CORRECTED TRANSCRIPT OF ORAL EVIDENCE
To be published as HC 88-iv

House of commons

oral EVIDENCE

TAKEN BEFORE THE

Energy and Climate Change Committee

The Road to UNFCCC COP 18 and Beyond

Tuesday 3 July 2012

Gregory Barker MP, PETE BETTS and DAVID CAPPER

Evidence heard in Public Questions 166 - 230

USE OF THE TRANSCRIPT

1.

This is a corrected transcript of evidence taken in public and reported to the House. The transcript has been placed on the internet on the authority of the Committee, and copies have been made available by the Vote Office for the use of Members and others.

2.

The transcript is an approved formal record of these proceedings. It will be printed in due course.

Oral Evidence

Taken before the Energy and Climate Change Committee

on Tuesday 3 July 2012

Members present:

Mr Tim Yeo (Chair)

Dan Byles

Barry Gardiner

Ian Lavery

Christopher Pincher

John Robertson

Sir Robert Smith

________________

Examination of Witnesses

Witnesses: Gregory Barker MP, Minister of State for Energy and Climate Change, Pete Betts, Director, International Climate Change, and David Capper, Head, International Climate Policy & Finance Team, Department of Energy and Climate Change, gave evidence.

Q166 Chair: Good morning. Welcome. Thank you for coming in for this session. Could I start by asking a general question? What, in your view, is the main objective of the Doha negotiations this year?

Gregory Barker: Good morning, Mr Yeo. Good morning, Committee. If I could just introduce the two officials I have brought with me. I have brought Pete Betts, who is the Director of International Climate Change, and the Deputy Director, David Capper. Clearly we are on the path now to 2015. That is the main objective, which is perhaps a welcome change from the previous staggering from one COP to the next. There is a sense of longer-term perspective now. In terms of what we need to achieve at Doha, there is quite a lot; in particular, we need to fill the mitigation gap. There is still a significant gap between what we need to achieve and what we are able to achieve with the policies on the table.

In terms of the current status of the negotiations, it might be a good idea if Pete gave you an update, because he was at the Bonn intersessional, which Ministers do not attend. So he has his finger on the pulse in terms of the mood of the climate talks now and what we realistically might hope to achieve at Doha.

Pete Betts: As the Minister says, we are on a four-year timescale. The first thing we want to do is get some sense of a work plan in Doha for the next three or four years. Realistically, that is not going to be detailed but we want a sense that we have some sort of phasing for the work with perhaps a sense of when particular inputs might come in from outside, like the IPCC review, and some sense of what the process is and where the work will take place and who will chair it. That is the first thing we would like to do.

We were very pleased at Durban to have got a commitment to look at ambition pre-2020, so secondly we want to try to explore whether there are concrete actions that could be taken that contribute to narrowing that mitigation gap. I am happy to talk about those. We also want to further build on the architecture that we built in Cancun and Durban-the Green Fund, the Adaptation Committee, the Technology Committee and so on-and as part of that package we would carry on with our commitment to deliver a second commitment period of the Kyoto Protocol.

The Minister just referred to the latest official level negotiations in Bonn, which were a little bit disappointing, very slow, rather adversarial and had some evidence of pushing back on what had been agreed, but probably that is the usual push back you get after a big meeting and is not to be taken too seriously.

Q167 Chair: How would you judge, from a British point of view, what constitutes success?

Gregory Barker: I think the success is 2015, whether or not we get the global agreement, and it is not going to be a straight line trajectory of incremental steps to get there. This year will be more about momentum and making sure that we are on a path and, as Pete said, agree on the work programme that is going to get there. If we don’t have an agreed work programme at Doha that is sensible and can realistically get us to the point of an agreement in 2015 that would be a setback.

We also need to adopt a second commitment under the Kyoto Protocol to begin on 1 January 2013. I think that is probably going to be a very tangible outcome from Doha. We will also need to close the Ad Hoc Working Group on Long-term Co-operative Action, which will include agreement on the design of a new market mechanism, clarifying the 2020 pledges of developed and developing countries and finalising plans for review. While the big ask is to develop that work plan and to have a sense of momentum through to 2015, there are some meaningful things that need to be closed off at Doha as well.

Q168 Chair: It has been suggested to us that strengthening the MRV regime is an important element. What are you doing to try to help that?

Gregory Barker: David, do you want to say something about MRV?

David Capper: Yes. I think if you look at the outcome from Durban-the actual text that was agreed-a lot of that covered monitoring, reporting and verification. The big challenge for this year is to turn that into these common reporting tables, which will apply to developed and developing countries, and ensure that those reporting tables contain the information that we need to know how we are doing, are we on track, are countries putting in place policies that will deliver the kind of mitigation that we need, and also cover off other elements of the accounting regime so we understand people’s pledges and what those mean in practice and, finally, also cover the finance that countries have committed and pledged so that that is fully transparent.

Q169 Barry Gardiner: Since 1992 when the whole process on this convention track started, emissions have risen. Some would say that shows the process is a failing process. How do we square that off?

Gregory Barker: I think you have to look at it against what the emissions rises would look like if we didn’t have the process, rather than just that there has been a rise in emissions. The UNFCCC is the best process that we have. We have to be very realistic-it has many faults, it has yet to deliver the robust agreement that many of us, certainly in the United Kingdom, would have liked to have seen in place by now, but there is no other forum that offers a better opportunity to secure agreement.

Q170 Barry Gardiner: Some people would suggest that the G8, the G20 and the Major Economies Forum are an appropriate way of trying to advance an agreement as well.

Gregory Barker: Some people do suggest that. That is not our view, and we are quite clear about that, not least because it is also the view of the largest emitters. There is no appetite for having a discussion of these issues, or a meaningful negotiation of these issues, in the G20 or any of these others, on the part of China or India or Brazil. I dare say the Americans, who set up the Major Economies Forum, might have a slightly different view. I don’t know. We haven’t tested it. But the bottom line is there is only one forum that currently is capable of bringing together all of the key parties who are vital participants in anything close to a global agreement and that is the UNFCCC. So it is certainly the least worst option.

Q171 Barry Gardiner: That brings me to the point. You mentioned the situation with China and them not wishing to negotiate outside of that process. There was real concern after the Bonn intersessional about the way in which the rhetoric coming out of the UK and the EU had impacted upon ongoing relations with China in that respect. While I am acutely aware that there was real frustration coming out of Bonn, it appears that the rhetoric that was used against China is certainly damaging to the ongoing wider relations and, in terms of looking at who else is dragging their feet, one could equally and perhaps with more justice have put that criticism to the US, Canada and Japan. The question is, how are we handling those long-term relations with China which are so crucial to getting a positive result at the end of the Durban platform in 2015 and going forward?

Gregory Barker: Certainly the bilateral engagement with China is absolutely crucial and we take that extremely seriously. You are absolutely right.

Q172 Barry Gardiner: But they are now talking not having those relationships with the UK, aren’t they, Minister?

Gregory Barker: They are talking about not having those relationships?

Barry Gardiner: Yes. You know what has been said in conversations backwards and forwards and they were really angry about the way in which the EU and the UK seem to have, in their view, unfairly picked them out after Bonn.

Gregory Barker: Pete, do you want to comment on that?

Pete Betts: Yes. I negotiate for the European Union, so I am often the person speaking to the Chinese. Certainly I didn’t say anything on the record about China. I know that the Commissioner did. We never criticise China for its domestic delivery. On the contrary, we always praise it and the Chinese are certainly doing a lot at home. I am very happy to put that on the record again now.

Barry Gardiner: That is helpful, thank you.

Pete Betts: What we did criticise them for in the course of negotiations was the way they used the process in Bonn to prevent progress: making very long interventions, reopening the Durban package, questioning almost every aspect of it at very great length and incurring the frustration not just of the EU but also of many developing countries. I think it is true that these tactics sometimes divert attention from what China is doing at home and it can make it harder for us to build the bridges that we have sought to build with China. The EU did have a full-day bilateral with China in the course of Bonn, which was very amicable and which I attended. It was disappointing that, in the negotiations themselves, they took a very legalistic and procedural approach.

Gregory Barker: We do need to see a greater unity of purpose. As Pete said, some things that China is doing domestically are outstanding and there is a great deal of ambition there, but it makes it all the more puzzling that often that ambition is not reflected in the international negotiations and so we would like to see a greater symmetry between action at home and ambition internationally.

Q173 Barry Gardiner: Minister, I agree with you there and I agree with what Mr Betts has said. I wonder, though, if sometimes we fail to focus equally on the shortcomings of countries like the United States and Canada and Japan in the way that we press home these issues, and that creates the impression, at least, of a disparity of treatment that can be damaging to the long-term strategic relationships that we need to be building. I do understand the individual frustrations of those meetings and when procedure is abused in the way that Mr Betts was talking about.

Gregory Barker: I think there may be something in your point, Mr Gardiner. We certainly are not overly harsh in our criticisms of the United States and others.

Barry Gardiner: Maybe you should be. Maybe we should start being a lot harsher in our criticisms of the United States.

Gregory Barker: That is a more sophisticated relationship than the one we have with China. I understand the point you are making, and these things are not black and white. There are shades of grey, and there are different factors behind them.

Q174 Barry Gardiner: I think the point has been made. Can I just finally ask a question. Professor King, who gave evidence to the Committee, advocated a global cap-and-trade system to reduce emissions. Can you just give us your views on that?

Gregory Barker: It is not exactly a new idea, is it? I did read that. I was rather under the impression that that is what we had all been trying to do for the last decade or more. Clearly a global cap-and-trade system is what we all aim for. That is the purpose-certainly so far as we are concerned-or the ultimate end game that we see for these negotiations, or at least one of the most desirable outcomes of the end game of these negotiations. The reality is we are a very long way from that. We are not a long way from it because nobody had thought of it or because it is not desirable, it is because it’s bleedin’ impossible in the current circumstances.

Barry Gardiner: Thank you very much.

Q175 Dan Byles: I don’t think there is any disagreement that we are facing an emissions gap in terms of what we are likely to achieve and what the desired outcome is. You, yourself, Minister, referred to that in your opening statement. Many witnesses to our inquiry have said that, as a result of that, the EU should push ahead and set a target of 30% reduction by 2020. Do you agree with that?

Gregory Barker: Yes, we do, and the UK continues to be probably the most active advocate of a high level of ambition in Europe. My Department recognises that there are significant difficulties with that. We are not pushing at an open door, but nor do we believe that the door is completely bolted to that proposition either. Therefore, while we are not at fever pitch in our lobbying, there is significant discreet lobbying going on, both at official and ministerial level.

I was in Madrid last week to engage with the new Spanish Government there-a centre-right Government wrestling with a huge debt burden; a centre-right Government worried about economic growth; more than a few passing similarities there-and had a very clear message that we did not think that taking action on climate change and having a more ambitious carbon reduction policy was anti-growth. If anything, it would send that signal-given the state of the carbon market and the need to reinforce a long-term and attractive proposition for investment in low-carbon technology, particularly in specifically energy-generating technology-that 30% would be desirable and help bring stability and growth to the EU.

Q176 Dan Byles: Do we have allies across the EU in this goal? Who are our friends in this debate and who are we trying to convince?

Gregory Barker: Certainly the Germans and the Danes. I have a list somewhere.

Pete Betts: Denmark have a cross-government position in support of that, as do Belgium. The German Environment Ministry is certainly a strong supporter, but it is not yet a collective German position; although the German domestic target takes them beyond the German necessary contribution to 20%.

Q177 Dan Byles: So who are the sticking countries?

Gregory Barker: I don’t think it is any secret that ultimately there are a number of countries who are concerned, but probably the biggest sticking point is the Poles. The Germans have been undertaking a degree of engagement. At the recent Bilateral Ministerial at Lancaster House between the UK and Germany-I think that was last week-I had a bilateral meeting with the German Environment Minister and we compared notes on this. I don’t think we are close to a breakthrough with the Poles, but this is an ongoing dialogue and we have by no means reached the end game. So we continue to step up our advocacy. The important thing is to consistently make the case that a high level of ambition on carbon emissions is entirely compatible with growth and deficit reduction.

David Capper: I think it is notable, when you are talking about who supports 30% and who is against it, to consider the three Environment Councils over the last year, which considered the low-carbon roadmap. This sets out milestones for 2020, 2030, 2040 and 2050, to the EU’s goal for emission reductions by 2050. In those Environment Councils, 26 Member States have been prepared to recognise those milestones and welcome that roadmap from the European Commission, and it is Poland who has been the one who blocked Council conclusions in support of that roadmap. So I think that gives you a good indication.

Dan Byles: So the Minister needs to spend less time in Spain and more time in Poland, perhaps.

Gregory Barker: The Secretary of State has been very active in the EU, both on the telephone and at face-to-face meetings, on the 30% issue and remains very keen to pursue this. The former Secretary of State, Chris Huhne, was certainly very robust in the line that he took with the Poles.

Q178 Dan Byles: On a slightly different note, most of the attention is given to carbon dioxide but, of course, other gases such as methane and HFCs also cause climate change. What action are you doing to reduce emissions of gases other than CO2?

Gregory Barker: Yes, you are absolutely right. They represent about 1.1% of historical greenhouse gases, but are growing fast and these emissions are expected to increase by 2020 to about 3%. In terms of what we are doing-in Doha we are going to continue to push for a COP decision for the UNFCCC to call for a phase-down of HFCs under the Montreal Protocol, which would help improve the chances of progress in the Montreal negotiations. When prioritising action on non-CO2 emissions some thought must be given to the atmospheric properties, and hence the importance of action in different time periods, in delivering a 2° trajectory. This is an issue that scientists are currently looking into on the back of recent research on action on short-lived climate pollutants because CO2 warms the atmosphere for around 100 years, but the different HFCs last 10 to 10,000 years, which is almost outside our comprehension, while methane lasts around 10 years and black carbon about a week. This is something that we are mindful of. It has not been forgotten, even though it is a relatively small part of the overall mix.

Pete Betts: Yes. We are looking at the HFCs,or hydrofluorocarbons, in respect of this gigatonne gap that you referred to earlier. We think that there is a good argument that probably the Montreal Protocol would be better at regulating some of these HFCs than the UNFCCC because it is well-adapted to dealing with particular gases where there are industrial solutions. We would be very keen to give the Montreal Protocol responsibility for regulating these gases. That has been resisted for many years by one or two countries, but we are hoping to give it a further push in Doha this year.

Q179 Dan Byles: Have you made any estimate of what sort of percentage reduction we would need or limits in the increase, rather than reduction?

Gregory Barker: The gigatonne gap is at best 6 gigatonnes. It may be bigger but it is at best 6 gigatonnes. We think effective action on HFCs could contribute around about half a gigatonne by 2020. So it is material, but it is not going to close the gap.

Q180 Dan Byles: Just before I hand on to my colleague, international aviation and marine transport emissions do often seem to be two of the elephants in the room. Are you going to recommend that they are brought into a new global agreement?

Gregory Barker: Where are we on the latest on those emissions?

Pete Betts: The EU has long been in favour, as the UK has, of regulating emissions globally from aviation and maritime. We pushed very hard for an agreement respectively in ICAO and the IMO and we will continue to do so. We would be very keen to get a further urging on those bodies to take action in Doha.

Q181 Dan Byles: How much support have you got?

Gregory Barker: I don’t think we would say that we are confident. In the meantime, we do think, in the absence of international agreement, that we should support the use of regional-based mechanisms like the EU ETS.

Q182 Ian Lavery: Post-COP 17 in Durban the then Secretary of State for Energy, Chris Huhne, said that a global warming deal for all major economies is an absolute necessity and he went on to say, "No present international problem has been solved without a legally binding agreement. However, a global deal may be out of reach today but it still is our objective". There are a number of agreements that could be reached-a protocol, a legal instrument, an agreement outcome with legal force, and perhaps many others. What form would you like to see a global agreement take?

Pete Betts: We would ideally like a further Protocol under the Convention. We think it needs to be an internationally legally binding instrument. We think that instrument should contain commitments for all but in a way that respects common but differentiated responsibilities and respective capabilities; not in the way it has been interpreted in the past, which is a sort of binary "either you are developed and you have commitments or you are not developed and you don’t", but that reflects more of a spectrum of responsibilities and capabilities with different kinds of targets and actions, but all legally binding.

Q183 Ian Lavery: Does it need to be legally binding, in your view, or is it just desirable?

Gregory Barker: We think it needs to be legally binding, and certainly it needs to be legally binding if you are going to have the end game of a global cap-and-trade system. It has to be something that has a basis in law. I would, however, say that if you step outside the UNFCCC process you do see a high level of ambition and interest in these issues. So it is important not to just see the solution exclusively in terms of legal architecture. We hosted the Clean Energy Ministerial in London a couple of months ago and it was very refreshing to see all of the key players in the global economy engaging in discussions about low-carbon technologies; showcasing what they are doing in their own economies, from China to the United States, in terms of investment in renewables, low-carbon infrastructure and sponsoring innovation.

I don’t want to give the impression that we are fixated on a legal structure for its own sake. There are lots of other avenues to be pursued alongside that, but ultimately, if we are going to have a response at the scale that is appropriate to the scale of the problem, it will require a global legal framework and a global framework that isn’t like Kyoto that differentiates between developed and developing countries in a very binary way, but puts us all on the same page, accepting common but differentiated responsibilities.

Q184 Ian Lavery: There have been 17 COPs, 17 held already and there are four left.

Gregory Barker: Is that all?

Ian Lavery: That is all, there are four left. Within the four that are left, there is a need to secure some sort of legally-binding agreement. In your view, what needs to happen at Doha for a deal to be secured by 2015?

Gregory Barker: There are only four left? I didn’t know that.

Ian Lavery: That is certainly what I am led to believe.

Gregory Barker: It is time-limited then?

Pete Betts: No, but we have a deadline of COP 21 to resolve it.

Gregory Barker: Right, okay. What do we need to do? As we said in the earlier questions, it is basically to agree the work programme that will allow us to agree to agree by 2015. Pete went into some detail on the practical difficulties that remain to do that, but basically it is having that work programme in place, primarily.

Q185 Ian Lavery: What are the specific milestones, do you think, for reaching a deal before 2015?

Pete Betts: We would envisage points by which we might receive input from organisations like the Intergovernmental Panel on Climate Change. We would envisage dates by which we might move to a negotiating text, for example. I guess the dynamic of the negotiations will tend to mean that the difficult discussions get concertinaed into the last six months. What we are trying to do is build a shared understanding of what this agreement would look like, have an honest discussion about how you capture this notion of a spectrum of responsibilities, try to understand what countries’ concerns are and see if we can see where the landing ground might lie. A lot of it is about a conversation to understand each other at this stage in the four-year cycle.

Q186 John Robertson: Should we abandon the Kyoto Protocol in favour of the Durban platform with its voluntary pledges to reduce emissions?

Gregory Barker: No, we don’t think so. We do think that Kyoto 2 should run to 2020. We don’t want any tailing off or have to have a short-term Kyoto 3. We do want KP2 to dovetail with the end game, which is a global treaty for all parties by 2020. Pete, do you want to add to that?

Pete Betts: No, I think you have said it. What we secured in Durban was a commitment that we would move towards a comprehensive global legal framework from 2020 and the price of that was that we, in the UK and the EU, would commit to a second commitment period of Kyoto in the years up to that time. I think if we were to back off that commitment to a second period of Kyoto the whole deal would probably unravel.

Q187 John Robertson: If you go for Kyoto 2, how effective will it be without some of the main players being part of it?

Gregory Barker: If we are really honest, it is not likely to be very effective, not least because based on current national positions it would only cover about 12% of the world’s emissions If you look at it, there are very few economies outside the EU that are expected to be impacted by this now. The reason it is important is because there is a huge iconic importance placed upon it by developing countries. In an ideal world, we would have moved straight to a new comprehensive agreement. That would have been our preferred way forward.

Q188 John Robertson: Minister, are the developing countries not happy with it, because they are not really governed by it, are they? I mean, it is basically a waste of time, then.

Gregory Barker: It is not a waste of time if it gets us through to a comprehensive treaty in 2020. The fact of the matter is, in negotiations it is not just about what you want, it is what is important to your counterpart. The fact of the matter is, whatever we may think about the effectiveness of the Kyoto Protocol or the second period of the Kyoto Protocol, as a vehicle for ambitious carbon emission reduction, the reality is, as a political device to show goodwill and show good faith on the part of progressive nations and blocs like the EU, it was absolutely vital. It is a stepping stone to achieving that comprehensive treaty that must do the business in terms of carbon reduction.

Q189 John Robertson: Would that not be a good reason for going down the voluntary road, working on the premise that people are more likely to get involved if it is done voluntarily?

Gregory Barker: They are not mutually exclusive. There is a lot of voluntary action going on-or at least unilateral action-that is not tied to Kyoto Protocol; if you look at some of the things that are happening in the United States of America, for example. While it is easy to be depressed when you look to the US, there are things that are happening there in terms of carbon mitigation. There are things that are happening in China that are outside the scope of KP2, but are certainly encouraging. I have seen them in India and so on. These things are not mutually exclusive, but I don’t think any observer, or certainly any participant, within the UNFCCC would honestly say that doing away with KP2 was a realistic option if one was still hoping to achieve a comprehensive global agreement.

Q190 John Robertson: Would it be fair to say that you would not be in favour of changing the target of 2°C to 1.5?

Gregory Barker: No, that isn’t the current position of HMG. We appreciate that 2° is extremely challenging, but at the moment we think the best of use of our efforts and that which is both politically and economically feasible in the current circumstances is that we should continue to marshal our efforts around 2°.

Q191 John Robertson: Just come back to what we were saying about trying to get other countries involved and other countries are doing it voluntarily. What countries are you trying to put-"pressure" is probably not the right word; shall we say, your diplomatic powers, to try to bring them on board?

Gregory Barker: We are doing more than just using our diplomatic powers. We are using our £2.9 billion International Climate Fund. We are using very significant financial and industrial engagement. Certainly, if you look at our relationship with the major emitters like India, and if you look at the smaller emitters in sub-Saharan Africa or South America, and look at what we are doing with Asian economies, there is not just a diplomatic offensive engagement, we are deploying our International Climate Fund.

We are also encouraging the use of private sector finance and driving, through the Capital Markets Climate Initiative, a much greater degree and a much greater focus of private sector investment in these markets, particularly into climate mitigation projects, primarily renewable energy and energy efficiency, much greater than would be in the "business as usual" case. It is still early days, but I think the UK is emerging as the global champion of viable, scalable, private sector finance models. We think that is probably our most unique contribution to what you would call, Mr Robertson, the voluntary side of things. We certainly see that there is huge potential, because of the strong economic and business case, for scaling up private-sector finance in a way that makes a useful contribution to achieving our wider goals.

Q192 John Robertson: Professor Michael Jacobs suggested that, with the COP happening in Doha, Qatar, it would be appropriate for Qatar and other Gulf States to make pledges. How can the UK encourage this?

Gregory Barker: We are doing that. I, myself, am planning to go to the region ahead of the COP. I am both engaged in a diplomatic-I am trying to think of a better word than "offensive"-engagement programme, but also talking to them about the big economic opportunities. These are some of the world’s largest sovereign wealth funds, some of the world’s largest investors. My priority for Doha is to engage with these nations about the economic and financial opportunities there are for them-not just in their own economies-to exercise responsibly their role as global citizens, and also point out the fact that they can make a lot of money in the longer term from investing in low-carbon transition technologies. I expect to lead a UK trade mission, combining both financiers and an industrial supply chain, to the region in the autumn ahead of that to demonstrate what we are doing in the UK by example, but also to help the low-carbon sector here get a piece of this growing global sector.

Q193 John Robertson: That is obviously one to keep an eye on. Several Central and Eastern European countries hold surplus assigned amounts of units, AAUs, of emissions from the first commitment period. What is the UK going to do to prevent these from being carried over?

Gregory Barker: If the entire surplus is banked and used in the second commitment period it would seriously undermine the integrity of the 2020 targets that we agreed in Copenhagen and Cancun. However, under current EU legislation, the EU target will remain untouched even if all AAUs are carried over because the EU climate and energy package doesn’t allow the use of AAUs to meet EU targets. The UK is actively seeking a solution on the carry-over and use of AAUs in the second commitment period that will maintain an ambitious level of environmental integrity, but also preserve incentives for over-achievement. There are several ways that this could be done, a straightforward restriction on banking of AAUs to restrictions on use to meet international commitments, and we are currently working with other countries to explore these options to try to find a workable solution. It is something that we are very live to. I don’t know if Pete or David would like to add to that.

David Capper: There are a number of proposals on the negotiating table, from the Small Island States, from the Africa Group, from Brazil, that are looking at different ways in which you could do this, as the Minister has described. So you can restrict carry-over or you could restrict the use of those AAUs within the period or you could do something with what happens to the AAUs at the end of the period. All these proposals have different variants on those themes.

Q194 John Robertson: You give advice. What one would you do?

David Capper: We negotiate as the EU. One of the issues for the EU is that, of course, some of the countries that do have these large surpluses are within the EU. So the EU has taken an approach so far that is based around observing other people’s proposals and treating them according to certain principles. One of those principles and the one that is most important to us is the one of environmental integrity, but there are other principles as well such as AAUs will be treated the same way for parties outside the EU as well as within the EU and that will preserve incentives for over-achievement. I think it is clear from what the Minister said that environment integrity is very important to us. So what we want to do is to limit that carry-over, because, clearly, if that carry-over was all used in the second commitment period it would add to this gigatonne gap that we have been talking about. One of our main priorities is to try to close that gigatonne gap.

Q195 Chair: Just going back to the period up to 2020, we certainly had witnesses saying, and I am sure we all agree, that what we do between now and 2020 is quite important in terms of the long-term impact on concentrations and, therefore, temperature. Your own evidence said it was a priority to build "momentum to enhance mitigation and ambition in the immediate future". Can you tell us exactly what steps you are taking to build mitigation and ambition in the next eight years?

Gregory Barker: Internationally?

Chair: Yes.

Pete Betts: We have said that we think it is unlikely that the big economies are going to change their pledges this year. There is a chance that there may be a political window in 2013 to 2015 with new leadership in some of the big economies and maybe the EU might raise its ambition, but it is not going to happen this year. That is not a view that is popular with our friends in the Small Island States, but we think it is realistic. So we are trying to focus, for this year, on actions that could realistically make a difference. There are countries representing around 20% of global emissions who have not pledged yet. Some of them are middle-sized economies. If they were to pledge then that could make a contribution.

One of the Members just referred to Qatar and it is possible that Qatar might make a pledge. That would not be big in absolute terms, but it would be a big signal and if others followed that would be valuable. We are trying to re-energise the REDD debate. It is quite clear that, although some would say not enough money has been pledged to tackle REDD, a lot of the money that has been pledged has not been spent yet and there are big barriers to spending it. If we could unlock that, that could make a difference.

If we could send HFCs to the Montreal Protocol, I think the Montreal Protocol has proven it is quite effective at regulating those kinds of gases. If we could deliver the public finance effectively that is there, it could deliver more tonnes and we have done some work on the numbers. The Minister has referred to private finance. A lot of the investments we need to make are cost-effective now, but there are barriers that mean that private capital is not flowing. The Minister has done a lot of work on this, if we could find ways of overcoming those barriers. We have done a vast amount of work on trying to identify these options and we had a meeting with some of our EU partners to look at who could try to drive some of these actions over the next months, and I know the Americans are also doing similar kind of thinking in a MEF context.

Q196 Chair: We all understand the difficulty of making progress quickly. This is a super-tanker that is trying to turn the wheel a bit. Realistically, do you think that-we have new leadership coming in in China and we may or may not have new leadership in the US and, even if we did-that it would take us rapidly in a green direction. There are quite large obstacles to making tangible progress. Is that a fair assessment?

Pete Betts: Yes.

Gregory Barker: Absolutely. If the Committee has some insight that we have missed on that we would be only too pleased to have it, but I have to say that there is no sign of a change in leadership direction in the USA. It remains problematic.

Chair: Barry, did you want to say anything?

Q197 Barry Gardiner: The one country that has not been mentioned, of course, is Russia. Whereas Russia with its stock of hot air was a focus early on for American intransigence, it has fallen out of the consideration in the normal dialogue that we now have around what is possible. Is that because people do not see much as being possible, or are there opportunities that we are just not thinking of with Russia to try to progress?

Gregory Barker: Russia is slightly more interesting. The hands of the President in the USA are tied, in large part, by Congress and, whichever way you roll the dice, it is difficult to anticipate a scenario in which you are going to see a big game-changing event post the general election in America this year. In Russia, I don’t think anyone would accuse President Putin of having his hands tied by the Duma. The fact of the matter is the Russians have, on one hand, shown themselves to be quite belligerent at times, but at other times capable of quite breath-taking flexibility. I think it is worth engaging and maybe we should engage more with Russia. They are a very important country, one I know quite well having worked there years ago, and I would not underestimate their own very clear view of these negotiations and their own entrenched interests in the economy and how they perceive those to be impacted by the UNFCCC negotiations. I think more engagement would probably be a good thing.

Pete Betts: If I may add, it is clear that climate change is not politically a high priority for Russia, but, for example, they do have massive fugitive emissions from their gas transmission network, probably greater than total UK emissions. It would be hugely to their benefit to control these emissions. There have been conversations about how best to engage with Russia, and I think it is important to find the right interlocutor to work with the Russians on that.

Chair: Unfortunately, the truth is that, as a country Russia does not suffer from an increase, in fact in some ways it benefits from it.

Q198 Sir Robert Smith: Minister, you have already touched on the financing debate, and a key part of Durban was financing and mitigation and adaptation in developing countries. We have had witnesses talk about the multiple rather than the overarching solution for climate finance as a priority and others saying we need to get rid of the confusion of so many multiple sources of finance. Do you favour the multiple solutions or do you think this is overly complex and bureaucratic?

Gregory Barker: I am not exactly sure what you mean by "multiple", but I think-

Sir Robert Smith: There is the Green Climate Fund, the Adaptation Fund, and the Special Climate Change Fund.

Gregory Barker: Yes. Basically, I tend to believe that more is more. We don’t want a complicated institutional architecture and it may be that there is scope within the UNFCCC framework to have a more streamlined approach. We have been supporting the Green Climate Fund and I think that will offer an opportunity to streamline some of the arrangements under the UNFCCC. Ultimately, we need more participants, but those participants need to come primarily from the private sector or to be mobilised from other nation states-I mean the Gulf we mentioned earlier. If we could encourage the formation of new funds, for example, that might work with or participate in the Green Climate Fund but effectively bring new participants to the party, alongside the International Climate Fund, alongside the likes of KFW, the Norwegians, that would be great. As well, of course, continuing to support the work of the multilateral institutions.

Q199 Sir Robert Smith: We have committed £2.9 billion through three Departments, and I think you are responsible for £1 billion of that. Do you have a strategy for allocating that £1 billion?

Gregory Barker: We do indeed, and we are making good progress on implementing that strategy. David, perhaps you would like to say a bit about that?

David Capper: Yes. First, it is important to say, as you rightly point out, that the money is governed between three Departments and three Secretaries of State, plus the Treasury. For the money that sits on the DECC budget, which we manage collectively with the other Departments, given the focus of our expertise, unsurprisingly, we see big opportunities in energy, as the Minister said, in renewables and also in energy efficiency. I think we have been thinking quite hard about how we develop an investment strategy that makes this money as effective as possible, which gets the best results for developing countries but also for the climate.

Clearly, one of the big barriers is how we get more private money into this space-and the Minister was talking about this earlier-through the Capital Markets Climate Initiative. It seems to us that there are a lot of things that should be happening, that the markets should be doing, but there are, for example, non-price barriers to these. Therefore, there is the question of whether we can use our money in a strategic way that unlocks the private money by helping to overcome these non-price barriers and thereby gets the investment into renewables and into energy efficiency. These are generally interventions that are fairly low down the cost curve.

We also think there is a case for complementing this with investments in some of the technologies that we know from, for example, the IEA that we need for 2°, but we are not on track for global deployment. So things like concentrated solar power, CCS, and other ways in which these kinds of technologies, which are higher up the cost curve, are the things that we can do with our climate finance that help bring those closer to market and make a contribution to getting those technologies more on track where we want them to be.

Q200 Sir Robert Smith: Is that something maybe you could expand on in writing, or is it still early days in setting those tasks?

Gregory Barker: We would be very happy to give you a breakdown, perhaps by technology and by each element of our strategy geographically. We will write to the Committee, Mr Smith. One point I would make about unlocking private finance: it is a two-way street; it is not just about mobilising institutions in the City of London or repurposing the banks and the big investors, it is also about making recipient economies aware that they have a responsibility to make their economies more receptive through strong governance, bringing down political barriers or certain things that give rise to commercial uncertainty, and that we are engaged in a process to help them understand the things that they can do to maximise their attractiveness to private sector investment.

Q201 Sir Robert Smith: The unlocking of the private finance is not so much a matched funding or anything like that. It is using the funds to resource the bureaucratic barriers to that private finance?

Gregory Barker: No, there is matched funding in there. We have used the International Climate Fund in certain ways in order to get leverage. Our chosen form of investment is where we can use our ICF and, by deploying it, unlock additional funds from the private sector. That is not always possible. There are projects that will never attract private sector investment, take certain adaptation projects for example, but if you are talking about energy projects invariably there is some way, smartly designed, that you can open the door to private sector investment, which allows your ICF money to go that much further.

Q202 Sir Robert Smith: Also in your memorandum you talked about the UK making additional voluntary contributions. I wondered how you assessed that.

Pete Betts: This was based on-

Sir Robert Smith: UNFCCC.

Pete Betts: The ICF is about spending money in developing countries. The payments to the UNFCCC we typically give to support developing countries to participate in negotiations or to fund specific additional activities that have been committed to by countries at the COP.

Gregory Barker: By and large, I am right in saying that this is a relatively small amount of money.

Sir Robert Smith: But it unlocks, again, their participation.

Gregory Barker: Yes, exactly. In the context of our separate near £3 billion pot, yes, this is a very small amount of enabling fund.

Pete Betts: Which we have sought to reduce in recent years.

Gregory Barker: Yes.

Q203 Sir Robert Smith: On the future funding, you touched on aviation and shipping and there has been quite a lot of lobbying that the EU ETS revenues should be used towards international climate finance. Do DECC have a view on that sort of lobbying?

Gregory Barker: I think it is more the Treasury have a view on that.

Sir Robert Smith: Unfortunately, Treasury no longer wish to talk to this Committee. So they have delegated that power to DECC.

Gregory Barker: I can’t think why.

Sir Robert Smith: There is a spectrum of views perhaps.

Gregory Barker: I think that is a very good way of putting it.

Q204 Dan Byles: The Treasury specifically said you would be able to answer any questions we had. They said that in writing. They said that all decisions are joint decisions by Government and that DECC can answer any questions we put to them on these matters.

Gregory Barker: We will have a go.

Chair: They have even refused to answer questions in writing.

Gregory Barker: Did they send it to the right address?

Chair: We had a reply.

Sir Robert Smith: We got the refusal.

Q205 Christopher Pincher: Apparently you have a comprehensive and constructive relationship on energy?

Gregory Barker: We do. That’s absolutely right.

Q206 Sir Robert Smith: There are a range of views on the EU ETS. How do you see the potential for a new source of revenue coming from a global levy on aviation and shipping and that being allocated to climate change?

Gregory Barker: To be deadly serious, the fact of the matter is when we came into power as a Coalition the forecast revenues for the ETS were already spent. This was not a decision of this Coalition. They were already in the Red Book and had been spent. Initially, in opposition, there had been ideas developed about how we might usefully potentially deploy. I remember having those discussions with Oliver Letwin in Opposition about how we might do that. The fact of the matter is we got there, they were already spent and, such is the scale of the challenge of deficit reduction, I think it would be almost vaguely ridiculous to anticipate that we could suddenly find ourselves a new source of income that would not, first of all, have to answer the question, "Can it better used in the short term to help reduce the deficit". That would be a very serious discussion with the Treasury.

In the longer term, I think you are right. If there are sources of income that can be more fairly assigned to the green economy and allow the wider public and investors to see that there is some sort of symmetry between money raised and money expended on subsidy and economic benefits that accrue from that, that would be desirable. But there is no escaping the number one priority of this Coalition, which is deficit reduction.

Q207 Sir Robert Smith: Finally, in the negotiations where do the other countries sit in delivering on these pledges, because there is a pledge to achieve an awful lot of funding?

Gregory Barker: It is absolutely true to say that the UK is the best pledger on the UNFCCC circuit. I am not aware-Pete, correct me if I am wrong-of any other country that has guaranteed its finance through to 2014.

Pete Betts: I think Germany now has finance up to 2015, but that is more recently than us. I may be wrong, but on the whole we are certainly a prominent leader in that.

David Capper: If you look at the fast-start pledges-the collective pledge by developed countries to commit approaching $30 billion over the three years 2010 to 2012-then the public estimates that are out on there pledges amount to about $27.6 billion, that is within touching distance of approaching $30 billion. As you know, the UK have committed £1.5 billion over those three years and, as we said in Durban and again in Bonn, we are on track to deliver our pledge. On countries that have pledged beyond 2012, then they have not done it as clearly as we have done in saying we have a £2.9 billion International Climate Fund out to March 2015, but the commitments that, for example, Germany and Norway have made in a way, on forests in particular, signal continuation of finance beyond 2012.

Q208 Barry Gardiner: DECC has outlined its priorities to this Committee as being increased ambition on emissions mitigation in the immediate future; work towards a global agreement in the second commitment period of the Kyoto Protocol and the development of the distinct international architecture building on Kyoto rules. Is that right?

Peter Betts: Yes.

Q209 Barry Gardiner: Why is adaptation not there?

Peter Betts: I would say that adaptation is firmly there as embedded in all of those elements. So the new legal agreement-it is clear commitment from Durban that it will.

Barry Gardiner: Increased ambition on emissions mitigation in the immediate future; that is the number one priority. It does not sound like you are talking about adaptation. Forgive me. "Work towards a global agreement"-well, absolutely, I agree with you, but it is certainly not explicit, is it?

Peter Betts: It is explicit in the decision. I take your point on the first one. It is explicit in the Durban decision that adaptation will be part of that.

Gregory Barker: It is also fair to say that at Durban, the UK announced support for a portfolio of multilateral adaptation of funds, each of which is going to play a unique role in different aspects of adaptation strategy. We announced a commitment of £85 million to the Pilot Programme for Climate Resilience; £10 million to the Adaptation Fund; £30 million to the Least-Developed Countries Fund. This new package provides a range of support particularly to the most vulnerable countries to ensure that adaptation is there. So it would simply not be correct, Mr Gardiner, to say that we are ignoring adaptation or it does not have priority. Semantically, you are correct in that it is not in our four goals in such an explicit way, maybe it should be in order to better reflect the amount of work that is going on in adaptation, we will take that point on board. I think perhaps that is something that we should revisit. But that said, we are very mindful of the Stern Report where it very clearly spelled out in economic terms that spending on mitigation was much more cost-effective than spending on adaptation. Obviously, I am sure you would retort that we have reached the point of no return, where some spend on adaptation is now required because we are going to suffer the consequences of man-made global warming but I think maybe we should revisit our-

Q210 Barry Gardiner: I think my stance would more be yours earlier, Minister, because I wrote down your words. You said, "In negotiations it is not just about what you want; it is about what is important to your counterpart". I think that is the point that Mr Betts was making when he talked about work towards a global agreement. My point really is that unless there is that focus on adaptation then we are not taking on board what it is that our counterparties in the negotiations want.

Gregory Barker: That is why there is now this commitment to funds. We should maybe revisit those words, because I don’t think they do justice to the work that we are doing as witnessed by the disbursement of funding.

Q211 Barry Gardiner: The campaigns director at Oxfam is quoted after the Bonn intersessional as saying, "No progress is made to deliver the financial support that the world’s poorest and most vulnerable need to deal with the growing impacts of climate change". She said that it is now vital that at the next climate summit in Qatar we see rich countries commit to an initial $10-15 billion to the Green Climate Fund between 2013 and 2015. Do you agree with that?

Gregory Barker: Would you just repeat the question, please?

Barry Gardiner: Yes. She said that no progress was made at Bonn to deliver on the financial support that the world’s poorest and most vulnerable need to deal with the growing impact. So she said that there was no progress at Bonn on adaptation for the poorest countries, and she also said that rich countries need to commit in Qatar to $10-15 billion to the Green Climate Fund between 2013 and 2015 as part of a broader financial package.

Gregory Barker: The Green Climate Fund firstly is not the only way of disbursing money on adaptation. It is an important but not exclusive way of putting money into adaptation projects and the UK is committed already to spending up to 50% of its climate fund on adaptation measures. But I was not at Bonn. Pete, perhaps you could comment.

Peter Betts: Adaptation is clearly a huge part of any credible strategy on climate change. As the Minister said, we see the Green Fund as a very important bit of the international architecture; potentially a really transformational part of the architecture. Subject to the rules being right, I would expect Ministers to want to contribute significantly to the Green Fund. Whether they are in a position to do that in Doha will depend on the state of where we have got to in agreeing the rules for the Green Fund. If we were going to put sums of public money on that kind of scale into a fund then we would want satisfactory fiduciary controls and so on. It is not clear yet whether we will be sufficiently advanced for that to happen.

Q212 Barry Gardiner: But broadly, Mr Betts, would you agree that that sort of scale, a $10-15 billion fund during that period, 2013-15, is about right?

Gregory Barker: I don’t think we’ve got a view on a specific number yet. It is not an unreasonable assumption but I don’t think we would hang our hat on that number at this point in time.

Q213 Barry Gardiner: Perhaps you may care to reflect on what you see as being the appropriate level for that package and then maybe write back to us.

David Capper: If I could just come in here. I just wanted to highlight some of the issues within the Green Climate Fund that need to be resolved. I think it is quite important when considering pledging very serious amounts of money that we make sure we have a fund that is able to take funding at significant scale. It is clear we are investing our time as the UK in being on the board of this fund, contributing to its running costs, for it to be a really significant piece of multilateral financing architecture. As we stand, outstanding issues on the Green Fund are for example which country will host it; who will co-chair it; who will provide the interim secretariat. Those are basic practicalities before you even get into the questions of what will be the results framework; the monitoring and evaluation of the project. We have said we will have a private sector facility. What will that look like? We have concessional finance along the lines of the current Climate Investment Funds but how will that work? There are commitments on direct access to developing countries but how will that work? What will be the allocation framework? Will it be like the Global Environment Facility?

Barry Gardiner: We get that.

David Capper: There are some really important design questions that we are keen to be able to get to. Design work-there will not be a moment where the design is complete. We will be on a trajectory and we need to get to a point where we know enough about these things to be confident that a pledge to the Green Fund from the UK will deliver real results.

Q214 Barry Gardiner: Don’t misunderstand me. I am not asking you to commit a pledge now. My question was more should we be looking at a fund of that size over that period given that there are all these things, surely, to be worked out at a logistical, administrative and bureaucratic level?

Gregory Barker: As I said, we would be loath to commit to that range but it is not out of the question that that could be. We have to advance our own thinking as to what would be appropriate but it is not a wild suggestion.

In relation to the many points of detail that Mr Capper was making, I think we have to also recognise that the UK has a reputation in finance, and the City of London is the global hub for green financial services. We have a wide reputation for expertise in financial services. So it would be expected of us to look at much more of the detail than other countries that have less experience in these things and I think it is beholden on us to be the country that makes sure that this is built to last.

Q215 Barry Gardiner: I absolutely agree with that and I think we would all wish to see the fund located in the UK, in London. But that may also mean that Britain has to be a substantial pledger towards it and supportive of it in that respect.

Gregory Barker: Yes. I am afraid we did not bid for it to be here. There were a number of reasons. I initially shared your enthusiasm to bid for the fund but there were a number of reasons that meant that we were unlikely to succeed.

Q216 Barry Gardiner: How will you ensure that the adaptation funding that you are spending, that you have already committed to, goes to the most appropriate levels because it is about getting this to communities, to local authorities, to businesses, to ensure that that funding gets real traction? How are you doing that?

Gregory Barker: That is something that is primarily the responsibility of DIFD and their in-country programmes that do vary from country to country. I think there is a much greater emphasis now on dealing with partners on the ground rather than just putting money through government programmes. David, if you can add more to that.

David Capper: Yes. DIFD have been working with the Adaptation Fund for some time and gave a lot of consideration before we made a commitment, as the Minister said, in Durban, to provide funding. You are absolutely right that for all of our ICF spend on adaptation one of the things that we do think is very important is that this goes to the poorest and most vulnerable countries and the poorest and most vulnerable people within those countries. Clearly it is important to the Adaptation Fund that that is what that particular fund does.

Q217 Barry Gardiner: I just wanted to touch on this. We saw at Rio that the US and others tried to backtrack on negotiations in terms of common but differentiated responsibilities and to pull back from that. How do you see common but differentiated responsibilities being preserved as the fundamental principle of the UNFCCC?

Gregory Barker: It is something that we take very seriously and I am endeavouring to begin a more open discussion of this important question with the Government of India. On my last visit there I had a discussion on this very topic with the Indian Environment Minister, who has an open invitation to come to the UK for an informal discussion.

I think it is fair to say that there is not a uniform acceptance of what exactly that well-known phrase or term means amongst developing countries. There isn’t even a uniformly accepted definition of what that means or should be taken to mean in India. I have spoken to several thoughtful members of the Indian Government who have a slightly different interpretation. I think what is important is that the fundamental principle of how you recognise or apply equity principles does remain controversial. I think as a Government, in the past, over a period of time that Britain has been maybe too belligerent in discussing this. I think we should be less afraid of discussing the issues of equity and fairness. We can’t be against fairness or against equity, clearly, but obviously we have to recognise that we need to come to a definition that does not stand in the way of, or impose impossible burdens on, future negotiations. I think this is something that is complex. It is not a binary choice. It would be well served by discussions outside the UNFCC as well as making progress within it.

Q218 Barry Gardiner: Do you see the Human Development Index as being a useful tool that can be deployed in working out those fundamental principles of equity?

Gregory Barker: It is certainly one of the measures. It represents a good proxy measure of how developed a country is. It is certainly one of the indicators that we could draw on. However there are other considerations such as a country’s national circumstances, its energy mix and also the marginal cost of reducing emissions. In the end we do not believe we will find an agreement around a single formula. As I said, there are many strands within this. A successful agreement is likely to draw on such indicators but we need to be pragmatic.

Q219 Ian Lavery: We have mentioned the private sector/public sector financing on different projects already this morning. In particular relating to the UN REDD+ programme. There were a number of witnesses to this Committee who would say that private finance will play a crucial role in delivering funds for the REDD+ projects.

Gregory Barker: Absolutely. That has to be the long-term goal, not least because the scale of the forestry issue is so large that I do not think we could fund the whole thing simply with public sector funding alone. The reality, as Mr Capper said earlier, is that we are finding it difficult to disburse our public sector funding into REDD projects with real integrity at the moment. So if we are finding that problem even in public sector funding it is all the more challenging to do so with private sector funding. So while I would agree with the general statement that encouraging responsible private-sector finance primarily driven by a move towards a global carbon market is the way to go, I do not want to mislead the Committee; the rate of progress has been very disappointing despite the importance that the British Government places on forestry and REDD and making progress on REDD+ specifically.

Q220 Ian Lavery: How will the finances from the public sector and the private sector be generated for these projects?

Gregory Barker: In terms of public sector they will come from our defined ICF budgets and we are endeavouring to disburse. David, do you want say a little more on that?

David Capper: We have contributed to most of the big forest funds that are out there, so the Forest Investment Programme; the FCPF; there is the Congo Basin Forest Fund. We have made contributions to all of these. But as the Minister says, we are concerned by the slow disbursement of that money to reach projects on the ground. As the Prime Minister said earlier this year when he visited Indonesia, we are looking at whether there are other ways in which we can deliver finance to REDD that could deliver results more quickly. This is something that we have been actively pursuing. There was a report done for Government last year by PwC that looked at the options both on how you could work more closely with the private sector to leverage some of their money and maybe impact on some of the drivers of deforestation, but also how you might work bilaterally with some forest nations in order to make progress and start to make a difference to what is a very difficult problem.

Q221 Ian Lavery: We mentioned before the strength of the monitoring reporting and verification regime. If I could just take you back just ever so slightly to that, there appear to barriers in the way of some form of effective MRV systems. What would you see as the potential barriers to an effective, strong MRV system?

David Capper: Specifically on forests?

Ian Lavery: Yes.

David Capper: One of the live issues with regard to MRV on forests is around the safeguard question whereby in Cancun we agreed seven different types of safeguard and in Durban we agreed on information systems around how forest nations would report against those safeguards. Now exactly what that regime looks like is something that we are hoping to make progress on this year under the REDD mechanism. The UK and the EU have put in submissions to UNFCCC. We have talked about how reporting should start in 2014; it should be incorporated with biennial reports; we would like forest nations to report against each of the safeguards because we think they all are important and they should not be overlooked. This will be one of the challenges for Doha: are we able to reach consensus on what the arrangements look like to make sure that safeguards are being implemented but at the same time they are not being implemented in a way that gets in the way of us solving the big challenge which is doing something to reduce the rates of deforestation globally.

Q222 Ian Lavery: How best do you see that these barriers can be overcome?

David Capper: I think if we can reach an agreement in Doha on that regime then that is how we will overcome barriers on the monitoring and reporting of safeguards within the REDD space. That is how we would hope to overcome those barriers.

Q223 Christopher Pincher: Last March, I think it was, we undertook as a Committee an inquiry into consumption-based emission reporting. You may remember that, Minister: you performed a legendary double act with Lord Taylor

Gregory Barker: Great man.

Christopher Pincher: Indeed, and I think it features on YouTube. In that report we said there is a clear divergence between the United Kingdom’s territorial emissions and its consumption-based emissions. In fact there is some divergence between DECC figures and DEFRA figures because DEFRA has produced a report that suggests CO2 emission had gone up by 20% if you include embedded figures. So I just wonder whether there is a case for United Kingdom action to deal with the embedded carbon in our imports.

Gregory Barker: We are certainly committed to trying to achieve a reduction in consumption-based emissions and we are keen to understand, measure and be open about the impact associated with consumption of imported goods and services. There is a range of Government policies that are aiming to address embedded emissions as part of our work to encourage a green economy more widely. We are enabling businesses to target emission hotspots for example through the PAS 2050 tool to assess products’ carbon footprints, and also through promoting standards that embody the lifecycle approach such as the CNTC 350, which I am sure you are familiar with-

Christopher Pincher: My bedside reading.

Gregory Barker: It is a standard in construction. And the EU Eco-label. We also encourage companies to measure and report on direct and indirect emissions including those in the supply chain. Since I last came before this Committee we have taken a major step forward with the Deputy Prime Minister’s announcement at Rio that we will be requiring greenhouse-gas emissions reporting from our largest companies and that is a very welcome first step towards more comprehensive accounting in due course. That is a world first amongst developing economies, requiring that type of accounting.

It is important, though, that new policies to consider consumption-based emissions, existing appraisal guidance for valuing policy impacts on greenhouse gases, energy, are jointly produced by DECC and the Treasury, which already recommends that consumption-based emissions should be considered although the reality is that defining them can be complicated in practice. To help address this issue and support consistent evaluation we will scope a risk assessment approach for evaluating the potential impacts of policy on consumption-based emissions.

In response to this Committee’s recent recommendation that Government departments work together to communicate the full picture of the UK’s impact on the global climate, we are going to take steps to increase the prominence of consumption-based emissions alongside territorial emissions on our websites and in statistical releases. We will be as transparent as possible when communicating the basis for statistics.

There are challenges in accurately measuring embedded emissions. This is something that is often hotly debated. The existing national positions and international agreements mean that consumption-based approaches are not currently workable as a basis for an international agreement to reduce global emissions. Raising issues over national sovereignty could make some countries liable for emissions in other countries. That would inevitably draw them into wanting close oversight and even control over sources of what other countries’ emissions are, all of which would be even more controversial and even more difficult to operate than the current UNFCCC framework.

So the current system based on production-based emissions seems to us to be the better basis for a workable effective agreement, but we fully accept that this is not perfect and that we ought to give greater consideration to consumption-based emissions. Full global carbon pricing is where we and Lord King would like to go in the long term, in which case it would not matter on which basis emissions were accounted for.

Q224 Christopher Pincher: Of course David King would like us to go further. He would like the EU, which is a major reporting area, to say that if we cannot get a binding global agreement on emission reductions then we should look to some kind of broader tax adjustment arrangement to bring up the cost of those imports to our own standards in terms of the embedded carbon. Is that something that you would support?

Gregory Barker: We are less than keen on starting an international trade war at a time of global recession. We think that would probably be unhelpful.

Q225 Barry Gardiner: On that point, Minister, you will have seen the outcome document from Rio that in paragraph 58(h), I think, specifically refers to a commitment not to introduce artificial trade barriers in any way in order to impose such restrictions extraterritorially or in other jurisdictions for what has happened in others’ jurisdictions. Has your department given any thought to how that commitment, which you signed up to at Rio, impacts on the EU legislation on illegal timber importations, which it seems to me it is directly counter to?

Gregory Barker: I have to say I am not deeply familiar with 58(h).

Barry Gardiner: I am pretty sure it is 58(h). I can check it out for you if you want.

David Capper: I think this is a DEFRA lead.

Barry Gardiner: It is only a DEFRA lead insofar as it is the negotiations on international illegal logging. But I would have thought given that it has clear implications for any action such as Mr Pincher was just talking about it should be of concern to your department as well. Clearly illegal logging and illegal timber and deforestation go straight into the REDD discussion that we have just been having.

Q226 Sir Robert Smith: Does it also impact on the European decision to bring aviation into the ETS for carriers outwith the EU?

David Capper: I am not familiar with the paragraph so we would need to review it but I would not see it that as it has been posited in the Committee hearing today, that paragraph would call into question either of the two pieces of legislation to which you refer.

Q227 Barry Gardiner: "58(h): not constitute a means of arbitrary or unjustifiable discrimination or a disguised restriction on international trade; avoiding unilateral actions to deal with environmental challenges outside the jurisdiction of the importing country and ensure that environmental measures addressing trans-boundary or global environmental problems as far as possible are based on international consensus."

That does seem to me that it does impact.

Peter Betts: That provision is not identical to but is quite similar to existing provisions in for example the UN framework convention on climate change. So I suspect that it does not change very much around either forestry rules or around aviation and ETS, and I would be surprised if we would have agreed to it if it had.

Chair: Perhaps you could have a look at it.

Gregory Barker: I suggest we, Chair, take on board Mr Gardiner’s comments and write to you on this issue.

Chair: Thank you.

Q228 Christopher Pincher: Nobody wants to launch a trade war, certainly not this Committee, but given that there is an inherent unfairness if countries such as the basic countries are able to continue to export embedded carbon while other countries have a legally binding objective of reducing carbon and they sign up not to do so, that does not do the environment any good either. What is the leverage that you envisage can be used to persuade those countries to reduce their carbon emissions in their trading groups, if not via some form of BTA?

Gregory Barker: Ultimately the goal of a global carbon market. That is the most comprehensive policy framework that would address this issue. But I think certainly unilateral action would be very provocative indeed. We have seen even something that we believe to be perfectly reasonable and very measured in relation to aviation in the EU has provoked a very negative response from other countries, ranging from China to the USA to India. We only have so much political capital to use up. We must aim for consensus wherever possible, we have to be very measured in these things. Our being a champion of free and open trade, any measure, however well founded, that sought to raise border tariffs would be looked at with extreme scepticism by Her Majesty’s Government.

Q229 Chair: Finally, Dave King raised with us the impact of fossil fuel subsidies, which you know the IEA have estimated to be $400 billion in 2010, mostly in non-AAU countries. What can Britain do in terms of the international climate change negotiations to help get commitment to eliminating these subsidies?

Gregory Barker: We certainly fully support the G20 commitment to phasing out fossil fuel subsidies. Doing so has clear environmental and fiscal advantages, and security of supply, but having travelled several times to India since taking on this job, I do not underestimate the practical difficulties of doing that. It is very easy for environmentalists like us to make sweeping statements about this but the reality is that hundreds of millions of the poorest people in many developing economies are dependent on subsidy from Government to keep down the cost of fuel in order for them to heat and light-not necessarily for heating but certainly lighting and cooking-and transport, which are the very bare building blocks of their life. Were, for example, Governments such as India, which has a huge subsidy for fossil fuels-it is a major part of the Government’s budget-to sweep that subsidy away it would have a massive chilling effect on poverty in that country.

That is not to say that that should not be the ambition and I know that reform in India of fossil fuel subsidy is something that is taken seriously and there are steps being made to move forward. But it is not quite as easy as it sounds. It is not just shovelling money into the pockets of Big Oil. Sometimes it may be that, but in developing countries often it is about supporting the poorest people who have trouble accessing energy. In the longer term we place great importance on making alternative non-fossil fuel based energy sources available to them or non-fossil fuel based energy technologies, for example supporting the Indian solar pathways and in sub-Saharan Africa. We are putting a lot of emphasis on supporting solar lights and new forms of stove cooking that do not require fossil fuels. But these are things that take time and we are pushing them as hard as we can as are other countries but it is a little simplistic to think that we can, however desirable that may be for all sorts of reasons, just knock away the subsidies overnight without its having a massive impact on the poor.

Q230 Chair: Yes. I don’t think anyone would expect them to be knocked away overnight but Dave King’s estimate was that removing these subsidies by itself would cut emissions by almost 6%.

Gregory Barker: I am sure it would, but we cannot just see these things through the prism of emissions. You have to be mindful of the impact it has on the poorest people.

Chair: Saudi Arabia is an even bigger subsidiser.

Gregory Barker: There, I think, is a probably more useful target.

Chair: I was going to say that it is even bigger than India and I do not think the issues that you quite understandably refer about poverty in India, which we fully sympathise with, would not be so applicable in the case of Saudi Arabia.

Gregory Barker: Absolutely. So let me qualify what I said by agreeing with you, Chair, that there are obviously economies where there is not such a big impact as there would be, say, in economies such as India and we need to be more discerning in the way in which we approach those economies. But I would have to say our negotiating leverage with Saudi Arabia perhaps is easy to overstate.

Chair: Maybe when we exploit our Shale gas reserves here-

Peter Betts: Just to add this. We talked earlier about the role of fora complementary to the UNFCCC, and the G20 has adopted aspirations on phasing out fossil fuel subsidies. We are working with the Foreign Office and Treasury in a group called The Friends of Fossil Fuel Subsidy Reform, which includes developing countries like Costa Rica and Ethiopia, to support reform because some of these subsidies are targeted on the better off. I know that Saudi Arabia is, allegedly, currently looking at developing around 50GW of solar energy precisely because of the price of oil being so high. They would rather export it than use it domestically.

We have thought about doing something on the UNFCCC on this but sometimes it is better to leave other fora to continue their work. But we have wondered whether there might be a case for trying to quantify the impact of action on reducing such subsidies and get some kind of reporting into the UNFCCC, and we are exploring that still.

Chair: Thank you. I think that brings us to a conclusion. Thank you very much for your time this morning.

Prepared 11th July 2012