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Chamber and committees

Transport, Infrastructure and Climate Change Committee

Meeting date: Tuesday, February 23, 2010


Contents


Subordinate Legislation


CRC Energy Efficiency Scheme Order 2010 (Draft)

The Convener (Patrick Harvie)

Good afternoon, everyone. I welcome you all to the fifth meeting this year of the Transport, Infrastructure and Climate Change Committee. I remind everybody present that all mobile devices should be switched off. We have 10 items on the agenda today, which might be a record.

The first item is evidence on an affirmative instrument: the draft CRC Energy Efficiency Scheme Order 2010. The order establishes in the United Kingdom an emission trading scheme in respect of greenhouse gases under the Climate Change Act 2008. It applies to direct and indirect emissions from supplies of electricity, gas and fuel by public bodies and undertakings. I refer members to the documents that have been provided.

I welcome Stewart Stevenson, Minister for Transport, Infrastructure and Climate Change, to the meeting. He is joined by Scottish Government officials John Holmes, branch head for climate change emissions trading, Eric Baster, policy manager for climate change emissions trading, and Jonathan Dennis, economic adviser in the economics (climate change) branch.

The order was laid under the affirmative procedure, which means that the Parliament must approve it before its provisions can come into force. The committee will be asked under item 2 to consider a motion to approve the order. First, though, we have an opportunity to take evidence from and put questions to the minister. I thank the minister and his team for making an additional briefing available to the committee, which is helpful with regard to what is a complex order. Do you have any opening remarks before we move to questions?

The Convener

Thank you. Have any particularly Scottish aspects been taken into account in the development of the scheme?

John Holmes (Scottish Government Climate Change and Water Industry Directorate)

It will be a short answer, minister: I cannot think of a Scottish aspect offhand. Eric Baster worked closely on the technical development of the scheme, whereas I was on the project board. Have you heard anything from Scottish regulators such as the Scottish Environment Protection Agency on a Scottish aspect, Eric?

Stewart Stevenson

In a sense, that reflects the fact that we have been in the project from the outset; it was not a question of our coming along later and seeking to modify it to reflect Scottish conditions. The project has been a good example of the different UK jurisdictions working to a common purpose and thereby coming up with something that is acceptable to all, subject to the agreement of Parliament and the various other jurisdictions’ elected politicians.

Stewart Stevenson

We share the view that schemes that reduce over time the available carbon for businesses, such as the European emission trading scheme, have a powerful role to play in the real world in reducing the amount of carbon that is emitted by creating a strong price penalty if appropriate behaviours are not modified. That is the kind of trading scheme that strongly promotes the agenda that the committee, other members of the Parliament and I broadly share. There is a sense of common purpose on such schemes.

Stewart Stevenson

I concede that it is, to some extent, arbitrary. The early part of the scheme essentially involves a dummy run up to 2013 before it starts to bite. One of the key elements of the scheme is the opportunity to review its operation. We need to find out, for example, whether the figure of 6,000MWh strikes the right balance, so that the scheme includes enough businesses to make a difference by capturing a significant proportion of carbon emissions, while not including so many relatively small emitters that the administrative and cost overheads are unreasonable.

The figure of 6,000MWh is a first estimate. I imagine that when a review takes place—as it will do at some point—it will consider whether the line has been drawn at the appropriate level. I concede that there is no magic formula that tells us the answer; a judgment call has to be made to balance the two aspects.

Charlie Gordon

What about the first part of my question, on why the use of electricity is the most appropriate measure?

Stewart Stevenson

We expect that transport will feature significantly when the UK Committee on Climate Change reports to us tomorrow, so it is far from being off the radar. A large proportion of transport emissions are down to private individuals making choices about transport. It is difficult to imagine that we could sensibly bring each individual private car driver inside a scheme of this type.

Again, it is a question of striking a balance and deciding whether we will make a real difference by including certain things in the scheme. We directly control the railway system—not the infrastructure but the operation of the railways—which is one of the reasons why we are making the biggest investment for many generations in converting railways to run on electricity. We have a target—or rather, an aspiration; I will be clear on that—for the whole of Scotland’s railway network to be electric by 2030.

Similarly, we fund the bus industry—more than 50 per cent of its turnover now comes from Government sources, which is a substantial increase over a period of time, so we have direct influence in that area. You will see that today we have announced changes to the way in which we are funding the bus industry by substantially increasing the bus service operators grant and the environmental components of that. We already have a range of policy instruments in our own jurisdiction that will enable us to deal with many of the issues in transport.







The order is a UK instrument so, although we could put those issues in, in responding to specific Scottish needs, it is better for us to have policy instruments that specifically address the matters that are the responsibility of Scottish ministers and not directly shared with ministers of other jurisdictions.

14:15

John Holmes

Yes. I can kick that off and then pass it on to one of my colleagues.

Stewart Stevenson

It is worth saying that, as we observe the scheme in operation, I am sure that we will want to consider whether, by excluding certain things, we are causing behaviours that divert attention to issues outside the scheme. That is the risk of not including everything in the scheme. We have to judge whether that will happen, but if we see any substantial evidence of it, that will form part of the review. I am sure that the other Administrations in the UK will take exactly the same stance on that and will seek to extend and include provision to ensure that how the scheme is constructed does not drive such distortions. Let us make a start with something comparatively simple; if it needs to be made more complex, it will be.

Stewart Stevenson

Were that to happen, there would be an early review. The scheme is just the bottom line—it is one of a series of policy interventions from the various Administrations in the UK to signal how important this agenda is. I make it clear when I speak to organisations—I know that the same applies in other UK Administrations—that we are all serious about the issue. If we do not see a response, the screw will simply be tightened. I hope that those who are listening to and watching the committee’s deliberations today, and are perhaps thinking that there is a free run ahead, take note of that comment.

Cathy Peattie (Falkirk East) (Lab)

The minister will be aware that, in some circumstances, the CRC will bring together organisations that are not legally related for the purposes of participation. Will you explain more about the process that will result in that? Shall I expand on my question?

Stewart Stevenson

I think that I know what you mean, but that would be helpful.

Stewart Stevenson

If the price were unsustainable, it would not be sustained. Part of the debate about the draft order has covered pricing—some later decisions related to that and were led by the UK Government, with our support. The period to 2013 will give us a sense of how the scheme operates. We are talking in theory at the moment. As we move forward, we will start to have practical feedback about how the scheme operates. At that point, we will have to consider whether we need to fine tune any aspects of the scheme, of which price might be one.

Stewart Stevenson

Ministers monitor the performance of all public bodies for which they are responsible. SEPA has made step changes in relation to a number of agendas. I am confident that SEPA’s present leadership will be able to respond on this agenda, as it has on others.

Stewart Stevenson (Minister for Transport, Infrastructure and Climate Change)

I have some brief remarks. The draft statutory instrument establishes the carbon reduction commitment energy efficiency scheme, which is a UK-wide emission trading scheme covering large businesses and public sector organisations. Those organisations are responsible for about 10 per cent of the UK’s carbon emissions, which total some 54 million tonnes of carbon dioxide annually. The aim of the CRC is to reduce emissions by encouraging the installation of cost-effective energy efficiency measures. Though those measures save organisations money, the current rate of uptake is low, so the scheme is designed to tackle the barriers to their adoption. It will combine the financial incentive of having to purchase allowances to cover emissions with the reputational incentive of a performance league table showing publicly how well each organisation is doing at reducing emissions. It will be largely revenue neutral for the Exchequer.

The CRC will place a cap on total emissions from the sector in 2013 that will be tightened over time, guaranteeing that reductions are achieved. It will make a valuable contribution to achieving our ambitious 2020 emissions target that we set through the Climate Change (Scotland) Act 2009. Importantly, the scheme is expected to result in a net financial benefit to the sector, as the cost of participation and the installation of efficiency measures will be more than paid back by savings on energy bills. I am happy to take questions, convener.

Stewart Stevenson

The scheme has seen all four jurisdictions—Northern Ireland, Wales, Scotland and the UK—sit together. John Holmes was part of the project team that developed the scheme. It is of course a UK draft instrument that is being considered by all the jurisdictions. I cannot identify a uniquely Scottish aspect, so at this early stage I ask John Holmes whether he can think of one.

The Convener

So the two levels of Government take the same approach.

Stewart Stevenson

I am not aware of and cannot identify any differences.

The Convener

Before members ask questions about the detail, are you able to update the committee on the debate on the order that took place last night in the House of Lords? Have you anything to add arising from that debate?

Stewart Stevenson

The House of Lords approved the order last night. The House of Commons considered it this morning but, at this stage, we do not have an update on that debate. We have had an opportunity to examine the Hansard or Official Report of last night’s debate. Nothing emerged from the debate that we need to bring to the committee’s attention.

Stewart Stevenson

For clarity, I point out that the scheme will reduce emissions by 4 megatonnes per annum by 2020, which is a very significant figure. At this stage, we do not have a disaggregated figure that enables us to say what that will mean in Scotland. We know that Scotland accounts for in the order of 8.5 per cent of the UK’s gross domestic product, but reductions are attributed to the locations of enterprises’ head offices. There are enterprises based in Scotland that operate in England and enterprises based in England, Wales and Northern Ireland that operate in Scotland, so at this stage we do not have a clear-cut answer to your question. A good first approximation is that the figure will be in the order of 8.5 per cent of the total, which is in the order of 340,000 tonnes per annum. However, I do not want to give false certainty about that.

Stewart Stevenson

Electricity will increasingly be the main energy source. It is, in its production, a very large emitter of CO2, and there is a UK market for it. I am not quite sure that I can answer the question why the use of coal or gas is omitted, because those would be two clear things on which we could focus. John Holmes may want to say something on that.

John Holmes

The simple answer is simplicity. As the minister said, electricity is the main energy source. In advising ministers, we officials attempted to keep the scheme as simple as possible. Some commentators have suggested that we did not make a very good job of that, but it is a lot simpler than it might have been. The scheme includes energy use in the round, but electricity use is the measure.

Eric Baster may want to comment on that.

Eric Baster

That has covered it.

Charlie Gordon

Why is transport excluded from the CRC? Are emissions from transport to be considered under other policy measures?

Stewart Stevenson

It will be about economics.

Jonathan Dennis (Scottish Government Rural and Environment Research and Analysis Directorate)

I do not think that there is a huge amount to add to that. The key thing is that we are getting hold of a proxy that identifies whether people have already taken action to address their energy use and efficiency. In putting the scheme together, we were looking for something that linked to that sort of action. By looking at Carbon Trust certification and metering, we get an idea of whether people are taking the issues seriously. In setting up the scheme, we wanted those who have looked at the question beforehand to be recognised, and the early action metric has been set up to do that.

Stewart Stevenson

There have been three rounds of consultation since 2006 that have provided organisations with the opportunity to be party to the scheme. I do not think that there are widespread concerns about skills and resources among the organisations that fall within the scheme. They are organisations of reasonable capability; we are not talking about small organisations. No one has expressed any concerns to me. If you know otherwise, I would wish to hear about it and to take the opportunity to respond. We want to ensure that, if people have concerns in this area, we provide appropriate support. However, concerns have yet to be expressed to us in those terms.

Alison McInnes

No reservations have been expressed to me; I am just concerned that we should not take anyone by surprise. Given the amount of consultation that there has been, however, that is unlikely. Are any arrangements in place to provide a forum of best practice and an exchange of information among the organisations involved? Would SEPA perhaps facilitate that, as the monitoring body?

Stewart Stevenson

The member will recall that quite a substantial number of the bodies that will be affected by the scheme are public sector bodies. There is a wide range of fora through which public sector bodies exchange best-practice information and I am sure that, especially in the early stages, when the scheme is, in essence, running without financial penalty, they will wish to ensure that we and they understand what works and does not work, and exchange best practice. If there appears to be a lack of opportunity to do that, I will be happy to ensure that the Government facilitates such an opportunity. I will not make a commitment on behalf of SEPA at this stage. If SEPA were considered to be the appropriate body, and if people required assistance with the scheme, I would be happy to take that forward. At this stage, however, there are many opportunities for the public sector in particular to share best practice. There are also a significant number of organisations in the private sector that are taking a keen interest in that agenda.

Alison McInnes

The minister answered my second question, so I shall ask a supplementary question if I may. You mentioned the early part of the scheme a couple of times—you called it dummy running, I think, or running without penalty. Is there a perverse incentive in the first year or two for people not to take any action and to keep their emissions quite high, while you are measuring what the emissions are?

Cathy Peattie

If it does not work perfectly satisfactorily and causes concerns and difficulties—you have given some examples, but other organisations will face the same problems—will there be an opportunity for us to come back and look at the scheme?

Stewart Stevenson

That is the point of the review. It would be a joint review—we are not talking about Scotland undertaking a review alone, as the issues that have been raised in Scotland have been discussed elsewhere in the United Kingdom. Once we get the scheme under way and see the effects of it, if there is a serious problem there will be an opportunity to review it. There is no timetable for a review; the review will be driven by the way in which the scheme works or does not work as well as it needs to.

Stewart Stevenson

I do not want to be picky, but I am not clear about the word “central”. Let us discard that word for a moment. The scheme will certainly be part of determining what our targets should be, but it is one of a range of interventions.

On the climate change agenda, there is, alas, no single thing that we can do along the lines of, “With one bound, he was free.” That simply is not the case. The scheme engages a wider range of players than the European emission trading scheme, which is for the biggest players, and will press down on the biggest emitters by engaging the next level of emitters, so it will play an important part. There are, however, great areas of emissions in Scotland that do not fall directly within the scheme. Agriculture, transport and our buildings are big emitters and will need their own policy interventions. I am, therefore, reluctant to use the word “central” and give the scheme that status, but it is certainly something without which we cannot do.

14:30

Alex Johnstone

I have a brief point that arises from what Cathy Peattie said about Forth Ports. Is the antithesis of that the danger that some operations that are liable to the scheme will be deliberately fragmented so that they are under the limit?

Stewart Stevenson

Do you mean qualitatively or quantitatively? Sorry for asking the member a question, convener. Do you mean both?

Cathy Peattie

I hear what the minister says but, given the responsibilities that SEPA has, it seems strange to me that the size of the organisation has been reduced. Will the Government look at how SEPA performs and monitor whether it is sufficiently well resourced to do the work that is expected of it?

Eric Baster (Scottish Government Climate Change and Water Industry Directorate)

No.

The Convener

You would not say that there is a difference of political opinion between the two Governments about, for example, the role that trading schemes play in addressing climate change.

Shirley-Anne Somerville (Lothians) (SNP)

It is estimated that the CRC scheme will deliver at least 4 megatonnes of carbon dioxide reduction in UK emissions by 2020. Can you provide an estimate of the likely savings in Scotland? How does that fit in with the wider work that is being done in relation to the climate change delivery plan and the climate change targets?

Shirley-Anne Somerville

Is work still to be done on how the CRC scheme will be tied into the climate change targets for Scotland that will be published soon, so that we can get an idea of the impact that the scheme will have on the wider targets?

Stewart Stevenson

I refer you to my opening remarks, in which I indicated that the organisations that the scheme covers account for about 10 per cent of the UK’s emissions. We can reasonably say that the reductions that we are discussing are of that order. For scientific advice and understanding of the detail of emissions, we rely on the UK Committee on Climate Change. As members know, that committee will be in Edinburgh tomorrow to publish its report to us; all of us will be interested in that. At this stage, we know that everything is not yet known, and that more work is needed before we can understand the issue. The Committee on Climate Change has been doing a great deal of useful work, but we do not yet have the type of information that would enable me to give exact answers to what are perfectly reasonable questions.







Charlie Gordon (Glasgow Cathcart) (Lab)

Why is the use of electricity considered the most appropriate measure for assessing inclusion in the scheme? Why is 6,000MWh considered to be the most appropriate value?

Charlie Gordon

The early action metric will recognise good energy management undertaken prior to the start of the scheme. How was that model arrived at?

Stewart Stevenson

I will make a general comment on that. On pricing, there is built into the scheme an economic advantage to coming in early, when it will be cheaper to operate the scheme, rather than later. I will ask John Holmes to talk about the early action metric.

Charlie Gordon

You do not seem that keen to deal with the question, minister.

John Holmes

All three metrics are proxies for other action. I hope that I will not sound repetitive if I am asked to say anything else but, again, simplicity was a key, and the early action metric that we are using was considered to be the simplest.

Over the years and in the consultations that we have had on the scheme, we have considered whether it needed to be expanded. I am not sure whether what I am going to say is in the public domain—as a civil servant, I should not announce something that is not—but I believe that it is. We are looking to expand the scheme beyond the Carbon Trust standard. Ministers did that in response to consultation responses and stakeholders’ input. The scheme will therefore go beyond the current metric. You will have to look to Jonathan Dennis for an explanation of how it will work in clinical detail.

Alison McInnes (North East Scotland) (LD)

The CRC will capture many organisations in Scotland, as you have said, but it will include some that will, in the end, have no need to purchase allowances. How will the Scottish Government ensure that organisations in Scotland have the skills and resources required to meet the requirements of the legislation?

Cathy Peattie

We have heard evidence from Forth Ports and the Scottish Property Federation, which act as landlords for small tenants on long leases. They are concerned that they may be unable to recoup the CRC costs for which they will be liable, and that they will be unable to rewrite long-term leases to reflect those additional costs. There is concern that the scheme does not take into consideration the role of such landlords, and that it is difficult for them to participate because they have no role in the way in which their tenants operate.

Stewart Stevenson

I make the obvious comment that there is, of course, a legal relationship between the parties, which have a shared interest but perhaps also have different interests.

This is an issue that we have talked about. The Scottish Property Federation and Forth Ports have expressed some concerns in the early stages, and I am aware of what they have said. To an extent, those concerns are based on a misunderstanding. For example Forth Ports is a supplier—but not a monopoly supplier—of electricity to many of its tenants, and it is for Forth Ports and others in a similar position to make commercial judgments; it is not for me to second-guess them. Equally, it is open to tenants to source electricity in the most effective way.

The British Property Federation has come up with a guide on CRC for landlords and tenants, and there are opportunities for everyone to ensure that they can recoup their costs and gain the benefits. The scheme is sufficiently simple and straightforward, and the running-in period gives us the opportunity to monitor the practical effects, so, at this stage, I am not concerned that there will be unresolvable issues. It is not something that people in those circumstances can ignore—it will not go away—but there is every prospect that the scheme will work perfectly satisfactorily.

Alison McInnes

I understand the concerns that have been raised by Cathy Peattie. My colleague Simon Hughes raised the matter this morning at Westminster and the minister there undertook to keep a watching brief on the issue and the amendments. I am grateful that you have given a similar commitment. Given that the scheme is new and we are finding our way, would there be a benefit in the Parliament having an annual debate about the scheme so that we can talk about the issues in the early years?

Stewart Stevenson

I make the obvious comment that it is not for me to tell Parliament what it should or should not debate. I say gently that it is a complex scheme and that I suspect—it is entirely a matter for the committees and Parliament—that it is the kind of thing on which a committee’s detailed engagement might be more effective than the wide-ranging kind of debate that we would normally have in Parliament. Nevertheless, I would be happy to support Parliament’s efforts in committee, in the chamber or wherever it decides is appropriate.

Alex Johnstone (North East Scotland) (Con)

After 2013, when you begin to implement the decreasing cap, will the scheme have a central role in the setting of the emissions targets under the Climate Change (Scotland) Act 2009?

Alex Johnstone

Given the range of tools that are available to you, are you confident that we will not find that the rate at which the cap is reduced produces a price that is unsustainable in the market that you hope that the draft order will create?

Alex Johnstone

Does the draft order take in the broad range of potential distortions that might occur in the market—Alison McInnes gave one example—and particularly the concept that some companies might move part of their operation abroad? Will you genuinely be able to take that into account?

Stewart Stevenson

One advantage of working with partners in other Administrations throughout the UK is that we at least eliminate boundaries in the UK that one might wish to cross.

In the passage of the Climate Change (Scotland) Bill, we recognised the principle that you address when we accepted that we should report to the Parliament not simply on our greenhouse gas emissions but on the greenhouse gases that are associated with our consumption—in other words, emissions that jurisdictions outwith the UK and the European Union make on our behalf. That will give us an early view of whether carbon-intensive activity—whatever its nature—is leaking to jurisdictions in which carbon penalties are less severe.

That brings us back to the fundamental point that, although a clear reason exists for us to exercise leadership worldwide and to show people what can be done in a developed and mature economy, we cannot disconnect from what the whole world must do. That is why it is disappointing that the Copenhagen conference did not achieve a legally enforceable agreement that would mean that we were moving together with objectives that are appropriate to each jurisdiction. Until we are there, a risk of leakage always remains. However, the committee should be absolutely sure that we understand that risk. We reflected that in the debate on the bill in June last year and we will, of course, continue to monitor the situation.

It is worth saying that the EU emission trading scheme’s price for a tonne of CO2 is a bit over €12, so it is coming up to the price that we are talking about in the CRC scheme. The prices are therefore aligned at the next level of jurisdiction. Such a price is not yet set internationally, as the price of the allocated accounting units that accompanied the Kyoto protocol has vanished because the United States withdrew from that protocol. We must keep an eye on the position, because the risk exists.

Stewart Stevenson

I simply return to the point that we need to watch such second-level effects—I am not an economist, but I think that they are second level; they might even be third level—and ensure that they do not happen. Of course, to demonstrate that a larger operation had been disaggregated to smaller operations for the purpose of the scheme—as for many other purposes—it would need to be shown that the operations were truly independent of each other in their decision making, financial arrangements and perhaps even ownership structures. I suspect that the costs of such disaggregation would far exceed any benefits that might accrue through avoiding the operation of the CRC energy efficiency scheme.

Marlyn Glen (North East Scotland) (Lab)

It is estimated that the scheme will have a net present value to participants of more than £1 billion. Will the minister outline what savings are expected to be made in Scotland?

Marlyn Glen

Yes, if you can outline both.

Jonathan Dennis

That goes back to the question that was asked earlier. Where the organisations are and the effects of that are yet to play out in the system, as are how the companies react within the mechanisms and how the incentives drive them to make changes in their investments and reduce their energy demand. We will probably have to wait and see what happens with the quantity of savings. When you get into the first stage—the first part of 2013—you will get an idea. Until you start to tighten the cap, it is difficult to say precisely how all that will fall within the UK.

Marlyn Glen

There are still a lot of unknowns. Perhaps I will get the same answer to my next question. Given that the Scottish Government must participate in the scheme, can the minister give us an assessment of the likely financial costs for the Government over the first years of the scheme’s operation?

Stewart Stevenson

I cannot do that at this stage. Right at the beginning, Shirley-Anne Somerville asked me what proportion of the activity was in Scotland. At the moment, we do not have a full understanding of that. Remember that the scheme is intended to be financially neutral. Generally, as participants respond by making investments in improving their energy efficiency and reducing the amount of energy that they use, we expect that the scheme will be self financing. Therefore, it is not a given that there will be a cost to companies and public sector bodies that respond to the dynamics of the scheme; there will be benefits to them.

We know that the long-term trend is for the cost of energy to continue to rise. Therefore, there is a good return for reducing your energy consumption and for using the energy that you consume more efficiently. That way, you will make the savings, which will pay for the investments that we hope that the scheme will drive.

Marlyn Glen

I can see what is behind the scheme and I understand what it ought to be, but are you confident that it will be financially neutral and self financing?

Stewart Stevenson

I am as confident as one reasonably can be at this stage. Is that an absolute confidence? Of course not. It will depend on what a wide range of organisations, including public sector bodies, do in practice. It is pretty generally understood that, in the way that we go about our business—that is a very inclusive term—there are plenty of opportunities to reduce our greenhouse gas emissions, energy costs and energy consumption.

I think that my second ministerial engagement in May 2007 was to speak to the Confederation of British Industry in Edinburgh. In my naivety, I had not expected to go into a room with 60 or 70 businesspeople who were all enthusiastically doing precisely this sort of work for the straightforward reason that they all had substantial inefficiencies in the way that they used energy and the amount of energy that they used, which meant that, for the expenditure to address that, they were getting their money back in an incredibly short time. There is still plenty of scope, right across Scotland, in public sector organisations and private organisations, for that to be so.





In the long run, when you get further down the track, it will get more difficult. Equally, however, the economics will be different, because the cost of carbon will rise. It was not €12 a tonne in the past, but it is today. It is also likely that the cost of carbon will rise, especially as the CRC scheme—and the EU emission trading scheme—will throttle back the consumption of carbon. It should do so in a way that means that there is still an economic incentive for people to respond. People will not respond to this agenda just because they are nice people—they will do so because there is an economic imperative behind it. It is clear to us that the CRC scheme provides that.

Rob Gibson (Highlands and Islands) (SNP)

SEPA is the regulator for the CRC energy efficiency scheme in Scotland. Given that SEPA’s income has dropped as a result of the recession, is the Scottish Government confident that the organisation has the resources to carry out its CRC functions and can work adequately with the regulators in the rest of the UK?

Stewart Stevenson

I am absolutely sure that the leadership of SEPA is up for this extension to its duties, which relates clearly to many other things that SEPA does. As parts of its workload have reduced, it has the resources to take on this work. It is up to the Government to ensure that the funding is in place to enable SEPA to discharge its responsibilities and to balance its books. We will ensure that that happens.

The Convener

As members have no further questions on the SI, I thank the minister and his colleagues for answering questions.

We move to formal consideration of motion S3M-5738.

Motion moved,

That the Transport, Infrastructure and Climate Change Committee recommends that the draft CRC Energy Efficiency Scheme Order 2010 be approved.—[Stewart Stevenson.]

Motion agreed to.

The Convener

We will report that outcome to the Parliament. I thank the witnesses and suspend the meeting briefly to allow for a changeover of witnesses before we move to the next item.

14:43 Meeting suspended.

14:45

On resuming—


A96 (Aberdeen Western Peripheral Route) Trunk Road Order 2010 (Draft)


A956 (Aberdeen Western Peripheral Route) Special Road Scheme 2010 (Draft)


A956 (Aberdeen Western Peripheral Route) Trunk Road Order 2010 (Draft)


A90 (Aberdeen Western Peripheral Route) (Craibstone Junction) Special Road Scheme 2010 (Draft)


A90 (Aberdeen Western Peripheral Route) Special Road Scheme 2010 (Draft)


A90 (Aberdeen Western Peripheral Route) Trunk Road Order 2010 (Draft)

Stewart Stevenson

The committee will be aware that on 21 December, the Cabinet Secretary for Finance and Sustainable Growth announced the decision to authorise the construction of the AWPR. It is a road that will take us another step closer to our aim of bringing the country’s strategic road network to an appropriate standard. Once the AWPR and the other major projects that we have in hand are complete, we will be in a position in which we will be mainly upgrading and improving existing roads rather than building new ones. It is an approach that will fit well with our wider transport policy and environmental objectives.

All statutory orders and a comprehensive environmental statement have been published for the scheme. A public local inquiry was held, and the reporters recommended that the orders be made. An affirmative order procedure in the Transport and Works (Scotland) Act 2007 has been assumed to apply to the AWPR, and a direction to that effect has been issued, requiring the Parliament to consider and approve the instruments. In relation to the AWPR, six schemes and trunk road orders are subject to the procedure. They are before the Parliament for approval. They are associated with a number of instruments that are not subject to parliamentary procedure. The remaining instruments will be made if the Parliament approves these affirmative instruments. I ask the committee to note that the six schemes and trunk road orders come as a package, and that if any one were to fall, the whole scheme would fall.





This is not simply about building a road. The project emerged from a major study into the provision of a modern transport system for Aberdeen, which was carried out by the former Grampian Regional Council and the north east of Scotland transport partnership. It is supported by the current regional transport strategy. That includes investment in park and ride, rail, bus priority measures and commuter plans. The Aberdeen western peripheral route will benefit the whole of the north-east of Scotland and, of course, wider Scotland. I regard it as a significant addition to our strategic road network, particularly for the north-east—one that has been anticipated for a very long time. I am happy to take questions.

Alex Johnstone

I am sure that I am not the first to welcome the proposal. Before I turn to the instruments, I have a matter that it would be inappropriate not to raise. About 25 years ago, a previous Conservative Government spent a lot of time and effort in developing the A90 from Dundee to Aberdeen into a high-quality road. At that time, there were many concerns about the quality of the junctions on the road; the minister is still dealing with the legacy of some of those issues.

Some junctions on the plans before us seem to be perfectly appropriate for their responsibility to carry traffic, but others raise questions. The minister is aware of my concerns about the junction at Stonehaven. There is also the junction between the two legs of the road—the southern legs of the road—at Maryculter. The fact that it is simply a roundabout raises some questions. Can the minister assure me that we are not making the same mistake that we made in the past of designing a road project that will deliver excellent roads but inadequate junctions? If so, we will struggle for years to make them adequate for their purpose in their time.

Stewart Stevenson

The member may not be surprised to hear me say that I would not have been comfortable in bringing forward the proposals that are before the committee today if there were remaining discomforts about the design. The road has not appeared suddenly; it has been subject to extensive research and design work over quite a long period—indeed, since before this Administration came into power in 2007.

The member referred to two junctions. Issues were raised on the Stonehaven junction and we looked at the proposals that were made. We are of the view that the alternative design would not save money, and that it might do the opposite. Given that we were challenged on the design, we looked at it carefully and we are satisfied that it is fit for purpose in terms of traffic needs. The original idea was, of course, for the link road simply to come off the AWPR and go down the A90 past Portlethen and so forth. It was precisely as part of that review that it was established that that part of the A90 would struggle. It would be particularly difficult to extend it to three lanes, let us say, which might have been part of the answer. A direct link road from the AWPR to Stonehaven was added to the design. The initial thought was that it would be a single carriageway, but it is now of greater capability. That part of the design has been thoroughly looked at.

I turn to the Maryculter junction. The design that we have come up with is precisely an indication of how detailed the consideration has been. On each and every junction, we have ensured that we neither under nor overprovide. It is important that we continue to deliver value for the public purse. I am satisfied that we have the appropriate designs in place.

The member asked whether things might happen in future that would mean that we would have to revisit the scheme. Yes, they might. Housing and industrial developments may come along. We are certainly cognisant of the potential for that to happen. That said, we would, of course, expect any developer that increases demand on the trunk road network to pick up a very substantial part of the costs. Developer contributions could continue to be part of the on-going development of the AWPR, as is the case on trunk roads across Scotland.

Stewart Stevenson

Modelling systems do not guarantee outcomes—they are modelling. However, we are not using the modelling systems for the very first time. They go down to a microscopic level, they have been used successfully elsewhere in Scotland and beyond, and I am confident that we have the best available answers in advance of actually getting traffic on the road.

The models look not simply at the road itself but at the consequential effects on other parts of the network, so we have a good understanding of that. Every evidence is that the modelling that we use on our road networks is substantially better than the modelling that has been used in recent years on our rail networks, in which we have substantially underestimated patronage. The evidence from our road networks is that the outcome from modelling has been pretty much on the money.

The Convener

Other members have told you that you will not be surprised to learn of their support for the project. I can reassure you that I will not surprise you, either. You are well aware that I have serious concerns about the project, not just because its cost has been consistently underestimated—even now, its cost is uncertain. A parliamentary committee is being asked to approve the project without knowing what it will cost and without knowing even what final cost will be borne by local authorities, in an area in which there have already been pressures on public services as a result of the financial situation to which you have referred.

However, I also have concerns about the project on the grounds that the environmental impact has not been properly considered in the selection of the route. You will be well aware that a complaint has been made to the Aarhus convention compliance committee. The complaint has been deemed admissible and is under investigation. The European Commission is also investigating a complaint about a breach of the European habitats directive. Sufficient concerns have been expressed by some organisations that you can well anticipate the possibility of a judicial review. Leaving aside fundamental questions about whether the AWPR will do anything beneficial to reduce congestion in Aberdeen and whether it will harm the environment in the wider area, my question is about the timing. Why is Parliament being asked to approve the project when two investigations are under way into complaints—one under the European habitats directive and one under the Aarhus convention—and there is the possibility of court action to come? Is that not premature?

The Convener

It has been estimated that in global terms, the increase in carbon dioxide emissions by 2026 will be 9 per cent. Is that consistent with the Government’s intention to make the ambitious cuts that Parliament has agreed to in legislation?

The Convener

You have not surprised me, either. We are unlikely to agree on the issues.

Do members have final questions on the package of instruments?

The Convener

I thank the minister for his evidence on the instruments.

Agenda item 4 is formal consideration of motion S3M-5729, which calls on the committee to recommend approval of an affirmative instrument—the A96 (Aberdeen Western Peripheral Route) Trunk Road Order 2010. I ask the minister to speak to and move the motion.

The Convener

The suggestion is helpful. Unfortunately, I am advised that our procedures require us to consider each instrument separately.

15:15

The Convener

There will be a division.

For

Glen, Marlyn (North East Scotland) (Lab)

Gordon, Charlie (Glasgow Cathcart) (Lab)

Johnstone, Alex (North East Scotland) (Con)

McInnes, Alison (North East Scotland) (LD)

Peattie, Cathy (Falkirk East) (Lab)

Somerville, Shirley-Anne (Lothians) (SNP)

Against

Harvie, Patrick (Glasgow) (Green)

The Convener

The result of the division is: For 6, Against 1, Abstentions 0.

Motion agreed to.

The Convener

The question is, that motion S3M-5730, in the name of Stewart Stevenson, on the A956 (Aberdeen Western Peripheral Route) Special Road Scheme 2010, be agreed to. Are we agreed?

Members: No.

The Convener

There will be a division.

For

Glen, Marlyn (North East Scotland) (Lab)

Gordon, Charlie (Glasgow Cathcart) (Lab)

Johnstone, Alex (North East Scotland) (Con)

McInnes, Alison (North East Scotland) (LD)

Peattie, Cathy (Falkirk East) (Lab)

Somerville, Shirley-Anne (Lothians) (SNP)

Against

Harvie, Patrick (Glasgow) (Green)

The Convener

The next motion for consideration is S3M-5731.

Motion moved,

That the Transport, Infrastructure and Climate Change Committee recommends that the A956 (Aberdeen Western Peripheral Route) Trunk Road Order 2010 be approved.—[Stewart Stevenson.]

The Convener

The next motion for consideration is S3M-5732.

Motion moved,

That the Transport, Infrastructure and Climate Change Committee recommends that the A90 (Aberdeen Western Peripheral Route) (Craibstone Junction) Special Road Scheme 2010 be approved.—[Stewart Stevenson.]

The Convener

The question is, that motion S3M-5732, in the name of Stewart Stevenson, on the A90 (Aberdeen Western Peripheral Route) (Craibstone Junction) Special Road Scheme 2010 be agreed to. Are we agreed?

Members: No.

The Convener

There will be a division.

For

Glen, Marlyn (North East Scotland) (Lab)

Gordon, Charlie (Glasgow Cathcart) (Lab)

Johnstone, Alex (North East Scotland) (Con)

McInnes, Alison (North East Scotland) (LD)

Peattie, Cathy (Falkirk East) (Lab)

Somerville, Shirley-Anne (Lothians) (SNP)

Against

Harvie, Patrick (Glasgow) (Green)

The Convener

The question is, that motion S3M-5733, in the name of Stewart Stevenson, on the A90 (Aberdeen Western Peripheral Route) Special Road Scheme 2010, be agreed to. Are we agreed?

Members: No.

The Convener

There will be a division.

For

Glen, Marlyn (North East Scotland) (Lab)

Gordon, Charlie (Glasgow Cathcart) (Lab)

Johnstone, Alex (North East Scotland) (Con)

McInnes, Alison (North East Scotland) (LD)

Peattie, Cathy (Falkirk East) (Lab)

Somerville, Shirley-Anne (Lothians) (SNP)

Against

Harvie, Patrick (Glasgow) (Green)

The Convener

That concludes our consideration of the orders. I thank the minister and his officials.

15:18 Meeting suspended.

15:23

On resuming—

Alex Johnstone

Finally on this subject, if we are assuming that some presumption for growth has been built in—that the road is not designed to deal simply with the traffic that is currently in the area or is expected on the day the road opens—how many years of tolerance are built into the construction of the road before we have to consider alterations if traffic grows?

Stewart Stevenson

I will make a couple of observations. We use the design manual, which has appropriate figures for the design that lead us to where we need to be. It is also part of our wider agenda to ensure that we do not see unconstrained traffic growth.

At present, we have a 15-year window for the design that we have in front of us. We will see the cost of private transport continue to rise as the cost of fuel rises, we will see a continued investment in the public transport system, and we will continue to see people making choices about their transport that are different from what they are at the moment. However, the basic answer to your question is 15 years.

Stewart Stevenson

We have certainly reviewed the design of the network. At the Blackdog end, developments will be subject to planning. The dualling of Balmedie to Tipperty—or perhaps the other way round; it does not really matter—will have an impact on that. We have taken account of that, and we are satisfied that the design is fit for purpose.

Complexity is not something that we introduce because we like to play with the toys and design box. There are a lot of different kinds of traffic coming from different directions to the north of Aberdeen, and the design is appropriate for the need.

If we were to change the design and, in particular, the land take, we would almost certainly have to have another public local inquiry, which would substantially delay the scheme before us. We are as satisfied as we reasonably can be that we have a design that is fit for purpose.

Alison McInnes

I am very heartened to hear that. There is a real opportunity to bring forward the schemes, particularly at Bucksburn and Portlethen, to make a saving and to deliver a national transport priority as well as a regional scheme.

You touched on the funding. I do not know whether it is appropriate for me to ask you about that. Last time I asked you, you said rather flippantly that you would pay for the scheme with money; I am glad to hear that you have developed that thinking a bit further. Can you give us an update on the funding scheme and any recent discussions that you have had with the joint proposers of the scheme—Aberdeen City Council and Aberdeenshire Council?

Stewart Stevenson

I do not recognise the figure that the convener has quoted. We have estimated some 10 kilotonnes net addition as the effect of the AWPR. I compare and contrast that with the 340 kilotonnes per annum benefit that was discussed in the earlier agenda items. It has always been said, by me and by other members of the Government, that the totality of our programme will lower our greenhouse gas emissions. We do not expect that every single project will reduce emissions. However, when we take actions that will result in an increase in emissions—in this case, 10 kilotonnes—it is necessary that we have balancing actions to ensure that there are reductions. The CRC energy efficiency of the order of 340 kilotonnes per annum is precisely such an entry in the carbon balance sheet.

Stewart Stevenson

I gently disagree with you. You posit a false choice. We are of course making substantial investments in public transport. I referred to the increase in bus service operators grant that we have agreed with the Confederation of Passenger Transport, which we announced today and which we guarantee for the next three years. That is one example of continued investment in public transport.

We have £2 billion a year of Government spending that can contribute directly to the climate change agenda. We are undertaking the biggest electrification programme on our railways for generations. We are doing a great deal. In my answers to Alison McInnes, I highlighted the work that we are doing with Nestrans and others on park and rides. We are doing such work throughout Scotland. I do not want to be absolute, but my recollection is that 11 new park and rides will open before the end of the financial year in Strathclyde partnership for transport’s area. Throughout Scotland, a range of interventions will help.

As part of the transport strategy, the AWPR will be a catalyst that enables us to deliver—for example, through the 20 per cent reduction in traffic between the A90 and the A96—a greatly improved environment for buses, public transport and cycling in Aberdeen. That will improve the environment and reduce carbon emissions.

The Convener

The next motion for consideration is S3M-5730.

Motion moved,

That the Transport, Infrastructure and Climate Change Committee recommends that the A956 (Aberdeen Western Peripheral Route) Special Road Scheme 2010 be approved.—[Stewart Stevenson.]

The Convener

The question is, that motion S3M-5731, in the name of Stewart Stevenson, on the A956 (Aberdeen Western Peripheral Route) Trunk Road Order 2010, be agreed to. Are we agreed?

Members: No.

The Convener

The result of the division is: For 6, Against 1, Abstentions 0.

Motion agreed to.

The Convener

The result of the division is: For 6, Against 1, Abstentions 0.

Motion agreed to.

The Convener

The result of the division is: For 6, Against 1, Abstentions 0.

Motion agreed to.

The Convener

The next motion for consideration is S3M-5734.

Motion moved,

That the Transport, Infrastructure and Climate Change Committee recommends that the A90 (Aberdeen Western Peripheral Route) Trunk Road Order 2010 be approved.—[Stewart Stevenson.]

The Convener

The result of the division is: For 6, Against 1, Abstentions 0. Another shock result.

Motion agreed to.

The Convener

I welcome a new panel of witnesses for the next agenda item, which is an evidence session on a series of Scottish statutory instruments relating to the Aberdeen western peripheral route. Members will have the relevant documents in front of them. We will take evidence on the package of instruments as a whole before moving on to consider them individually. I welcome, again, Stewart Stevenson, who this time is joined by Caroline Lyon, head of solicitors in the transport, culture and procurement division at Transport Scotland; Jim Vance, head of design and development at Transport Scotland; Robert Galbraith, director of operations at Jacobs UK; and Dr Pete Gilchrist, divisional director at Jacobs UK.

The instruments are subject to affirmative procedure, which means that the Parliament has to approve them before the provisions can come into force. I thank the minister’s officials for making available to the committee additional background information on the instruments. I ask the minister to make any introductory remarks before members ask questions.

Alison McInnes

Just before we move away from the topic of junctions, minister, you may recall that I made representations to you on behalf of a constituent, who suggested that the Blackdog junction and, in particular, the arrangements for the village were overly complex for the traffic movements there. You advised that, as you were in the inquiry stage, you could not answer me at that time but that you would consider the issue at the end of the inquiry. Have you been able to consider it?

Alex Johnstone

Is the minister confident that the traffic modelling system that was used to design the junctions is robust enough to stand up to the test that it was set?

Alex Johnstone

Thank you very much.

Alison McInnes

You said in your opening remarks that the AWPR is part of a modern transport system. I am delighted to see the statutory instruments in front of us, having spent 15 years of my life speaking to five different transport ministers about the road. It is very nice to have reached this point. However, part of that was that we would have a ring of park-and-ride schemes around the city, feeding in and out of the road. In particular, I want to talk about the Craibstone junction, where there is a proposal for a park and ride that will bring significant improvements to the road access to the airport. Nestrans has suggested that it is prepared to contribute around 70 per cent of the costs of that scheme, which leaves only a little bit of money to be contributed by the Scottish Executive. If we were able to combine that park-and-ride scheme with the design and construction of the road, there would be significant savings in delivering it. Have you discussed that with Nestrans? Are you open to negotiations on it?

15:00

Stewart Stevenson

We have certainly had discussions with Nestrans. I will have one of my periodic meetings with Nestrans in a matter of weeks—I cannot give you the exact date, but it will happen very shortly. We are considering the possibility of including within the non-profit-distributing model provision for building additional park and rides and other transport interventions.

The Craibstone park and ride would improve access to the airport. It is of course quite close to the AWPR, so it is the one that fits most naturally. However, we are also looking at other opportunities a bit further afield. The AWPR is part of trying to make the transport infrastructure in the north-east work better. We are looking to ensure that we draw together as much as is possible. Let me qualify that by saying that, of course, I cannot make assumptions about planning in relation to park and rides such as Craibstone. I do not wish to suggest to the committee that that issue is yet dealt with. However, there is a very good chance that we will be able to bring together the park and ride within the scheme. We will certainly try to do so.

Stewart Stevenson

We have said for the best part of two years that it will be an NPD scheme; I keep being asked about it, but it remains an NPD scheme. We know, through the memorandum of understanding that was signed some considerable time ago, that Aberdeen City Council and Aberdeenshire Council will each contribute 9.5 per cent of the cost of the AWPR. That does not include the fastlink to Stonehaven, which is to be funded 100 per cent by the Government.

The memorandum of understanding is in place. It is up to the councils to decide whether to participate in the NPD scheme—they are not required to do so—in providing their 9.5 per cent. There has been discussion, although not recently, of their paying it up front as a capital subvention to the scheme. That option is available if the councils feel that it is the right way to go. They can decide that individually—they do not have to make the same decision. In the current climate, it is probably more likely that they will find that participating in the NPD scheme and paying up over 30 years will be the most attractive option.



The question that I was asked was about the funding more generally, not simply the position of the councils. We have considered a range of options, and NPD is the one that appears to be the most cost effective. It is a model with which we are familiar. We have had some preliminary talks with one particular funder, and there is interest in participation in the scheme. In times of financial stringency, lenders especially look to put money into projects that have a guaranteed and long-term return. There is little better in the way of projects of that character than those that are underpinned by Governments. There is substantial interest in a number of the schemes that the Government is progressing, and I expect this scheme to attract a great deal of interest at the funding level.

Stewart Stevenson

You will be aware that the Parliament’s standing orders prevent my commenting on any live legal action so I will not do so, save to say that we are confident that an environmental assessment of the project, the processes that we have adopted in our engagement with the community over a long period, and a public local inquiry that is being conducted meet every requirement that exists legally.

The Convener

Are you not at all concerned about the opportunity cost of such a commitment, when public transport schemes that could be funded with the same resources could have a benefit in carbon dioxide terms as well as benefiting people’s transport needs?

Alison McInnes

The minister mentioned the detrunking instruments, which are not part of the package. Has agreement been reached about improving the roads that are involved before they are detrunked? I am thinking of the Haudagain roundabout in particular.

Stewart Stevenson

I will not answer that question in the terms in which it was posed, but I will repeat the point of substance. The financial responsibility will remain with the Government until it is discharged. That is independent of whether the roads are detrunked.

I am not trying to be obtuse; I just do not want to create a procedural difficulty when what matters is that the Government steps up to financial responsibilities. We will not detrunk without negotiation and discussion with Aberdeen City Council, which will take over responsibility for what will become a local road.

Stewart Stevenson

I am happy to do that, but may I crave an indulgence by asking how you intend to deal procedurally with the six motions in my name? Given that I said that the instruments must stand or fall together, can they be dealt with in a single vote, with the permission of you and the committee? It is for your clerk to advise you on that. A single vote would provide certainty, which might be a useful outcome.

Stewart Stevenson

If that is the advice, I can hardly disagree with it. In that case, I will make no further remarks.

I move,

That the Transport, Infrastructure and Climate Change Committee recommends that the A96 (Aberdeen Western Peripheral Route) Trunk Road Order 2010 be approved.

The Convener

Thank you, minister. I suspect that we will not agree on this and the other orders, so let us rattle through them.

The question is, that motion S3M-5729, in the name of Stewart Stevenson, on the A96 (Aberdeen Western Peripheral Route) Trunk Road Order 2010, be agreed to. Are we agreed?

Members: No.

The Convener

The result of the division is: For 6, Against 1, Abstentions 0.

Motion agreed to.

The Convener

There will be a division.

For

Glen, Marlyn (North East Scotland) (Lab)

Gordon, Charlie (Glasgow Cathcart) (Lab)

Johnstone, Alex (North East Scotland) (Con)

McInnes, Alison (North East Scotland) (LD)

Peattie, Cathy (Falkirk East) (Lab)

Somerville, Shirley-Anne (Lothians) (SNP)

Against

Harvie, Patrick (Glasgow) (Green)

The Convener

The next motion for consideration is S3M-5733.

Motion moved,

That the Transport, Infrastructure and Climate Change Committee recommends that the A90 (Aberdeen Western Peripheral Route) Special Road Scheme 2010 be approved.—[Stewart Stevenson.]

The Convener

There will be a division.

For

Glen, Marlyn (North East Scotland) (Lab)

Gordon, Charlie (Glasgow Cathcart) (Lab)

Johnstone, Alex (North East Scotland) (Con)

McInnes, Alison (North East Scotland) (LD)

Peattie, Cathy (Falkirk East) (Lab)

Somerville, Shirley-Anne (Lothians) (SNP)

Against

Harvie, Patrick (Glasgow) (Green)

The Convener

The question is, that motion S3M-5734, in the name of Stewart Stevenson, on the A90 (Aberdeen Western Peripheral Route) Trunk Road Order 2010, be agreed to. Are we agreed?

Members: No.