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If we are to meet the 2020 EU target on renewable energy, substantial amounts of renewable heat will be required, as well as an expansion of renewable electricity and transport fuels. We estimate that, to meet the
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United Kingdom’s renewable energy target of 15 per cent. by 2020, we will need to obtain not 10 per cent. of heat from renewable sources—as I believe was suggested by the hon. Member for Northavon (Steve Webb)—but about 14 per cent.

At present, the renewable heat sector is very small. The Government accept that financial support is necessary for investment in renewable heat, and creating the right financial incentive will be important in helping us to meet our 2020 renewables targets. The powers in the amendment will allow the Secretary of State to establish a financial support system for the renewable heat incentive.

The purpose of amendment (a) is to get the Government to specify a time scale. I understand why information should be required—the hon. Member for Wealden (Charles Hendry) rightly said that people would need it so that they could take a view—but because heat, including renewable heat, is a new and potentially complex area of policy, it will take some time to make the necessary arrangements. A new Department with a new agenda has made a series of changes to the Bill at quite a late stage, and, understandably, a good deal of work on the details of the policy remains to be done.

To an extent, we have a picture of what we want to do. We want to enable those who generate heat to be paid from a levy to be imposed on those who supply fossil fuel for the purpose. The funds created by the levy will be used to support the production of renewable heat. That formulation, however, does not take us far enough. We could do this through the Treasury, through something more like the renewables obligation or through a direct mechanism like a feed-in tariff, which I think would be preferable. We need to think about the details, and discuss them not only with the industry but with all the potential beneficiaries.

Stakeholders have recognised the complexities involved in developing new policies in a sector in which there are much more players and issues to consider than there are in the electricity sector. It will take time to work out the implications of a move to the heat market, and how best to provide incentives for renewables. As was pointed out by both my hon. Friend the Member for Nottingham, South (Alan Simpson) and the hon. Member for Wealden, people want to know about the timetable. We plan to introduce the renewable heat incentive as soon as possible, and hope to be able to set out a robust timetable in the new year. However, a good deal more policy work will be necessary before we can do so with much precision.

Can we do this at the same time as introducing the new feed-in tariffs? Clearly the two schemes will have to work side by side, and clearly it will be important to provide a single interface for generators who will want to benefit from both schemes. Heat is a complex issue, and considerable time will be required for the development of the strategy. However, we must find a way of providing the two financial incentives together, so that people can benefit from both.

Martin Horwood: Will the Minister give way?

Mr. O'Brien: I am very conscious of the time, but I will give way briefly.

Martin Horwood: The Minister accepted earlier that it might be necessary to accelerate rules on smart meters in relation to new build. Ground source heat pumps are
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obviously a viable technology for new build. Would he be interested in a variation of the heat incentive, perhaps on an accelerated time scale, which might encourage the use of ground source heat pumps in such buildings?

Mr. O'Brien: I am tempted by that suggestion, but I would want to be a little cautious about it. The hon. Gentleman talks of creating a financial incentive just for new build, but we cannot create a separate incentive. If we are not ready to create the broader, main incentive, we will not want to rush into that, although the hon. Gentleman is right to suggest that it would probably be easiest to introduce an incentive relating to new build first.

We will produce a robust timetable as soon as we can—by the new year, I hope—and we will then be in a position to give a clear indication of when the scheme will be introduced. It is more difficult and complex than feed-in tariffs. I wish I could assure my hon. Friend the Member for Nottingham, South that we will be able to introduce it all at the same time in 16 months, but I cannot do that. He will have to accept that the new Department and the Government have come a long way. We have tried to produce the Bill in an open and straightforward manner, and to show that a clear direction of policy is developing in regard to renewables and energy in general. I hope that on that basis, despite my acknowledgement of the lack of a precise timetable, my hon. Friend will support the Government rather than pressing his amendment.

Alan Simpson: I welcome the Minister’s declaration of his intention to come back with an outline of a scheme in the early part of the new year. I accept the good will and good faith of his commitments, and I simply ask him to bear in mind two time deadlines.

7.30 pm

Simply because this issue is new for his Department does not mean that it is new per se. Germany has
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already committed that by 2020 it will have developed such matters to a point where it will be economically non-dependent on Russian gas. In our own context, by 2010 when the European Union waste directive is applied to local authorities, many will face huge increases in charges for disposal of biodegradable waste, and I should think they will be looking for the sort of initiative that is to be found on the continent as a way to address such problems. If the Minister can grasp this opportunity and harness it to his enthusiasm, the House will be well served.

On the basis of the assurances, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lords amendment No. 65 agreed to [Special Entry] .

Lords amendments Nos. 66 to 105 agreed to [one with Special Entry].


Motion made, and Question put forthwith, pursuant to Standing Order No. 83A (Programme motions),

Question agreed to.

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Climate Change Bill [ Lords]

Lords message considered.

Mr. Deputy Speaker (Sir Michael Lord): I must inform the House that a message has been brought from the Lords as follows. The Lords agree without amendment to certain of the amendments made by the Commons to the Climate Change Bill; they agree to a Commons amendment with an amendment to which they desire the agreement of the Commons; they agree to a Commons amendment with amendments in lieu of the words so left out of the Bill, to which they desire the agreement of the Commons; and they disagree to certain other amendments made by the Commons but propose amendments in lieu thereof to which they desire the agreement of the Commons.

Copies of the Lords amendments are available in the Vote Office. I must draw the attention of the House to the fact that Lords amendment No. 48A involves privilege. If the House agrees to that amendment, I shall ensure that the appropriate entry is made in the Journal. The Government proposals are being debated in four groups.

Clause 11

Matters to be taken into account in connection with carbon budgets

Lords amendments: 7A and 7B

7.33 pm

The Parliamentary Under-Secretary of State for Energy and Climate Change (Joan Ruddock): I beg to move,

Lords amendments Nos. 7A and 7B in lieu deal with emissions from international aviation and international shipping. Throughout discussions on the issue in this House and in the other place, the Government’s consistent position has been that it is vital to put in place strong mechanisms to deal with emissions from international aviation and international shipping, but that finding the right way of deciding on which of those emissions should be allocated as being the UK’s responsibility is beyond our reach at the moment. These amendments reflect the view—as expressed by the Chairman of the shadow Committee on Climate Change, Lord Turner of Ecchinswell, in his letter to the Secretary of State—that although the right methodology does not yet exist for including these emissions in the carbon budgets, decisions made by the Committee or the Government in relation to the budgets must take into account projected emissions from international aviation and shipping. On Report in the Commons, the Government accepted an amendment that reflected the Committee’s view, but on the basis that we would need to ask parliamentary counsel to advise on the drafting. We propose amendments Nos. 7A and 7B to fulfil this commitment.

Amendment No. 7A would require that both the Government and the Committee take account of projected emissions from international aviation and international shipping in setting, and advising on, carbon budgets, respectively. Amendment No. 7B defines what we have in mind, and also provides that the projections may be estimated using such reasonable methods as the Secretary of State or the Committee considers appropriate.

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Charles Hendry (Wealden) (Con): As my party colleagues in the Lords made clear and as my hon. Friend the Member for Bexhill and Battle (Gregory Barker) told the House on Report, we welcome the inclusion of aviation and shipping emissions in the Bill. We recognise the existing difficulties in methodology, emission accounting and international law that still trouble these sectors, but we also recognise that the difficulties are surmountable, and that simply ignoring them was never going to be a solution. We welcome the amendments that their lordships made yesterday evening to Commons amendment No. 7 and consider these changes to be a necessary tidying of the Bill as well as a positive endorsement of issues agreed to and voted on in this House on Report.

Question put and agreed to.

Clause 25

UK Domestic Effort

Lords amendments: 17A and 17B

Joan Ruddock: I beg to move,

These amendments deal with domestic effort and use of overseas credits. This has been a key theme in our debates on this Bill. The Government absolutely agree with the importance of driving emissions reductions in the UK, and we have designed the Bill to provide a clear framework for action. It will ensure greater clarity for industry and households about our path towards a low-carbon economy, at the same time as sending a clear signal to our international partners about our commitment to tackling climate change.

The amendments on this issue, which I bring before the House today, further strengthen the Bill in this key area. Amendment No. 17A would require the Secretary of State to set in secondary legislation a binding limit on the use of carbon units for each budgetary period, taking into account the views of the Committee on Climate Change on the appropriate balance between domestic and overseas effort. This limit would also have to be set in the context of the requirement, which we introduced in Committee in the Commons, for the Secretary of State to have regard to the need for UK domestic action on climate change in considering how to meet the 2050 target or any carbon budget. In proposing a limit, the Secretary of State would also have to consider each of the matters in clause 11, which must be taken into account in coming to

With the exception of the first budgetary period, where the limit is to be set at the same time as the level of the budget, amendment No. 17A would require that the limit be set 18 months before the start of the budgetary period in question. This would ensure an appropriate limit could be set once the level of the budget was known, and the wider policy context, including the international situation, was clear.

Amendment No. 17A would also provide the important flexibility that particular units may be excluded from counting towards the limit. This would allow, for example, the exclusion of carbon units arising as a result of UK companies’ participation in the EU emissions trading scheme from counting towards the limit. A limit on
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credits that affected the EU ETS sector by including emissions allowances sourced from participants in the scheme elsewhere in the EU would conflict with the UK’s commitment to this key policy measure. This approach could also undermine the economic efficiency of the trading scheme by placing further requirements on UK-based participants that were not imposed elsewhere in the EU. Such a limit would also cause a real likelihood that we will find ourselves with inconsistencies or a lack of transparency, which would go against everything we are trying to do in this Bill. We need the flexibility to apply a limit that supports the certainty and transparency that we have tried to provide to businesses.

We propose that regulations under the new clause would be subject to the affirmative resolution procedure. That would mean that the Government’s approach on the limit proposed, and the reasons for the exclusion of any types of carbon unit, would be fully debated in both Houses of Parliament at least once every five years.

Amendment No. 17B would supplement amendment No. 17A by specifying in clause 27 that any carbon units in excess of the set limit may not be counted towards the net UK carbon account. The amendment effectively puts in place the binding nature of the limit for the purposes of carbon accounting under the Bill.

Charles Hendry: We welcome the amendments with great pleasure. Their inclusion is a considerable asset to the Bill, and we hope that they will go some way to removing the remaining Achilles heel of the Bill: the fact that there was nothing to prevent 100 per cent. of our carbon reductions from being made on the international carbon markets, without the attendant economic benefits accruing to the United Kingdom. We are pleased that the Government have agreed that there will be a limit on the carbon units that can be purchased from abroad and that, in doing so, they will take into account the advice of the independent Climate Change Committee. We thought it quite appropriate that the Committee should be used in that way, and we are pleased that the Government have accepted that.

We have long argued that the Bill represents a crucial opportunity for the United Kingdom to lead the world not only in legislation but in a jump to a low-carbon economy, with all the benefits that that will bring. It is clear that United Kingdom leadership is helping to influence others. Today, President-elect Barack Obama said at a climate summit being hosted by Governor Schwarzenegger in California:

He continued:

There should be great pride in this country that the new President of the United States is following a lead that has been taken here.

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