16:37 Matthew Pennycook (Labour)

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 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 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.

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16:42 Amanda Solloway

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.

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