Draft Carbon Tax Budget
(3 years, 6 months ago)
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The Chair
Before we begin, I remind Members to observe social distancing and that Mr Speaker has stated that masks should be worn in Committee when not speaking. Hansard colleagues would be most grateful if Members sent their speaking notes to hansardnotes@ parliament.uk.
The Minister for Business, Energy and Clean Growth (Anne-Marie Trevelyan)
I beg to move,
That the Committee has considered the draft Carbon Budget Order 2021.
The draft order was laid before the House on 21 April 2021. It may be only one line long, but it is a world-leading line of legislation. It sets a sixth carbon budget of 965 million tonnes of carbon dioxide equivalent, which will reduce greenhouse gas emissions by 78% by the 2033-37 budgetary period, compared with 1990 levels. That level is recommended by our statutory expert advisory body, the Climate Change Committee, and endorsed by all four Governments of the UK nations. The UK was the first country to introduce a legally binding long-term emissions reduction target, through the Climate Change Act 2008. That was updated in 2019 to set our new target of net zero emissions by 2050. Carbon budgets are set on the way to 2050 to step down our emissions every five years. So far, five budgets have been set in law, setting our decarbonisation path through the last decade and the next.
The proposed sixth carbon budget is highly ambitious, seeking to achieve well over half the emissions reductions required from now to 2050 in the next 15 years. It builds on the momentum of our new nationally determined contribution under the Paris agreement to reduce emissions by 2030 by at least 68% compared with 1990 levels—the highest reduction target set by a major economy to date.
The sixth carbon budget will, for the first time, incorporate the UK’s share of international aviation and shipping emissions—an important part of the Government’s decarbonisation efforts that will allow for those emissions to be accounted for consistently. We aim to introduce the necessary legislation formally to include those emissions as soon as possible, and within the year.
The arguments for decisive action on global climate change are overwhelming, and the consequences of inaction are stark. Unchecked, it will lead to rising temperatures and rising sea levels, extreme weather, damage to ecosystems, and reduced crop productivity. Co-ordinated global action is critical if we are to mitigate the potentially catastrophic effects on the environment and economies across the world. The UK is leading the way in responding to the climate threat. This world-leading sixth carbon budget will reinforce that strong leadership, ensuring that the UK acts consistent with the Paris agreement temperature goal to limit global warming to well below 2°C and to pursue efforts towards 1.5°C. Importantly, it will allow us credibly to call on others to increase their own efforts, including at this year’s COP26 summit.
We know that we have a significant challenge ahead of us, with additional effort needed across every sector of the economy, but look at what we have already achieved: cutting emissions by more than 40% since 1990 while growing our economy by more than three quarters. Today, low-carbon electricity gives us more than half our generation, while we boast the world’s largest offshore wind capacity. Consider the benefits that net zero will bring: protecting the planet for future generations; economic growth and jobs in new green sectors; reducing air pollution; and enhancing biodiversity.
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. We recognise that we can harness such benefits only if we back our targets with ambitious plans across all sectors of the economy. Over the coming months, we will bring forward further bold proposals, including a comprehensive net zero strategy showing how we intend to meet this ambitious new carbon budget and earlier targets. That will set out the Government’s vision for transitioning to a net zero economy, cutting emissions and creating 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 emphasising the utmost importance of the sixth carbon budget in our efforts to cut emissions and strengthen our climate leadership ahead of COP26. I hope very much that hon. Members will support this statutory instrument, and I commend the order to the Committee.
Matthew Pennycook (Greenwich and Woolwich) (Lab)
It is a pleasure to serve with you in the Chair, Mr Davies.
It will not be lost on right hon. and hon. Members that the order is incredibly significant and that it will have far-reaching implications for our economy and all aspects of our society over the next 16 years. For that reason, although the Opposition fully support its passage and have no intention of dividing the Committee, I hope that Members from all parties will forgive me if I make a series of important points and put a number of questions to the Minister. After all, in all likelihood this is the only opportunity the House will have to debate these matters in any detail.
As the Minister made clear, as this is the first carbon budget to be set since the House legislated for a net zero target in 2019, the sixth carbon budget marks a critical point in our country’s contribution to delivering on the ambition of the Paris agreement and thus keeping alive the hope of limiting global heating to 1.5° C above pre-industrial levels.
Labour very much welcomes the Government’s decision to accept the Climate Change Committee’s advice that the budget level be set at 965 megatons of carbon dioxide equivalent for the 2033-37 period. I also put on the record the Opposition’s thanks to the CCC for the comprehensive nature of the advice it produced in December, as well as the road map that it set out alongside that advice for achieving a fully decarbonised economy by mid-century.
We also welcome the Government’s decision finally to include emissions from international aviation and international shipping in the legal scope of carbon budgets. I press the Minister to give the Committee a more precise timescale as to when the separate order necessary to give effect to that decision will be introduced.
That our country must achieve carbon neutrality by 2050 at the latest is not in dispute. Indeed, the Government’s own impact assessment for the sixth carbon budget states that
“there is no alternative to the legal requirement in the Climate Change Act to set a sixth carbon budget level with a view to reducing UK emissions to net zero by 2050”.
Yet it is hard to overstate the challenge posed by seeking to reduce emissions by 78% below 1990 levels over the next 16 years.
As the Minister is acutely aware, the sixth carbon budget target represents a significant scaling-up of ambition relative to the fourth and fifth budgets. For the first time, the whole of society will be required to engage more directly with emissions reduction, in terms of the products we buy and the way we live our lives. However, as the CCC made clear in its advice, if the emissions reductions set out in the order are delivered, that will not only result in the new industrial opportunities that the Minister mentioned, the potential to create hundreds of thousands of well-paying and secure jobs in every nation and region, cheaper bills, warmer homes and a host of other health and environmental benefits, but produce net gains for our economy that offset up-front investment over the long term—for example, in relation to reduced reliance on imported fossil fuels.
The problem is that, as a country, we will achieve net zero by mid-century and realise its promised benefits only if the carbon budget and its two predecessors are met. However, as things stand and as the Minister knows full well, the Government are still off-track not only on the net zero target with which the order aligns the carbon budget framework, but on the less ambitious target that preceded it.
We accept that when it comes to stated ambition, the announcements made over the past year have brought the Government within touching distance of what is required to meet the fourth and fifth carbon budgets, premised as they are on an overall emissions reduction target of 80% relative to 1990 levels. However, when it comes to the commitment in the 2030 nationally determined contribution that the Minister mentioned and in the sixth carbon budget, which we are legislating for this evening, there is still a significant gap between current ambition and what is required to get on track on both those things.
So, for all those commitments that are now aligned with the net zero target—from the pledge to bring forward 40 GW of offshore wind by 2030 to phasing out petrol and diesel cars and vans by the same date—there are scores of other areas, from low-carbon heat networks and heat pumps to peatlands, where ambitions have either not been set or have been set but fall far short of what is required.
In adopting the CCC’s recommended target for the sixth carbon budget, we fully appreciate that Ministers are under no corresponding obligation to follow its specific policy recommendations. However, if the Government choose not to do so, as they have done, the onus is on the Government to make alternative proposals to demonstrate how the budget will be achieved across the economy; how, if ambition falls short in some areas, it will be made up elsewhere; and how, when it comes to up-front costs and distributional impacts, the transition will be made equitably.
Therefore, a huge amount rests on the comprehensive net zero strategy that the Minister mentioned and that we have been promised will be published prior to COP26 in November. That strategy needs to set a coherent vision, filling in the gaps and clarifying the ambiguities that remain. However, if we are to have an effective policy framework to ensure that this carbon budget is met, we also need the full range of detailed blueprints that have been promised by the Government, but not yet delivered.
Where is the heat and buildings strategy, which was promised for spring 2020 and has been repeatedly delayed? Where is the net zero aviation strategy, which was promised for early 2020 and of which there is no sign? Where is the hydrogen strategy that the December 2020 10-point package stated would be published in early 2021? Where is the transport decarbonisation plan, which was announced in 2020 and then delayed until spring 2021? It is still nowhere to be seen.
Crucially, where is the final Treasury net zero review? In an answer to a written question that I tabled on 18 May, the Exchequer Secretary stated that it would be published “this spring”. By my calculation, spring ends today, and there is still no sign of it. As the Minister knows, we need that review, not least because calling any net zero strategy that had not fully incorporated the conclusions of such a review “comprehensive” would be a misnomer.
There is a pattern here. The promises on a given strategy are announced to great fanfare. Some are delivered after significant delay, whereas others fail to materialise, and even those that are published too often fall short of what is required. That pattern points to another problem. Here I sympathise with the Minister—she sits in the lead Department, whose influence clearly does not extend across Government—because several Departments, most notably the Ministry for Housing, Communities and Local Government and the Department for Environment, Food and Rural Affairs, are simply not pulling their weight on emissions reductions. Even those that are doing reasonably well in relative terms are plagued by poor performance in key areas.
The Minister knows that net zero requires a whole-of-Government approach. As it has real implications for giving effect to the order we are about to pass, I would be grateful if she gave the Committee some sense of why certain Departments seemingly get away with lagging so far behind others. Why do the Cabinet Committees on climate action strategy and climate action implementation not appear to be doing what is required in leadership and co-ordination to drive progress across the board?
Finally, even if the Government close what remains of the ambition gap and introduce detailed strategies in each of the remaining areas, meeting the carbon budget and achieving net zero will still require a step change in delivery. As things stand, only a fraction of the emissions savings required to meet the sixth carbon budget are on track to be implemented in full. Given that the Government are not doing what is necessary to ensure that the change takes place at the pace required, any further fiscal opportunities to lock in a genuine green economic recovery from the coronavirus crisis cannot be squandered. From road building to planning, there needs to be a renewed focus on ensuring that all Government policy is compatible with the net zero target, but greater priority must also be accorded to ensuring that well-designed schemes, particularly those that relate to the decarbonisation of challenging sectors such as buildings, are up and running by the end of this Parliament.
The recent green homes grant fiasco is a case in point. It is not good enough simply to scrap the scheme for homeowners and take forward the local authority delivery element. Given the scale of the challenge presented by energy efficiency in the residential sector, Ministers need to introduce a replacement scheme as a matter of urgency—one that draws on the lessons of what has gone before. I ask the Minister to provide some assurance not only that work is being undertaken to that end, but that there is an impetus within the Government more generally to ensure that the gap between delivery and stated ambition is closed at the pace required to comply with the order and get us on track for net zero.
We of course welcome the order, but we remind the Government that announcing targets is the easy bit. The difficulty lies in achieving them. To date, the Government have been long on aspiration but short on tangible progress. We are about to pass the order, so the focus will turn decisively to implementation and delivery, and we look forward to rigorously holding the Government to account in that respect.
Anne-Marie Trevelyan
I thank the hon. Gentleman for his thoughtful words and for the depth of his commitment to the subject. We all appreciate that this is, in every sense, whole-of-Parliament legislation. None of us underestimates the challenges of decarbonising the economy, but this legislation will ensure that we give ourselves a marker to move towards.
I will answer a number of the hon. Gentleman’s questions. The shipping and aviation timeline will be within a year. It will be as soon as we can find some parliamentary time and pull together the relevant details, but it is very much at the front end of the queue, because it is important that industry in both sectors can get on and do the work that we want it to do.
Can we be more ambitious? Well, we are incredibly busy. I have published the industrial decarbonisation strategy already, and I will be imminently publishing the hydrogen strategy. The heat and building strategy, which is clearly within the remit of the Department for Business, Energy and Industrial Strategy, is doing the final stages of its tour around Whitehall before it can be published.
I cannot directly speak to the challenges that the hon. Gentleman raises about the Department for Transport’s strategies, but I would like to give him confidence that there really is whole-of-Government thinking on net zero in a way that has never really been visible before. The Climate Action Implementation Committee, on which I sit, meets regularly and is really driving incredibly hard and fast. It is drawing together, at both official level and ministerial level, that criticality of thinking through both the key policies and the most effective policies that can have the biggest impact as quickly as possible.
I cannot give the hon. Gentleman a precise time on the Treasury’s net zero review, but I know that it, too, is coming close to completion. Its focus will be on the exposure of household sectors and regions to these changes. The Treasury is providing important oversight by understanding the risks and making sure we make the journey safely and inclusively. This must be a just transition. If it is not, we will be leaving parts of our communities behind, which is not something any of us wants to do; quite the opposite. This affords us the opportunity to think in a forward-leaning, world-leading way to set technologies in place and drive forward private and public sector investment. That gives us the opportunity to give the world leadership and technology to help it decarbonise.
I hope I have provided the necessary assurances to allow the statutory instrument to be approved. It will keep the UK on a credible path to meet our 2050 net zero target and try to keep the temperature rise to 1.5°. It will build on the current momentum, and we will continue to drive new policies that enable us to capitalise on the opportunities that net zero brings and credibly urge other countries to do the same for the benefit of our planet.
I hope I have answered all the questions, and I commend the order to the Committee.
Question put and agreed to.