With permission, Mr. Deputy Speaker, I would like to make a statement on coal and carbon capture and storage. In our energy policy, we face three challenges: to transform our energy to low-carbon sources; to maintain security of supply; and to do so in a way that is right for the British economy and industry. To meet that challenge will take all the low-carbon technologies at our disposal.
We need renewable energy, and in the last five years we have tripled renewable electricity supplies. We have more offshore wind power than any country in the world, and yesterday my right hon. Friend the Chancellor announced new support for offshore wind and new financial help for the wind industry to get through the credit crunch.
We need to facilitate nuclear energy, too. In the face of climate change, with assurances on safety and cost, many who once opposed nuclear power now support it. Thanks to decisions made by my predecessor, Britain is on track for a renaissance in nuclear power, and I announced last week the nominations for 11 potential sites.
The future of coal in our energy mix poses the starkest dilemma we face: it is a polluting fuel, but it is used across the world because it is low cost and it is flexible enough to meet fluctuations in demand for power. In the UK, a third of our existing coal-fired power stations are due to close in the coming decade.
To ensure that we maintain a diverse energy mix, including maximising our domestic fuel supply, we need new coal-fired power stations—but only if they can be part of the low-carbon future. Across the world, we know the challenge that coal presents. With many countries, including China and India, reliant on coal and many building new coal-fired power stations at a rapid pace, there is an urgent international imperative for us to make coal clean. With a solution to the problem of coal, we greatly increase our chances of stopping dangerous climate change. Without it, we will not succeed.
There is a solution to the challenge—through carbon capture and storage. Capturing the CO2, transporting it and locking it permanently underground would reduce emissions by 90 per cent. While this technology has been demonstrated in its different parts and at small scale—capturing emissions from 30 MW—it has never been tried on a commercial scale, and never as the complete process from start to finish on a power station, so the first task is urgently to drive the technology at scale. We are already running a competition for one of the first end-to-end demonstrations in the world, covering capture, transport and storage. It will be one of the biggest CCS projects in the world—more than 10 times bigger than the largest existing pilot.
Yesterday, my right hon. Friend the Chancellor announced the public funding for the next stage. We will select bidders to proceed to detailed designs, but we know that we need to go further and, because of yesterday's Budget, there will also be funding for up to three more demonstration projects, which we want to involve a mix of pre and post-combustion so that all the technologies can be tested.
To support that, the Chancellor yesterday announced plans for a new incentive mechanism to support CCS. It could be based on a CCS feed-in tariff, so that projects could receive a fixed price for electricity, or on a fixed price for carbon abated. We will consult on this alongside our new coal conditions by the summer.
We need to ally this reliable stream of funding for carbon capture and storage, which we now have, with a policy on coal-fired power stations to drive the demonstration and deployment of CCS. We consulted last year on carbon capture readiness as the condition for new coal-fired power stations, but I have concluded that while it is right to go ahead with this condition, it will not on its own drive the change we need. I believe that we need to signal a move from the building of unabated coal-fired power stations—it is right to drive our country towards low carbon as part of a progressive decarbonisation of our power supplies. That is also an essential part of a new industrial strategy, and it is necessary if we are to show international leadership on climate change.
I therefore propose two new conditions that any new coal-fired power station must meet to gain consent in England and Wales. We are proceeding with a strategic environmental assessment and will consult formally in the summer. First, we must send a decisive signal that change starts now, so I propose a requirement to demonstrate CCS on a substantial proportion of any new coal-fired power station. We will propose for consultation a requirement to demonstrate at least 300 MW of net capacity or around 400 MW of gross output as a condition of any consent. The demonstration condition would mean that henceforth unabated coal-fired power stations would not get Government consent. Secondly, alongside that, we must secure not just a commitment to demonstrate, but, when the technology is proven, a commitment that CCS will be fitted on the entire plant.
The Committee on Climate Change concluded that
"conventional coal-fired power generation should only be built on the expectation that it will be retro-fitted with CCS by the early 2020s"— the earliest it believes will be feasible. With the demonstrations in the UK and abroad, we will plan on the basis that CCS will be technically and economically proven by 2020. There will be an independent judge of when the technology is proven and I envisage the Environment Agency playing that role. Every coal-fired power station built from now would have to commit to retrofitting CCS on the whole plant—100 per cent.—within five years of 2020, subject to the technology being ready. Once the technology had been judged as proven, every new coal-fired power station would have to commit to CCS, not just on a portion, but on the whole plant.
I believe CCS will be effective and can be shown to work, but I will seek views in the consultation on whether we need a safety net if it does not become proven as quickly as we expect. We will also consult on whether, through an emissions performance standard, it is possible to implement the conditions I have outlined.
The new conditions come on top of the requirement on every power station to buy carbon permits, which under the EU emissions trading scheme are capped and falling. I believe that the funding for demonstrations and the conditions I have proposed meet the criteria I have set out. They set us on a decisive low-carbon path, with the UK doing more than any other country to demonstrate and deploy CCS, and they are the most environmentally ambitious coal conditions of any country in the world. They protect security of supply by making possible the only sustainable long-term diversity there is—low-carbon diversity.
I have received representations that there should be 100 per cent. CCS on new coal from day one, but I believe that they do not appreciate the need that still exists to demonstrate the technology before full-scale commercial deployment is possible. Such a condition would reduce the range of technologies that could be affordably demonstrated, would mean that demonstration of post-combustion CCS would be far less likely, and would fail to meet our international obligation to drive forward low-carbon technology.
By embarking on today's path to low-carbon coal, we shall be able both to meet our climate change commitments and to secure up to four new coal-fired power stations by 2020, whose operation will include the use of indigenous coal. This route to low-carbon coal is also right for the British economy, and will enable us to lead the world in carbon capture and storage. With a reliable stream of finance, we are investing in British skills so that our industries can lead CCS not just in Britain, but at power stations around the world. I hope that our industry, universities and scientists will respond to the challenge of creating a new industry in Britain.
Research suggests that CCS and other carbon abatement technologies could sustain 50,000 jobs by 2030. This is a massive regional opportunity for Britain. I pay tribute to our regional development agencies for what they are already doing on carbon capture and storage, and look forward to working with them. Teesside, the Thames Gateway, the Firth of Forth and the Humber are among the locations that could be suitable for a new CCS cluster. For our North sea oil and gas industry, CCS can herald a new low-carbon future. The 1960s and 1970s saw the development of a new North sea industry; in later decades, Britain can do the same with CCS.
The proposals that I have announced seek to combine the drive towards low carbon at home and around the world, meeting the need for security of supply, with the building of Britain's industrial future. They signal that the era of unabated coal is over, but a new low-carbon future for coal with CCS can begin. I commend the statement to the House.