Fourth Carbon Budget

Meg Hillier Excerpts

Tuesday 17th May 2011 Commons Chamber

[The Secretary of State for Energy and Climate Change (Chris Huhne)]

Today I am announcing that the Government propose to set an ambitious target in law to reduce greenhouse gas emissions in line with the advice from the independent Committee on Climate Change.

Signing up to an ambitious fourth carbon budget will result in no additional costs to consumers during this Parliament. We will, however, undertake a review of progress in early 2014 to ensure that our carbon targets are in line with those of the European Union. We are working up a package of measures, to be announced by the end of the year, to help energy-intensive industries adjust to the low-carbon industrial transformation while remaining competitive.

By agreeing to the level proposed by the Committee on Climate Change, we are demonstrating our desire to drive the changes needed to turn the UK into a dynamic, low-carbon economy that is attractive to investors in the new and growing low-carbon sectors. We are also sending a clear signal to the international community that the UK is committed to the low-carbon economy. That will help us to reach agreement in Europe on moving to a 30% emissions reduction target and build momentum towards a legally binding global climate change deal.

The Climate Change Act 2008 sets a target to reduce greenhouse gas emissions in the UK by at least 80% from 1990 levels by 2050. It also requires Governments to set carbon budgets, which are limits on greenhouse gas emissions in the UK for consecutive five-year periods. Carbon budgets must be set at least three budget periods in advance. They are designed to put emission reductions on an appropriate and cost-effective pathway to our 2050 target. The first three carbon budgets were set in 2009, following advice from the independent Committee on Climate Change. The fourth carbon budget, which sets the limit on emissions for the five-year period from 2023 to 2027, has to be set in law by the end of June 2011.

As advised by the Committee on Climate Change, the level that we propose setting in law would mean that net emissions over the fourth carbon budget period should not exceed 1,950 million tonnes of carbon dioxide equivalent, which is a 50% reduction from 1990 levels. As required by the 2008 Act, once the fourth carbon budget has been set in law, we will publish a report setting out the policies and proposals required in the medium and long term to meet the budget, building on the strong foundation provided by our existing policies. That will take the form of the revised Government carbon plan later this year, following the publication of the interim version in March.

The Committee on Climate Change advised that we should aim to meet the budget through emissions reductions in the UK, rather than by relying on carbon trading, such as under the EU emissions trading system or the purchase of international credits from projects abroad. We will aim to reduce emissions domestically as far as is practical and affordable, but we also intend to keep our carbon trading options open, to maintain maximum flexibility and minimise costs in the medium to long term. Given the uncertainty involved in looking so far ahead, that is a pragmatic approach.

Under the Climate Change Act, emissions reductions by the UK’s industrial and power sectors are determined by the UK’s share of the EU emissions trading scheme cap. That protects the UK industrial and power sectors from exceeding EU requirements. However, if the EU ETS cap is insufficiently ambitious, disproportionate strain could be placed on sectors outside the EU ETS, such as transport. To overcome that problem, and to provide clearer signals for businesses and investors, the Government will review progress towards the EU emissions goal in early 2014. If at that point our domestic commitments place us on a different trajectory from the one agreed by our partners in the EU under the ETS, we will revise up our budget as appropriate to align it with the actual EU trajectory. In line with the coalition agreement, the Government will continue to argue for an EU move to a 30% target for 2020, and for ambitious action in the 2020s.

As part of the transition to a low-carbon economy, we need to ensure that energy-intensive industries remain competitive and that we send a clear message that the UK is open for business. Before the end of the year, we will announce a package of measures for the energy-intensive businesses whose international competitiveness is most affected by our energy and climate change policies. Rising electricity costs pose a risk to those businesses’ sectors, which are critical to our growth agenda. We will therefore take steps to reduce the impact of Government policy on the cost of electricity for those businesses, allowing them to continue to play their part in delivering our green industrial transformation. In that way, we will ensure that those sectors remain internationally competitive and send a clear message that the UK is open for business.

It is important to stress that the UK’s existing policies already put us on track to meet the first three carbon budgets. They also provide a strong foundation for the fourth carbon budget, implying no additional near-term costs. We are reforming the electricity market, making homes and businesses more energy-efficient through the green deal, ensuring that new homes are built to a high energy efficiency standard, encouraging the uptake of ultra-low carbon cars and setting up a green investment bank.

Meeting the 1,950 million tonnes target that we propose for the 2023 to 2027 period is ambitious but achievable. By providing long-term clarity for investors, the fourth carbon budget places the UK at the leading edge of the global low-carbon industrial transformation. It will set Britain on the path to green growth, establish our competitive advantage in the most rapidly growing sectors of the world economy, generate jobs and export opportunities in those sectors, maintain energy security and protect our economy from oil price volatility. It is a framework not just for action on climate but for growth and prosperity.

[Meg Hillier (Hackney South and Shoreditch) (Lab/Co-op)]

I thank the right hon. Gentleman for early sight of his statement this afternoon. May I make it very clear that we welcome the fact that the Government have finally made a decision on the fourth carbon budget? We know that it has been a rocky week for him, as his colleague the Business Secretary sought a very different decision on this issue. We also know the many battles that he has lost within Government on the green agenda, so I congratulate him on this progress. I welcome the fact that he has not, after all, ducked the chance to answer questions on this important matter and is here before the House today.

I need to pick up on a point that the right hon. Gentleman made. He talked about our being on track to meet the first three carbon budgets, but I do not really think that is thanks to the current Government. We have seen a go-slow from him on green progress. Can he reassure us that he, the Treasury and the Business Secretary are united in delivering on these challenging targets? Can he be sure that he at least has the support of the Prime Minister?

The importance of this decision cannot be overstated, and I shall not repeat what the Secretary of State clearly laid out on the rationale behind the Climate Change Act 2008, which was established under the previous Government. However, I am puzzled about the 2014 review that he announced, because it introduces new uncertainty for those investing in the country’s greener future and breaks with the five-year cycle. He has already failed to provide business certainty by delaying the green investment bank and pulling the rug from underneath the solar industry. It is therefore essential that the scope of that review is clarified so that it does not do the same.

With those budgets now agreed, the Government must deliver on policies to meet them. As I have said, we have seen over the course of this year the Government failing to deliver on their green promises. The long-awaited green investment bank is unable to borrow till 2015—no rush there!—and it is the subject of yet more disagreements. Confidence in the renewables sector was shaken by a hasty and ill-conceived revision of the feed-in tariff, and of course, the commitment to zero-carbon homes was scrapped with no notice.

The right hon. Gentleman’s confidence in his record belies the facts. He needs to focus on his Department and on the detail of this agenda, which is very important to the future not just of the UK, but of the world. For the UK to meet those targets, we need a clear plan from the Government. The right hon. Gentleman talked about a strong foundation, which we need, but he needs to get real and to deliver on that.

We cannot meet our targets without a major reduction in domestic emissions. It is therefore critical that the Government make the improvements to the Energy Bill that the Opposition have demanded. Most importantly, they need to be clear on what carbon reductions the green deal will deliver, which, as we said last week, cannot be left to the market to decide.

Policy needs to be joined-up if we are to have the green industrial revolution that this country needs. We are clear that there is cross-party agreement on the carbon-reduction trajectory, but I should like to ask a few detailed questions of the Secretary of State. What will be the purpose and scope of the 2014 review, which I have already highlighted? Is there a prospect that the Government will weaken the targets that he announced today, or is he suggesting that they can only be tightened? What are the Department of Energy and Climate Change and the Department for Business, Innovation and Skills doing to support energy-intensive industries? When will he have more detail on that? He alluded to that, but we need more detail.

Will the Government introduce clearer aims for the green deal, so that we can be clear on how it will contribute to the necessary emissions reductions? When will we see the national policy statements, including on nuclear? Will that happen before the summer? When will the revised carbon plan be published? Will the Secretary of State and his Department consult widely on that?

After scrapping the grant funding for wave and tidal—we still await the renewables obligation certificates review—how will the UK gain a competitive edge in wave and tidal energy, in which we should be groundbreaking? Will the Secretary of State introduce an accelerated timetable for the trial and deployment of industrial-scale carbon capture and storage for coal and gas?

Does the Secretary of State agree with the Committee on Climate Change that we need to be more explicit in our support for new nuclear and onshore wind? Finally, what plans do the Government have for introducing road pricing, as suggested by the Committee? Has he consulted the Transport Secretary? Is that a policy for the next Parliament, or is there an urgent need to legislate for vehicle use now?

[Chris Huhne]

Perhaps I would be forgiven for wondering whether the hon. Lady and I have been living in the same country for the past few years. Given the picture that she is painting of policies that have been put in place to deliver on carbon budgets, she should perhaps remember that our inheritance after 13 years of the previous Labour Government is that our renewable sector is 25th out of 27 EU member states. That is not a record of which the hon. Lady can be proud. As for efforts to be made, for example, on energy efficiency, it took this Government to introduce the Energy Bill, which legislates for the green deal, which is the most comprehensive attempt to deal with energy saving in future.

Since the hon. Lady asked, I can assure her that the carbon budget has been approved unanimously by the Cabinet and has the support of the Business Secretary, the Chancellor and the Prime Minister. It is an important commitment by the Government, because it is the first commitment beyond the period for which the EU has legislated. Unlike the previous Labour Government’s three carbon budgets, this one goes beyond what the EU requires of us. We have set it according to our own domestic legislative framework and with our own domestic legislative agenda.

The 2014 review will be simple and clear. On the traded sector, which is crucial to our international competitiveness, we will review what is happening in the rest of the EU, because it is appropriate that we move at the same pace as the sector there. The hon. Lady mentioned that the green investment bank can borrow in 2015, which is crucial because the second part of this decade will see the greatest need for borrowing powers to ensure the installation of renewable and other low-carbon energy. I am astonished by her description of what has happened so far under this Government. We have set aside more than £800 million for a renewable heat incentive, and we are legislating for a carbon price floor.

Despite the Opposition’s warm words, in 13 years of a Labour Government not a single piece of turf was turned in order to install a single new nuclear reactor, yet work has already begun at Hinkley Point. The sense of urgency in dealing with the climate change challenge displayed by this Government is of an entirely different order of magnitude. On clean coal and gas, about which the hon. Member for Bolsover (Mr Skinner) and some of his friends are particularly concerned, the Government, in an extremely tough and difficult expenditure round in which we have to clear up the mess inherited from the Labour party, found £1 billion to set aside for the first commercial-scale carbon capture and storage project. In 13 years under Labour, no money was put aside and no planning was done for low-carbon growth.

We will proceed with our national planning statements, and there will be an interim review by the nuclear regulator, Mike Weightman, which I anticipate coming shortly. The hon. Lady asked a detailed question about road pricing. We have made it clear already that there will be no plans for that in this Parliament. I repeat, however, that we are set on a road that will unlock enormous opportunities for British business, with a low-carbon economy and high growth.