The Minister of State, Department for Energy Security and Net Zero (Lord Whitehead) (Lab)

My Lords, I thank the committee for its consideration. The draft Carbon Budget Order 2026 was laid before the House on 2 June and the draft Climate Change Act 2008 (Credit Limit) Order 2026 on 14 April. Given that we are sitting here this evening on the second of the four hottest days there ever have been in June, after a similar number of hottest ever days in May, we may think that the question of whether we should debate doing anything about climate change answers itself. We have a far more scientific way to act on climate change at the moment, as this Carbon Budget Order sets a science-led budget to reduce emissions by about 87% for the period 2038 to 2042 compared to 1990 levels. This is in line with the level recommended by the independent Climate Change Committee and endorsed by the Environmental Audit Committee. The detailed impact assessment published alongside the Carbon Budget Order provides a rigorous assessment of options, all showing significant benefits of continuing towards net zero over abandoning it. The proposed seventh carbon budget sets a pragmatic and achievable path that will enable the UK to continue seizing the benefits of clean energy and climate action, including energy security, lower bills, good jobs and growth, and health and nature benefits. This is also consistent with the action needed globally to meet the goals of the Paris Agreement, building on the UK’s 1.5 degree-aligned nationally determined contribution for 2035. We can fight for our national interest only by pushing for global action built on the power of our domestic example. A delivery plan setting out how carbon budget seven will be met will be published as soon as reasonably practical after Parliament has approved the budget. I emphasise that what we are debating today is the level at which carbon budget seven should be set. We are not debating—or should not be debating—the policies that will be set by the Government in response, to make sure they can meet that level. Those policies, as I have emphasised, will be published shortly but are not really a question for debate in detail today. Under the Climate Change Act, the Secretary of State is required to set a limit on the number of international credits that can be used towards a carbon budget at least 18 months before the budget period starts. That is very relevant to the second SI we are discussing tonight, concerning the credit limit order. This order sets a zero credit limit for the carbon budget five period of 2028 to 2032. It does not represent a change in policy but reflects the fact that carbon budget five can be met through domestic action. All other carbon budgets to date have been delivered solely through domestic action. The order takes into account the advice of the independent Committee on Climate Change that carbon budget five can, and should, be achieved without the use of international credits, and this also ensures that the UK economy will profit from the co-benefits of the transition. The Secondary Legislation Scrutiny Committee has reported on the Carbon Budget Order, and I am grateful to the committee for its report and the careful consideration of this draft instrument. The committee noted the importance of incentivising the shift to clean electricity. The Government recognise that rebalancing the price ratio between electricity and gas is important to long-term fairness so that electricity prices reflect the falling cost of clean power. We are taking steps to address this from Budget 2025, removing £150 off energy bills due to the success of the contracts for different scheme in bringing forth new renewable assets at fixed competitive prices, which are beginning to decouple electricity and gas markets. Reformed national pricing enables us to further bear down on network constraint costs and improve system efficiency. I recognise the non-fatal amendments tabled by the noble Lord, Lord Moynihan, for discussion today and I will address the points he has raised in turn. In relation to the Carbon Budget Order, the noble Lord first suggests that this will increase reliance on intermittent renewables. The Government are, in fact, strengthening energy security by reducing dependency on volatile fossil fuel markets and delivering a diverse, secure and clean energy system. This will be backed by unabated gas only when it is essential, and any residual emissions would be offset by removals. The noble Lord suggests that the order will cause higher energy prices. The main driver of high energy costs has been global gas prices, which have also pushed up electricity prices. Clean power is what will give us control over prices, with the offshore wind secured in a recent auction being 40% cheaper than building and operating new gas plants. On causing deindustrialisation, this Government are committed to supporting UK industry to decarbonise, while protecting and creating thousands of jobs across the UK. We are taking ambitious steps to lay the groundwork for further industry investment. Last year, the Government set out their modern industrial strategy, which will drive forward ambition for UK business operating in the clean energy space. With regard to economic growth, setting carbon budget seven at this level builds on the UK’s pioneering Climate Change Act 2008, providing a framework for combining economic growth and climate action. I have a fairly simple and straightforward comparison. The UK has cut its emissions by 54% since 1990, while growing the economy by over 85%. In other words, emissions reduction and growing the economy have been fully and effectively decoupled over that period. Indeed, since July 2024, the UK has seen over £100 billion of private clean energy investment announced and the Government’s clean energy plans are expected to support 400,000 extra jobs by 2030. With regard to claims that retaining the carbon tax negatively impacts households and industry, the biggest threat to energy security is the UK’s dependency on volatile fossil fuel markets, not the carbon price applied under the emissions trading scheme. The UK has had an emissions trading scheme in place for over 20 years. It provides stability to UK businesses and industries, supporting them to take long-term investment and planning decisions, while “free allowances” protect sectors at risk of carbon leakage, ensuring we decarbonise over time without undermining UK competitiveness, and limits many sectors’ exposure to the carbon price. It has already played a key role in ending the burning of coal for electricity, setting us on our way to being a clean energy superpower. On behaviour change, the noble Lord suggests that the Carbon Budget Order relates to a reduction in livestock numbers and meat and dairy consumption. This Government have been clear that we will meet our targets in a way that does not tell people how to live and behave. The transition will be led by consumer choice. Accepting the CCC’s recommended target does not mean we replicate its pathway. I am sure a number of other issues will be raised in the debate, including offshoring UK emissions. Clear actions are being undertaken—CBAM and various other things—to make sure that does not happen and we are taking precautionary action to prevent carbon leakage. In conclusion, these orders set a clear, credible pathway to net zero and ensure that these emissions reductions are delivered at home. I urge noble Lords to act together in the interest of current and future generations by agreeing these statutory instruments, which will give us energy security, lower bills, good jobs, cleaner air and protect our homes for our children and grandchildren. I beg to move.