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However, I am pleased to say that we can accept amendment No. 72 in the name of my right hon. Friend the Member for Scunthorpe (Mr. Morley). The Government believe that when setting or advising on budgets, due regard should be given to emissions from international aviation and shipping; my right hon. Friend and the shadow Committee on Climate Change have made that clear. We are saying that we will have due regard to emissions from aviation and shipping, as the Committee recommended, but we cannot account for them domestically at present. There are a few technical problems with amendment No. 72; for example, it refers to “budget”
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rather than budgetary periods, and refers not to the Committee on Climate Change, but only to the Secretary of State. It does not refer to “targeted” greenhouse gases, which is how such gases are defined in the Bill. The Government will therefore return, before final consideration in the Lords, with a version of the amendment that has benefited from parliamentary counsel’s redrafting; I hope that all parties can agree to that.

Amendment No. 3 would simply require emissions from international aviation and shipping to be included in the Bill’s targets and budgets within five years of Royal Assent. That would have to be done, and nothing else could be done. We all agree that we are talking about global issues, and that a global solution would be the best way forward; I hope that I have made that clear. Such a solution would be much more difficult if we had a domestic deadline for deciding what the UK’s fair share was. It is possible for us to reach international agreement, through the United Nations framework convention on climate change, the IMO or the International Civil Aviation Organisation, that the best way to deal with international aviation or shipping emissions is through a sectoral approach, rather than through allocating such emissions to individual countries. In fact, that is one of the approaches already under discussion. The point is about methodologies. We could end up with a completely different proposal, so it would not be appropriate for us to make a unilateral decision. Indeed, we are already starting to see such an approach at EU level, where it is likely that under the EU emissions trading scheme, aviation emissions will be allocated to airlines rather than to individual member states.

David Howarth: I thank the Minister for giving way, perhaps at the right part of her speech now. If we in the UK take the lead, will we not shape the international debate and push the final solution of the problem to a position closer to what is in our interests, rather than in other countries’ interests, whereas if we leave the negotiations to others we will not do that?

Joan Ruddock: I have to tell the hon. Gentleman that there is no question of our leaving the negotiations to others. We are right there in the forefront of the negotiations. It is the UK Government who pushed for the inclusion of international aviation and shipping emissions in the EU trading scheme. We succeeded in persuading other member states that that should be done, and it will be done. Adopting a measure in the Bill that could be completely out of line, as the amendments suggest, with what we are negotiating in Europe is obviously the wrong thing to do.

The questions concerning shipping emissions are even more complex. If we were to include shipping emissions in any of the existing agreements or future agreements such as global agreements, we would have even more problems than we clearly have with airlines. I have outlined how we might deal with aviation through the European trading scheme, but the difficulty with ships is that they can go for many weeks without refuelling, and can take on fuel from tankers in international waters. If we based our calculations only on fuel that has been sold in the UK, it would appear that shipping emissions declined over the past 10 years and then began to rise again. However, we know that that is not the case. We know that shipping has continued to
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increase, so we must assume that emissions have increased as well. Clearly, relying on bunker fuels is not the answer.

4.15 pm

Mr. Gummer: I am sympathetic to the concept that the Minister advances: that her hands should not be tied by writing into the Bill of answers that may well be the opposite of what will be in our interests or in the interests of reducing emissions. Does she agree, however, that the concomitant is that the Government must be extremely loud about the negotiations, making sure that people realise that we are taking the lead and that there is no excuse for delay on this front? Shipping is hugely important to the United Kingdom and hugely important if we are to do something about emissions.

Joan Ruddock: The right hon. Gentleman is correct. We want to remain in the forefront and I am sure he will keep us up to the mark.

Finally, and especially if we are acting alone, there is the risk of perverse impacts, such as planes and ships filling up elsewhere and coming to the UK with a heavier fuel load, of air traffic simply diverting from Heathrow to Amsterdam or Paris, or of some ships with UK-bound cargo diverting to a continental port from where the cargo is delivered to the UK by another ship or another mode of transport. All those scenarios could increase emissions, rather than reduce them.

Mr. Peter Lilley (Hitchin and Harpenden) (Con): Can the hon. Lady assure us that despite her distinguished lifetime career advocating unilateralism, nothing in the measure will unilaterally hamstring our aviation or maritime industries if other countries do not follow suit?

Joan Ruddock: I have just explained the complexity of including shipping emissions, whether unilaterally or within the EU emissions trading scheme. There are real difficulties. I gave the example of the calculations based on bunker fuels purchased in the UK and the fact that they gave a totally incorrect reading of what has been happening to UK shipping. The right hon. Gentleman should understand the complexity of the matter. It has to be sorted out and we have to find a way forward. That means that it is not sensible to adopt a measure today on our own behalf.

As I have said, we need a flexible approach to the evolving international context. I hope people understand that we are anxious to make progress on international aviation and shipping emissions, but we need to do that first in a European context and then in the global context. We will do what we can to take account of the necessary factors. I hope that amendment No. 3 will not be pressed to a Division.

Gregory Barker (Bexhill and Battle) (Con): We warmly welcome the Government’s change of heart and measured response in including emissions from international aviation and shipping in the Bill. We support new clause 15 and its accompanying amendments Nos. 36, 42, 43 and 50, which I understand are important tidying measures. Although we also recognise the real and practical difficulties, which the Minister has explained, of including aviation and shipping and although we acknowledge
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the danger of perverse incentives if we get the issue wrong, we think it right that aviation and shipping are included.

Conservative Front Benchers have consistently argued that aviation and shipping should not be exempt from accounting for the pollution for which their sectors are responsible. Furthermore, as the Minister said, not including aviation in the Bill would have perverse incentives. For example, it would incentivise an individual passenger, from a carbon point of view, to take a short-haul flight to Paris rather than the Eurostar. That cannot be right.

We should also be mindful of the positive way in which the shipping sector and certain responsible airlines have contributed to the debate: they have made important and constructive suggestions on the way forward. We must not forget that shipping is among the most carbon-efficient forms of heavy transport. Sea freight emits between 30 g and 90 g of CO2 per tonne of freight per kilometre, whereas the equivalent figure for road freight is between 130g and 190g, and that for aviation is obviously much, much more.

We must therefore be cautious about always twinning aviation and shipping in this debate, as their carbon efficiency profiles contrast and they face different challenges specific to their sectors. We all acknowledge that there are difficulties with the measurement and apportionment of these emissions. However, it is important that we do not allow such issues of methodology, complex as they are, to let us lose sight of the principal aim of the Bill: to achieve a net reduction in emissions across the whole UK economy in sufficient proportion for us to play our fair part in keeping man-made global warming below the dangerous 2° level.

The necessity of eventually including all sectors of our economy in that task was reconfirmed to us earlier this month by the advice of Lord Adair Turner’s Committee on Climate Change. Mindful of that advice, we are sympathetic to amendments Nos. 68 and 69, tabled by the hon. Member for Edinburgh, South (Nigel Griffiths). We are also sympathetic to amendment No. 3 and new clause 14, tabled by the hon. Member for Northavon (Steve Webb).

Methodology is crucial, so the Government need to publish their methodology for making their aviation and shipping emission projections, as would be required by new clause 14. That is particularly important to us. We welcome the announcement just now that the Government have taken on board the intent embodied in amendment No. 72. The right hon. Member for Scunthorpe (Mr. Morley) has done a great deal of work: he has campaigned outside the House and brought together a large consensus on the measure. We welcome the fact that the Government are prepared to take the issue on board and, having redrafted it with the help of parliamentary counsel, bring it back to the House of Lords. That is typical of the spirit in which the Bill has gone through the House.

Having made our support for this proposal clear, I should like to sound a note of caution regarding the definition of aviation and shipping that the Government have chosen. Although we welcome the fact that they intend to include emissions from aviation and shipping, the measurement of emissions from the movement of goods and passengers should account for all stages of
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the journey rather than merely singling out the carbon footprint of flights and sea journeys to and from the United Kingdom. In that way, we could avoid unintended consequences such as encouraging more polluting methods of travel outside the UK. My party is committed to working with the Government in their efforts to secure the all-important international agreements on aviation and shipping emissions that are crucial if we are to crack this problem.

The Bill has come a long way since it was first introduced in another place last year. Now, on Report, one of the last outstanding totemic issues is finally being dealt with. If we can come to an agreement on this, it will turn the Bill from good legislation into world-class legislation. However, the caveats on definitions that Conservative Members spoke about at length in Committee and in the other place still remain. Although we are concerned about the definition of aviation and shipping, rather than our chosen definition of international trade and transport, we are not opposed to including aviation and shipping in the carbon budgets from the outset. Our concern is rooted in our wish to ensure that we do not, through well-meaning but poorly designed legislation, offer a perverse incentive to use more carbon-intensive modes of transport, such as road freight, over the more efficient moving of goods by sea. For example, if shipping becomes heavily regulated, particularly unilaterally, there might be an incentive for ships to dock at Rotterdam—or worse still, Istanbul—and then drive across the continent to enter this country via the channel tunnel. That is why we argued in Committee for aviation and shipping to be described as international trade and transport. We wish to prevent any system of measurement from being skewed in favour of more carbon-intensive methods of transport, which could happen if shipping and aviation are included without reference to other modes of transportation.

Let me give some practical examples. If one were importing oranges from Spain into the UK and sent them over on lorries, only the short leg of the journey, by ferry, would be included in the UK’s carbon allowance. If one sent them by sea, the whole journey would be counted, making transporting oranges from Spain by sea far more carbon-expensive. That would create a significant incentive for the use of road freight over sea freight, despite its being many times more carbon-intensive. If national-level emissions trading schemes were in existence through the transit states, the disincentive to use road freight would be strong enough to deter that, but if we introduced our system before some or all of our neighbouring European transit states, Britain would perversely incentivise the movement of goods away from direct shipping and towards the more polluting form of road transport. Similarly, when importing goods from China, the best way in terms of cost and the environment is for the container to be shipped directly to the UK. If we define only aviation and shipping without reference to other means of importing goods, that could mean it would make economic sense to ship goods only as far as Rotterdam and then move them by lorry into the UK in order to minimise the amount of carbon officially being counted.

I hope I have made the point sufficiently clear without sounding as though we are opposed to the inclusion of aviation and shipping, as per the amendment, but it is very important. We are in favour of these measures, and
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we have always argued that there should be no sectoral exemptions for aviation and shipping, but the definition of the process can still be improved. We would be keen to work closely with the Government on establishing a means of description that is more effective and would secure the international agreements on aviation and shipping that are vital if we are to find a truly holistic solution to this very important international problem.

Mr. Redwood: Is my hon. Friend saying he is worried that the Government have not done enough work on possible dispersion of industry and activity out of the UK and into other centres? That would seem to be an own goal of the worst kind because it would not reduce carbon output, but it would reduce the number of jobs.

Gregory Barker: That is a far more concise way of putting the rather laboured argument that I was trying to make from the Dispatch Box.

This is a complex area. It is not beyond our ken to crack it, and some very sensible points have been made from colleagues on the Opposition Benches about the unintended consequences of including aviation and shipping. We do not want to lose sight of the principal aim of including those sectors in a way that makes them responsible for their own carbon pollution, but my right hon. Friend is absolutely right, and with his experience as a former Secretary of State and from his considerable business career he is well placed to understand the complexities and dangers that could be posed to our competitive position. That should not, however, prevent us from offering to work constructively with the Government on the matter; if they unable to do it, an incoming Conservative Government would certainly want to work closely with the aviation and shipping industry to ensure that a satisfactory answer was reached in order to allow carbon measurements to be made, but in a way that did not harm unduly our international competitive position.

4.30 pm

John Hemming: I am a little confused by the Prime Minister saying that we need an ever-increasing supply of oil. Does the hon. Gentleman believe that as a result of the Bill there will be a reduction in the amount of crude oil used by this country?

Gregory Barker: I do not think there is going to be an immediate reduction in the amount of crude oil used as a result of this Bill, because the Bill is simply a framework. It is a form of regulating and auditing our emissions; it sets targets. What we need to follow the Bill is a really ambitious transformational set of policies, which will allow an incoming Conservative Government to effect the sort of dynamic changes that have been so absent during the past 10 years, but without harming our international competitive position. The big danger of the Bill is that people place too much emphasis on the targets and auditing mechanisms contained in it, which are then mistaken for policies that will deliver the transformation to a low-carbon economy that is imperative. We will not find them in the Energy Bill. A whole range of policies are sadly lacking from this Government, but would not be lacking from an incoming Conservative Administration.

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Mr. Elliot Morley (Scunthorpe) (Lab): I warmly welcome the contribution to the debate made by my hon. Friend the Under-Secretary, particularly her acceptance of amendment No. 72, which stands in my name. I would like to emphasise that it is in my name only because it was tabled very late, and I want to pay tribute to my hon. Friend the Member for Edinburgh, South (Nigel Griffiths), who has been very active in this matter. I am pleased to support the amendments that stand in his name and those of many hon. Friends, many of whom are present.

My hon. Friend the Under-Secretary knows that the issue we are discussing is of key interest to many members of the public and non-governmental organisations, and I agree with the hon. Member for Bexhill and Battle (Gregory Barker) that the improvements to the Bill and the scrutiny as it has gone through the parliamentary process have turned it into a piece of world-class legislation that gives a strong international lead. By accepting the amendment to take aviation and shipping into account, the Bill will send a clear signal internationally that including such emissions is the way that we have to go.

I accept that there has also to be international agreement on the matter. It was a great failing of the original Kyoto protocol that the bunker fuel agreement was not included. We all know the reasons for that—it was not possible to get international agreement, particularly given the resistance from the United States and others. We all know that whatever the outcome of the forthcoming elections in the US there will be a change of position, and I hope that that transfers to including aviation and shipping in the post-Kyoto 2012 framework, as we must. The European Union emissions trading scheme helps in that respect, and it may drive that change.

I would confirm what my hon. Friend the Under-Secretary said: the agreement on including aviation was reached under the UK presidency of the EU. It was a British initiative and a British priority. The UK presidency managed to get that agreement, which I believe to be so important. I also understand the point that the hon. Member for Bexhill and Battle made about perverse incentives, although the logic of that is to include all sectors of the economy—at some point, surface transport must be included in the EU ETS—but those are matters for future negotiation.

I reinforce the point that many groups are pleased about this. I acknowledge the contribution of the Friends of the Earth Big Ask campaign, which included the two key elements: the 80 per cent. target, which has been conceded, and the inclusion of aviation and shipping, which is being conceded tonight. That will strengthen the Bill; the two issues are vital.

Mr. Nick Hurd (Ruislip-Northwood) (Con): I congratulate the right hon. Gentleman on his amendment, which I support in principle. I note that the Government are minded to accept it, so I press him to define a little more tightly or expand a little on what he understands by “taken into account”?

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