16:30 Jesse Norman (Conservative)

Having said that, I am very pleased to open the debate on the draft Carbon Budget Order 2016. The order fulfils the requirement under the Climate Change Act 2008 for the Government to set five-year carbon budgets on the path to the 2050 target of an 80% reduction in emissions. It sets the level for the fifth carbon budget, covering the period 2028 to 2032.

Before discussing the order, I will reflect briefly on the Climate Change Act and what it means at the present time. Leaving the EU will bring challenges and opportunities to the United Kingdom. However, it does not change the fact that climate change remains one of the most serious long-term risks to our economic and national security. The Act was a groundbreaking piece of domestic legislation, passed with nearly unanimous cross-party support. Its success has inspired countries across the world including Denmark, Finland and France and, at its heart, the system of five-year cycles inspired a core part of the historic Paris climate agreement.

The certainty given by the Act underpins the remarkable investment, totalling about £40 billion, that we have seen in the low-carbon economy since 2010. The fifth carbon budget level set by this order continues the certainty into the 2030s. The order will set the fifth carbon budget at a 57% emission reduction on the levels of 1990, meaning that UK emissions will be capped at the equivalent of 1,725 million tonnes of carbon dioxide. That budget level is in line with the recommendations of our independent advisers, the Committee on Climate Change, as well as the views of the devolved Administrations.

As required by the Act, the Government considered a wide range of factors in proposing that level. Key to those considerations was proposing a carbon budget that balances how to keep on track to the 2050 goal with how to cut emissions as cheaply as possible. The Committee on Climate Change and the Government agree that that budget level will put us on a cost-effective path to that legally binding 2050 target.

One should be perfectly clear that the Government do not expect the budget level to jeopardise their commitment to keeping our energy supplies secure and bills as low as possible. It is not simply Governments and experts who agree; it is clearly in line with the views of business. The Confederation of British Industry, EEF and others have all welcomed the certainty that the budget level gives in the country’s journey to a low-carbon economy. I am also pleased to see that, in line with the Act, the budget level has been welcomed across the political spectrum. The shadow Secretary of State for Energy and Climate Change, the cross-party Select Committee on Energy and Climate Change and the Scottish National party have all expressed their support.

The Paris agreement sends a strong signal to business and investors that the world is committed to long-term decarbonisation. The proposed budget level will ensure that the UK economy is best placed to realise the opportunities that that transition presents. Of course, the target is of value only if we accept the challenge of meeting it. Our emission reductions to date put us in a good starting position to do that. The UK met the first carbon budget and is on track to meet the second and third budgets. Provisional figures show that UK emissions in 2015 could be 38% lower than in 1990, and more than 3% below those in 2014. The last two years have seen the greatest annual emission reductions, against a backdrop of a growing economy, but it is clear that we need to do more to address the gap of approximately 10% currently faced in the fourth carbon budget.

The Climate Change Act requires the Government to set out their policies and proposals

In conclusion, the draft order sets the right budget level. It is in line with the views of the Government’s independent advisers, continues the UK’s leadership on climate change and has the support of politicians and businesses alike. It will provide the certainty needed for future investment in our continued transition to a stronger, low-carbon economy. I therefore commend the order to the Committee.

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16:36 Barry Gardiner (Labour)

I think that the Minister must accept that it was a poor signal to remove the words “Climate Change” from the name of the Department. Many of the concerned parties were deeply antagonised by the fact that the Department of Energy and Climate Change had been taken away, lock, stock and barrel; then to drop the words “Climate Change” from the name was, I think, a tactical error. However, the Minister has reassured the Committee today that there is to be no slackening of effort, and that of course is to be welcomed.

The Minister talked of investor confidence, which is indeed critical. He will know that the analysis not only of the financial industries and the investment banks but of the Select Committee was clear that the Government had damaged investor confidence across the whole of the clean energy sector, putting energy security and the costs of decarbonising under great pressure. They in fact said that after reversing their own manifesto commitment to develop CCS, removing all support for the cheapest form of clean energy and failing to provide any visibility on clean energy investment beyond 2021, the UK is facing an investment hiatus. I hope that the Minister and his colleagues in the new Department will put a particular focus on that, because if we lose investor confidence, the £100 billion of investment that this country needs in its energy infrastructure before 2020 will be extremely difficult to deliver.

The Minister also mentioned the European Union, and I think he understands that that situation has exacerbated the uncertainty around investment in our energy future. The Government have insisted that they remain committed to delivering the secure, affordable, clean energy that families and business need. Of course, the Minister is right that I welcomed the proposal to set the fifth carbon budget at the level of an average 57% reduction in emissions. That is the most cost-effective pathway to our long-term 2050 goal, and for that reason we will not oppose the order; but he will appreciate that the Government are not judged on words alone. One thing that he and the new Department will have to explain is why the previous Ministers in the former Department failed to comply with their statutory obligation to set the fifth carbon budget by the deadline set out in section 4 of the Climate Change Act.

The Government should also explain why they did not follow the Committee on Climate Change’s recommendations to include shipping emissions in the fifth carbon budget. In 2012, the Government deferred a decision to include international aviation and shipping emissions in the net carbon account, but said:

Certainty over the UK’s continued participation in the EU emissions trading scheme would also be helpful. The EU ETS has sectoral caps that are far too lax, but the scheme itself is designed to ensure that emissions reductions occur at the least cost. The downside is that, even if the ETS had more stringent caps, it could give a falsely optimistic reading of the success of our actual emissions reductions. Clarity is paramount. Will the Minister take this opportunity to end the unnecessary inclusion of ETS credits in our net carbon account beyond 2027? That would give more confidence to the power sector and industry in the UK’s commitment to decarbonisation. I believe that was a missed opportunity in the Energy Act 2016.

When asked whether climate change had been downgraded, the Prime Minister’s spokesperson said,

The Government must now press forward with the former Secretary of State’s promise to ratify the Paris agreement early, taking all necessary steps to do so this year.

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16:47 Callum McCaig (Aberdeen South) (SNP)

The Minister said that the draft order provides the certainty that is required. It does to a degree but far more certainty is required. Essential reading for the Minister, new in post, is the Energy and Climate Change Committee report on investor confidence. The sector, which is key to delivering what this legislation proposes to do today, has been damaged by the uncertainty. That requires amends across a number of different energy aspects; I cannot stress how important that is.

What is also fundamental is the potential. This is not just something that we have to do; it is a massive opportunity. The Minister’s predecessors talked about the opportunities for offshore wind. The UK has done well and continues to do well in that and in other areas. There is tremendous economic opportunity in being at the cutting edge when it comes to tackling climate change.

Finally, I reiterate the comments of the hon. Member for Brent North pressing for the ratification of the Paris agreement as soon as possible. That cannot come soon enough.

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16:50 Jesse Norman (Conservative)

The hon. Member for Brent North asked why “Climate Change” was removed from the name of the Department. There is a very positive way of seeing that, which is that it is recognised that tackling climate change is a vital part of government: it is understood that it is a central challenge for the next 50, if not 100 or more years, and in a sense it has become part of the furniture of the discussion. The point of this consolidation of Ministries is in part to allow that understanding to spread across our whole industrial strategy. That seems to me a thoroughly important thing.

The seriousness of the Government’s position can be easily gauged by the fact that we have not demurred from the testing targets set by the Committee on Climate Change. That is the overall framework that sets the context for investor decisions, so that is a clear indication of the deep seriousness with which the Government take this.

The Minister may be aware of the Ernst & Young report on the index of the best countries in the world for renewable energy investment. We never used to be out of the top 10, but in the past two years we have fallen from eighth to 11th to 13th, so there is an independent scale showing that we are going in the wrong direction. He may also be aware that Vattenfall said that in the light of Brexit it was reviewing all its renewable energy investments in the UK, including its £5.5 billion array off the east coast of England. I am not accusing the Minister of complacency, but he must take this seriously.

I was confining myself to issues specifically relating to climate change, but there are reasons to be confident about the overall position. We have seen enormous further investment in the Nissan Leaf plant in Sunderland and there are other examples of recognition of the progress that this country continues to make.

The question was raised of the impact of Brexit on the EU emissions trading system. Of course, it is far too early to say whether the UK will remain part of the ETS, but the Government take the matter extremely seriously. Even were we to end up leaving the institutions around the ETS, the effect of that would be our having increased flexibility to set our climate change targets as we saw fit. Those targets could be more testing, less testing or exactly at the level required by the ETS itself, so there need not necessarily be anything particularly problematic about it.

Finally, on the 10% gap, I would simply say that we are some way away from the policy development stage. One naturally expects—in particular in an area such as climate change and emissions control—there to be a dynamic response from the economy as these budget constraints start to get set and embed themselves. We are already seeing some of that economic behaviour and one might easily expect to see more of that to come.

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