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Industrial Carbon Emissions (Targets) Bill

– in the House of Commons at 11:47 am on 3rd July 2009.

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Second Reading

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Photo of Charles Kennedy Charles Kennedy Liberal Democrat, Ross, Skye and Lochaber 11:49 am, 3rd July 2009

I beg to move, That the Bill be now read a Second time.

I should like to add my congratulations to all those involved in the debate that we have just listened to and, in large measure, enjoyed. I congratulate Mr. Ainsworth on his success in getting his Bill this far. Let us hope that it is given a fair wind in the other place. I also thank him for his kind comments about my Bill, which were much appreciated, as were the understanding and supportive comments of my hon. Friend Simon Hughes and Frank Dobson.

I am a bit new to the specifics of these proceedings and to the process that the hon. Member for East Surrey has been dealing with in regard to his Bill. He was talking about having dealt with three Ministers. I have had some dealings with the Under-Secretary of State for Energy and Climate Change, Mr. Kidney, and I have been equally impressed by the dealings I have had with the civil servants involved. However, anyone listening in might have thought that the hon. Member for East Surrey was being a little uncharitable to the Minister. I timed the Minister's speech. He devoted 44 minutes to one of the most detailed replies to a Back Bencher that I have heard in my 26 years in the House, before going on to make his own, fresh contribution to the matter for a further 21 minutes. I shall be charitable and take that as an indication of the seriousness with which this Minister—if not the Government generally—views these matters. I find that encouraging.

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Photo of Andrew Dismore Andrew Dismore Labour, Hendon

The right hon. Gentleman is not a regular attender on a Friday. If he were, he would know that Ministers often make very detailed responses to Back Benchers' Bills.

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Photo of Charles Kennedy Charles Kennedy Liberal Democrat, Ross, Skye and Lochaber

There are advantages to having a constituency that is an awfully long way away—it provides a very useful excuse at times.

My Bill aims to help the United Kingdom to meet its targets under the Climate Change Act 2008, and to help to craft an adequate energy policy to ensure that the UK becomes a genuinely long-term low-carbon economy. Its main purpose is to require the Government to introduce regulations that set an emissions standard for new power plants in the UK, known as an emissions performance standard. It intends to provide—in a constructive way—greater clarity on all sides of this important issue.

What should the United Kingdom's energy policy look like in a new, low-carbon age? The environment needs a firm guarantee that any new coal plants will be fully fitted with carbon capture and storage—CCS—facilities by a given date. Equally, companies need clear, long-term regulation which, along with a finance mechanism to fund demonstration projects, will give them the confidence to invest. The provisions of the Bill will contribute substantially to the delivery of both those objectives.

I shall explain briefly what the emissions performance standard is. It is a carbon intensity target for power generation that could be applied to all new power plants in the UK. If the standard were set at a certain level, consent applications for new coal-fired power plants would be able to proceed only if there was a commitment to fitting a substantial proportion of their generation capacity with CCS. It is important to note that CCS would need to operate at the plant from the outset. The operation of renewables and other low-carbon technologies would be unaffected by the standard as they have much lower emissions.

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Photo of David Howarth David Howarth Shadow Secretary of State for Justice

My right hon. Friend is making the important point that new coal-fired plants would have to be fitted with a working CCS capability, rather than simply being carbon capture ready, as seems to be the present policy. When I was the energy spokesman for our party, I investigated what "carbon capture ready" meant, and it turned out to mean simply that there needed to be a big field in which something might happen later.

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Photo of Charles Kennedy Charles Kennedy Liberal Democrat, Ross, Skye and Lochaber

I thank my hon. Friend for that contribution; he has hit the nail on the head. The Bill aims to encourage much more specific definitions in these areas.

The EU has set emission limits for other pollutants—sulphur dioxide, for example—so the concept behind the Bill is already well established. Perhaps the most well known example of an emissions performance standard for CO2 is the one applied to power plants in the state of California—and, indeed, it is being extended to other states in the US. It was implemented in California in 2007 and it requires that any new power station—or, for that matter, any energy imported into the state—meets carbon intensity limits. These are set so that new unabated coal plants without CCS cannot go ahead. If CCS is added to a new plant, however, it complies with the standard and it can proceed—precisely the point that my hon. Friend David Howarth made.

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J

I am worried that Carbon Capture and Storage (CCS) may not work or may be yet another way of passing the burden to future generations. The technology is not yet developed yet the prospect of CCS is being used to justify new coal burning power stations and business as usual rather than frugality. Even if the technology works, I understand the CO2 will be injected into holes in the ground where it will present a risk of leakage (gradual or catastrohic). I need reassurance that this storage will be safe and permanent because it is not fair to construct problems for future generations - particularly because we have the alternative of being...

Submitted by John Byng Continue reading

Photo of Simon Hughes Simon Hughes Shadow Secretary of State for Energy and Climate Change

I thank my right hon. Friend for his interest and initiative in introducing this Bill. I met some of the people involved in the Californian project earlier this year when they visited the Government and others here. They were very clear that the development of this technology is entirely possible within the time limits needed to ensure that the next generation of power stations are fitted. This is not undiscovered science; it is science already worked out, but it needs to be expanded to fit the plants. It can be done.

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Photo of Charles Kennedy Charles Kennedy Liberal Democrat, Ross, Skye and Lochaber

I am grateful to my hon. Friend for that intervention. What he says about timing and readiness is very apposite; one of the reasons for introducing the Bill is that we are now at a key moment in deciding climate and energy policies for our country. Decisions made now will determine our success—or, for that matter, our failure—in becoming a low-carbon economy over the next few decades.

Why do I say that? Well, Parliament has passed the Climate Change Act 2008, which contains strong emission reduction targets, and we are about to take long-lasting decisions on the nation's future energy mix. We should remind ourselves that coal-fired power stations have life spans of more than 40 years, so once they are built they represent huge investments, and companies obviously do not want to shut them down prematurely.

On the environmental aspects, the independent Committee on Climate Change made it clear in December last year that it sees the power sector as absolutely key—and "key" is its own word—to the UK achieving its targets. Furthermore, the committee said that the power sector should be almost completely decarbonised by 2030. That is because technologies such as electric cars will not reach their full potential for reducing CO2 emissions unless they are powered by clean sources of energy. However, the committee expressed its concern that the carbon market established by the EU emissions trading scheme, in which many people have placed their faith over the years, would be insufficient on its own to drive the necessary low-carbon investments in time. Additional measures would be necessary to "buttress"—again, the Committee's own word—the carbon price.

It seems to me that that conclusion has profound implications for energy policy. It means that we must not rely solely on the carbon markets to decarbonise the power sector, as complementary regulation will be required. The Committee on Climate Change made it clear that all coal-fired power stations in the UK would either have to have full CCS by 2025 or shut down. Finally, it called for a clear policy on coal to be stated now, as this would be so essential to meeting the 2025 deadline.

What have the Government proposed? Up until a few months ago, I think it would be fair to characterise the Government's essential stance on this issue as, "Let's build new coal plants, make them capture ready and hope the carbon markets deliver full CCS at some point." That takes us back to the point made by my hon. Friend the Member for North Southwark and Bermondsey. We had a competition under way to demonstrate CCS on one plant, but the Government seemed happy to let other plants go forward without that measure of CCS.

To be fair where fairness is due, I have to say that today it is clear that the Government have taken a big step in the right direction, which I very much welcome, although they still have much further to go.

In April, the Secretary of State declared that the "era of unabated coal" had come to an end. No new coal plants would be allowed unless they demonstrated some level of CCS, and the United Kingdom has said that it will fund up to four demonstration projects. A consultation on new coal was launched very recently, on 17 June, and has revealed that the Government hope that CCS will be technically and economically proven by 2020 and scaled up to cover the full generating capacity of new plant by 2025.

Much as I welcome the movement on the part of Government, if it is measured according to the standards of the Committee on Climate Change it is clear that there is scope for much greater improvement. The problem with the Government's proposals is that there is no absolute, firm guarantee of when full CCS would be required. There is no mandate, and that must be cause for concern.

Under the current proposal we could see four new coal-fired power plants built in the United Kingdom, fitted with small-scale CCS but failing to fit the technology fully to the whole generating capacity. According to that scenario, which is by no means implausible, a plant could continue to operate largely unabated, emitting some 80 per cent. carbon dioxide into the atmosphere at precisely the time when a marked reduction in emissions is needed. I cannot believe that the Government, or indeed the House generally, would want that to happen. The four demonstration power plants proposed by the Government may capture only 20 per cent. of their annual emissions from the outset. Over its lifespan, one of those plants could emit nearly 240 million tonnes of carbon dioxide if it was not fully fitted.

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Photo of Gregory Barker Gregory Barker Shadow Minister (Energy and Climate Change)

The right hon. Gentleman is making a very important point, and he is not scaremongering. He is absolutely on the money. We need only look at the size of coal-fired power plants historically, relative to the size of other power-generation facilities, to see what he means. I understand that Drax, our largest coal-fired plant, accounts for nearly 10 per cent. of emissions.

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Photo of Charles Kennedy Charles Kennedy Liberal Democrat, Ross, Skye and Lochaber

It is certainly no wish of mine to scaremonger, but in the context of what was said by the Committee on Climate Change, there are real worries ahead unless we move things further forward—which, obviously, is the aim of my Bill.

The Government hope that the new plants will be fully fitted with CCS by 2025, but they do not propose a firm guarantee. If the technology is proven by 2020, both technically and economically, the plants will have five years in which to fit CCS fully. However, even the Government acknowledge that there could be delays. The technology might not work, or it might not be economic by 2020. The United Kingdom would then be in danger of failing to comply with the recommendations of the Committee on Climate Change, and could be seriously off track in terms of its long-term policy of decarbonising its power supply.

As we know, the Government are considering the idea of a safety net should such a scenario occur, but propose not to consider the option itself until 2020. That is completely the wrong approach to such a serious issue. If delays occurred or the technology did not work, closing the plants less than 10 years into their operation would become a real possibility. I think that any future Government who built their energy policy on the assumption that the plants would continue for their likely lifespan of 40 years would be unwilling to consider such an economic option. Certainly they would feel very uncomfortable about it.

From an industry perspective, what business needs above all else is the confidence to be able to make long-term investment decisions that deliver an expected financial return—I do not think there is any sensible disagreement in the House about that, and I certainly hope not. That confidence depends on whether there is a credible regulatory framework set by Parliament, and whether there is clarity and transparency in what will be required of companies and by when it must be done. A policy that breeds confusion about whether 100 per cent. CCS will ever be required in new power plants would create unwelcome unknowns and risks for companies seeking to invest in coal. It would be a massive financial disincentive from a commercial point of view.

The benefit of an emissions performance standard is that it provides long-term clarity. Government, industry and non-governmental organisations all need to know what must happen and when. What is needed is regulation that brings about clear and unambiguous action. An EPS applied across the whole power sector would, by proxy, set a clear timetable for how much CCS had to be fitted to new coal power plants and by when. If it were supported by the finance mechanism for demonstration projects to which I have referred, it would provide a clear legal framework allowing power companies and investors best to decide what to invest in; it would be clear in 2009, just as it would be in 2020. That is exactly the kind of approach that is needed.

Clause 1 would place a requirement on the Secretary of State to introduce regulations introducing an EPS. That would amend the Electricity Act 1989 so that no consent for a new power station could be granted unless it complied with these regulations. Clause 2 sets out how compliance with the standard could be calculated. CCS is explicitly stated as a means of compliance, and the useful heat captured by combined heat and power can also help to meet the targets. Renewables can also be fast-tracked through this requirement, which is a useful addition. This is, of course, an enabling Bill, but it requires the Government to come back with regulations after 12 months. Clause 4 sets out who should be consulted on the level of an EPS and how the statutory instruments should be introduced. Finally, when setting the EPS, the Secretary of State needs to consider the latest science and any further advice from the Committee on Climate Change.

I believe that an EPS is not only necessary but a good way forward—arguably, the best way forward. It would show that, as a country, we are serious about driving investment that would contribute towards a decarbonised—or as close as possible to a decarbonised—power sector by 2030, and it would provide the certainty and guarantees that other options cannot offer.

An early-day motion in favour of the idea of an EPS has attracted the support of 186 Members—colleagues from all parties, without exception, across the House. I am not speaking in a party capacity at present of course, but the EDM is officially supported by the Liberal Democrats and by the Conservatives, and 71 Labour MPs have signed up to it, too. I believe that this is a timely debate, and I hope the Government will be able to respond to it constructively.

In a different context, in the earlier debate this morning the Minister rightly referred to the fact that mañana could not be an option. In the west highlands of Scotland where I come from there is an old joke about a person who has never previously been up and experienced the lifestyle there. He cannot believe how much more leisurely it is than the city lifestyle he is used to, with all its pressures and attendant difficulties. He is listening to two old boys talking to each other in Gaelic in the local bar, and says to them, "I can't believe the pace of life here. It is so much more idyllic than what I am used to. It is like mañana. What is the word in the Gaelic language for mañana?" The old boys look at him, and then one of them says, "There is no word that conveys that sense of urgency." I say to the Minister that we do need that sense of urgency, and I hope he can convey it in his response.

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Photo of David Howarth David Howarth Shadow Secretary of State for Justice 12:10 pm, 3rd July 2009

I support the Bill and I do not wish to take up more than a few minutes in adding to what my right hon. Friend Mr. Kennedy said, but I want to make one point.

The necessity for this Bill comes from the fact that carbon markets are not acting in the way that many people hoped they would. The original policy idea of the carbon markets was that before long, with the right set up, there would be a high and stable carbon price, which would drive forward technological change and carbon saving throughout the economy in a predicable and effective way. Unfortunately, that has not happened, because the carbon price has, on the whole, remained low and there is no obvious prospect of its reaching the levels necessary for it to be effective in the way that was originally hoped. The carbon price also seems to be quite variable and that is, in itself, a problem, given what my right hon. Friend rightly said about predictability being an important part of the policy objective.

There are a number of reasons why the faith that many people had in the carbon price and carbon markets as a way forward has been deeply damaged, but I wish to focus on one. Such reasons include those relating to enforcement costs, certainty of enforcement and the necessity for proper regulation of carbon markets—those things have come to the fore and will do so again in future—but the central point is that because carbon permits are issued by Governments, the setting of the total amount of carbon permitted in a particular economy is, in the end, a political act. We are not dealing with some natural property that is limited by physical factors; we are dealing with a property right created by the state.

The problem is that whenever some difficulty affecting a particular industry comes to the fore in the political debate, the reaction of Governments is to give way to that particular industrial lobby. The long-term effect of that approach is to reduce the confidence of people generally in the long-term prospects of a rising carbon price. If the pattern that establishes itself is that politicians give way and issue more permits every time a problem arises, the carbon price cannot rise in the long term to the level necessary to drive the policy forward. That is why we must now turn to a more regulatory solution, as proposed in my right hon. Friend's Bill. I was very glad that in the previous debate the Minister said that we have to look to regulatory solutions, not just incentives. With that in mind, I hope that the Government will give the Bill a fair wind.

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Photo of Gregory Barker Gregory Barker Shadow Minister (Energy and Climate Change) 12:13 pm, 3rd July 2009

It is a pleasure to follow two excellent speeches. I thought that Mr. Kennedy put the case for this important measure succinctly but very powerfully, and David Howarth also made very important points about the effective use of market instruments.

Two years ago, I was fortunate enough to go to California specifically to look into energy efficiency, the emissions performance standard and the market mechanisms that had been used there in order to reduce carbon emissions. I was fortunate to meet a number of the key policy makers who had been involved in the development of that suite of policies, of which the EPS has certainly had the most important impact. I was struck then by the simplicity and effectiveness of emissions performance standards and how they have made a real change to the way in which electricity is generated in California and imported into the state. Although California has its problems, it has typically been the first to embrace several exciting and progressive policies on climate change, the environment and energy efficiency. The great attribute of the EPS is that it is a firm measure that gives clear, simple and long-term market signals that act as key drivers on innovation and efficiency, and aligns the long-term interests of investors with the over-arching objectives of driving down dangerous CO2 emissions.

When I returned to the UK and the rumblings of support from the Government for a new generation of coal-fired power stations, and with Kingsnorth coming up the political agenda, my party began urgently to explore the potential of adopting such a policy here to head off such an eventuality. The EPS is important for three reasons. The first is the impact that it would have on our own carbon emissions. The second is the message of international leadership that it sends out, and the third is that it would help to put the UK at the very forefront of the development of carbon capture and storage technology, with the creation of those green jobs that we may struggle to define but nevertheless understand to be important.

The key point about international leadership on CCS is that simply having an impact on our own emissions will not be enough, but if it can be implemented effectively and on sufficient scale, the potential impact of its introduction in the developing world on a global solution to climate change would be far greater than anything that we can do on our own. We are in a position to drive forward that agenda because of the tremendous expertise that we have in our universities and research houses, and in industry with our heritage in oil, gas and coal. We should use that positively and progressively to push this agenda forward.

All these factors convinced us that we needed to ensure that the UK would play a leading global role in the development of scalable solutions for carbon capture and storage. We therefore needed to take a clear stand and make a break with our old dirty coal past. Just before Christmas 2007, my right hon. Friend Mr. Cameron, the leader of our party, visited China and used the occasion to announce the Conservatives' EPS policy and our ambitions should we form the next Government. It was right that he chose to make that statement in China, because nobody can be taken seriously on the issue of climate change without addressing the building of new coal-fired power stations in that country. We saw the opportunity to drive the development of CCS technology with an appropriately calibrated performance standard, backed up by serious strategic investment to support CCS pilot projects for new power stations, but on a whole new level to that anticipated by the Government.

Our endorsement and support for carbon capture was well ahead of Government thinking and, I think, ahead of most parties' thinking. That position has not only become Government policy but has been backed by many of the green non-governmental organisations and, crucially, by the Committee on Climate Change. The Government had to be dragged on to this agenda, however, and their previous use of competition as a main tool for encouraging CCS was woefully inadequate. I am glad that we are now shot of it and have something that is far more ambitious and looks far more like the policy that my right hon. Friend the Member for Witney articulated two years ago. That is welcome. Indeed, the Committee on Climate Change has also recommended the use of an EPS as a tool to help drive the decarbonisation of the UK electricity supply.

This excellent Bill and the measures that it would facilitate have seen incarnations as amendments to the Bills that became the Climate Change Act 2008 and the Energy Act 2008, but I think that this is the first time that we have had a sole focus on EPS, and that is to be greatly welcomed.

Despite the growing consensus from industry and the green lobby, the Government have remained entrenched in their objections to the mechanism of an emissions performance standard, despite having done so well in adopting so many other areas of Opposition policy through their conversion to feed-in tariffs and an incentive for low-carbon heat generation. The Government have had a welcome change of heart on those matters, so I hope that the Bill will be the catalyst for another Government U-turn. This matter is incredibly important.

I obviously support the Bill in its detail as well as supporting its overarching aims. The right hon. Member for Ross, Skye and Lochaber has been very smart to keep it so permissive and relatively loosely drawn in its ambition. Giving flexibility to the Secretary of State to set the EPS through regulation will allow a Government gradually to reduce the cap over time according to a trajectory that could give industry the certainty it needs in order to invest in decarbonising electricity generation. The long-term certainty that business needs to plan major capital investment has been a recurrent theme in speeches from both sides of the Chamber this morning and from the Minister himself. It is vital that regulations around compliance with the new standard are detailed, clear and reached in consultation with the industry. Again, it is only by giving business clarity that we can expect it to trust a Government enough to make bold yet vital investments in emerging sectors.

I am glad to see the inclusion of a consideration of the benefits of captured heat in determining the carbon intensity of a power station. That will not only give a much-needed boost to combined heat and power deployment, but encourage more medium and small-scale local generation where a heat load is often better matched to production. Too often, consideration of heat capture at power stations is cursory and this provision will sharpen the demand to get heat capture and transmission infrastructure into the ground.

Stipulating a time scale for introducing the regulations is also a sensible precaution given the Government's enthusiasm for endless iterative consultation and their track record of delivering regulation on time. In the face of the challenges of potentially catastrophic man-made climate change in this decade and our stringent targets for emissions reductions, we have little choice but urgently to tackle head-on emissions from our power sector.

Electricity generation in the UK accounts for a substantial portion of our CO2 emissions, and we will need to achieve cuts of well over 80 per cent. in that sector by 2050. Renewables will play an increasing role, but certainly, through this century, we will need to continue to rely on fossil fuels as the backbone of our energy mix. An emissions performance standard will be essential to give innovators and investors in industry a clear signal of the pace of change expected by the Government and the rate at which we expect carbon capture and storage technology to be developed and deployed. An EPS will catalyse the deployment of CCS—a technology that is vital to reducing emissions in the UK, and absolutely vital to reducing them in the developing world, in countries that are more reliant on coal, and in countries that are without the rich resources for renewable energies that we enjoy in the UK.

The UK is extremely well placed to develop export CCS technologies. I hope that CCS will become a real engine of economic growth for the UK in the coming years. The potential for the creation of jobs to do with that technology is very significant. We have world-leading centres of expertise on the chemical, mechanical and civil engineering skills that are essential to CCS, and we have institutions, such as Imperial college, that have a long and impressive heritage in the sector. We have rich resources of storage sites at depleted oil and gas wells in the North sea. What we stand to gain in intellectual property, jobs and wealth creation through CCS as a result of an EPS should not be overlooked.

The Bill's provisions should have been included in major legislation a year ago, but it will provide Government with a hugely powerful tool to cut emissions, will give certainty to industry, and could drive innovation, investment and job creation. I am proud that my party has played an important part in promoting the CCS agenda in the UK, and energy performance standards as a means of promoting CCS, but I commend the right hon. Member for Ross, Skye and Lochaber for having the gumption to bring the measures together in one Bill, and for securing legislative time for it. I hope that the Government will respond to that agenda in the same positive way that they responded to the previous Bill discussed today. I hope that they realise that we simply cannot afford to delay or defer the measures any longer.

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Photo of Simon Hughes Simon Hughes Shadow Secretary of State for Energy and Climate Change 12:27 pm, 3rd July 2009

I, too, am delighted to welcome the Bill introduced by my right hon. Friend Mr. Kennedy. He made it clear that our party has taken the two opportunities given to us by good fortune this year, through the private Members' Bill ballot, to come forward with practical proposals to deal with the climate crisis that we face. Earlier in the Session, my hon. Friend Mr. Heath introduced his Fuel Poverty Bill, but frustratingly he failed, by a handful of votes, to get it over the hurdle of Second Reading on its first outing. It is on the Order Paper to be considered later in the year, but I guess that that means that it will not get on to the statute book this year.

The Fuel Poverty Bill signified the importance of the energy efficiency agenda, to which the Minister says that he is committed. Frank Dobson reaffirmed the importance of that agenda earlier, and we are all signed up to it. Now my right hon. Friend the Member for Ross, Skye and Lochaber has added to that by making another specific proposal in his Bill. As was evidenced by the support from my hon. Friend David Howarth and Gregory Barker, the proposal has growing support in politics, and huge support outside. There is huge support for ensuring that we do not just proceed as we are doing, but put some regulatory constraints in place for the future, so that people can plan for the future and adapt the energy industry accordingly.

The most important first point to make in support of my right hon. Friend is that the core proposition is that if we regulate now, everybody knows where they stand and they will work to live within that framework. If we do not regulate, there is uncertainty and the risk is that people will not understand the crucial importance of moving quickly to avert climate crisis. This is not a Bill for which he plucked an issue out of the air, so to speak, and said, "This is important because it will add to the agenda." It is a Bill that relates to our country because coal has been so important and remains so important. We expect it to continue to be important, but if it is to play a responsible part in our future energy mix, it must be produced in a way that coal-fired power stations do not send huge amounts of CO2 out into the atmosphere, contributing to the climate crisis.

My right hon. Friend mentioned the widespread support in Parliament for the Bill and the 186 signatures on the early-day motion in the name of Mr. Yeo, who chairs the Environmental Audit Committee. It is significant that the motion is proposed by him, because that gives it the gravitas that deserves recognition. Having totted up the figures today, I am pleased to say that 49 Liberal Democrats are signatories among those 186 names, including my right hon. Friend the Member for Ross, Skye and Lochaber, my hon. Friend the Member for Cambridge and me.

The second strong point, which the hon. Member for Bexhill and Battle rightly highlighted, is the importance of countries such as China to the debate. My right hon. Friend pointed to the importance of what has been happening in the United States, particularly in California. China is the obvious place where there needs to be a change in energy production in response to the environmental agenda. According to the figures that I have, China is now the largest greenhouse gas emitter in the world, getting three quarters of its energy from coal. We get a substantial part of our energy from coal, as do other European Union countries, such as Poland.

The Chinese have recently shown their understanding of the need to adapt and change, which is exceptionally welcome. We must do all we can to encourage that. The new American Administration in the White House has shown its determination to change the agenda. There was the first legislative move in Congress, in the House of Representatives a week ago today, which, though modest in some respects, is none the less a move in the right direction.

The world is moving to realise that we need an energy mix that has the maximum renewable energy component, but that if we continue to presume that coal will play a part, coal must in future be produced within the constraints necessary to ensure that it does not pollute the atmosphere more and contribute further to the environmental crisis. That is important for our country, the European Union, the United States, China, India and other such countries. Whatever its merits and its huge contribution in the past, coal is the dirtiest large-scale power generation method that we use.

The second point implicit in the remarks of my right hon. Friend is that we should see the current situation as an opportunity for Britain. We have the technology, the scientists and the engineers, and there are many people raring to go. As I learned from my discussions with the Californians, and as I assume the hon. Member for Bexhill and Battle also learned from his conversations, they are not in any doubt that the technology can be delivered. They do not say that they are only at the beginning of the research and development process. They know what they have the capability of delivering.

It was interesting that in the United States, as I understand it, once California had legislated, which it did in 2006, the neighbouring states also legislated. The danger was that if California legislated and neighbouring states did not, people could import energy from neighbouring states into California, circumventing the whole strategy. Washington state, Montana and Oregon have all now legislated, so this is not an area of policy or legislation that is not beginning to be accepted broadly. This is not an idea whose time has not yet come.

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Photo of Gregory Barker Gregory Barker Shadow Minister (Energy and Climate Change)

The hon. Gentleman is absolutely right to say that California created a wave that is now being followed and encouraged by the Obama Administration. However, on a point of detail I should say that the emissions performance standard in California applies to all energy, whether generated in the state or imported, so there is no danger of exporting dirty coal to neighbouring states. That has meant that some of the coal states, in the heart of the coal producing areas, that export energy to states as far away as California are having to make changes and think again about how they will develop in future.

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Photo of Simon Hughes Simon Hughes Shadow Secretary of State for Energy and Climate Change

I am happy to be corrected on that point. The Minister has probably not made an official visit to California to see these things, but I am sure that he has been briefed about the strong public support, as well as political leadership, in favour of the initiative.

There is widespread support among the informed community in this country for the proposal. As the Minister will know, WWF and the Royal Society for the Protection of Birds, which has huge public support, with a membership of more than 1 million, as well as Christian Aid and the other faith-based organisations, are all clear about the matter. They have written to many MPs asking us to support my right hon. Friend's Bill because they realise that, given that coal contributes half our CO2 emissions, we will not grasp the nettle unless we deal with the coal industry. The hon. Member for Bexhill and Battle mentioned the fact that single power stations can contribute. Anyone going up the east coast main line has only to look out of the window to realise the history of and prospects for what is going on. My right hon. Friend has adopted a straightforward ring-fenced area of policy.

The proposal in the Bill is entirely straightforward. It is a model private Member's Bill; I hope that the Minister has no objection to how it is drafted. It makes provision for Ministers to set the limit and the date by which the measure has to be put in place and to have a consultation period before doing that, with all the obvious suspects. It also stipulates that there should be a deadline of a year after the Bill is enacted so that we know that the issues are not being put into the long grass.

All the advice that I have been given, since I took over this brief in its newly constituted form at the beginning of this calendar year, is that we need to be robust about the policy that should be adopted by Her Majesty's Government, of whatever party, on the issue. So far, the Government have not been robust enough, and the Bill is an attempt to make colleagues more robust.

I want to say only a couple more things, as I do not want to give the Minister an opportunity not to be entirely positive about the Bill in his response, and I want him to have time to be positive. There is external evidence other than that from places such as California, which have legislated; there is evidence from groups that are supportive. I pray in aid Dr. James Hansen, the well respected director of the NASA Goddard Institute for Space Studies. He has expressly said that there must be an end to building new coal-fired power stations in the developed world unless carbon capture and storage technology operates in them from the outset. There lies the rub. The difference between the Liberal Democrats and the Government is that the Government have not yet signed up to the idea that such technology should be in place from the outset.

On the day after the Budget announcement, the Secretary of State for Energy and Climate Change made a statement—it was responded to by my hon. Friend the Member for Cheltenham because I was in the United States at the time—in which the Government set out their proposals, whereby there can be carbon capture and storage plans, and the capacity to put the technology in place, but not at the beginning. Therefore, someone could build, say, Kingsnorth power station, get it going and allow it to do its work, but it would not have the controls put on it until later. The danger of that is that as little as a fifth of the emissions might be caught from the beginning. The idea that the sector that contributes half the emissions in the UK might, in its new generation, have only a fifth of its emissions captured, and only later have all of them captured, is, bluntly, not good enough.

When the Government launched their consultation on 17 June, they proposed that new plants should fully fit carbon capture and storage technology within five years of the technology being technically and economically proven. They acknowledged that it might not work, might be delayed or might not be economic, and therefore proposed that we accept a safety net, as it were, to deal with emissions from new plants. They actively considered that an emissions performance standard—my right hon. Friend's proposal—should be an option, but said that we should not decide on it until 2020, which is in 11 years' time. My right hon. Friend has come to the House to say that we need to decide on this imminently—not today, but so as to have the legislation in place this year in order for the date to be fixed next year. That would mean that next year the big energy companies will know the date by which they must have the technology in place, and that they will not be able to get Kingsnorth, or any other power station, to start producing until it is in place. Following all my consultations, I have no doubt that if that were the law, they would comply with it and understand it. They know they have a market out there, and they know that coal has a future in this country. It is important that it does, within the constraints, but we must set the regulations now.

My right hon. Friend has brought his heavyweight experience as a politician to a subject which, as he says, is probably not the thing that people on Skye wake up in the morning thinking most about. Nevertheless, he is very clear, as we are as a party, that we now need to put it at the top of our agenda. I hope that we will all sign up to the fact that, as my hon. Friend the Member for Cambridge argued, it is not sufficient to leave it to the market. The crisis is so great that we have to regulate. I am not someone who instinctively wants to regulate and legislate; as a liberal, I always come to that view as a matter of last resort. However, we can all read the advice of the Committee on Climate Change and look at the science in the build-up to the Copenhagen talks. I am persuaded by the science, as we should all be, that it is necessary to act now, not, as the Government propose, in 10 years' time—that is not good enough.

I hope that the Minister will be very positive about the Bill and robust in understanding its importance. If we can make progress on it, this will be a doubly good day for the environment in the House of Commons.

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Photo of David Kidney David Kidney Parliamentary Under-Secretary, Department for Energy and Climate Change 12:43 pm, 3rd July 2009

I congratulate Mr. Kennedy, who presented the case for the Bill, on his choice of subject. It is one of the major issues of the day, and he has his finger on the pulse in bringing it before us. I always thought that he led his party with great skill and great good humour, and he brought those qualities to bear in leading this debate, which he did adroitly and persuasively.

I know that in the previous debate some hon. Members were a touch impatient to hear my full arguments, so I shall give them a synopsis of what I am going to say. The Government's position is that in our general policy direction, we are where every Member who has spoken has urged us to be. We have already commenced a consultation on the best way to get a detailed policy so that we can travel forward. Unlike Gregory Barker, I believe that consultation is a very good thing and an important component of getting policy right. In that context, the Bill is premature in the solution that it proposes. The solution will look something like the Bill, but we will know better how precisely it will look when we have concluded the consultation.

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Photo of Simon Hughes Simon Hughes Shadow Secretary of State for Energy and Climate Change

For those who read or hear our debates, will the Minister put on record the closing date of the consultation, so that people know by when they need to respond?

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Photo of David Kidney David Kidney Parliamentary Under-Secretary, Department for Energy and Climate Change

I think that it is 9 September, but I will come back to that in a moment and correct it if I have got it wrong. As the right hon. Member for Ross, Skye and Lochaber kindly said, the consultation is currently open, and it will close in the autumn.

Having congratulated the right hon. Gentleman on his Bill, I confirm that reducing emissions from our power stations is imperative if we are to achieve our climate change goals. I was pleased to be able to have a meeting with him recently. Being a new Minister, every day seems to last an eternity, so I cannot remember whether it was last week or the week before, but it is reasonably fresh in my mind. Simon Hughes mentioned the many powerful non-governmental organisations that support the Bill, and I was pleased to see some members of WWF at that meeting. I said privately then, and I am happy to say publicly today, that I am a keen supporter of WWF's environmental campaigning in many areas, and I have personally supported many of its initiatives in the past. I am grateful to it for the expertise that it brought to the meeting and the arguments that its representatives made. It was a valuable exchange because they not only listened to and understood the Government's position but teased, pressed and probed it, so that I genuinely had to think about the issues that they raised. In every sense, the meeting was very helpful.

Even in the short time since we had that meeting, there have been three key developments that are relevant to today's debate. The first was that my right hon. Friend the Secretary of State for Energy and Climate Change published the Government's manifesto for the negotiations in Copenhagen at the end of this year in a document called "The Road to Copenhagen". It set out our case for an ambitious international agreement on climate change in December. Hon. Members will know, and I hope it becomes widely known by the public, that the full document contains a detailed exposition of the Government's position. For people who want a handy and accessible summary of the position, there is a shorter document that they can obtain. There are plenty of paper copies of it, and it is on the Department's website. During the launch of that document last Friday, my right hon. Friend the Prime Minister was once again at the forefront of international efforts to secure what perhaps matters most, which is the finances to ensure that the world goes forward practically.

The second crucial development since the meeting was mentioned by the hon. Member for North Southwark and Bermondsey. The US Clean Energy and Security Act completed its passage through the House of Representatives at the weekend. As he said, among its provisions is a requirement that all new coal power stations permitted after 2020 must have carbon capture and storage fitted.

The third element of the package, which is important, is the Government's announcement on Monday of our draft legislative programme for the next Session of Parliament. The Prime Minister stood at the Dispatch Box and explained the programme, in which his No. 1 measure was an energy Bill. Clearly, the Department is pleased that such priority has been given to its work through a new energy Bill to implement the financial support mechanism for up to four carbon capture and storage demonstration projects that were announced in the Budget this year.

So much meaningful activity in under two weeks demonstrates the pace of change. We all understand that urgent action is required to tackle dangerous climate change. The Government's own thinking is developing at speed—that is shown by the fact that, when the Bill had its First Reading in January, the Government had not pronounced publicly on an emissions performance standard—EPS, as everyone calls it—as part of our portfolio of measures to tackle emissions from power stations.

Following the report from the Climate Change Committee, which the right hon. Member for Ross, Skye and Lochaber mentioned today, and responses to our previous consultation on the subject, "Towards Carbon Capture and Storage", we have moved forward and are exploring in our current consultation the possibilities of using an EPS to support our aim of reducing emissions from power stations. The consultation document, of which I have copy before me, was launched in June and contains a great deal of discussion about what an EPS might comprise, how it could be applied, and—perhaps the most crucial point in the right hon. Gentleman's speech—the timing of its introduction.

The Government have the same agenda as all hon. Members who have spoken in the debate, but the point at issue is that, while we greatly support the Bill's intentions, there are several reasons for being unable to support its further progress at this time. I will go through them in detail later on—the right hon. Gentleman and I have discussed them previously. Let me first emphasise that the wider issues relevant to the Bill, including the development and deployment of carbon capture and storage technologies, without which it would be difficult to achieve any meaningful emissions performance standard, are a priority for the Government.

Reducing our carbon emissions to avoid dangerous climate change is an increasingly urgent challenge. Without urgent action, when a child born today reaches 50, average temperatures worldwide could have increased by up to 2.5° C above pre-industrial levels. Local and seasonal increases in temperature could be significantly higher, and the effects on society and the environment would be dramatic. For example, some 20 to 30 per cent. of plant and animal species could become extinct; food production may start to decline; and a 60 per cent. reduction in glaciers in the northern hemisphere could affect the drinking water supply of a sixth of the world's population—a billion or so people. "The UK Climate Projections 2009", published on 18 June, shows the extent of the changes that the UK might face as a result of climate change: warmer, wetter winters and hotter, drier summers, with more drought, heatwaves, flooding and sea level rises.

Tackling climate change is a global challenge and we need co-ordinated global action. A global climate change deal, if it can be won in the negotiations in Copenhagen this year, will affect all our lives and the prospects for generations to come. As I said earlier, my right hon. Friend the Secretary of State for Energy and Climate Change has set out the UK's position for the global climate change negotiations in "The Road to Copenhagen".

The overriding goal of the Copenhagen agreement must be to limit climate change to an increase in global average temperature of 2°. That means that the deal needs to establish a credible trajectory for reducing global emissions by at least 50 per cent. on 1990 levels by 2050, and to put in place now the measures to ensure that emissions start to fall in the next decade. We will be working intensively with other countries to resolve the issues and remove the barriers to reaching an effective international agreement at Copenhagen. We are also determined to ensure that the UK's domestic emissions reduction effort contributes to achieving that global deal.

Through the Climate Change Act 2008, the UK became the first country in the world to introduce legally binding carbon budgets, which commit us to carbon savings of 34 per cent. by 2020 and at least 80 per cent. below 1990 levels by 2050, to be achieved through action at home and abroad. The four key measures by which we can meet those ambitious targets will be: first, from 2013, a progressively declining cap on emissions in the power and industrial sectors, through the EU emissions trading scheme; secondly, incentivising low-carbon sources of energy; thirdly, bringing about dramatic improvements in energy efficiency; and fourthly, facilitating a switch in energy demand in the heat and transport sectors to low carbon electricity and renewable fuels. The first two of those measures are of most relevance to today's debate.

There have been some less than wholehearted endorsements of the EU emissions trading scheme in this debate. The scheme is the first of its kind—and the first of such size, ambition and scope—anywhere in the world. The revised EU ETS directive was agreed last year and will come into effect from 2013. It sets an annually declining trajectory for the cap on emissions to 2020 and beyond, which will deliver emissions 21 per cent. below 2005 levels by 2020 and is consistent with keeping the EU on track to deliver a 60 to 80 per cent. cut in emissions by 2050. The EU ETS cap will also be tightened up to the 30 per cent. greenhouse gas reduction target when the EU ratifies a future international climate agreement—in other words, if we reach a robust agreement at Copenhagen.

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Photo of David Howarth David Howarth Shadow Secretary of State for Justice

This is probably the crux of the issue. The increasing academic consensus among economists is moving against emissions trading, and especially emissions trading as the only measure. The reason is that if what the Minister has said were fully accepted and there were no problems of public choice—that is, of people thinking that the agreements might not be kept to—then the futures price of carbon would be rising, but as we can observe, it is not. The problem that the Government must face is that the facts have changed, and therefore their policy must change.

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Photo of David Kidney David Kidney Parliamentary Under-Secretary, Department for Energy and Climate Change

I am someone who is instinctively concerned about putting all the eggs in one basket, so I take the hon. Gentleman's point about not claiming everything for one approach, in this case emissions trading. However, he should bear in mind the scheme's fairly recent arrival and the fact that it is necessary to learn from early experiences, including the giving out of permits at the beginning to get the scheme going. As we move forward and learn the lessons of the first phase, we can have a much more effective scheme in the future.

For our part, the UK will be auctioning 100 per cent. of EU ETS allowances to the power sector from 2013, and at least 60 per cent. of allowances will be auctioned in the UK by 2020. That will provide a more economically efficient way of allocating allowances and help to reinforce the incentive to reduce emissions and invest in and develop cleaner technologies. As the hon. Gentleman said, that was the original goal of the scheme and that is the intention that we support. Overall, the combination of a tighter cap with a set declining trajectory, auctioning as the primary means of allocation and reduced access to project credits from outside the EU will result in more predictable market conditions, with a more stable price and improved certainty for industry. As the EU-wide cap on carbon emissions tightens, the carbon price should rise and options for reducing emissions will become progressively more economically attractive.

With 35 per cent. of the UK's emissions coming from the generation and supply of electricity, making the shift to low carbon electricity generation is an essential part of our overall transition to a low carbon economy. The challenge is to achieve this transition while ensuring that we maintain the security of our electricity supplies. This means ensuring that we have sufficient generation capacity available, that we maintain a diverse energy mix so that we are not over-reliant on any one fuel or technology, and that electricity is affordable. To ensure that we have a full range of options available, the Government are working to overcome the barriers to deployment of the three key technologies expected to contribute to the decarbonisation of UK electricity generation: renewables, nuclear, and carbon capture and storage.

Our electricity mix will change significantly over the next decade. By 2018, between 18 and 20 GW of generation capacity is expected to close. Seven nuclear power stations will reach the end of their licensed lifetime, while six coal and three oil power stations will close as a result of EU environmental legislation to reduce emissions of sulphur dioxide and nitrogen oxides. We therefore need substantial investment in new electricity generation capacity if supply is to continue to meet demand reliably. [ Interruption. ] I seem to have the Obama problem with a fly.

New generation capacity will come from all generation types. Our renewable energy strategy, to be published before recess, will drive a step change in renewables deployment. We are taking steps to facilitate investment in nuclear, and we expect further applications for coal and gas power stations to come forward. Investment in new fossil fuel power stations is needed to provide sufficient generation capacity through the next decade and to provide flexible back-up to increasing levels of intermittent renewable generation. We cannot avoid the fact that fossil fuel power generation will continue to play a significant role in our energy mix for the foreseeable future, but we must also recognise the need to take steps to reduce emissions from fossil fuel power stations, both in the UK and—crucially—internationally. That is particularly important in relation to coal-fired power stations. Coal provided 41 per cent. of the world's electricity in 2006, and the International Energy Agency predicts that this could increase to around 44 per cent. by 2030. Yet it is the most carbon-intensive means of generation, with emissions from the UK's existing coal power stations in 2007 averaging 940 kg per MWh, compared with 400 kg per MWh from our gas power stations.

Any credible strategy for tackling climate change must address effectively the challenge of reconciling nations' energy security needs with the urgent need to tackle global carbon emissions. This is where carbon capture and storage technologies have a crucial role to play. By capturing, transporting and safely storing the carbon dioxide produced by power stations, CCS technologies can reduce power station emissions by around 90 per cent. The International Energy Agency estimates that the global costs of tackling climate change would increase by 70 per cent. without the availability of CCS as a proven technology for reducing emissions.

However, CCS is not yet commercially deployable. Each of the different stages has already been demonstrated successfully over a number of years. Capture technologies are already deployed commercially in industrial processes, albeit on a smaller scale than that required for a power station, and 3,000 km of pipelines are currently used to transport about 20 million tonnes of carbon dioxide a year for use in enhanced oil recovery in the US and Canada. A number of significant projects are demonstrating the safe storage of carbon dioxide in geological formations, including a project that has been storing carbon dioxide under the North sea since 1996, and one in Canada that has been storing around 2.8 million tonnes a year since 2000. But there are no operational projects demonstrating the full chain of technologies on a commercial-scale power station, and it is this transition to commercial scale that is the critical next step.

We have made significant progress in the UK on putting the framework in place to support CCS. In the Energy Act 2008, we introduced one of the world's first legal regimes to permit the permanent storage of carbon dioxide in geological formations under the sea. Following a consultation exercise last summer, in April this year we announced a requirement that all new power stations in England and Wales will have to be carbon capture ready—I appreciate that this is the crux of our debate—in order to gain consent for construction under section 36 of the Electricity Act 1989.

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Photo of Gregory Barker Gregory Barker Shadow Minister (Energy and Climate Change)

Will the Minister give us an absolute definition of this much bandied-about term "carbon capture ready"? When I was in California, someone told me that their driveway had been Ferrari ready for years and years, but the Ferrari had still to arrive. What does the Minister mean by carbon capture ready—not building on the car park?

Photo of David Kidney David Kidney Parliamentary Under-Secretary, Department for Energy and Climate Change

I would ask the hon. Gentleman to be patient while I make a bit of progress. If I have told him that there is no commercially scaled-up project in the world, how can I then tell him what a future scheme will look like? It means as a minimum, and as David Howarth said, ensuring that there is space for the technologies to fit into, that the connections are in place to make the transportation and storage part of the process work, and that the building design itself is capable of taking the addition at a later stage of the carbon capture technology. What this means for developers is that they will have to leave sufficient space for the carbon capture equipment; they will have to demonstrate that it is feasible to retrofit the equipment; and they will have to identify a suitable offshore storage site and demonstrate that it is possible to transport the carbon dioxide from the power plant.

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Photo of Simon Hughes Simon Hughes Shadow Secretary of State for Energy and Climate Change

We could all probe this issue all afternoon, but we will not. Let me ask the Minister the reverse question: why do the Government baulk at the idea of telling producers, "You must have this in place"? We all know where the science, technology and development is, so if the crisis in the science is so grave, what is the difficulty in saying, "Sorry, guys, but the next generation has to comply—go to it"?

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Photo of David Kidney David Kidney Parliamentary Under-Secretary, Department for Energy and Climate Change

If the hon. Gentleman had read the consultation document, he would agree that it is an unfair characterisation of the Government's position to say that we baulk at imposing a standard. The document sets out some of the risks involved in setting a standard—or certainly setting it before having undertaken appropriate consultation and assessment of the likely outcomes. Would not the hon. Gentleman agree that it would be a risk if we set a standard that deterred anyone from investing in these technologies at this time, especially if they could either postpone the investment completely or make it somewhere else where the same standard had not been set at the same time? There are risks of proceeding in an ill-considered way, which is the whole point of asking for the consultation to be completed before we legislate—or before we take the necessary decisions, if they can be taken without primary legislation, which is possible. That is why we should hold our horses—at least for today.

In November 2007, we became one of the first countries in the world to launch a competition to select a commercial-scale carbon capture and storage demonstration project, with Government support.

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Photo of David Howarth David Howarth Shadow Secretary of State for Justice

I am trying to follow the logic of saying, "We should not proceed with this Bill today, because the consultation that might result in doing the same thing is going on at the same time." The Bill allows the Secretary of State to set the maximum level. I can see an argument for saying that we should not set the maximum level today, but the Bill does not do that—it allows the Government to do that. Why not let the Bill go into Committee, which would allow further progress to be made in October after the consultation comes to an end, so that we could then get on with it quickly rather than wait for a new Bill in the new Session, which might not get through Parliament before the election?

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Photo of David Kidney David Kidney Parliamentary Under-Secretary, Department for Energy and Climate Change

It seems to me inappropriate for any legislature to proceed on the basis that if it pops in place permissive powers for the Government to take action in advance, those powers might be made use of one day in the way that was contemplated on the day the permission was given. Surely it is appropriate to conclude what the policy is first—rather than put the cart before the horse—before proceeding with the necessary legislation, although the hon. Gentleman will have heard me say a few moments ago that some actions urged on me today might not require primary legislation. It is sensible to decide the policy first and the actions that flow from it and then take those actions. That is the Government's position in their opposition to the Bill today.

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Photo of David Howarth David Howarth Shadow Secretary of State for Justice

It is not a case of putting the cart before the horse; it is a question of whether the Government have a horse at all. The Bill allows them to have a horse, and they can change the cart later.

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Photo of David Kidney David Kidney Parliamentary Under-Secretary, Department for Energy and Climate Change

In that sense, we have the horse. We will have an energy Bill in the fifth Session in any event. It is possible, however, that we will not need to take the horse out of the stable because we have the powers already. I am sure Members have got my drift and understand my synopsis. The argument is about prematurity, not technical defectiveness, as the hon. Member for North Southwark and Bermondsey pointed out earlier.

We have also been working actively in the global arena to ensure that the UK's efforts are part of an international effort to prioritise the development and deployment of CCS. We were instrumental in securing EU funding to support a programme of up to 12 EU demonstration projects and a G8 commitment to launch 20 demonstration projects by 2010. The UK has also led the EU approach to the development of a commercial-scale CCS project in China, providing up to £3.5 million for a technical study which will be completed by autumn this year and will inform the demonstration and development of CCS in China. Earlier this week, I had the great good fortune to meet the team of officials in my Department who are doing that work with the authorities and the Government in China. Their expertise, enthusiasm and commitment to the project are deeply impressive.

However, progress is still not being made quickly enough if CCS is to achieve its potential in tackling emissions from power stations within the time frame required to prevent dangerous climate change. That is why the Government published, on 17 June, a consultation paper containing proposals for a new regulatory and financial framework to drive the development of clean coal. The consultation remains open until the date that I did remember correctly earlier: 9 September.

What we propose would provide financial support for up to four commercial-scale CCS demonstrations here in the UK, require any new coal power station in England and Wales to demonstrate CCS on a defined part of its capacity, and require new coal power stations to retro-fit CCS to their full capacity within five years of its being independently judged technically and economically proven. I said earlier that the technology had not yet been established on a commercial scale anywhere in the world, and, as I am sure Members appreciate, there is more than one technology. It is not yet clear which will become the defining technology for the future. The fact that we can have a range of demonstration projects in this country, in the European Union and around the world will enable us to test the various possible technologies more fully.

As Members will know, the first of those technologies is called pre-combustion capture. Carbon is extracted from the fuel before it is burned, which means that the fuel must first be "gasified" by being heated in only small amounts of oxygen. That produces "syngas", which is primarily a mixture of carbon monoxide and hydrogen. Steam is then added to convert the carbon monoxide to carbon dioxide, producing additional hydrogen. The carbon dioxide can be chemically separated, leaving hydrogen that can be used as a "clean fuel" in a power plant, as a fuel for vehicles, or for other chemical processes. Only a few integrated gasification combined cycle coal plants exist, as they are not yet an established technology, and all those that do exist are without CCS.

Capture of carbon dioxide through the second technology, oxyfuel-combustion, involves burning fossil fuels in almost pure oxygen rather than air. The oxygen is obtained through the removal of nitrogen and other gases from air, which is 79 per cent. nitrogen by volume. Burning the fuel in oxygen results in a flue gas of almost pure carbon dioxide and water vapour. The carbon dioxide can then be separated relatively easily from the mixture for transportation and storage.

The third technology is post-combustion CCS, in which the carbon dioxide is removed after the fuel has been burned, just before the combustion products are released in the atmosphere. A chemical solvent is usually used to capture the carbon dioxide from the flue gas. Subsequent heating of the mixture allows the solvent to be recycled as it frees the carbon dioxide to be compressed, transported and injected into a storage site. This technology is particularly suited to retrofit applications, which is the main reason it was selected for the first UK-based CCS competition.

Our consultation also discusses the merits of an emissions performance standard, which brings me back to the details of the Bill. The Bill would require the Secretary of State to introduce an emissions performance standard for all power stations—coal, gas and oil—that would specify the maximum amount of carbon dioxide that could be emitted per unit of electricity generated. The details of the standard would be set out in secondary legislation.

Emissions performance standards have long been used to regulate emissions of other pollutants. For example, the first Europe-wide limits on air pollutants from motor vehicles were introduced as long ago as 1970 and the large combustion plants directive, which sets limits for sulphur dioxide and nitrogen oxides from power stations, has been in force in one form or another since 1990. That directive and the more general integrated pollution prevention and control directive, which is also based on the setting of emission limit values for various pollutants, are to be subsumed by a comprehensive new, revised and consolidated EU directive: the industrial emissions directive, which is at an advanced stage of negotiation, and may have an impact on plant closures in about 2020.

Using an EPS as a tool to tackle carbon dioxide emissions from power stations is certainly an idea the Government consider worth exploring, particularly in relation to coal-fired power stations. Several US states have already introduced an EPS for power generation. For example, California and Washington have introduced an EPS based on emissions levels from gas-fired power stations for new base-load generation. Proposals have also been put forward at the federal level through the US Clean Energy and Security Act that I mentioned at the start of my speech, although the legislation has yet to complete its passage. Page 35 of the consultation document contains a very useful description of the American legislative attempts to set EPS standards; it sets out the position in California, Oregon and Washington, as well as giving more details about the Clean Energy and Security Act.

An EPS can be absolute, so that a power station is expected to meet the standard at all times, or it can be averaged over a period of time, so the power station has to ensure that emissions meet a specified average over a year, for example, or a lifetime. Our consultation document sets out two broad approaches to the possible use of an EPS as part of the regulatory framework. One approach would reflect the development of CCS technologies, ensuring that the timing and level of any EPS implementation is linked to progress made on CCS. This would mean setting an initial EPS at a level that would support CCS demonstration and then, once CCS is proven, tightening the standard to a level that supports retrofit.

The second approach would be to set the EPS in advance of demonstration of CCS technology; that is the approach urged on me by the right hon. Member for Ross, Skye and Lochaber. This would mean setting an EPS with a downwards trajectory for emissions in line with climate change objectives. Our consultation also looks at the critical issue of the level at which the standard should be set under either scenario.

Our proposal is that if an EPS is introduced, it should be based on average emissions over a period of time, possibly with a maximum emissions level that could be tightened for individual sites if they are judged technically and economically able to meet that standard. In setting a maximum level, there are various possible approaches. One of them is linking the standard to emissions of gas power stations. This would create a level playing field for coal and gas power stations in terms of emissions. Very high levels of co-firing with biomass could take coal power stations some way towards meeting such an emissions level, but in practice they would need to fit CCS.

An alternative approach is to link the standard to the minimum achievable emissions at each site while allowing economic operation of the plant, based on an assessment of best available techniques. Until we know more about the operation of CCS on a commercial scale and future carbon prices, it is difficult to make an informed judgment about what this level might be.

Another option is to link the standard to modelling projections of the contribution that reductions in emissions from power stations could make to delivering climate change goals. In this case, assumptions would need to be made about factors such as the carbon price and the availability and costs of options for reducing emissions across all sectors.

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Photo of Gregory Barker Gregory Barker Shadow Minister (Energy and Climate Change)

That is a very helpful canter through the consultation document, but can the Minister say that he does not anticipate arriving at a conclusion whereby there would not be some form of EPS? Will he say that the Government are committed to the EPS in principle, even if he cannot specify to which particular scheme or number they will attach themselves?

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Photo of David Kidney David Kidney Parliamentary Under-Secretary, Department for Energy and Climate Change

I thank the hon. Gentleman for showing such an appreciation of my summary of the consultation document. He will notice that in none of the options I proposed is there not to be an EPS of one form or another. I hope that in a moment I shall be able to discuss contingencies in case CCS is not proved on a commercial scale by 2020—our ambition is that it will be—and even in such circumstances the EPS may well have a role to play.

Another key issue in the development of a position on an EPS is an understanding of how it would fit with the EU emissions trading scheme. At the moment, the ETS is the only mechanism for controlling emissions of carbon dioxide from our power stations and other large industrial installations. Whatever measures we wish to take in the UK, the EU ETS will remain the central measure for reducing emissions throughout Europe. It is therefore essential that any approach to an EPS in the UK ensures that it complements the EU ETS and is fully consistent with EU law and policy throughout the rest of the European Union.

The Bill suggests that the EPS should be implemented through the development consent process. That is certainly one option, but there are others. Our consultation set out two options for implementing an EPS in order to implement a requirement to retrofit CCS technologies once the technology has been assessed as proven. In both cases, the Environment Agency would take a leading role. In the first option it could use the environmental permitting regime that it already uses to limit emissions of other harmful gases, such as sulphur dioxide and nitrogen oxides, in setting an EPS. Operators would have the flexibility to determine how to meet the set standard, and could take actions such as co-firing with biomass, improving operational efficiency or fitting CCS or any other new emissions reducing technologies that might be developed. Alternatively, in the second option, the Environment Agency could simply specify in the environmental permit that the power station has to fit, or retrofit, the CCS technology and operate it.

If an EPS is to be effective in helping to achieve our climate and energy security objectives, a full analysis of the various options and their impacts on the energy mix has to be undertaken. A full consultation process is an integral part of gathering the evidence required for such an analysis, which is why we included the discussion of an EPS in our consultation on the framework for the development of clean coal. I was sorry that the hon. Member for Bexhill and Battle, who speaks for the official Opposition, appeared to take against consultations, given that they are such a valuable part of the process in ensuring that we get the law right.

Supporting this Bill would cut across that consultation. Although we are keen to take the most effective action that we can to encourage the development and deployment of CCS technology as quickly as possible, it would be premature to legislate now to impose an EPS. In addition, as I have outlined, there are a number of significant policy issues still to be worked through before it will be possible to take an informed decision about whether an EPS is the most effective approach to driving the transition to a diverse and secure low-carbon energy supply; about when and how an EPS should be introduced if it is found to be the most effective approach; and about its effect on other existing EU measures, including the EU ETS, to which I have referred.

It is also important to ensure that we have a comprehensive framework in place to support the development and deployment of CCS technologies in order to reduce emissions from our power stations. This is why our consultation covers a range of proposals, not just the EPS itself.

The right hon. Member for Ross, Skye and Lochaber was on the money, as the hon. Member for Bexhill and Battle said, about the timeliness of this debate and his proposals. He is right to press the Government on taking action sooner rather than later. I enjoyed the Gaelic humour over the word "mañana" and it is interesting how something that I said in one debate about not being able to wait for tomorrow was used against me in the very next debate. However, I hope that the right hon. Gentleman will agree that the Government have the right sense of urgency about doing what he wants us to do, although we are determined to do it right.

The hon. Member for Cambridge is no longer in his place, but he was right to say that the carbon price has not yet developed under emissions trading in the way that was anticipated. I told him of the actions that we are taking to try to put that right for the future. The hon. Member for Bexhill and Battle let party politics creep into his contribution a little too much. In the first debate, we all said how important a long-term cross-party approach would be, so it does not help to take cheap shots at the Government and say that we have had to be dragged kicking and screaming towards a policy position. We have reached that position without any help from him and his colleagues, thank you very much.

I have been urged on more than one occasion to travel to California, no doubt in a carbon-emitting aeroplane. When I served on the Joint Committee that carried out the pre-legislative scrutiny of the Climate Change Act 2008, we heard from representatives of the administration in California by live video link. I shall obtain information from those representatives in that form in the future, and keep my emissions as low as possible.

I agree with the hon. Member for Bexhill and Battle that it is important to get this policy right and ensure that we give long-term, stable signals to the market to provide confidence for private sector investment in what is not yet commercially proven technology. It is important for the Government to show their commitment at the beginning so as to start the process, which is why Government support for the demonstration projects is an important part of the whole. I agree also that it will be crucial in international negotiations that we are able to engage on the basis that CCS will be an important method of reducing carbon emissions in the future, especially in those developing countries that are so reliant on coal as part of their energy mix.

We want to be at the forefront of the technology for CCS, because it offers huge potential for jobs and exports in the future. As the hon. Gentleman says, huge sectors of the Chinese economy are dependent on burning coal in power stations. The world has hundreds of years of stocks of coal, so we have to get CCS or similar technologies fitted in this country and others around the world if we are to keep emissions low. Of course, no amount of legislation here will make China take such action: it is the international negotiations that will be important in reaching that position. The hon. Member for North Southwark and Bermondsey made the same point about China and developing countries that are so reliant on coal as an important part of their energy mix.

In conclusion, this Bill raises an important issue and I welcome Members' contributions to the debate. I trust that we will continue to have the debate as we develop our policies over the coming months. I hope hon. Members will agree that the Bill is premature at this stage, and I ask the right hon. Member for Ross, Skye and Lochaber to withdraw his Bill, now that we have had such a useful debate. I wish to end where I began, by referring to the meeting that I had with him and representatives of the WWF recently. I told them that this is an important issue and we want to ensure that we have everyone's support. We must take the right arguments into account, and I suggested that we meet again in the autumn to discuss—I hope—the Government's position on the responses to the consultation and in the light of a new energy Bill. Clearly, we now know that both of those things will happen. There will be responses to the consultation, because it has already been launched, and we have now heard that there will be a fifth Session energy Bill.

Let me say to the right hon. Gentleman, as my personal commitment at the end of this debate, that I look forward to meeting him and the representatives of WWF who came with him last time later this year.

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Photo of Michael Lord Michael Lord Deputy Speaker (Second Deputy Chairman of Ways and Means)

Order. The right hon. Gentleman must say, "With the leave of the House," to respond— [ Interruption. ] He should ask the leave of the House.

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Photo of Charles Kennedy Charles Kennedy Liberal Democrat, Ross, Skye and Lochaber

With the leave of the House, Mr. Deputy Speaker—I have now forgotten what I was going to say.

I want to thank the Minister for his characteristically courteous and, on today's evidence, characteristically thorough reply to the debate. He has not quite matched the record that he set earlier this morning, but he is not far off. Although I have one hour left at my disposal, I can assure him that I do not intend to make use of it.

As the Minister quite fairly said, if we go back even a few months to January, when the Bill was fist introduced, we can see that things have moved on a lot. They have even moved on a lot in the past two weeks, on the principle that a week is a long time in politics—I think that our meeting took place a week ago last Monday, and things have moved on quite a lot since then. However, I think he was perhaps being a bit unfair. He said that there were three great developments that had taken place: first, the publication of the "Road to Copenhagen" document; secondly, the legislation, in so far as it has been enacted, in the United States; and, thirdly, the welcome confirmation that there will be an energy Bill. There is of course a fourth development, which is today's debate. We should not knowingly undersell the global impact that we seek to have.

There is movement, and that is to be welcomed. I take on board the Minister's point that there is not necessarily a disagreement in principle, as things stand at present, to what the Bill proposes, as we know from the early-day motion and from what has been said today. We have heard helpful and welcome comments from the Conservative spokesman, Gregory Barker, whom I thank, and from my hon. Friends the Members for Cambridge (David Howarth) and for North Southwark and Bermondsey (Simon Hughes). Members of the Labour party and other parties have also expressed their concerns, not orally today but in other forms, on the Order Paper. Let us see how things progress as we move towards the autumn.

Let me draw one comparator from the 1980s, in reference to a point that was raised more than once in the debate. It concerned acid rain regulation. I remember that there was quite a debate in the House at that point about how best to go about tackling it. The Government had a target to fit coal-fired power stations with sulphur scrubbers, as they were known. The opportunity was repeatedly missed because the framework, the Government of the time said, was not firm enough. Despite the fact that public funding was made available for the new technology, the power companies were able to delay and it was only when an EU directive came into place mandating the technology that in the late 1990s, lo and behold, the companies found the money and the technology was introduced.

As was said in the debate on the Green Energy (Definition and Promotion) Bill, in public policy as well as in private behaviour there is a need for a degree of the carrot-and-stick approach. However, I hope that the Government will not resile in due course from setting firm dates and setting them as soon as possible.

In conclusion, I hope that that this has been a useful and timely contribution to an ongoing, fundamentally important issue. As well as WWF, to which the Minister has been kind enough to refer on several occasions in the context of the meeting that took place, the cause has had the support of the Royal Society for the Protection of Birds, Greenpeace, the World Development Movement, Christian Aid and ClientEarth. One reason that so many Members, in such numbers, signed the early-day motion is that the constituent members of many of those organisations have been lobbying their MPs to try to secure their active support for what is being proposed. That having been started, it certainly will not go away in the next three or four months, which will take us until after the consultation period; I say that with a view to the next Queen's Speech, assuming that this Parliament gets that far. On that basis—I hope I get my terminology correct on this occasion—I beg to ask leave to withdraw the motion and the Bill.

Motion, by leave, withdrawn.

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