Draft Climate Change Act 2008 (Credit Limit) Order 2021

Amanda Solloway Excerpts

Monday 14th June 2021 General Committees

[The Chair]

Before we begin, I would like to remind Members about the social distancing regulations. Seats available to Members are clearly marked. I also remind Members that Mr Speaker has stated that masks should be worn in Committee when not speaking. Hansard colleagues will be grateful if you send any speaking notes to [e-mail].

[The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Amanda Solloway)]

I beg to move,

That the Committee has considered the draft Climate Change Act 2008 (Credit Limit) Order 2021.

It is a pleasure to be here today, Mr Mundell. The draft order was laid before the House on 13 May. This Government are committed to being a world leader in climate action and to decarbonising the UK economy while driving economic growth, meeting our ambitious targets for net zero emissions by 2050.

While the current pandemic is rightly at the forefront of our work as we rebuild, we must build back better, greener and faster. That means supporting green jobs, levelling up, accelerating our path to meeting net zero, and creating a long-term advantage for the UK in low-carbon sectors. We have shown that rapid progress on decarbonisation is possible alongside a thriving economy. Our emissions have gone down almost 44% over the last 30 years, and our economy has grown by 78% in the same period. We are also in the process of reaching a significant milestone in approving legislation to enshrine in law the UK’s sixth carbon budget, proposing a target that will reduce greenhouse gas emissions by 78% by 2035, compared with 1990 levels. That is a huge commitment and the Government are working flat out to achieve it.

As part of the Climate Change Act 2008, the Government must set a limit on the number of international carbon credits that can be credited to the UK carbon account for each budgetary period. These carbon credits represent the reduction or removal of greenhouse gas emissions overseas. The draft order 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, which was passed with near unanimous support, allows for the flexibility of using carbon credits to meet a carbon budget if necessary. Our intention is to meet our nationally determined contribution and net zero commitment through domestic action, but having that flexibility helps to ensure that even if unforeseen circumstances affect how we might most effectively deliver against our carbon budgets for the taxpayer, the UK is better able to meet our legally binding emissions target under the Act.

The draft order will set the credit limit of the fourth carbon budget at 55 million tonnes of CO₂ equivalent, which is only 2.8% of the total carbon budget. That 55 million tonnes of CO₂ equivalent is the same amount of flexibility as the House agreed for the credit limit orders for the second and third carbon budgets. I must also highlight that this draft order does not commit the UK Government to buying international credits. As we have witnessed with previous carbon budgets, this Government have an impressive track record of delivering clean growth and have not used any allowances set for the previous carbon budgets. This Government will continue to put forward ambitious plans to meet carbon budgets through domestic action and are committed to meeting our world-leading target.

It is at this point that I should reassure colleagues that the limit set by the draft order excludes any net use of credits that result from the operation of the European Union emissions trading system. The exclusion is required because, while the UK emissions trading scheme replaced UK participation in the EU ETS on 1 January 2021, Northern Ireland electricity generators continue participate in the EU ETS, and so will receive EU ETS allowances within the fourth budgetary period.

In determining the appropriate fourth carbon budget credit limit, subject to the present discussion, the Government have considered the advice of the Climate Change Committee and the views of the devolved Administrations, as well as the range of factors required by the Act, including the economic, fiscal, social, scientific and international circumstances. All the parties agree that the purchase of international credits should not replace domestic action on emissions when delivering our net zero target. Although 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 during the fourth carbon budget period. That builds resilience into our projections and allows us flexibility to respond to future uncertainties—a consideration that any responsible Government should factor in.

We are extremely grateful to the Climate Change Committee for its expert analysis and advice, and look forward to working closely with it on the fundamental decisions we will need to take over the coming years to drive forward our progress. As hon. Members know, we accepted its advice and aligned our positions on the sixth carbon budget targets and nationally determined contribution. However, we have not always agreed on points of detail—for example, the balance of emissions reductions between sectors, or exact policy interventions—and we undertake our own robust analysis alongside it.

This ambitious Government are taking decisive action to ensure that we deliver the fourth carbon budget domestically, but it is prudent to allow ourselves flexibility in the future to manage the uncertainty of emissions projections. We are dedicated to tackling climate change throughout our commitments and action. On 21 May, through our G7 presidency, we reaffirmed our strong and steadfast commitment to strengthening implementation of the Paris agreement and to unleashing its full potential. Building on that, we fully intend to use our vital role hosting the COP26 negotiations in November to catalyse ambitious global action to cut emissions. Ahead of COP26, we will set out our ambitious plans across key sectors of the economy to meet our climate commitments. That will include a comprehensive net zero strategy, which will set out a vision for transitioning to a net zero economy and raise ambition as we outline our path to meet net zero by 2050.

--- Later in debate ---

[Amanda Solloway]

I thank the hon. Member for Greenwich and Woolwich (Matthew Pennycook) for his contribution to the debate.

It is because of the Government’s ambitious proposal and actions that the UK finds itself at the forefront of climate action and a world leader in reducing emissions, as highlighted through our presidency of this year’s COP26 summit. As I said, the UK has seen the sharpest reduction in emissions of any G7 country since 1990. We also have the highest emissions reduction target for 2030 of any G7 country. As the hon. Gentleman mentioned, we have been in consultation with the devolved Administrations and did recommend a zero credit limit. However, the Government have concluded that it is best to maintain a small amount of flexibility over the fourth carbon budget period, as it builds resilience into our projections and allows us the flexibility to respond to future uncertainties, which are a consideration that any Government should factor in.

The Government intend to continue with our ambitious proposals and our position remains that we intend to meet all our targets through domestic abatement, as we have in the past. Nonetheless, international credits could offer a contingency for delivering our legally binding targets, and so the elimination of their potential use, as allowed under the Climate Change Act 2008, would not be prudent in our view. It is also important to reiterate that this legislation does not commit the UK to buying international credits and, as we have witnessed from previous carbon budgets, the Government have not used any international credits to date, even with a 55 million tonnes of carbon dioxide equivalent limit. I can confirm that the current legislation is only concerned with the fourth carbon budget. We will consider the limit for the fifth and sixth carbon budgets at the appropriate time.

As I mentioned in my opening speech, despite the considerable challenges we are facing on the other side of the pandemic, we can leverage our strength to deliver a better and greener economy and go further and faster to accelerate the transition to net zero carbon emissions by 2050. I commend the draft regulation to the Committee.

Question put.