Climate Change, Environment, and Infrastructure Committee

Diolch, Cadeirydd. Bore da, Gweinidog. Could I begin by asking you to set out the key Welsh Government policy decisions that led to Wales meeting and exceeding both the carbon 1 budget and the 2020 target? And could I ask you also just to respond to the very good evidence session we had with Lord Deben, where he asserted that the 2020 target and the carbon 1 budget were exceeded because they were too low, they were insufficient?

Yes, thank you, Huw. I'm familiar with Lord Deben, obviously. We have had a lot of interaction with him and with the committee. Yes, so, the final statement that we issued was focused on the first carbon budget only, and although the Environment (Wales) Act was introduced in 2016, the first plan was only published in 2019 because we were out of synch for that first legislative cycle. So, it is important for the committee to get the timeline right. So, the first plan was in place for less than two years of the first carbon budget. So, it's important to take that into account. Also, most Welsh emissions occur in non-devolved policy areas. So, we rely on UK Government action to deliver emissions reductions in several key areas, which I'm sure the committee will come on to later on. So, we need absolutely to work in harmony with the UK Government so that they continue to deliver policies that reduce emissions here in Wales.

The final statement that we put out explains the monitoring and reporting system. I will say, Huw and Chair, it's incredibly technical. So, I usually like to get across all of this myself, but I'm going to rely on my officials for some of the technical expertise here, because you really do need to be a technical expert in some of this stuff. So, depending on the level the committee wants to go into, officials will fill in some of that. I'm sure you know that the final statement is split into sectors. So, power, the transport industry and waste are the main contributors to Wales's success over carbon budget 1. So, the final statement goes into our policies and which achieved the desired direction of travel, and they provide a qualitative update, but we're continuing to improve the monitoring and reporting system as we go forward.

There have been a number of areas where we have made progress: implementing energy consenting powers arising from the Wales Act 2017, the 'Planning Policy Wales' documents, and the Welsh national marine plan are all now in place. In January 2021, alongside other Governments of the UK, we implemented the UK emissions trading scheme, and, in terms of existing homes, the Warm Homes scheme has seen increases in the funding provided and its reach. We also have—and I know the committee has discussed this with me a lot of times—the innovative housing programme, targeted at new homes, which has provided grants totalling over £180 million, or just over 2,000 homes, between 2017 and 2020. We've also got support in the public sector for schemes like the Welsh Government energy service, which had £50-something million for energy efficiency public sector projects between 2018 and 2020. And the big piece for Wales, of course, is reducing the amount of waste sent to landfill, encouraging the adoption of what we call the blueprint waste collection systems, which is the Welsh Government's recommended way to collect household waste in Wales. We've had some really good successes, even just very recently, as authorities finally swap across to blueprint, having been able to demonstrate its efficacy. And we've also, of course, increased the number of social homes compliant with the Welsh housing quality standard.

Going to Lord Deben's particular point, the 2020 target and carbon budget 1 were placed in regulation in 2018 and they were entirely based on the Climate Change Committee's advice. I guess it's a self-criticism in a way. We agree they were too low for net zero, because we only passed net zero into law in 2021. It wasn't possible to amend the 2020 target or carbon budget 1 to align with net zero, because originally the climate committee's advice to us was that we would not get to net zero. We set the 2020 target in 2018, so we were on the pathway to the original 80 per cent reduction by 2050. That followed their recommendations at the time. Then, obviously, we received advice on the net-zero target in December 2020.

For carbon budget 2, we followed the CCC's latest recommendations to make it more challenging. We accept the view that Wales will need to outperform the revised CB2 to be on track for CB3 and beyond. Just to put that the other way around, we know we will make carbon budget 2, but we need an awful lot to get to carbon budget 3. We need to well exceed the targets to be on track for carbon budget 3. The latest advice in December 2020 recommended we increase carbon budget 2 from a 33 per cent average reduction to 37 per cent, because the Aberthaw power station had closed earlier than had been allowed for in its original advice. They also advised us that the economic uncertainty arising from the COVID pandemic, and the significant influence of UK Government action on Wales's short-term emissions, meant they did not recommend setting a higher carbon budget 2 in law. But they did recommend that we outperform the 37 per cent statutory target, to get on track for carbon budget 3, which is 57 per cent, and the 2030 target of 63 per cent. Again, to put that the other way around, Huw, we'll need to do twice as much in the next 10 years as we did in the last 20, so it's quite scary stuff.

I think, broadly, we agree with Lord Deben, but we were following their advice. I think this demonstrates that the world is changing in this regard. We are getting a much better grip of what needs to actually happen and some of the really quite radical changes that will have to be made to get anywhere near these targets. And again, Chair, and Huw, just to say, if you want more technical detail there, I've got various officials on the call who are much more expert than me in the technical details of it.

Minister, thank you very much for that. It's a comprehensive and a very frank assessment of where we are, why those targets were set, why they were exceeded, but how much further we need to go. Others will go into some more detail on the technical aspects that your officials might want to help with, but can I just ask you—? You seem to be very, very clear that what the Welsh Government needs to do is not rest on the individual COPs and not rest on the individual five-year cycles or the targets for 2030. There is a genuine attempt, it seems to be, from what you're saying in the Welsh Government, to ratchet up, as the phrase goes, year by year and to adjust and to accelerate the level of ambition year by year.

Very definitely, Huw. This isn't some kind of weird technical exercise; the world is changing around us and we need to do this. Every single nation has to play its part. There's no good pointing the finger elsewhere; we all have to play our part. And we can only do that on a global stage if we are doing everything we can do at home. And so, absolutely, we have to do that. And let's just be clear: these are not easy, nice-to-have things; a lot of these things are very, very difficult and they need a substantive change across society to get there. But I'm not at all convinced—. I don't want to be too fearmongering; I don't think apocalyptic talk is necessarily good. But, genuinely, the world is in real danger here and we need to really, really change what we're doing.

Thank you, Minister.

Thank you, Minister. Janet.

You may have touched on this, but I didn't quite catch whether you had. Why did you carry over the surplus emissions from carbon budget 1 to 2, especially when the Climate Change Committee's unequivocal advice was that there shouldn't be a surplus carry-over at all?

Well, we haven't carried the surplus over, Janet, so—

You asked to carry it over, didn't you, Minister?

No. We explored all of the options in front of us, including whether we should carry it over, and we explored with the committee whether carrying forward a surplus would be sensible. We needed to test our situation against all the circumstances that might arise in the future. This is a bit of future-gazing, isn't it? So, in one world, you'd say, 'Well, do carry the surplus over because we don't know what's going to happen, and we need to be able to make sure that we can do it—it's a huge change.' But I'm very pleased to say that, having gone through all of the arguments in the Cabinet about the pluses and minuses of both of them, and following my very firm recommendation, we did not carry it over.

It goes back to the answer I finished the last question with, which is that this is not a technical exercise—this is something we absolutely have to do. If it was a technical exercise, then of course we should carry it forward, we should take all the leeway we've got. But it's not a technical exercise; it's an exercise in changing what we're doing. And so we didn't carry it forward. But of course, rightly, we explored all of the various options before making that decision.

That clarifies it for me. Thank you.

Thank you. Joyce.

Good morning, Minister. You've already alluded to the challenge in reaching carbon budget 3, and I'm sure that that's the case. What I would like to explore is what are the main challenges that we face as a nation to get to that carbon budget 3.

Thank you, Joyce. I mean, gosh—many and various. I just think it's worth pointing out here that reducing carbon isn't the only problem that we face. Reducing carbon is fairly easy if you don't give a stuff about anything else. So, if you don't care about jobs and society and the way that people run their lives, then we could just do it tomorrow. We could shut down Tata Steel and all the power stations and all the rest of it and we'd all go back to not having any steel and not having any power and we'd have a lot less carbon. I'm being facetious, just to make the point, because clearly that is not the way we want to do it. We put social justice and a fair transition at the heart of our carbon-reduction policies. We need to do this in conjunction with also worrying about our economy, our environment and our social equity. And that's the problem, Joyce—trying to calibrate it so that you have a transition arrangement, so we get where we want to go, but we take everyone with us, and, frankly, the burden of it doesn't fall on the shoulders least able to bear it. The people with the most challenging socioeconomic conditions now actually have the lowest carbon footprints, but, generally speaking, policies in the past have not reflected that, so we really, really need to make sure that we can do all of that.

We've got an average reduction of 37 per cent against baseline over the five-year period of the second carbon budget. The plan has 123 policies and 100 pledges for action—I've said that so many times now, it's like a mantra. Our modelling at the time of publication showed that delivering that plan would actually put us on track to outperform it. We thought we'd get to a 44 per cent reduction against the baseline. But it's a Wales plan—it's important for the committee to really understand that this is a Wales-wide plan. It requires actions to be taken by others, including the UK Government, not just the Welsh Government. It requires actions to be taken by many parts of our society, not just the Welsh Government. We need to make sure that the conditions are in place for everyone to step up to that.

The CCC told us in 2020 that, by around 2050, about 60 per cent of the changes needed in Wales were influenced by powers mostly reserved to Westminster. In Net Zero Wales, we very much put that on the UK Government's plate, making sure, for example, that the real levels of investment are there to get our industries that we rely on entirely, like the steel industry, to transition to clean and sustainable futures. There are many others; we've met with the cement industry, and the oil and gas industries down there in your neck of the woods, Joyce. All of these industries want to work as fast as they can to be as carbon neutral as they can manage it, along a trajectory. But we also don't want to push them out of business, and, very importantly, we don't want to export our emissions. You could shut them all down in Wales, and then just import stuff from elsewhere, but we know that steel imported from elsewhere has higher carbon footprints than we have. We're very keen that we don't export our global footprint in that. We're on trajectory for that. And then, carbon budget 3 has a 58 per cent average reduction, and the 2030 interim target is set at 63 per cent reduction. So, we need to get carbon budget 2 under way, but also we need to make sure that we've got the increase in ambition for carbon budget 3.

The committee is watching us make some very difficult decisions, and they are not easy and not welcome. Changes in transport behaviour, for example, are very, very challenging, and you can see the reaction—it's dividing opinion in Wales, isn't it, the roads review, the 20 mph thing. I have at least as many people urging me to go faster as I have people telling me that I've lost possession of my senses on all kinds of social media platforms. But we have to do these things if we're going to get anywhere near these carbon budgets. Setting the targets is the easy part, isn't it? It's actually carrying through the necessary changes in the way that we live our lives and the way that we put our investment in order to get anywhere near meeting these targets. And I can't emphasise to the committee enough that this isn't about setting ambitious targets—it's about delivering it, and that is not easy.

Thank you. That was a very clear message. Of course, it's not easy. If we are going to transition in terms of energy production, there are two sides. One is the transition into the cleaner, greener energy, because nothing is carbon neutral, but also the production of whatever we decide to use to deliver that for us. Because, again, if we're importing everything that we use, there's going to be a carbon cost to that. So, how aligned is this with a few things—the skills agenda in the first place, but also the manufacturing of those goods?

One of the biggest things that we've been doing by way of changing the way that the Government looks at this was the creation of my portfolio, of course, which brings together a whole range of levers—power, transport, housing, waste, buildings, forestry, et cetera—to try and shift the dial on how we pull a lot of these things together, and trying to get a focus on some of the most difficult areas. We're also looking at our global footprint. Rebecca Evans and Vaughan Gething have been looking at procurement strategies, supply chain strategies, and so on. Yesterday in the Senedd in the afternoon, Vaughan introduced the net-zero skills plan, which, obviously, we've worked on together across the Government. We have a standing item on a number of civil service programme boards, which Lucy and the others can talk about, in terms of pushing other parts of the Government into doing the right thing as well.

We've got some real difficulties here. The committee will be very, very familiar with this. Yesterday in the cross-party group, I spoke with Jenny about the real problem that we have with decarbonising thousands of homes and farms. That's a very good example of what I'm talking about—meeting a target and not caring about somebody and meeting a target and caring about somebody are very different. I could decarbonise housing in Wales by moving everybody to electricity. I would also drive enormous numbers of people into fuel poverty by doing that, because we know that heating homes with electricity in current global circumstances is more expensive than it is to carry on heating them with gas. We don't want to do that.

We have a large number of problems with farms all over the place, having to work with the farmers about decarbonising, and, indeed, what do we even mean by that—what measure are we using, what are they supposed to be measuring their carbon footprint as, and against what targets. We're working with them. We have to find ways of storing electricity at volume and deal with seasonal variations for people like farmers, and, indeed, for domestic suppliers, and we have to do that in a way that doesn't destroy the planet at the same time. None of these things are easy. Batteries are not the best environmentally friendly sources of things. There is a lot of intertwined complexity in this, and trying to steer your path through the difficulties of all of it is really important.

I'm the politician in this, and I hope, Chair, we will get round to asking some of the officials about some of the technical details. But for me, it's about just saying what I’m saying now—it’s about the leadership in saying, ‘We must find this path’. We must find this path that allows our people to come with us on this journey and make it a sustainable path for them. I don’t want to make everybody feel poor. I don’t want to drive the farmers out of business because they can’t afford their energy prices. We want to work with them to find a way to do this that means that we have a sustainable system into the future. You’ll know that the new sustainable farms scheme is a really important opportunity for farmers here, and there’s loads going on in that space—you need to get Lesley Griffiths to come and talk to you about some of that. But again, we’ve worked very closely together on making sure that that’s calibrated, and we want to reward farmers for doing the right thing. My colleague Lee Waters—I’m sure you’ve heard him say on a number of occasions that it’s our job to make it harder and harder to do the wrong thing and easier and easier to do the right thing, and that’s the thread that runs through all of these technical papers on how we get to various carbon budget targets.

Chair, I don’t know if you want me to ask a couple of the officials to give you some technical detail, or whether you want to wait till later on in the session.

Later.

Yes, okay. We’ll pick up on those later, if you don’t mind, Minister, because I have a few Members wanting to come in now. So, Janet.

Thank you, Chair. So, what mechanisms are in place to ensure that you do have a climate-focused cross-Government policy? I know that you speak lots in your own portfolio, and it’s fair to say the Minister for agriculture does the same—we hear about climate change, but we never hear it about our health service. We know that there are problems in the health service, but they’ve still got their responsibilities regarding their aims towards carbon zero. So, how do you get that whole-Cabinet approach to supporting you, if you like, in us achieving those goals?

Yes, sure, Janet. So, as I said, the portfolio itself brings together a whole range of things that weren’t together before, and that’s driven some change. I obviously work very closely with colleagues right across the Government. We’ve got a whole series of internal governance arrangements to develop and deliver Net Zero Wales. I really want to call—well, John Howells, if he’s able to do it, with his technical difficulties, but otherwise I’m sure that Jon Oates will do it—to just talk to you a little bit about how the cross-Government Cabinet is supported by the portfolio boards that the climate change lead officials take part in, and its chaired, and John chairs that, so I want to get him to do that if you don’t mind, Chair.

We have a termly discussion on climate change right across the Cabinet. We have focused arrangements to monitor and drive the delivery of both the programme for government and net zero, and we track the targets and budgets on an annual basis, and we have a wider suite of well-being indicators, and there’s a well-being of future generations indicator on greenhouse gas emissions that I’m sure the committee’s familiar with. And I have what we call bilaterals—I love all this jargon for inter-governmental relationships. I meet with colleagues, one on one, to discuss what they’re doing in each of their portfolios, and I’m about to start chairing the portfolio board periodically as well just to push the civil servants a bit faster. So, if you take health, for example, Eluned and I very recently had a long discussion about how we’re going to help decarbonise the hospitals, and what can be done to move them, and I had the real pleasure of opening the solar array that now powers Morriston hospital in Mike Hedges’ constituency. Working with the health service on investments of that sort to decarbonise the health service and actually reduce our energy bills at the same time is one of the big things that we’ve been talking about in health, and then you saw Vaughan Gething doing the net-zero skills plan yesterday, and Jeremy and I have discussed this on the curriculum. But, you know, there are a lot of conversations going on across the Government.

But, Chair, I hope you’ll indulge me and let me let one of the Johns just tell you about the internal civil service structures. I think you need to understand that to get the picture.

Sure. And I understand that John Howells is on the call; his video is switched off because it allows for a stronger audio feed so he can respond. So, you tell us, Minister, who you think is most—

Yes, John Howells, if he can do it, please.

Can you hear me?

Yes, we can. Thank you, John, yes.

Thank you, Chair. Yes, the Minister’s absolutely right—the portfolio board brings together colleagues from right across Government with my department holding their feet to the fire, as we say, about progress on a regular basis. We’re also working with each department on the development of pathways as to how they’re going to meet their targets for net zero. But I think the other aspect of our work that I’d want to emphasise is that we’re also engaging within each of those portfolio areas, and actually, the health service is striking for the enthusiasm that the declaration of a climate emergency has generated right across the health service. There are very difficult questions about responding in terms of the capital that will be involved in transforming hospitals, but the enthusiasm that we've discovered at operational level is quite remarkable, given all the other things that the health service has to grapple with at the moment.

We're also really encouraged by the local authority response, which we bring together under something called the local government strategy panel on decarbonisation, which means that each of the individual local authorities are discussing with us on a regular bimonthly basis progress towards these challenging targets. They're also working with us to develop the monitoring regime, and, once again, we seem to be tapping into real enthusiasm across the public sector. We've got an awful long to way to go, but I'm really encouraged by the response we've had so far. I don't know whether Jon or Lucy want to add anything to that.

Would Jon like to come in?

Certainly on the public sector side, I've been involved in work trying to stimulate the public sector to act with greater urgency for five or six years now, and, certainly, it's night and day compared with what it was five or six years ago. There's lots of energy. It is very, very complex; it's very difficult. There are public bodies scratching their heads about, 'Where do I focus my attention?'

I think we've aided that by implementing the voluntary reporting mechanism for the larger public sector bodies to undertake on an annual basis. That is not only showing what they already knew, i.e. what kinds of emissions we get from our buildings, but also highlighting the kinds of emissions they get from the fleet, from people commuting, from the goods and services that they procure, and the grants that they push out, as well. So, that is creating a greater understanding of the challenge, but also better opportunities for bang for buck, as it were, or effort to decarbonise. So, as John says, an awful long way to go, certainly in the public sector, but I see a very energised public sector from top to bottom of these organisations. There's some asymmetry, clearly. Not all organisations are progressing as fast as the fastest, but there's lots of energy.

And we have the NHS and the Welsh Local Government Association coming in for our next meeting, I believe, to look specifically at the decarbonisation of the public sector, so I'm sure that we can pick up on some of that with them. Janet, you wanted to come back in.

Yes, just a small one, Minister. When you talk about transforming hospitals, I know I've raised this before, but, certainly, in north Wales, Maelor, Gwynedd and Glan Clwyd all have hundreds of housing units. So, so that it's on record, would you just, if you like, consider when you're talking about the health service in terms of net zero, there are properties there that are ideal pilots for the decarbonisation, because the majority of them need redoing; a lot of them are empty. I've raised it with you before. Maybe you could incorporate the decarbonisation of that housing stock as well.

Yes, Janet, you've raised this with me a number of times, and I've had a conversation with the health service about it. I'm afraid we're having difficulty tracing quite the number of homes you talk about and the empty ones. So, perhaps you wouldn't mind giving me better detail in—

I can, yes.

—you know, writing to me with better detail. I'm more than happy to have a look at it, but I'm struggling to trace it from our various interactions in public, I'm afraid, so, perhaps if you could write to me with the details, I'm more than happy to have a look at it.

Yes, I'm happy to do that.

Fine, thank you. Can I just ask one supplementary, as well? You've outlined the magnitude of the challenge that we face, and, obviously, we're very aware that the Government and the First Minister have brought together, if you like, in your portfolio, the big carbon emitters. You've probably been asked this before, haven't you? Is your portfolio not too broad for one Minister and one Deputy Minister? Because, if it is really the big, big push and the big focus, and I know others have their part to play, but surely it's too big a job for a Minister and one Deputy.

I'm hardly likely to agree with that, am I, Llyr, as I accepted the job in the first place? [Laughter.] I think it's important to understand what the politicians are doing. I have a myriad of able civil servants actually doing the work. What we're doing is focusing the direction of travel and giving the kind of political oomph and leadership to it, and the reason that we pull those things together is because you wanted to change the policy focus, and I think you can see that happening in transport; whether you agree with us or not, you can see the change of the focus, and you can see it in other areas as well, actually. So, you'll shortly be able to see the clean air plan coming through; you'll be able to see the change to the biodiversity things and so on. And that is just about us giving the leadership and refocusing the policy direction towards climate change in a much bigger way than it was before and towards net zero in a bigger way than it was before, and towards the nature emergency. They're all intertwined things.

So, I don't have to personally deliver the net-zero plan or the housing plan; for me, it's just about making sure—. I have a directors' meeting very frequently where all the directors come together with myself and Lee Waters, the deputy, and we discuss the kind of policy direction and push that we're giving—where the kind of oomph is, if you like. And that's what our job is. I don't agree that it's too wide. The issue has been always, of course: where do you stop?

Yes.

You could actually just start to put your arms around, and that's the structure that John was talking about is how we then spread the tentacles out, if you like, into the Government, and make sure that that direction is happening elsewhere.

Okay, thank you. Delyth.

Diolch, Cadeirydd. Minister, good morning. It's actually on that exact point I wanted to ask you in terms of where you stop, because almost the inverse of the Chair's point—this came up when we were talking to Lord Deben in our last session—one of the most challenging industries in terms of reaching net zero is agriculture. Do you think that it's a challenge that, given that the department that you lead covers so many different areas, but agriculture's not in that, is that a particularly provoking challenge? I don't know if that's quite the right word, but is that one of the more challenging dynamics, almost?

So, one of the reasons that agriculture isn't with me is because it is one of the most challenging sectors, and we thought it needed more ministerial oomph, if you like, than being included. I'm not sure if that's the correct terminology, but I think the committee understands what I mean. [Laughter.]

We know what you mean, yes.

And so, Lesley Griffiths obviously does that, but we absolutely work hand in hand, step by step together, so all the way through the working of the sustainable farming scheme, my officials and hers have been working together. She and I have had numerous meetings about the content of it, as have officials. John's board has discussed it on a number of occasions. It's as intertwined as it's possible to be and you have to draw the edge somewhere.

You can say the same about economy: one of the big challenges we have, as I just discussed, is things like steel, oil and gas, cement industries, which are very important to Wales; Wales has a much higher manufacturing base than the rest of the UK, still. So, how do you fan it out, if you like. So, we just work very closely in lockstep together. The bits that are in my portfolio, I discussed with the First Minister when he set his Government up, and we decided that those were the ones that needed the kind of biggest pull, if you like, at that point in time. He could have split it differently, maybe other Governments would have, but I think it's working, and as I say, Lesley and I work very much in lockstep together. And I know that you're all familiar with the phosphate summit that's about to come up next week—is it next week, it's hard to keep track of these things—and you'll see there that we're pulling together sectors right across Wales in trying to come together to make a plan, and we're using that kind of methodology to do this across the Government. And frankly, the way that we put the net-zero plan together in the first place was done like that. You can see that it ranges right across the whole piece, and we're very familiar with working across Government. But I guess, Delyth, that the answer to your question is that you've got to cut it somewhere.

No, I totally take that point. Thank you, Minister.

Thank you, both. Okay. Huw, then.

Turning to private investment, away from public sector, but in the different sectors where you have this really stretching target, we're not going to do this on our own; we've got to lever in significant private investment. Can you give us an overview of how that is going, how successful it's being? And maybe we could ask as a committee if you could write to us in detail, sector by sector, because it would be interesting to know how this is going not just in renewables, but in transport, in housing, in agriculture and so on, where you've identified the potential investment, and how much is being levered in and how much we'll have in five years. But can you give us a top-line overview of how private investment is going at the moment?

Well, I can give it a shot, Huw. It's a very complicated area, of course, and it's quite difficult to stretch the thread through. So, just to give the example, it will be a range of everything from you and I making a different choice when we replace our heating system—so, that's private sector investment—from that domestic level, right up to how does Valero or Tata Steel make their proper investment decisions? So, we need a whole range of key drivers in that and we know that we can't do this alone—we have to key in private sector investment. We also need a UK Government to drive private investment, particularly using regulatory levers. So, there is a whole range of things that they can do to encourage private investment in net zero that we just don't have the levers to do—tax incentives and various other tools that can be used.

But we have done a number of things. We've set up sector and regional bodies and boards to identify investment challenges and create links with the private sector and establish appropriate financing models. We've got Net Zero Industry Wales, for example, and we've got the woodland financing group, both set up as private sector individuals to have a look at that. We've got sector and regional funding to incentivise private investment in decarbonisation-related activities. Examples that the committee might have heard of are the circular economy fund and the economic futures fund, which are both in place at the moment. We've got the Development Bank of Wales, and I hope you saw Vaughan and I announcing the loans and equity investments portfolio very recently for businesses to support decarbonisation. We've committed to delivering a network of electric vehicle charging points to incentivise uptake and investment in electric vehicles in Wales—charging points on the strategic trunk road network every 20 miles across Wales by 2025.

Can I just stop there a moment, though, and say that that, to me, epitomises the problem? Nobody expects a Government to deliver petrol stations—we just accept that it's something that the private sector does, but, somehow, we're expected to deliver electric vehicle charging stations. It bothers me a lot that people currently delivering petrol stations can't see that their industry is dying and that they should be investing in trying to do electric vehicle charging if they want to stay in a similar area. So, trying to get into existing business models of that sort and change them so that the private sector investment remains in place is one of the things we really need to do, and I just use that as a very good example of the swap to a Government intervention being needed from one that wasn't—. When cars were first introduced, the Government did not put petrol stations everywhere. That's not how it worked.

But the last one I would say, Chair, before I test you patience—one more—is we have done some regulation as well. This is this whole business about making it easier to do the right thing. So, part L of the building regulations, setting minimum standards for new-build housing is a very good example of that, as are the control of agricultural pollution regulations, which I know the committee is familiar with.

Lovely. Okay, thank you, Minister. We're about halfway through our allocated time and I think we have a number of areas that we still wish to cover, so we'll change gear a little bit, I think, and we're moving on now to look at some of the stuff in the net-zero plan. I think, Joyce, you're going to start off with this.

Yes. As we said, we want to look at the progress, so, in order to look at the progress, we need to look at the monitoring, because otherwise we won't understand how that's going forward. So, we had a response to Lord Deben's comment that the areas where Wales has made the best progress are those under the control of the UK Government, rather than those under the control of the Welsh Government. How do you respond to that?

Yes, thanks, Joyce. That's undoubtedly the case. As I said earlier, the statement of progress is focused on the first carbon budget and the plan's only in place for a year of that, and, as I acknowledged at the time, emissions occur in non-devolved policy areas. So, UK Government policy has large effects. So, the one that you're all familiar with is if you shut down a coal-fired power station, then clearly you reduce emissions vastly all of a sudden. I have to say that the same Government that did that has recently opened a coal mine, so it doesn't make my heart sing that they seem to be going into reverse, and I'm sure Lord Deben had quite a bit to say about that. He certainly has to me.

So, the UK Government has levers in a high level of emissions that are easily switched down if you have the right kind of investment. So, we have a large number of gas-fired power stations in Wales—we'd like to see a lot of those switched off. We want the investment made in the Celtic sea opportunities for floating wind and for other forms of renewables—tidal and so on—around the coast of Wales, which would allow those power stations to be switched off, but it would be a UK Government action to switch them off, not ours. So, that's what we're talking about.

Where our levers are are in areas where emissions are more distributed and complex. So, we've already discussed agriculture and housing, for example. We have a statement of progress that explains the monitoring and reporting system. At this point, Chair, if you really want to go into that, I really do need to get the officials to do it for you, because it's very complicated. But, at a sector level, that's power, transport, industry, waste and greenhouse gasses. So, they're the main contributors to success over CB1. We want to continually review emissions across all of those sectors to make sure that, for CB2, we're getting there, and you can see the changes that we're making in transport, and so on, and the clean air Bill will be introduced to the Senedd now in March, and you'll be able to see what we're talking about there in terms of emissions monitoring, and so on. So that's the kind of progress we're making, but ours are much more distributed and it's much harder to get that big-bang effect than with the UK Government's arrangements. But, if you want the detail of that, I'm afraid I'm going to have to ask the officials to explain.

We will be coming to the monitoring and the reporting and verification stuff in a moment, so we'll hang fire for a second if that's okay, Minister. I promise you we will get there. Jenny wants to come in.

Okay. So, I just wanted to look at the progress report that the Climate Change Committee laid last year, and particularly the Wales-specific recommendations, and also focusing on the tier 3 indicators, which are the ones that the Welsh Government policies can influence. You talk in your paper about the two tier 3 indicators that are rated 'red' within the waste and the power sectors, where the desired direction of travel hasn't been achieved. Could you say something about how the Government is addressing making it flow in the right direction?

Yes. We've got eight Wales-specific recommendations in the progress report, and we've provided an update to the UK Government's response to the CCC's report in March. So, on transport, I've already talked about the substantial amounts of funding allocated to reduce the amount of high-carbon travel and the delivery of a charging network.

On waste, we've obviously got the pathway for targets for recycling post the 70 per cent statutory minimum target, which came into place for 2024-25. We've got the 'Beyond Recycling' work, for example, the final consultation on the business, public and third sector recycling reforms are currently under way, and a go-live date for the deposit-return scheme has now been set at 2025. Those are later than I would have liked, but they're in place now and so we're going towards them.

On housing, the Warm Homes programme is being developed after the consultation at the end of last summer. A policy statement will be coming out very shortly now, Chair. We've got a heat strategy under way and a comprehensive delivery plan that incorporates decarbonisation across all housing tenures. We'll be introducing a new Welsh housing quality standard, for example, for social homes, and I've already spoken about Part L of the building regs that we've already done. So, there's a lot going on.

Some of them are taking slightly longer to get into place than I'd like. Some of them are dependent on a whole-UK conversation. So, on the deposit-return scheme for drink containers, I'm sure committee members will remember that when I said in Plenary that we were doing this, I was disappointed that England had come away from doing glass as part of the scheme, whereas that will be the case in Scotland, Wales and Northern Ireland. I think that's a real mistake by England, and I think that they are going to regret it and, within a year of us going live, I'm absolutely certain that they will come in line with that. It's very similar to the conversation about plastic bags, which the committee will remember—or those of us who have been here a while will remember, anyway.

So, that's where we are with some of that—

Okay. Can I come back to you on the thing that's most concerning me, which is the future Warm Homes programme? The committee has flagged up the fact that the current Warm Homes programme is coming to an end next month, and I think we're really keen to see how we're going to use the summer period to reduce the numbers of fuel-poor households who simply don't have enough money to heat their homes at the moment.

Yes, so as I said, Jenny, we'll be publishing the policy statement very shortly on that. We'll have both a heat and a warm homes strategy, actually. Last summer's heatwave makes it very obvious that we need both a heat strategy and a cold strategy—I'm not sure we'd call it a cool strategy, a—

Well, it's insulation that's the top thing, surely, because that will sort both problems out, and insulation surely is the quickest win whilst we're sorting out some of the complexities of heat pumps, which I don't want to go into here.

Yes, and, again, you've heard me say a number of times now that we've got a programme running that allows us to look at the tech that's available for each house and make sure that it's the right tech for the right house. So, it's all very well to say insulation, but we know from the first iteration of the Welsh housing quality standard, for example, that a small number of houses had real problems with condensation and damp as a result of ill-thought-through insulation policies, so it is absolutely important to make that right.

I have to say, I don't think the Warm Homes programme is going to make any difference at all to the 0.5 million households currently in fuel poverty. Without a significant shift in the energy pricing mechanism, there's absolutely no way we're going to make a very big dent there, but it's very important to do it and it does do very good things, but there is an enormous problem with the energy market at the moment. We've been urging the UK Government to do something about it. You've seen an enormous range of people from across civic society also urging the same thing, but unless that energy pricing system is changed, I fear that if the committee hopes that the Warm Homes programme is going to make a big dent in that, it's going to be disappointed, because it's not.

Okay, but reducing the energy inefficiency of buildings is clearly one of the ways forward. We can't control what the UK Government gets up to. We can agree on what needs doing.

I agree with that entirely, Jenny. We are going to do it, but I'm just saying if you're hoping that it will make a big dent in fuel poverty, it will not. I mean, clearly it needs doing for all kinds of really good reasons, but it's just not going to make that much difference to that.

So, is there anything concrete you can tell us, (a) about the amount of money we're going to put into the Warm Homes programme in the next financial year, and (b) when this policy statement is going to be published?

Well, in the spring, and I'm not going to preannounce it, I'm afraid. I'm always tempted by committees into preannouncing things, but I'm not going to.

Well, spring started today, so we're—

Indeed, it did, so there we are.

Yes, there we are—the clock is ticking. Okay, thank you for that. I know you've spoken a bit about the agri Bill and agriculture and the big part it has to play. Just looking specifically at land use, land use change and forestry, that sector saw a net reduction in the carbon sink during carbon budget 1. Now, aside from what we expect to see emerging from action as a consequence of the agri Bill, what else is the Welsh Government doing, or what action are you taking, to prevent further decline in that respect?

Thanks, Chair. So, we've got a real problem with good quality, complete and up-to-date data here, and there's a lack of some key data sets to characterise changes in the sector. We're working on a plan to try and sort that out, so I just wanted to put that as a start. And you're absolutely right—there was a decrease in the size of the emissions sink through the CB1 budget period, but it is still a sink, just to emphasise that. It hasn't turned into an emitter. So, it did achieve the anticipated contribution set out in the first programme, and you'll know and be very aware that we're now driving a lot of further action. Woodland creation in Wales doubled in 2021-22 to 580 hectares, and 69 per cent of that was broadleaf. It's encouraging, but we need a rapid increase to get to our 43,000 hectares of new woodland by 2030. We've done the trees and timber deep-dive, attempting to remove barriers to woodland creation. The recommendations are in the process of being implemented, and we hope they will drive a real increase in creation in future years.

We've got two big creation schemes: the small grants woodland creation scheme and the woodland creation grant, and, of course, the sustainable farming scheme will create a new system of farm support that maximises the protective power of nature through farming. I know the Chair is very familiar with our proposal for 10 per cent tree cover on all farms—the hedges and edges proposal, as we call it—which I'm very keen on and which many farmers across Wales have embraced wholeheartedly already. If the committee hasn't been to see Stump Up for Trees, do go—it's great. It shows the real power of what you can do if you harness private investment, actually, of course, because the farmers are doing it themselves. So, we're very much working on upping our game on a lot of that, but, again, Chair, you'll be very familiar with the fact that we have to take people with us. We have to do this so that people want to do it, and we have to do it in a way that's sustainable, that the communities embrace, so that we have as much community involvement as possible in the creation of new woodlands, and, of course, we've got the big new national forest project that we're working on as well.

Okay, thank you.

I want to come back to the Agriculture (Wales) Bill and the sustainable land management scheme. Having been involved in the Stage 1 scrutiny of the Bill in a minor way, people like Simon Wright were absolutely clear that we need targets for the way in which we're going to use the sustainable land management scheme to address the sustainability of what we're doing with our land. And I just wondered, in your conversations with the rural affairs Minister, what action you expect the agriculture Bill to do to support emissions reductions.

Just to be really clear, Jenny, obviously you know perfectly well this is a matter for Lesley Griffiths—

Absolutely.

—the rural affairs Minister, and not for me, but obviously we work very closely with her. So, I'm not going to be answering on any very specific policy proposals. You'll all know it's going through Stage 2 of formal Senedd scrutiny at the moment. But, obviously, we've discussed with her the four objectives included in the Bill, which are, as you've just said: to produce food and other goods in a sustainable manner; mitigate and adapt to climate change; to maintain and enhance resilience of ecosystems and their benefits; and to conserve and enhance the countryside and cultural resources. It changes the way that the basic payment scheme and agri-environment schemes worked completely.

From our point of view, we were very keen to see included the woodland cover up to 10 per cent and making sure that we have a timber industry that integrates the trees in ways that make them an asset to the farm. I just want to make this point as well, Chair: timber is a renewable resource; that means that sometimes we cut the trees down in order to use them as a renewable resource, but we also want to maintain tree cover. So, what we want to do is find a way to do forestry at a farm level that allows the farmer to have a really good sustainable income from a sustainable industry and to keep the tree cover, which is essential for biodiversity. So, we don't want clear cropping and all the rest of it. So, we've been working really hard with people from across the world on how to do this kind of sustainable timber industry, and we'll be bringing forward a strategy shortly. I just wanted to make that point because that's part of what we're trying to do with the sustainable farming scheme. We want the farmers to have an income from this. It's not about just keeping it over there in a corner.

Can I just take us back to what is the biggest source of emissions by households, which is food? What sorts of things have you been discussing with Lesley Griffiths on how we're going to reduce our emissions from food, using our agriculture Bill, which is supposed to be for the next 20 to 30 years?

As I say Jenny, if you want to go into scrutiny of the Bill, you'll have to make sure you've got Lesley in front of you. I'm not here to do that.

Okay.

That's fine. That's a fair comment. We are really up against time now, so unless there's anything—.

Okay. Well, I was just going to go on to the public sector.

I think the Minister has spoken a bit about that, if that's okay.

Okay. All right. Fine.

And we're revisiting it with the Welsh Local Government Association and NHS next week. So, Janet, I'll bring you in and then we will, I promise, Minister, get to the monitoring stuff.

Okay, Chair. Thank you. Minister, we've talked about the lack of progress during carbon budget 1, and I do take the point you've made about electric chargers—why are the private sector and the industry not just being more businesslike about it, really, if that's the direction of travel? But how will you accelerate the renewable electricity capacity rate in carbon budget 2, particularly in light of the more stretching targets?

Thanks, Janet. So, we've done a huge number of things in this space. The deployment rate since 2015 reflected a lot of uncertainty in the market, particularly the support available from UK Government funding streams. Again, we bitterly regret the loss of the feed-in-tariff programme, for example. But we did a renewable energy deep dive, and the recommendations have highlighted the changes we needed to make to improve deployment rates in Wales, to protect the natural assets and retain as much benefit and value in Wales as possible. So, we have three things we're trying to do at the same time: we're trying to deploy as much renewable energy as possible; we're trying to make sure that we do that in the most environmentally sustainable way possible; and we're trying to do it in a way that keeps most of the profits from that in Wales. So, all three together is what we're actually after.

So, we absolutely need to deploy offshore wind programmes and fixed offshore wind, and also the demonstrator-scale floating offshore wind projects in the Celtic sea. I've spent a large part of my life over the last three or four months talking about the Celtic sea opportunity with a very large range of partners. Just yesterday, I was talking in Delyth's cross-party group about it, for example, and we're very, very, very keen to make sure that the Celtic sea opportunity maximises both the production of renewable energy, but also the supply chain and employment initiatives in Wales, so that those green jobs that go with that opportunity stay here and that we have as much community ownership and community shares in that as we can manage.

Also, as I'm sure you know, we've made our own renewable energy developer here in Wales. We're going to be accelerating the programme there, and the whole point of that is to support community ownership and to keep the profits of deployment on the Welsh woodland estate, for example, here in Wales. But it's an enormous challenge, isn't it? We absolutely have got to do it and, again, Chair, I'm sorry, it would take a whole scrutiny session by itself to go into this, but one of the big issues for us is to make sure that the pressure on the UK Government to sort out the grid is kept up. So, if the committee can help us with that, that would be very much appreciated.

Indeed. Thank you. Janet.

And then, just a tiny one, coming back to you there, Minister. We've talked about petrol companies not willing to play ball yet, with putting their own infrastructure in, but, certainly, in my own constituency, I've got businesses, hotels where they actually have huge car parks that are not always taken up and they want to actually put in, say, banks of electric chargers, but they just don't know where to go to get that kind of advice to do it. They're willing to pay for it, and they're willing to charge for it as well, but how can they feed in to getting some kind of advice via Government or some organisation or what?

Sure, Janet. There's a Welsh energy service that can help, but, actually, if you're talking about a very large array, then you've probably got a grid capacity problem, depending on where you are in Wales—and that's why I said, Chair, I won't go into it now because it's an hour in itself. But one of the big things that we really need to do is make sure the holistic network design is rolled out in Wales as fast as possible, so that people who want to make that kind of private sector investment can do so and know that the grid is available for them to be able to do it. So, that's definitely one of the things. We've got our own grid study going on at the moment. We're hoping to feed into the grid study for Wales by telling them what our projection for future energy needs across Wales is, so there's no excuse, frankly, for saying that they didn't understand what they were looking at. So, we're very, very keen to do that as well.

I think the UK Government gets it now. It's taken a long time, but I think they get it now. I'm not convinced—and that really worries me—that they understand the speed with which they need to move now. So, I think you all heard the First Minister saying that one of the developers for the Celtic sea said to him—and it's a caricature, so I apologise, Chair—that he would arrive on the beach somewhere in south Wales with a plug, and there would be no socket to plug it into. And that's really a big problem for us, and what we really need to make sure doesn't happen is that energy grid constraints don't cause it to go over to Devon and Cornwall, or even worse, into the Republic of Ireland, where we miss the opportunity altogether. We just need to be really clear about how bad the grid is. So, we've got a housing development over in Newport that cannot be connected to the grid for three years. This is desperate stuff, so if the committee can help with that, I'd be very grateful.

So, Minister, on that note, I will be making representations to the UK Government about this, because it bothers me as well. If we're going to get all this renewable energy and all this investment, we need a grid that has the capacity. So, could we as a committee write to the UK Government to express our concerns that we're well aware of this? Because I'd be happy to sign a letter.

Yes. We could, and we are making these points in reports that we've published in the past, and no doubt we'll still be making them in future reports, regrettably. But, certainly, anything we can do to encourage action on that front, we will.

If it helps the committee, the current Minister is Graham Stuart. [Laughter.]

I was going to ask, myself. I'm like, 'Which one is it now?' [Laughter.]

Okay. Right, thank you for that. We have around 20 minutes left, so we're going to move on now to Huw, who's going to take us into our next area of questioning.

Thank you. And I'll try and bundle my questions on monitoring, reporting and verification into two questions, basically. First of all is your assessment of how effective it's been to date at monitoring the emissions impact of spending decisions. But also, then, going forward—and this is my first question, Minister—going forward, what have you learnt, to what extent are you going to change the way in which the MRV process worked, including around issues about the availability of data to track progress, and whether that's an impediment at the moment? So, how has it gone so far, what are you changing for carbon budget 2, particularly in terms of data, but anything else you want to tell us?

Thanks, Huw. So, the data piece is really important here; sectors have varying degrees of data availability, and some policies apply a much longer term impact on greenhouse gas emissions that can't be observed over a five-year-long carbon budget period. So, we need to find ways of making sure that we have data that can track that. I'm going to get Jon Oates to explain to you what the quantitative and qualitative indicators look like, and how the policy works with that, because that's his expertise, and certainly my level of knowledge is nothing like his. We probably want to try and focus down a little bit, Huw, so that, rather than have a plethora of indicators that aren't telling us very much, we try and focus action and align it to existing data sets, and then try and push progress. So, just to be really clear—and I know the committee knows this—the point of monitoring is not to say how well we've done, but to actually push progress along. It's nice to be able to say how well we've done, or not, but, really, we want these indicators to push people along this path, so that they go as fast as it's possible to go, and that they have good policies for looking at that. So, I'm going to get Jon, if you don't mind, Chair, to just tell us a little bit more about that.

Yes, of course. Over to you, Jon.

Thank you. Can I just urge a little caution as well? Because there's a temptation, I think, to think that an indicator system will tell us all we need to know, and give us perfect foresight, and make decisions easy. There's a key word here: they're 'indicators', so they indicate progress, or lack of. We have a very, very complex economy, as everybody will understand, and there is a temptation to think, 'Well, if we just put in place 50, 100, 1,000 indicators, and we add up all of the things that we think that they're doing, then that will meet the decarbonisation trajectory we were on.' That is never going to be the case, because there are things beyond those indicators for which we have no control—whether our winter is going to be cold or warm, how the economy is doing. Generally, when the economy is doing better, emissions rise, and the converse as well.

So, the indicator framework that we've set up, as has been articulated previously—and Lucy can help me here as well, because she knows it better than I do—has three tiers, essentially. The first tier is at that strategic level: did emissions come down or go up? Tier 2 is, for what reason do we think did they go up or come down. And then, the third tier, which is, to what degree do we think our policies contributed to that change. So, there are a whole bunch of things that aren't our policies that will have factored in the change: UK Government action, business action, individual householders' actions—turning down the flow in their boiler because the cost of gas has gone up. All of those different things affect the pathway that we're on. And these indicators are just a snapshot and an attempt to understand the degree to which our policies are actually driving action. They are more backward facing, and I think what the evidence paper articulated to you is that we finalised the indicator framework for carbon budget 1 in preparation for the final statement. For carbon budget 2, that work is now ongoing; we don't even have the first years of tier 1 data from the National Atmospheric Emissions Inventory yet—we'll get that in the summer—and that will help us to build the framework.

It's also worth noting that there is a separate system for budgets as well, which Treasury colleagues manage. So, when they are setting the budget, they are going out to officials, and trying to understand carbon impact assessments of the proposals for budget. So, there's quite a complex system of trying to understand where do we put our money to be of greatest effect, and least worst effect, actually, as well. Because that's really important: not just where do we spend our money that drives carbon down, but where do we spend our money that might drive it up. And then there's a whole other system that is trying to understand the effectiveness of our policies.

That's very well explained. Thank you for that, Mr Oates—really helpful. It seems to me like you're aiming a ship in a certain direction, and you're looking to pick the right things to measure and assess to keep you on that track, but things will buffet you, I understand that. So, you mentioned at the end there decisions that would then flow from this on particular policies. So, have there been any policies that have been either adapted or, indeed, ended as a result of tracking implementation and effectiveness with the MRV too, or is it too early to have done that yet?

Would you like me to pick that up, Minister?

Yes. I don't know if it's you or Lucy, Jon—whichever of you.

What I would say is that these indicators are part of that, but, clearly, all of the policies that are delivered across Welsh Government we would hope would have some assessment over time of their effectiveness. The indicators that we've been describing are largely about carbon, but what we haven't talked about for a large part of this meeting is it's not all about carbon. So, most of the policies that are driving down carbon, carbon reduction is probably not their primary function—their primary function might be improving the health and well-being of a certain community, it might be about building a new hospital, it might be about building a new school. So, we would expect, across the organisation, across the Welsh Government, all of the policies that are being delivered to be assessed for their effectiveness across the raft of those objectives. So, that, I would suggest, is the primary mechanism for assessing in-flight policies and whether they need to be adjusted, not the monitoring framework.

Right, but can you tell us whether—

Huw, can I translate that for a minute? Sorry, if you don't mind.

Yes. Brilliant.

Yes, please.

Poor Jon is struggling. So, policies are a bit more arbitrary than your question would lead, aren't they? We have a new policy called the roads review—that wasn't in contemplation when the budget was put in place. Two new Ministers came in, and they had a different policy, and now we have a policy, and that will impact on the carbon budget, but the policy wasn't necessarily in contemplation when the budget was set. That's what Jon's trying to say, I think.

That's fine.

And then there are others that are ongoing. So, you'll all be familiar with the innovative housing programme, for example. My colleague Jeremy Miles has made sure that all new schools are now at net zero. That's an incoming Minister making a change there. So, these things happen not necessarily because they were planned into the carbon budget, but because an incoming Minister has a particular action that they want to take that leads us along that path in perhaps a faster way, or a slightly different way.

That's helpful. Thank you very much.

Thank you. Good. Okay. Delyth.

Diolch, Gadeirydd. Minister, throughout the session this morning so far, we've been talking about how challenging the plans already are to reach net zero by the current target, and I'm actually going to push you further about the feasibility of reaching an earlier target of 2035. Could you talk us through, please, or could you give us an update on, the net zero by 2035 challenge group in terms of the terms of reference, how the group members were chosen, any involvement with the CCC committee, and, moreover, what you hope that will achieve?

Thank you, Delyth. As you know, this is part of the co-operation agreement between the Welsh Government and the Plaid Cymru group, and the agreement committed us to commission independent advice to examine potential pathways to net zero by 2035. I've had a lot of discussions with the designated Member, Siân Gwenllian, and, as a result of that, we asked Jane Davidson to chair the independent group, and she's very fortunately agreed. They've had two meetings already. The group is completely independent from the Government; it's for them to decide where they focus their efforts and what they think the emissions reductions could look like, what can be brought forward and what will result in wider benefit or harms. They're going to publish their terms of reference alongside a public statement to summarise the discussions at the last two meetings and then provide statements on each meeting going forward. The full minutes of the group's deliberations will then be published in the final report to the Welsh Government and to Plaid Cymru as part of the co-operation agreement.

So, just to be really clear, though, the group is different to the CCC. It's looking at the impact on society and sectors of our economy of accelerating decarbonisation and how any adverse effects might be mitigated, including how the costs and benefits are shared fairly. We're going to get the lead Climate Change Committee analyst to attend the group as an observer to just make sure that they're not crossing against each other. But they're doing a very different thing to the Climate Change Committee, I think: that's the point I want to get across. And if they can indicate ways that we can accelerate progress or exceed our carbon budgets in the way that we know that we need to, then great.

Thank you, Minister. I think Janet may want to come in on this as well. But, just quickly, if I could just push you little, I completely take the point that you were making that this is separate from the Government, but if there is a particular hope that you have about what will be the outcome of that group's deliberations—.

So, we hope the group will help us bring Welsh society along with us. That's what we want. That's the big problem for us. So, as I said right at the beginning, we could go to net zero much faster if we didn't care about anything else, but we do care—all of you care; we all care about other things as well. So, the idea is to find a pathway that's acceptable to people and to help us along the kind of behaviour change, 'change is difficult' route, and we hope the group will very much be able to help us along that path. That's a very different remit to the CCC. And it widens out the debate, and frankly it allows us to harness a whole series of experts in their field who are giving their time freely to us in order to help us along this pathway, and I hope that they will identify really good ways that we can accelerate this process in certain areas. I don't want to be cynical about it—I think it's quite difficult to accelerate everything in this way, but there will be areas that can be accelerated, and I hope that they will be able to help us along this path.

And then, I think, Delyth, just to say as well—and I know the committee knows this—no-one has all the answers to this. Nobody knows how to do it. The CCC doesn't know how to do it either. So, we're all just trying to follow the best pathway and the best evolving science, and we're all trying to keep abreast of the science as it evolves. So, harnessing the scientific community as much as we can is a really great thing to do as well, and I'm very keen to do that. We're very, very, very lucky in Wales that we have a large number of people with big reputations in their field who are prepared to come along and give us their time for nothing, for the sheer pleasure of being able to help society along this path, and that goes for this climate change group, it goes for the biodiversity deep-dive, it goes for the energy deep-dive, it goes for the tree deep-dive; all those people are doing this for the love of it. I'm very grateful to all of them.

Thank you.

Okay. Janet, you wanted to come in.

Yes. Just challenging a little bit on that group, what are its terms of reference? You've said what you hope the group will achieve. How did you choose those group members, from what backgrounds are they, and whether the CCC will be involved in the work of this group?

So, I answered that last one, Janet. They're going to come to the group as an observer, and then, tempting though it is to pre-announce things, and you're all very good at tempting me to do this, as I've just said, the group will publish its terms of reference alongside a public statement shortly. So, I'm not going to—

And how did you choose the people on it?

Well, they'll publish their terms of reference and how they were formed at the appropriate time. I'm not going to pre-announce it, sorry.

But there was a process, presumably.

Indeed.

Yes.

There was a process, yes.

Okay. Okay. We look forward to seeing that soon. Right, we're coming to the last few questions now, Huw.

Thank you, Chair. Minister, we've got to the bit we've all been waiting for: we're going to turn our attention to the UK emissions trading scheme and the carbon border adjustment mechanism and what might be happening both in Europe and here. This is the spicy bit now.

So, the UK ETS: the balance here between making sure that we have this just transition, as you said, to a zero-carbon future whilst we still have steel in Port Talbot and elsewhere in Wales, where we have jobs in Milford Haven around the refineries and so on that are looking for this new future.

So, you've made it clear before that your view is that the ETS does need to challenge industries to move into a new space, but what's your assessment of where we are at the moment with the ETS, whether there is sufficient challenge, but also enabling those industries to actually move to a decarbonised future as well? Where are we?

Thanks, Huw. So, I'm definitely going to get Jon and Lucy to come in on this one, but just to start you off. So, this is based on the 'polluter pays' principle and it's a market-based policy—you already know this—incentivising investment in low-carbon technologies and it allows a journey for high-carbon industries to decide how and where to put their investment along that journey and to decarbonise as much as possible. So, obviously, the UK industry, as you've just said, needs to remain competitive. I have said several times in this session already that we don't want to just close down our industries and export our carbon footprint elsewhere. Actually, our industries are very efficient. It's actually better for the world that the more efficient ones stay in business and we very much want to help them do that. But we also want to encourage them along the road to decarbonising and we know that, previously, some energy-intensive industries have had up to nearly 90 per cent of their emissions covered by free allowances. So, that's not much of an incentive in my view to decarbonise, if you're just getting those allowances for nothing.

So, we're actually—it's called the UK Emissions Trading Scheme Authority and it's formed of the four Governments of the UK, and we're in the process of developing the scheme to make it align with net-zero ambitions. So, we are doing a lot of work and analysing exactly where we are, and, as I said earlier in the session, we have a much higher level of this kind of industry than any other part of the UK. So, it matters to us very much more, in some ways. And we also want—

Sorry to interrupt you, Minister. Could I just ask, because we are running out of time, just for your clear assurances that you're working with those sectors and those players in industry in Wales that are most affected, in making sure that their voices are heard, even if the challenge is strong—that at least we're trying to achieve this just transition?

Yes, Huw. So, I was just going to come to say that the biggest issue for us is greater transparency in the use of the revenues generated. So, when we finally hit on this scheme and people do have to pay for some of their allowances, then the reinvestment of revenues from the scheme should be used to support the decarbonisation of those industries paying the carbon price.

So, for us—that's why I was labouring the point about us having the higher percentage of manufacture—the UK Treasury will collect this in, and, if they just keep it and distribute it on a Barnett formula, then our industries will be paying disproportionately in and not getting proportionately back what they ought to by way of investment. And that's actually a very important point for us and it's one of the things that we're really labouring, I'm afraid, and we're having a bit of an argument with the UK Government about it. And absolutely, we're on the side of the industries here in Wales, because they need that investment in order to get along this journey. And they all want to go along the journey—we haven't got any pushback on it. They know they need to do it, but they need to be able to invest appropriately and to stay competitive. And also, all of them have global masters that they have to persuade to invest, so, they need the UK Government to do that. So, that's why I was labouring the point, Huw, I'm afraid, so—

No, no, fully understandable. I just wondered, Chair, whether it might be helpful, Minister, if you or your officials could drop us a note afterwards on the sorts of things you're trying to get out of those negotiations on a UK basis, because it may be that the committee wants to consider then strengthening your arm in those as well so that we do protect these interests and we don't get the negative consequences from doing this wrong.

We're into the final minute and 20 seconds, so, I'm going to ask for your views on the introduction of a carbon border adjustment mechanism in the UK, bearing in mind that the EU, which we have left, is seeking to introduce and implement this in October of this year. So, in this new post-Brexit landscape that we have, where are we on—?

So, we're very keen to bring forward the consultation as soon as possible. We want to get on with it, basically. We need to understand what the effect of the EU carbon border tax will be for the UK and we need to do that at some speed. I can see that Jon is literally bouncing in his chair desperate to tell you all about—

It's excitement.

—yes—the carbon budget. I'm sure you could do it in writing, Jon, but do you mind, Chair, if I give Jon the last minute?

Very, very briefly, then, yes; thank you, Jon.

Very briefly, a CBAM would have two effects: (1) it protects from carbon leakage. We already do that in the UK ETS through those free allowances that the Minister said we give. So, it's an alternative to that—it's not an 'and'. The big thing globally that it potentially does is that, if you're trying to send something to a country with a CBAM, so, say, the EU, sending something into the EU, you are paying a tariff at the border. That tariff then goes to the EU. If you’re a country that is exporting a lot to the EU, why don’t you just put in place your own carbon price and not have to pay that tariff at the border? You keep the money within your territory. So that, globally, is the bigger thing. CBAMs are very, very complex. They work with World Trade Organization rules—they have to—and they don’t necessarily help people when they export outside of that territory. It’s very complex.

Jon, thank you very much. Jon and the Minister, sorry, we’ve gone over time, but I do need to ask—. We’re slightly behind the curve on this in the UK; are there discussions going on in our changed partnership now with the EU about doing exactly that, basically alignment with what’s going on in the EU so that there’s not a competitive disadvantage for the UK here, but also so that we can fit in with the thinking that’s already gone on? Is that going on or is it just a UK discussion?

Yes, it is going on, and that’s why we’re encouraging them to bring forward the consultation ASAP so that we can get on with it.

There we are. Lovely. Thank you. We have concluded this session. Can I thank the Minister and her officials for joining us? You will, as always, be sent a draft copy of the transcript to check for accuracy. Thank you very much on behalf of the committee for your attendance this morning. Diolch yn fawr iawn.

Pleasure.

The committee will now break for 10 minutes—actually, less than 10 minutes, because we are keen to kick off promptly at 11:00 for our next scrutiny session with the Deputy Minister. Diolch yn fawr. Thank you.