The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Jesse Norman)
I beg to move,
That the Committee has considered the draft Carbon Budget Order 2016.
It is a pleasure to serve under your chairmanship, Ms Buck, particularly in this new capacity. I would like to say a few words by way of background. Those present will be aware that not only am I not an expert on this topic, even by the formidably inexpert standards of the House of Commons, but I have been but a few hours in the job, so I certainly would not describe myself as being in a position to give absolute satisfaction on any questions that may be asked. There is no joy like the joy of watching a new Minister fall on his face and I will attempt not to give satisfaction in that regard.
Having said that, I am very pleased to open the debate on the draft Carbon Budget Order 2016. The order fulfils the requirement under the Climate Change Act 2008 for the Government to set five-year carbon budgets on the path to the 2050 target of an 80% reduction in emissions. It sets the level for the fifth carbon budget, covering the period 2028 to 2032.
Before discussing the order, I will reflect briefly on the Climate Change Act and what it means at the present time. Leaving the EU will bring challenges and opportunities to the United Kingdom. However, it does not change the fact that climate change remains one of the most serious long-term risks to our economic and national security. The Act was a groundbreaking piece of domestic legislation, passed with nearly unanimous cross-party support. Its success has inspired countries across the world including Denmark, Finland and France and, at its heart, the system of five-year cycles inspired a core part of the historic Paris climate agreement.
The certainty given by the Act underpins the remarkable investment, totalling about £40 billion, that we have seen in the low-carbon economy since 2010. The fifth carbon budget level set by this order continues the certainty into the 2030s. The order will set the fifth carbon budget at a 57% emission reduction on the levels of 1990, meaning that UK emissions will be capped at the equivalent of 1,725 million tonnes of carbon dioxide. That budget level is in line with the recommendations of our independent advisers, the Committee on Climate Change, as well as the views of the devolved Administrations.
As required by the Act, the Government considered a wide range of factors in proposing that level. Key to those considerations was proposing a carbon budget that balances how to keep on track to the 2050 goal with how to cut emissions as cheaply as possible. The Committee on Climate Change and the Government agree that that budget level will put us on a cost-effective path to that legally binding 2050 target.
One should be perfectly clear that the Government do not expect the budget level to jeopardise their commitment to keeping our energy supplies secure and bills as low as possible. It is not simply Governments and experts who agree; it is clearly in line with the views of business. The Confederation of British Industry, EEF and others have all welcomed the certainty that the budget level gives in the country’s journey to a low-carbon economy. I am also pleased to see that, in line with the Act, the budget level has been welcomed across the political spectrum. The shadow Secretary of State for Energy and Climate Change, the cross-party Select Committee on Energy and Climate Change and the Scottish National party have all expressed their support.
The Paris agreement sends a strong signal to business and investors that the world is committed to long-term decarbonisation. The proposed budget level will ensure that the UK economy is best placed to realise the opportunities that that transition presents. Of course, the target is of value only if we accept the challenge of meeting it. Our emission reductions to date put us in a good starting position to do that. The UK met the first carbon budget and is on track to meet the second and third budgets. Provisional figures show that UK emissions in 2015 could be 38% lower than in 1990, and more than 3% below those in 2014. The last two years have seen the greatest annual emission reductions, against a backdrop of a growing economy, but it is clear that we need to do more to address the gap of approximately 10% currently faced in the fourth carbon budget.
The Climate Change Act requires the Government to set out their policies and proposals
“As soon as is reasonably practicable”
after setting a budget level. It is too early to give specifics of what will be included, but the Government’s new low-carbon infrastructure plan will provide policy direction and pathways for the transition over both the fourth and the fifth carbon budgets. It will set out what this Government are doing to build an energy infrastructure that is fit for the 21st century. The Government have already begun to talk positively with businesses, consumers and civil society on the development of our policies and proposals, and will continue to do so in the coming months.
In conclusion, the draft order sets the right budget level. It is in line with the views of the Government’s independent advisers, continues the UK’s leadership on climate change and has the support of politicians and businesses alike. It will provide the certainty needed for future investment in our continued transition to a stronger, low-carbon economy. I therefore commend the order to the Committee.
Jesse Norman
I am grateful to the shadow Minister and to the hon. Member for Aberdeen South for their comments. I shall pick up on each of them in order but try to address them collectively.
The hon. Member for Brent North asked why “Climate Change” was removed from the name of the Department. There is a very positive way of seeing that, which is that it is recognised that tackling climate change is a vital part of government: it is understood that it is a central challenge for the next 50, if not 100 or more years, and in a sense it has become part of the furniture of the discussion. The point of this consolidation of Ministries is in part to allow that understanding to spread across our whole industrial strategy. That seems to me a thoroughly important thing.
The seriousness of the Government’s position can be easily gauged by the fact that we have not demurred from the testing targets set by the Committee on Climate Change. That is the overall framework that sets the context for investor decisions, so that is a clear indication of the deep seriousness with which the Government take this.
On investor confidence, that framework is important, but a couple of other things are worth mentioning. First, investor confidence does not appear to be that muted. Siemens has reiterated its investment in the blade plant in Hull, and there are many other indicators that investor confidence remains remarkably high, as the Department and the Government wish it to be: the UK has been the fourth-highest investor in clean energy globally for the last five years; more than half of the total investment in the EU last year occurred in this country; and we continue to increase investment at a rapid rate, especially by international standards. There is no reason why one should feel concerned about investor confidence.
Barry Gardiner
The Minister may be aware of the Ernst & Young report on the index of the best countries in the world for renewable energy investment. We never used to be out of the top 10, but in the past two years we have fallen from eighth to 11th to 13th, so there is an independent scale showing that we are going in the wrong direction. He may also be aware that Vattenfall said that in the light of Brexit it was reviewing all its renewable energy investments in the UK, including its £5.5 billion array off the east coast of England. I am not accusing the Minister of complacency, but he must take this seriously.
Jesse Norman
I was confining myself to issues specifically relating to climate change, but there are reasons to be confident about the overall position. We have seen enormous further investment in the Nissan Leaf plant in Sunderland and there are other examples of recognition of the progress that this country continues to make.
The question was raised of the impact of Brexit on the EU emissions trading system. Of course, it is far too early to say whether the UK will remain part of the ETS, but the Government take the matter extremely seriously. Even were we to end up leaving the institutions around the ETS, the effect of that would be our having increased flexibility to set our climate change targets as we saw fit. Those targets could be more testing, less testing or exactly at the level required by the ETS itself, so there need not necessarily be anything particularly problematic about it.
On why the submission for the fifth carbon budget was not on time, the truth is that it was important to get the decision right. It will be understood that by 30 June the Government had quite a lot on their plate for other reasons arising over the previous three or four months. I have inquired into whether there is a question about the legality of the budget as a result, and the legal advice has been that it remains intact. There is no reason to think that the legal status of the budget has been affected by the delayed filing. It is also worth saying that we are talking about a period some distance in the future; therefore, we are not talking about something that begins tomorrow.
Barry Gardiner
I am grateful for that clarification. Will the Minister agree to provide a summary of the legal advice, or indeed the legal advice itself, so that we can see it and have the confidence he has that there could be no positive legal challenge?
Jesse Norman
Legal advice between an attorney and a client is privileged information, so it is not the Government’s practice to publish legal advice that is given, or generally even to publish summaries of legal advice, but I am happy to take the point up and consider it, as the hon. Gentleman has raised it.
On shipping emissions, the International Maritime Organisation has talks under way at the moment. This is an international issue and not something where one can simply make decisions based on simplistic calculations of port of origin or arrival. It is entirely appropriate that the Government continue that process of participating in those negotiations with the IMO. The point is important: shipping emissions, like aviation emissions, should in the fullness of time, if proper methods of calculating an agreement can be reached, be included in the scheme because obviously there are economic impacts and, potentially, perverse incentives that occur from not doing so. The wider point is well taken.
The point about ETS credits reverts to that which I made earlier. In general there is some benefit to having credits because they confer additional flexibility on Government. It would not send a useful signal to investors to have to make changes in policy just because of marginal differences in performance, which credits could address. The position is sensible, but again the point is taken.
Finally, on the 10% gap, I would simply say that we are some way away from the policy development stage. One naturally expects—in particular in an area such as climate change and emissions control—there to be a dynamic response from the economy as these budget constraints start to get set and embed themselves. We are already seeing some of that economic behaviour and one might easily expect to see more of that to come.
Philip Boswell (Coatbridge, Chryston and Bellshill) (SNP)
In respect of the gap that the Minister spoke of, will he perhaps look at making ground on the transport and the heating sectors, where much more can be done?
Jesse Norman
I have no doubt that the Government will continue to look, as part of the infrastructure planning process over the rest of this year, closely at that sector, as they will at other key contributors to carbon emissions.
Question put and agreed to.