Climate Change Bill [HL]

moved Amendment No. 186A: 186A: Schedule 2, page 49, line 18, leave out sub-paragraph (1) and insert— ““(1) The regulations must identify the process to which persons undertaking activities to which the trading scheme may apply (the ““participants””) may submit to become authorised to carry out an approved activity.”” The noble Duke said: My Lords, in moving Amendment No. 186A, I shall also speak to Amendments Nos. 186B to 186D, which are grouped with it. A member of my family is involved in carbon trading, but I have no financial interest in that. Just a week ago today, on the previous day on Report, we heard differing views from all sides of the House on what would produce the most effective and rapid increase in carbon emission savings, and on what was likely to be the best approach to show the way in our own economy. In the course of that argument, I listened with great fascination to the approach of the Minister, who emphasised: "““It would be quite wrong to come along with a whole list of regulations now to snuff out innovation and ideas””.—[Official Report, 11/3/08; col. 1426.]" Earlier, he expressed his worries when he said that, "““uncertainty comes about if there is to be regulation, covering everybody, as opposed to hundreds of private sector companies making decisions at any time in a framework of their choosing””.—[Official Report, 11/3/08; col. 1424.]" I think we all recognise that the Government have had huge ambitions to be seen as pace setters in making the world a less carbon-dependent place. In its paper, Consultation on the Recommendations of the Climate Change Simplification Project, Defra talks of the need, "““to unlock the potential for cost effective carbon savings””." The question today is: have the Government found all the opportunities that could be employed? I was interested to hear the Chancellor of the Exchequer in his Budget speech in another place being full of how Britain is already the leading financial centre for carbon markets. Private initiative has meant that London is now the biggest global hub for the international trading of emissions. I am told that the UK is the leading country in the world on the approval of projects under the clean development mechanism, which is one of the Kyoto Protocol mechanisms to which the Minister referred on a previous occasion. The UK is also a global leader in the burgeoning industry for service providers in this arena. However, unlike at least 11 of our European neighbours, when faced with the challenge of the process for project-based mechanisms under joint implementation it has flatly refused to take on board what is likely to be one of the most innovative processes promoted under Kyoto and will still be under its successor agreement. We all know that cap and trade is still the prime mechanism being used to achieve carbon savings, but it is the ultimate in a top-down regulation mechanism. Under the Kyoto Protocol, an important role was given to bottom-up initiatives, where the market would be one of the forces providing a process of identifying and delivering cost-effective emission reduction opportunities. With these amendments we are trying to fill in that other part of the picture to which the Minister referred, but, in this case, where a lack of powers that are offered under the Bill could tend to snuff out innovation and ideas. The amendments are put forward in such a way as to give the Government scope to draw up a project-based mechanism which would operate solely within the United Kingdom. I have some detailed suggestions as to what application this could have, but I do not think that I shall bore the House with them now. These amendments would leave the choice entirely in the Government’s hands. The Minister is probably aware that just two weeks ago the German Government launched a pilot project under the Kyoto joint implementation scheme within the state of North Rhine-Westphalia. This will encourage small and medium industrial sites and public buildings, many of which will be much smaller than those targeted under the carbon reduction commitment, to replace obsolete heating and steam producing boilers. The Government will issue the carbon credits that can be verified and sell them. They will then pay the money received to each facility in proportion to the savings that they have generated. Having seen the enthusiasm with which the present London administration embraces carbon saving policies, one can imagine that whoever finally wins the mayoral election could be eager for such an opportunity to embrace this kind of innovation for London. Will the Minister explain the Government’s thinking on joint implementation? Under the Kyoto Protocol joint implementation, any sale of achieved carbon credits requires a surrender of the assigned amount units for what constituted the host country’s initial allocation. Is the Government’s reluctance driven by the fact that, in their initial calculations under the Kyoto Protocol, they tried to pitch the quantity of our existing carbon emissions so low that they are now terrified that any surrender of these assigned amount units would completely derail their efforts to reach the target that has been set out? It surely cannot be their anxiety because the verification under joint implementation is so much more rigorous than it is under the EU ETS. Or is it simply that because it is a bottom-up process, it produces an unquantifiable outcome? Anyway, the Treasury perhaps has been far too busy with the Budget to produce a considered opinion. Perhaps I am in some ways producing the same approach as the noble Lord, Lord Woolmer, did on his scheme. But, as I mentioned earlier, the wording of these amendments should give the Government, under advice from the climate change committee, scope to design and implement a UK limited project-based mechanism, which is similar to joint implementation. Verification would be exactly the same as is likely to be required under the carbon reduction commitment and some rule would be required to ensure that it complied with the regulations on supplementarity. This could have three advantages. First, it would give scope for the innovative talents of British business to assess what they could do with the type of financial incentive that this would offer and thereby make up an area of the ground that the UK Government have lost in leading the international community in domestic climate policy and measures. Secondly, it would drive greater activity in cost-effective greenhouse saving within the UK economy, without involving the loss of credits to overseas. Thirdly, it would give the Government some idea of what the appetite and ability of British industry would be if they decided that participation in the fully fledged joint implementation process, or its successor, was desirable. Amendments Nos. 186A to 186C would amend paragraph 15 of Part 2 for the schemes encouraging activities to allow the Government to regulate both possible kinds of participants that are in mind. Amendment No. 186D would add a similar paragraph to Part 2, defining what will constitute a carbon credit to parallel paragraph 7, which exists under Part 1, for schemes limiting activities. I beg to move.