Climate Change: Targets

Lord Callanan Excerpts

Thursday 27th May 2021 Grand Committee

[The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Callanan) (Con)]

My Lords, as I made clear to the House just a few weeks ago, climate change remains one of the most pressing issues of our time. While we of course presently find ourselves in the midst of a fairly vicious health pandemic, we will not abandon our climate change goals and risk further crises down the line. Let me reaffirm the point I made to the House a few weeks ago: this Government are absolutely determined to play their part in upholding the Paris Agreement and driving down our own greenhouse gas emissions.

To this end, we recently passed a significant milestone by beginning the process of enshrining the UK’s sixth carbon budget in law, proposing a target which would reduce greenhouse gas emissions by 78% by 2035 compared to 1990 levels. This is a huge commitment which the Government are working flat out to achieve. Despite the considerable challenges that we face, we can leverage our strengths to deliver a greener and stronger economy, and go further and faster to level up and accelerate the transition to net-zero greenhouse gas emissions by 2050.

In response to the noble Baroness, Lady Sheehan, I am pleased to confirm that on 31 March 2021 the UK Government implemented their new policy and will no longer provide any new direct financial or promotional support for the fossil fuel energy sector overseas. This applies to any new ODA and investment, including support provided by UK Export Finance. We are working hard to drive down demand for fossil fuels. However, there will continue to be ongoing demand for oil and gas, which is recognised by the work of the independent climate change committee.

Through our recent landmark North Sea transition deal, we are the first G7 country to set in place an ambitious partnership to back the oil and gas industry to transition away to clean, green energy while supporting the tens of thousands of highly skilled jobs that exist in this sector. I agree that it is an existential issue and that we need to get it right. The foundation for delivering net zero is through the Prime Minister’s 10-point plan for the UK to lead the world into a new green industrial revolution. This innovative programme sets out ambitious policies, backed by £12 billion-worth of government investment.

To respond to the point on legislation, and to a similar point made by my noble friend Lord Sheikh, this is key to delivering our climate change goals. We were the first major economy in the world to set a legally binding target to reach net-zero greenhouse gas emissions across our economy by 2050 and in April we laid the draft legislation for the UK’s sixth carbon budget. As I said earlier, it proposes a target which would reduce emissions by 78% by 2035.

Under the Climate Change Act 2008, we have made significant progress in meeting our climate targets. We confidently met the first two carbon budgets and we are projected to meet the third out to 2022. We exceeded the required emissions reduction in the first carbon budget by 1.2%, and in the second by nearly 14%. Now is the time to double down and decrease our emissions further and faster.

In response to the noble Lord, Lord Lennie, we do recognise the need for further action to meet the fourth and fifth carbon budgets. Our forthcoming sector decarbonisation strategies and our wider plans that deliver a green economic recovery following the Covid-19 pandemic will contain further proposals to support delivery of carbon budgets 4 and 5. We will also publish a comprehensive net-zero strategy ahead of COP 26, setting out the Government’s vision for transitioning to a net-zero economy.

The noble Baroness, Lady Meacher, and the noble Lord, Lord Oates, talked about the UK’s plans to develop hydrogen production. Working with industry, the UK is aiming for five gigawatts of low-carbon hydrogen production capacity by 2030. This is stretching but credible for the UK. We welcome the Scottish Government’s ambition, which will be important in developing low-carbon hydrogen production at scale within the UK. Our ambition will be supported by a range of policy measures, including the £240 million net-zero hydrogen fund, which was confirmed out to 2024-25, for co-investment in hydrogen production. We have committed to consulting on our preferred hydrogen business model in 2021 and set out a revenue mechanism to enable our new business models to bring through private sector investment. The noble Lord will be aware that we are developing our hydrogen strategy in partnership with industry, because while our ambition is important, the key ask from industry is that we have a clear revenue/business model to support delivery. That is why we are not rushing ahead with a strategy.

My noble friend Lady Altmann spoke about using pension scheme assets to assist in the battle against climate change—indeed, she has spoken about this a number of times before. Trustees of occupational pension schemes are, as she is well aware, independent of government and not bound by the commitments which the Government have signed up to. However, given the significance of the financial risks posed by climate change, the Government expect all investment decisions made by pension scheme trustees to take climate change into account. As of 2019, trustees of pension schemes with 100 or more members have been required to set out in their statement of investment principles policies on stewardship and on environmental, social and governance considerations, including climate change.

In the Pension Schemes Act 2021, the DWP took powers to require trustees to manage climate risks and opportunities to their savers, and to report on how they had done so. After two consultations, the DWP will lay the required regulations next month. If approved, they will come into force in October 2021 and will require larger occupational pension scheme trustees to undertake governance activities, assess how their scheme will fare in different temperature rise scenarios, calculate the emissions of their portfolio, and set targets. They will need to make annual disclosures about these activities in line with the TCFD recommendations. This will make the UK the first major economy to mandate TCFD reporting for its pensions sector.

The noble Baroness, Lady Altmann, also asked about the Government’s plans for bitcoin and other cryptocurrencies. As always, we stand ready to respond to emerging risks or changes in the market, and we will continue to monitor how cryptoassets are being used in the UK. Regarding the emissions they create, it is of course important to consider this in the context of the UK’s success in decarbonising the power sector. As she will be aware, between 1990 and 2019, the sector saw a reduction of 71% in emissions.

The noble Lord, Lord Bradshaw, spoke about balancing our ideas to reach net zero with their cost and their deliverability. Our ambition to protect the planet goes hand in hand with supporting economic growth and prosperity across the UK. The 10-point plan will also help develop the cutting-edge technologies needed to drive down emissions in industries across the United Kingdom, such as through the significant investment in hydrogen that I spoke about earlier, and in carbon capture technologies through our £1 billion net-zero innovation portfolio. We have developed our plans to reach net zero centred around the UK’s strength, and there is huge potential in boosting innovation and advancing technology to help meet those ambitions. At every step on the path to net zero, we will of course put affordability and fairness at the heart of our reforms.

In response to the noble Baroness, Lady Bennett of Manor Castle, analysis from the Climate Change Committee shows that to achieve net zero, GGR methods will be required to balance residual emissions from some of the most difficult to decarbonise sectors—for example, some parts of agriculture and aviation.

Last year, it was my pleasure to meet the noble Lord, Lord Mountevans, and his colleagues to talk about the maritime sector, so let me respond to the points he made about the maritime industry. The UK will continue to play a prominent role in international forums, including at the International Maritime Organization, to encourage action from other countries to cut emissions from this sector. We will invest £20 million in the clean maritime demonstration programme to develop that clean maritime technology. We are already running hydrogen ferry trials in Orkney and we are due to launch a hydrogen refuelling power plant in Teesside, as we seek to revitalise our ports and coastal communities. The clean maritime demonstration competition includes feasibility studies on our sites, such as Orkney and Teesside. The competition will support the development of hydrogen and alternative fuel shipping hubs across the UK, enabling a number of clean maritime clusters.

In response to the noble Baroness, Lady Hayman, and the noble Lord, Lord Sheikh, on legislation being key to delivering our climate change goals, I remind them that, as I said, we were the first major economy in the world to set a legally binding target and in April, we laid draft legislation for the UK’s sixth carbon budget. Under the Climate Change Act 2008, we have made significant progress in meeting those climate targets. As for the point the noble Lord raised about requiring every policy submitted to have a climate impact assessment, net zero has become an increasing priority for this Government. For the first time, we now have two Cabinet committees, chaired by the Prime Minister and the COP president-designate, to turbo-charge the net-zero transition and co-ordinate action across government. As the lead department for net zero, BEIS works in the centre of government and other key departments to ensure that net zero is factored into all our key policy decisions and future plans.

The noble Lord, Lord Sheikh, also raised the point that in order to deliver on net zero, we must ensure that local authorities and the devolved Administrations are adequately involved and trained in delivery of net zero. We are working closely with our partners in the DAs and many local authorities to achieve those climate goals. Local authorities are key delivery partners in projects ranging from electric vehicle charging infrastructure to heat networks and energy efficiency schemes.

Unfortunately, I am running out of time, so I shall write to those noble Lords I have not had a chance to answer and that will be a more effective use of our time. I am grateful for the time of the Committee.