net-zero finance review from the Treasury in September.

The noble Lord, Lord Lansley, identified carbon capture and storage, and the noble Lord, Lord Moynihan, identified heat pumps for new homes. Plus, a comprehensive plan now has to be set out, ruling out anomalies in carbon pricing. Can the Minister confirm that the urgency of the situation will be met with the publication of all these strategy documents, with policies, before COP 26 this November? Does he recognise the value of being ready to provide leadership to the conference? Can he tell the Committee how the Government propose to tackle the requirement to include international aviation and shipping in this sixth carbon budget? This is necessarily part of transport, but will it be addressed separately, as it is clearly a more difficult challenge that must now be faced?

The noble Lord, Lord Oates, spoke of the initiatives put forward by the French Government. Will this Government come forward with better solutions for energy efficiency following the collapse of the green homes grant scheme? How do they propose to encourage the uptake of electric vehicles, especially by low and middle-income families, and to remove the up-front costs barrier? Does the Minister favour Labour’s plan to offer interest-free loans for new and used electric vehicles? How will the Government accelerate the rollout of charging points in streets?

Labour calls for a green economic recovery, with the delivery of high-skilled jobs in every part of the UK as part of the drive towards a decarbonised—

I can see that it is 24 seconds past the minute. I have another 15 to 20 seconds to speak, and then I will finish. I thank the noble Baroness, though, for reminding me that the clock is ticking.

Will the Government come forward with a new skills plan? With so many issues to cover and so much urgency needed for ambitious plans, I am pleased to approve the order before the Committee.

First, let me thank noble Lords for their valuable contributions to the debate. I hope that I will be able to provide in my response all the necessary assurances that will enable noble Lords to approve the statutory instrument before us.

As I stated in my opening speech, this SI will set a world-leading target in line with the independent expert advice of the Climate Change Committee and is supported by all four Governments of the UK nations. Carbon budget 6 is an important step towards meeting our 2050 net-zero target, building on our NDC to reduce our emissions in 2030 by at least 68% compared to 1990 levels. It will strengthen our position as a global climate leader going into our G7 and COP 26 presidencies, highlighting our commitment to taking decisive action against climate change. In addition to showing the world that the UK is serious about protecting the health of our planet, it will help to seize the opportunities and benefits that the net-zero transition will bring, not only reducing the risks of catastrophic climate change but leading to economic growth and jobs in new green sectors. The UK can position itself as a global leader in green technologies of the future.

My noble friend Lord Lansley made a number of important points on how we will implement the range of ambitious policies that will be needed as we transition to net zero. He rightly highlighted the need for a clear focus on the delivery of new measures across, for example, carbon capture, energy efficiency and hydrogen. He also highlighted the importance of using all possible policy levers across government to meet our ambitious targets. I agree with him that targets are in and of themselves insufficient. Our net-zero strategy, which is to be published before COP 26, will set out bold proposals to make progress across the economy. We will also set out further proposals throughout the year—for example, our heat and buildings strategy and the transport decarbonisation plan. This will be a bold and ambitious programme of the co-ordinated action needed to end the UK’s road transport greenhouse gas emissions by 2050 and, at the same time, ensure that the transport sector plays its part in delivering our legally binding carbon budgets.

My noble friends Lord Lansley and Lord Moynihan raised the important issue of carbon pricing. The UK is a strong supporter of carbon pricing and a pioneer of carbon markets through both domestic action and our support for the uptake of carbon-pricing schemes around the world. Putting a price on carbon is recognised as an important element of climate change mitigation. It provides a cost-effective and technology-neutral way to reduce emissions, mobilising the private sector. It can of course also offer social and biodiversity benefits.

As COP president, the UK is fully committed to reaching a successful outcome on carbon trading rules at COP 26. This is a fundamental element of the Paris Agreement, enabling parties to co-operate to achieve higher ambition in both adaptation and mitigation actions. We will build on the good progress made at COP 25 in Madrid, working with all parties towards a successful outcome in Glasgow.

In response to my noble friend Lord Lilley, who rightly raised issues about the costs of the transition, I can say that the costs cited in the impact assessment include the full costs and benefits of the transition to net zero. I recognise that we need to manage the costs of this significant transition carefully but, overall, we expect the costs to be outweighed by significant benefits: reducing polluting emissions as well as bringing fuel savings and improvements to air quality and enhancing biodiversity.

It is of course important that we consider the impacts on the most vulnerable when decarbonising our homes. We are offering additional protections to the vulnerable and fuel poor. The expanded warm home discount and the energy company obligation will provide around £6 billion of support to low-income and vulnerable households between 2022 and 2026—an increase of more than £1.7 billion over that period. Over the last year, we have committed over £1 billion of energy-efficiency funding through the local authority delivery scheme, the home upgrade grant and the social housing decarbonisation fund. This will fund home improvements for low-income households now and over the next two years. Her Majesty’s Treasury is soon to publish its net-zero review and BEIS a call for evidence on energy consumer funding, fairness and affordability, on the costs of reaching net zero and ensuring fairness and affordability in the energy system. These will all inform the Government’s approach to achieving transition in a way that works for households, for businesses and, of course, for the public finances, while at the same time maximising our economic growth opportunities.

In response to the noble Lord, Lord Sarfraz, who asked about carbon off-sets, the UK is working through international fora to set the foundations for a credible global carbon trading system rooted in environmental integrity. As COP president, the UK is fully committed to reaching a successful negotiated outcome on carbon trading rules at COP 26. The UK’s international climate finance is strengthening the international carbon market, helping to reduce emissions and leverage additional investment.

In response to the noble Lord, Lord Oates, who highlighted the importance of delivery and some important considerations, again, we know that setting a target is only a first step and that further action is of course needed. Ahead of COP 26, we are setting out ambitious plans across many key sectors of the economy. These will build on strong recent progress on the Prime Minister’s 10-point plan and will culminate in our net-zero strategy, to be published later in the year.

I am pleased that the noble Lord welcomed the inclusion of international aviation and shipping in the carbon budget, as that of course allows for those emissions to be accounted for consistently with others. The Government take the matter of aviation and their commitments on the environment extremely seriously and the expansion of any airport must always be within the UK’s environmental obligations. By taking immediate steps to drive the uptake of sustainable aviation fuels and investments in R&D to develop zero-emission aircraft, and developing the infrastructure of the future at our airports and seaports, we will make the UK the home of green ships and green planes.

Through the Aerospace Growth Partnership, industry and government have made a joint funding commitment of £3.9 billion for aerospace research and development from 2013 through to 2026. This includes the FlyZero project to study in depth the potential for zero-emission aircraft. We are also investing £125 million in the future flight challenge to enable the use of new forms of green and autonomous aircraft. Further work on sustainable aviation fuels and air traffic control is co-ordinated by the Department for Transport and our partnership with industry through the Jet Zero Council. The Government are planning to consult shortly to update our position on aviation and climate change.

In response to the points made by the noble Lord, Lord Grantchester, who emphasised the points that a number of other noble Lords made about the importance of policy action, I agree that urgent action is needed to address the threat and help secure the UK’s long-term economic security. That is why we are committed to these world-leading targets, and we will bring forward further plans shortly to meet them.

The independent advisers, the Climate Change Committee, are clear that their recommendations have been explicitly designed to reflect the UK’s highest possible ambition within the UK’s particular capabilities as required by the Paris Agreement. Our sector decarbonisation strategies will contain further proposals to put us on track for meeting our carbon budgets and to provide clear direction for different sectors of the economy.

The comprehensive net-zero strategy ahead of COP 26 will set out the Government’s vision for transitioning to a net-zero economy. It will outline our path to meet net zero by 2050 and our emission targets along the way. We are in no doubt about the challenge that this target presents, but it is right that we pursue the highest possible ambition in the face of climate change. This target ensures that we are playing our part in meeting the Paris temperature goal, and we will be urging other countries to follow us and do the same. It is in line with the level recommended by the CCC and it is feasible to meet with substantial efforts across every sector of the economy.

I set out in my opening speech what we have already achieved, and we can make considerable progress in the power sector as we now boast the world’s largest offshore wind capacity. Now we look at the even greater benefits that net zero can bring, such as protecting the planet for future generations, through economic growth and jobs in the new green sectors. This statutory instrument will keep the UK on a credible path to meeting that 2050 net-zero target, seeing well over half of the emissions reduction needed by 2050 in the next 15 years. It will build on the recent momentum to capitalise on the vast opportunities of net zero and will strengthen our ability to urge countries to go further in delivering net zero globally. I commend the draft order to the Committee.

Motion agreed.

Sitting suspended.