Lord Bradshaw
To ask Her Majesty’s Government what assessment they have made of the European Union’s emissions trading scheme in the light of recent allegations of fraud in the trading of permits.
The Parliamentary Under-Secretary of State, Department of Energy and Climate Change (Lord Marland)
My Lords, the European Union emissions trading system continues to provide an effective means of incentivising cost-effective reductions in emissions from heavy industry. The UK’s ETS registry is widely seen as the most secure in Europe and has not suffered any cyberattacks. The Government have been working closely with the European Commission to demonstrate the security of the UK registry, and I can confirm that it will reopen tomorrow morning. We will continue to work to ensure improved levels of security in other member states’ registries. I refer the noble Lord to the Written Ministerial Statement made to the House of Commons by Gregory Barker this morning.
Lord Bradshaw
I thank the Minister for that reply. Does he agree that the trading scheme is the basis on which airlines are able, for example, to claim credits for the fuel they burn, and that any weakness in the system and the system of certificates of origin would be a very serious blow to the industry?
Lord Marland
I totally agree with that statement. I would just point out to the noble Lord that airlines will not join the system until 2012, so it is hard to evaluate the role of the system in that regard. By way of evaluation, it will be very interesting to see how it works, because airlines will be registering their carbon in the country to which they send their planes most often rather than in the country where they are domiciled. So there are one or two things that need to be looked at before 2012. However, I completely agree with the noble Lord in the sentiment of his question.
Lord Tomlinson
My Lords, I express my gratitude to the Minister for his clear statement that there were no cyberattacks on the emissions scheme, because there are all sorts of conflicting views about that. However, will he confirm that it is imperative to the interests of this country that we secure the services provided by the European Union from cyberattack to precisely the same level as we protect ourselves domestically, and that if that has implications for the European Union budget, so be it?
Lord Marland
The noble Lord makes a very good point. The great thing about the British system is that the International Emissions Trading Association has made it clear that we are the most secure of any European country. That does not mean for one moment that we should be complacent—in fact we must be even more vigilant given the potential for cyberattacks and the fraud attacks that have been made on other registries. That is why we recently worked with the European Union on a process to demonstrate the security of our registry—and my thanks here to the Environment Agency for the excellent work that it has done. I hope we can yet again show leadership in Europe on this issue.
Lord Lawson of Blaby
If my noble friend the Minister wishes to show leadership in Europe, perhaps I may ask him a question about that. I am delighted to hear that the UK registry is in good nick, but the fact is that we are part of a European emissions trading system. That system—in the accurate words of the Wall Street Journal recently—has been a story of “serial theft and fraud”, which is continuing. What are Her Majesty’s Government going to do about that?
Lord Marland
We are not going to do a lot about other people’s registries at this point but I can confirm that there will be a single European registry in 2013 which I think will iron out a lot of problems. I hope the leadership and direction that we have shown with our own registry will become the benchmark for the single European registry, and again I commend the work of our agencies and Government in securing this very fine example.
Lord Brooke of Alverthorpe
Is the Minister aware that, in 2008, Sub-Committee D of your Lordships’ European Union Committee undertook a review of the revision of the European Emissions Trading Scheme and that it produced a significant amount of evidence, part of which was from bankers who themselves complained about the inadequacy of the regulation governing ETC trading? Will the Minister look at that report? He will see that the concern is not solely about cyberattacks but also about the fundamentals of the scheme, as the noble Lord, Lord Lawson, identified. Will he also check to see whether the FSA is doing a proper job on it?
Lord Marland
As I said earlier, my Lords, the reality is that we have a pretty tried-and-tested system. We should not be complacent, but there is no point in going backwards in reviewing things. I want to look forward in our review to make sure that in the current environment we have an even more secure process. For your Lordships’ information, BarCap, one of the major traders in this scheme, has said that this is the best scheme in Europe. That is a very good starting point for us.
Lord Berkeley
My Lords, do the Government have any plans, with the European Union, to widen this scheme to other industries as part of their commitment, which I assume is still there, to reducing the carbon emissions in this country by 80 per cent by 2050?
Lord Marland
The short answer, obviously, is yes. As I referenced earlier, the airline industry—as the noble Lord will know as an expert in the transport field—will join it in 2012. We must look further to reduce our greenhouse gas problem.
Baroness Maddock
My Lords, as the Minister indicated in his earlier answers, there are other emissions trading schemes around the world. Can he tell us how many have had similar problems to the European one and whether there are any lessons that we can learn from them?
Lord Marland
There are a huge number of lessons that we can learn from every attempted fraud. I am not familiar with the detail of these frauds across the world but I am familiar with the detail of those in Europe. There are five or six countries which have endured fraud which is pretty well documented. I will not go through each of them now, or their extent, but we must learn from each of these problems. We live in a very sophisticated world of fraud which changes the whole time and we must make sure that our registry is fit for purpose in that regard.