Emissions Reduction Scheme: Progress (Hansard, 14 January 2001)

§ The Parliamentary Under-Secretary of State, Department for Environment, Food and Rural Affairs (Lord Whitty)
My Lords, the UK emissions trading scheme was launched by my department last August. We are on course for the scheme to go live in April. As part of that, the department published draft legal rules for consultation on 18th December 2001. We anticipate releasing the final rules for the scheme later this month.

§ Lord Jenkin of Roding
My Lords, if firms are going to be expected to trade from April, are not the Government leaving it extremely late to provide them with the necessary rules so that, for instance, they can make their bids in the allocation of the £215 million incentive money that the Government have made available? That may well be all right for firms that are currently in the market, as it were. But what about the rules for new projects? Is it true that they are not likely to see the light of day until well into the summer? Arc the Government aware that there may be a number of new projects showing substantial potential reductions in emissions? They will simply stand still until the new rules are available and people know where they stand.

§ Lord Whitty
My Lords, there are a number of different ways of participating in the scheme, as the noble Lord will be aware. Those who commit themselves to absolute reductions will have clear rules in time to start in April. There are those who are already involved in sector agreements and others who may be further down the line. The mainstream rules will be produced by April. There will be project rules slightly later. As has been agreed with all the representatives of industry with whom we have consulted, it is important to get the system up and running as rapidly as possible. It will give UK business and the City the chance to be the front runners in the area across the world. There has been substantial business involvement in the design of the scheme. We can meet the tight but achievable target of starting the main part of the scheme from April.

§ Lord Ezra
My Lords, the noble Lord, Lord Jenkin of Roding, made an important point about projects. Is the Minister aware of the difficulty that could be caused with CHP schemes or others that will clearly save energy being delayed until they know where they stand on the emissions trading arrangements?

§ Lord Whitty
My Lords, we very much hope that good CHP schemes will come into the system. Some of them will be part of an individual company's ability to set itself targets and some will be under the project
829 arrangements. It is only a matter of months before the full rules are available. It is important that we move as rapidly as possible on all parts of the scheme. I agree with the noble Lord, Lord Ezra, that CHP projects will contribute to meeting our targets in that area.

§ Baroness Thornton
My Lords, can my noble friend tell the House of any government schemes in place to encourage companies that are reluctant to reduce their greenhouse gas emissions?

§ Lord Whitty
My Lords, the UK emissions trading scheme is exactly such a scheme. It will reduce greenhouse gases and involve market mechanisms in the delivery of that aim. As the noble Lord, Lord Jenkin, said, the Government are also providing £215 million over five years for firms that voluntarily take on emissions reduction targets. Those who are outside the scheme will miss out compared with those inside. The scheme will also provide significant gains from what might be called "learning by doing". Firms will be able to engage in that market at a later stage. The system is designed as an incentive, one way or another, to firms to come into the scheme and not to resist the pressure for reductions in emissions. We hope that the bulk of British industry will eventually participate in this or other means of meeting our Kyoto targets.

§ Baroness Byford
My Lords, further to the Minister's answer to my noble friend Lord Jenkin, representations have been made to us about the delay in the rules and the effect that that will have on investment. This is the time of year when companies are often looking forward to their forward time investment. Is the Minister concerned that investment may be lost and that new projects may fail to claim money that they would otherwise be able to obtain?

§ Lord Whitty
My Lords, the discussions on the scheme have continued for some time. Consequently, the hulk of industry is aware of the scheme's broad attributes, and I should have thought that companies would have already begun to take into account both the availability of the market mechanism and of the government money available under the scheme. I should therefore think that it would not have a serious effect on investment decisions in the corning few months.

§ Lord Jenkin of Roding
My Lords, the Government give the impression that they are not aware that there is a substantial trade in emissions permits on the Internet, or that the only country currently unable to participate in that trade is the United Kingdom—because the UK Government have not yet made the rules and firms do not know where they stand. Will the Government now get ahead and deal with it?

§ Lord Whitty
My Lords, I dispute that that is the case. In many ways, this is the cutting edge scheme across Europe. The European Union has proposed some slightly different rules, but there is no way in 830 which those would come into play except at the back end of the timetable of this scheme. Although voluntary trading is occurring in North America and around the world, this scheme would be the first and the most effective and comprehensive emissions trading system. In that, as I said, we are ahead of the world and not behind. I think that the noble Lord is being slightly misleading on that point.