Climate Change Act 2008 (Credit Limit) Order 2021
(Limited Text - Ministerial Extracts only)
Read Full debate
Lord Callanan
That the Grand Committee do consider the Climate Change Act 2008 (Credit Limit) Order 2021.
Relevant document: 3rd Report from the Secondary Legislation Scrutiny Committee
The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Callanan) (Con)
My Lords, I beg to move that this order, which was laid before the House on 13 May 2021, be approved.
The question of how we act on climate change is perhaps one of the most pressing issues of our time. Climate change is here—this Government absolutely accept that and are determined that the UK play its part in upholding the Paris Agreement and driving down our own greenhouse gas emissions. This Government are committed to decarbonising the UK economy while of course, at the same time, driving economic growth, and to meeting our ambitious targets for net zero emissions by 2050. We were the first major economy in the world to set a legally binding target to reach net zero carbon emissions across our economy by 2050, and we have shown that rapid progress on decarbonisation is possible alongside a thriving economy. Our emissions are down by almost 44% across the last 30 years and our economy has grown by 78% during the same period. We are currently in the process of reaching a significant milestone in approving legislation to enshrine the UK’s sixth carbon budget in law, proposing a target that would reduce greenhouse gas emissions by 78% by 2035, compared to 1990 levels. This is a huge commitment and one which the Government are working flat out to achieve.
Turning to the topic of today’s debate, under the Climate Change Act 2008 the Government must set a limit on the number of international carbon units that can be credited to the net UK carbon account for each budgetary period. These carbon credits represent the reduction or removal of greenhouse gas emissions overseas. The legislation we are debating today sets a limit on the net number of international carbon credits that may be used to meet the fourth carbon budget, which runs from 2023 to 2027. The Climate Change Act, passed with near unanimous support in this House, allows for the flexibility of using carbon credits to meet a carbon budget. The order will set the credit limit for the fourth carbon budget at 55 million tonnes of carbon dioxide equivalent, which is about 2.8% of the total carbon budget. This is the same amount of flexibility as the House agreed for the second and third carbon budget credit limit orders. However, I highlight that this legislation does not commit the UK Government to buying international credits: as we have witnessed with previous carbon budgets, the Government have a strong track record of delivering clean growth and have not used any of our allowances on other budgets to date.
We continue to put forward ambitious plans to meet future carbon budgets, including through our bold sector strategies, and are committed to meeting our world-leading targets through domestic action. Noble Lords should be aware that the credit limit set through this legislation excludes any net use of credits that result from the operation of the European Union Emissions Trading Scheme. The exclusion is required because, while the UK Emissions Trading Scheme replaced the UK’s participation in the EU ETS on 1 January 2021, Northern Ireland electricity generators continue to participate in the EU ETS and will therefore receive EU ETS allowances within the fourth budgetary period.
The role of the Climate Change Committee in providing independent expert advice to government on climate change mitigation and adaptation is widely accepted as global best practice. The Government’s net zero target covers the whole of the UK, and all four parts of the union have an integral role to play in delivering the Government’s carbon budgets leading up to 2050. As such, we of course also work closely with our partners in the devolved Administrations in order to achieve our climate goals.
In determining the appropriate credit limit for the fourth carbon budget, which is the subject of the present discussion, the Government have considered the advice of the Climate Change Committee and the views of the devolved Administrations. All parties agree that the purchase of international credits should not replace domestic abatement when delivering our net zero target. While the Climate Change Committee and the devolved Administrations recommended a zero-credit limit, the Government have concluded that it is best to maintain a small amount of flexibility over the fourth carbon budget period.
As a Government, we have undertaken our own robust analysis to validate our position and have considered the range of factors required by the Act, including the economic, fiscal, social, scientific and international circumstances. We judge that this flexibility will continue to ensure that the Government can best deliver our carbon targets more effectively and be resilient to unexpected changes in future emissions.
We are extremely grateful to our independent advisers for their expert analysis and advice, and to the devolved Administrations for their valuable ongoing engagement. We look forward to working closely on the fundamental decisions that we will need to take over the coming years in order to drive forward this progress.
The Government recognise the significant advantages that the net zero transition can bring, in addition to the essential benefits of ending our contribution to global warming. Now is the time to double down and decrease our emissions further and faster. Ahead of COP 26, we will bring forward further bold proposals, including our net zero strategy, to cut emissions and create new jobs and industries across the whole country, going further and faster towards building a stronger, more resilient future and protecting our planet for this generation and those to come.
As for the legislation for debate today, the Government’s sustained drive ensures that we are on track for the fourth carbon budget. However, as we have outlined, in our view it is still prudent to allow ourselves a small amount of flexibility in the future in order to manage the uncertainty in emissions projections and to continue to deliver emissions reductions in the most prudent and fair manner for the whole of the UK. I therefore commend this order to the House.
Lord Callanan (Con)
First, I thank all noble Lords for their extremely valuable contributions to this debate.
This year, we in the UK find ourselves in the privileged position of being the president of the G7 and the host of COP 26. We are determined to use these key international moments, as noble Lords saw at the G7 earlier this week, to promote ambitious action to deliver the transformational change required by the Paris Agreement. In line with this, it is imperative that we continue to be bold and ambitious in not only our commitments but our actions, as the noble Lord, Lord Oates, pointed out, to deliver progress against climate change.
To reiterate what I said earlier, our position remains that the Government intend to meet all our targets through domestic abatement. International credits merely afford us a potential flexibility to ensure a cost-effective approach to reducing carbon emissions when managing uncertainty in historic and future emissions.
As usual, we have had a very interesting debate. I will pick up on some of the points raised. We acknowledge the progress pointed to by the noble Lord, Lord Bradshaw, and other noble Lords, including my noble friend Lord Bourne, and the success we have had so far in decarbonising the UK economy to date. Many developing countries plan to sell credits in future, but my noble friend is absolutely right that these must be of the very highest quality. We are using our international climate finance to ensure that developing countries have the capacity to meet this bar and access finance through the carbon market.
On the action that the Government are taking to decarbonise transport, which my noble friend Lord Bourne also asked about, we recently announced that the UK is embarking on a comprehensive transport decarbonisation plan. This will be a bold, ambitious programme of the co-ordinated action needed to end the UK’s transport greenhouse gas emissions by 2030 and, at the same time, ensure that the transport sector plays its part in delivering our legally binding carbon budgets. The plan will think in terms of not only modes of transport but technology and places. Part 1 of the plan was published in March 2020, with part 2, containing policies and proposals, expected to be published shortly.
We will also commit to communicating our public engagement approach to our net-zero strategy to generate widespread awareness, and, hopefully, acceptance, across the UK, because achieving the net-zero target will be a shared endeavour requiring action from everyone in society—people, businesses and government. Therefore, we are increasing our work on public engagement on net zero, both in communicating the challenge and in giving people a say on shaping future policies.
I have addressed a number of my noble friend Lord Bourne’s questions, but I am sorry to tell him that he missed the debate on the most recent carbon budget. It was debated in this House last week; the noble Lords, Lord Oates and Lord Grantchester, were present, with a couple of other Peers. It still has to go to the House of Commons, but I am afraid that my noble friend has missed his opportunity to contribute to that one.
On Northern Ireland and the emissions trading scheme, Northern Ireland power plants have remained in the ETS under the Northern Ireland protocol, but all other emissions in Northern Ireland remain under the UK Government’s coverage.
The noble Baroness, Lady Jones, asked why we chose not to set a credit limit at zero tonnes, as was recommended by the Climate Change Committee. I can tell her that the Government intend to meet our net-zero target and our interim carbon budgets through cutting our domestic carbon emissions. As I said earlier, we are simply choosing to maintain the limited tools that we already have under the Climate Change Act to ensure that we can deliver on our carbon targets at the lowest possible cost, including the option of using international credits. Our internal analysis reaffirmed that this level is suitable to account for any potential uncertainties.
The noble Lord, Lord Oates, implied that we could have sought to deliver a lower level for the credit limit order. Again, I remind him that our analysis indicates that any lower level might not provide sufficient flexibility to manage the uncertainty associated with the inventory using only credits.
The noble Lords, Lord Oates and Lord Grantchester, asked whether the Government are on track to meet carbon budgets 4 and 5. We are taking decisive action to ensure that we deliver on both. Ahead of COP 26, we will set out our ambitious plans across key sectors of the economy, such as the energy White Paper and the industrial decarbonisation strategy. These will build on the strong recent progress that we set out in the 10-point plan and will culminate with the net-zero strategy later in the year.
The noble Lord, Lord Grantchester, asked about future carbon budgets. I remind him that this current legislation only concerns carbon budget 4, of course. We will consider the limit for carbon budgets 5 and 6 at the appropriate times in the future, using analysis that is relevant to the context at the time.
The noble Lord also raised the use of other flexibilities in the Climate Change Act 2008. In response, I want to make it clear that we have no intention of using any other flexibilities afforded to us through the Act and we intend to meet our ambitious targets purely through domestic action.
I conclude by saying that, as I mentioned in my opening speech, this statutory instrument effectively continues the status quo, setting the same credit limit that we have held but not used for carbon budgets 1 to 3. This status quo has allowed the Government to deliver world-leading emissions reductions and encourage similar ambition in other countries across the world. I therefore commend this draft order to the Committee.