Draft Climate Change Act 2008 (Credit Limit) Order 2021

Matthew Pennycook Excerpts

Monday 14th June 2021 General Committees

[Matthew Pennycook (Greenwich and Woolwich) (Lab)]

It is a pleasure to serve under you in the Chair, Mr Mundell. In her opening remarks, the Minister presented the draft statutory instrument as almost a purely technical matter, and the Government’s decision to set a positive limit on the quantity of international carbon credits that can be used to meet the fourth carbon budget as a simple precautionary measure against future uncertainty in relation to accounting for that budget. To the extent that the Government have been clear, and the Minister has been clear again today, that it is not their intention ever to use the international credits for which this order provides, that may well be true, but the Opposition believe that the order is nevertheless problematic.

As the Minister said in her remarks, when placing a limit on the quantity of international credits that can be used to meet any given carbon budget, the Government, under section 9 of the 2008 Act, must take into account advice from the Climate Change Committee and must also consult the devolved Administrations. The CCC’s advice on this matter could not have been clearer. It recommended that international emissions credits should not be allowed to contribute to meeting the fourth carbon budget—that is, that a limit of zero should be set instead of the 55 megatonnes of carbon dioxide equivalent provided for by this instrument. In their response to the consultation, the Scottish Government made it clear that they would support the adoption of a zero limit. Similarly, the Welsh Government stated that they would support a zero limit in principle. The UK Government have determined that they will ignore those views and dismiss the very clear recommendation of the CCC. In doing so, the Government essentially make two arguments in support of setting a positive limit.

The primary argument is that the headroom provided by up to 55 megatonnes-worth of international credits is required to provide—I quote from the impact assessment—

“sufficient flexibility to manage uncertainty in emissions projections”.

The secondary argument is that the purchase of international credits could also enable the UK to support climate mitigation action in developing countries via the carbon budgets framework, and contribute to the development of a global carbon market, thereby reducing the cost of global climate action over the long term.

The second argument can be dealt with very quickly. At any point in the future, should they wish to do so, the Government can purchase international emissions credits to augment the delivery of their own carbon budgets through domestic action. There would be nothing to prevent the Government from bolstering global climate action efforts by means of the purchase of international credits if the limit on use of those credits to meet the fourth carbon budget were set at zero today.

The first argument is, on the face of it, the stronger one. After all, it is surely only sensible, as the Minister has said, for any Government to plan for contingencies and to build in some flexibility to mitigate unforeseen circumstances. The problem with that argument is that the benefit of building in wiggle room of a mere 2.8% to account for potential changes in the methodology underpinning the emissions inventory, or the risk of high emissions relative to current projections, is, we believe, outweighed by the damage that it causes. I do not dismiss it entirely, but I am not primarily referring here to the negative impact of setting a positive limit on investor confidence, which I believe the Government are right to argue is likely to be relatively small. I am thinking more of the harm that setting a positive limit is likely to cause in terms of the signal it sends about the Government’s perception of the degree of flexibility involved in the carbon budget framework, their commitment to achieve the net zero target through domestic action and—as a country that, as the Minister rightly said, has a relatively strong record of domestic emissions reductions—the example it conveys to other countries about the approach they can follow when it comes to their own pathways.

The Minister knows full well that the 2030 NDC that the UK formally submitted at the UNFCCC in December last year under the Paris agreement, and the sixth carbon budget announced in April, will require a far more ambitious pace and scale of emissions reductions over the coming years. If, as a country, we finally begin to do what is necessary to put ourselves decisively on track to achieve net zero, there should be no question that the fourth carbon budget, which—according to the CCC—remains at the right level even accounting for inventory changes, will be met without the use of international credits. Taken together with the fact that the Government’s central projections make it clear that they are unlikely to use the credits provided for by this order, and the likelihood that the cost of those credits will rise significantly in the years ahead, the Opposition believe that the case made by the Government for a positive limit does not outweigh the damage it might cause and is not strong enough to justify ignoring the CCC’s advice.

The Government should have the confidence to set a zero limit and thereby clearly indicate that they will do whatever it takes to comfortably meet, and hopefully outperform—given the more stringent targets that are coming forward—the fourth carbon budget through domestic action alone. For that reason, we intend to divide the Committee this afternoon. While I can see from the numbers here that the order will be approved, I hope the Minister will take on board our very real concerns about the detrimental impacts of legislating for the use of international credits and recommit the Government to doing whatever is necessary to achieve net zero over the coming years through planned government policy.