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'(1) The Secretary of State must, for each reporting period, prepare a report on progress during the reporting period-
(a) in decarbonising electricity generation in Great Britain (covering separately generation by coal-fired generating stations), and
(b) in the development and use of carbon capture and storage technology in Great Britain.
(2) Each of the first three reports under subsection (1) must include an assessment by the Secretary of State-
(a) of whether use of carbon capture and storage technology in generation of electricity on a commercial scale has been, or when it will be, successfully demonstrated;
(b) of whether coal-fired generating stations for which appropriate consent is given on or after 1st January 2020 that are built in Great Britain can be expected to be constructed so as to enable use of carbon capture and storage technology on all their generating capacity.
(3) A report under subsection (1) must also include a review of whether, having regard to the other matters contained in the report, any government policies should be revised and, if so, why.
(4) In preparing a report under subsection (1), the Secretary of State must-
(a) consult the Scottish Ministers and the Welsh Ministers;
(b) take into account any relevant points raised by reports by the Committee on Climate Change under section 36 of the Climate Change Act 2008 (reports on progress).
(5) The Secretary of State must, within 1 year after the end of a reporting period, lay before Parliament a document containing the report under subsection (1) for that period.
(6) In this section-
"appropriate consent" means consent under section 36 of the Electricity Act 1989 or section 114(1)(a) of the Planning Act 2008;
"coal-fired generating station" means an electricity generating station powered wholly or mainly by coal;
"decarbonising electricity generation" means reducing the amount of carbon dioxide emitted into the atmosphere from electricity generation;
"reporting period" means-
(a) the period beginning with the passing of this Act and ending with 2011;(b) the 3 year period beginning with 2012 and each subsequent 3 year period;
and "the reporting period", in relation to a report under subsection (1), means the reporting period to which the report relates.'.- (Joan Ruddock.)
Brought up, and read the First time.
With this it will be convenient to discuss the following: new clause 6- Carbon emissions performance standard -
'(1) The Secretary of State shall make provision by regulations or otherwise for a carbon emissions performance standard to set the maximum level or levels of carbon dioxide that may be emitted per unit of output by all individual generating stations.
(2) The Secretary of State shall review the emissions performance standard established under subsection (1) no less frequently than every three years.
(3) In establishing the level or levels of the carbon dioxide emissions performance standard in subsection (1), and in carrying out the review required in subsection (2), the Secretary of State must-
(a) take into account the most up-to-date scientific knowledge about climate change; and
(b) obtain and take into account the advice of the Committee on Climate Change, particularly in relation to carbon budgets, medium- and long-term emission reduction targets, and future emissions from the electricity generating sector.
(4) The Secretary of State must introduce the standard under subsection (1) no later than 12 months from the date on which this Act is passed.'.
New clause 15- Emissions performance standard -
'(1) The Secretary of State may by regulation introduce an Emissions Performance Standard to apply to new electricity generation plant.
(2) In this section "Emission Performance Standard" means a restriction on the amount of carbon dioxide that electricity generation plant can emit.
(3) In setting such a level, the Secretary of State must take account of the latest information available to him on-
(a) the most up-to-date scientific knowledge about climate change;
(b) the advice of the Committee on Climate Change, particularly in relation to carbon budgets, medium and long-term emission reduction targets, and future emissions from the electricity generating sector;
(c) the affordability of electricity prices for consumers; and
(d) national energy security.
(4) The Secretary of State must set out his proposals for consultation within six months of the passage of this Act, with final proposals to be placed before Parliament within 12 months.'.
New clause 25- Emissions performance standard -
'(1) The Secretary of State shall, within one year of the passing of this Act, make provision by regulations or otherwise for a carbon dioxide emissions performance standard to set the maximum level of carbon dioxide that may be emitted each year by any coal fired electricity generating station.
(2) The maximum level of carbon dioxide under subsection (1) will be no more than 25 per cent. of the emissions that would be produced by a coal fired power station of an equivalent size operating without any carbon capture and storage equipment.
(3) The emissions performance under subsection (1) will come into effect no later than 2025.'.
Amendment 1, in clause 4, page 4, line 17, at end insert-
'(2A) An electricity supply levy will not be charged in respect of supplies of electricity, derived exclusively from renewable sources of energy.'.
Government amendments 5, 9 and 36.
First, let me say that the document is not central to the features of the Bill. When my hon. Friend the Under-Secretary gave that undertaking in Committee, he did so in good faith. We want to get the document right, and it will be published shortly, but I do not believe that it is vital to the conduct of this debate.
Let me now address new clause 8 and Government amendments 5, 9 and 36. There has been much discussion during the passage of the Bill about the need to reduce the emissions from electricity generation and particularly from fossil fuel generation. In many ways, this issue is at the heart of my Department's mission. The decarbonisation of the electricity sector is central to achieving our statutory goal of reducing carbon emissions by 80 per cent. by 2050. The low carbon transition plan, which was published last July, set out our plans for getting about 40 per cent. of our electricity supplies from low carbon sources by 2020. Those plans include a comprehensive package of measures such as increasing support for renewable technologies, facilitating the development of new nuclear power stations, and demonstrating, then deploying, carbon capture and storage technology in our fossil fuel plants.
We have not stopped there. The lead times for investment decisions in energy infrastructure are such that we now need to develop clear pathways towards our 2050 goal; we cannot just stop at 2020. Our decarbonisation pathways to 2050 document, which will also be published shortly, will build on our low carbon transition plan and set out possible pathways to a low-carbon UK, including the decarbonisation of the electricity sector.
The need to decarbonise the electricity sector means that the issue of emissions from fossil fuel power station has to be addressed. Coal-fired power stations generate about 30 per cent. of UK electricity and about 40 per cent. of global electricity. Tackling emissions from coal-fired power stations must therefore be a priority if we are to avert dangerous climate change while enabling countries to maintain energy security.
How many new power stations do we need to commence building this year to avoid the risk of the lights going out because of the incoming, much tighter emissions standards and the retirement of old plants? On how many will construction start this year?
I am sure that the right hon. Gentleman understands that we have an energy mix and a privatised energy market. It will be up to the companies to decide what investment they make. What we endeavour to do in the Bill is make it possible and profitable for companies to invest in new coal. We believe that if it were not for the provisions of the Bill, we would not get the new coal-fired stations that we will need, because we will lose a third of existing coal-fired capacity by 2015.
These are issues with which Parliament should be rightly concerned. We have set out clear ambitions that any new coal plant constructed from 2020 will be fully carbon capture and storage from day one and that coal-fired power stations with demonstration projects will retrofit CCS to their full capacity by 2025. Let me make it absolutely clear that there will be only a limited role for unabated coal in the 2020s.
"whether coal-fired generating stations for which appropriate consent is given on or after 1st January 2020 that are built in Great Britain can" have full capacity for CCS. Can she assure us that it is not anticipated that coal stations that cannot have CCS in them after 2020 will continue to operate, or is it anticipated that such stations might continue without CCS?
It is very important to answer the hon. Gentleman's question in context. If he will permit me, I shall continue to set out the case, which will, I think, answer his question.
I repeat that these are issues with which Parliament should be rightly concerned. Ensuring that our policies deliver the carbon reductions that we need within the time frame that we need them is of critical importance if we are serious about tackling climate change. New clause 8 provides the means for Parliament to hold the Government to account for progress on these matters. It requires the Government to lay before Parliament, every three years, a report on progress towards the decarbonisation of the electricity sector including the decarbonisation of coal-fired power stations. The report will also include an assessment of the status of CCS technologies and progress towards demonstration at a commercial scale, and whether coal-fired power stations that have been consented to from 2020 can be expected to be fully CCS from the start.
I think that I was a second ahead, but I am sure that my hon. Friend the Minister will take both interventions. Will she spell out what decarbonisation means in the context of this debate? I know that the Government have had a consultation on the subject. When we talk about CCS, are we talking about 100 per cent. abatement, 50 per cent. abatement or somewhere in between? I hope that we are talking about nothing less.
Knowing how deep an interest my hon. Friend takes in these matters, I am afraid that I cannot answer his question in the precise detail that he would require. We will follow the advice that we get from the independent Committee on Climate Change, which has already made pronouncements on the decarbonisation of the electricity supply by 2030. We are currently considering how to progress from 2020 through 2030 to 2050, and it is in that context that we will be able to give him a definitive answer.
Does the Minister believe that we need to be really honest with people and say that CCS has real potential but that it is currently unproven? That is why we need demonstration plans and a period of time in which to experiment with the technology and economics of the area. Those who press for early action risk the possibility of closing down CCS plants.
My hon. Friend demonstrates real understanding of and wisdom on this issue. As I continue with my remarks, I will give force to the points that he has made. CCS is a new technology and we need to work on it, but it has great promise.
I am sorry to contradict what I am sure is an excellent report-indeed, I might not contradict it, as there may be a misunderstanding about size-but I am advised that there are no plants operating at the scale that we are proposing in our CCS arrangements for this country. There are plants operating at a pilot scale and there are research plants in other parts of the country, but there are no known commercially viable plants operating at the scale that we propose.
The Minister will have seen the report of the Select Committee on Science and Technology on CCS and its investigation, so she will know that the Committee agrees with her regarding CCS and the developing technology and that we must not rush into it too quickly and fall. She will also be aware that the three-year review period mentioned in new clause 8 is a very long period. Has she considered making it a one or two-year period?
I thank the hon. Gentleman for that question. I know that he, too, takes a great interest in these matters. We certainly did consider having a shorter reporting period, but because there is quite a long way to go to make CCS operational at a commercial scale, the three-year period seems appropriate to us. That will mean that we will report in 2012 at the latest-just a couple of years from now-and in 2015 and 2018, coinciding with the review period. We think that that is appropriate, but of course hon. Members can always ask for ministerial statements at any time.
I recognise the wisdom of Paddy Tipping, but also the need for balance in these matters. Will the Minister therefore confirm that competition among nation states for investment in CCS technology is massive and growing quickly? Does she agree that we must make sure that we do not disappoint potential investors by giving the impression that we are not overly bothered?
I could not agree more with the hon. Gentleman. I am so glad to see such support on the Opposition Benches, from him at least. He is right: we need to get on with this- [ Interruption. ] I think that we may hear from some members on the Opposition Front Bench that they want to tinker with our plan for CCS, and possibly undermine it. We are very concerned about that.
From a sedentary position, Greg Clark says that we should get on with it, and that is certainly what we want to do. We want to have these plants up and running: that is the very heart of this Bill, and I thank Mr. Binley for his remarks. He is absolutely right about the competition, as we need to make sure that the UK remains a leader in this field.
I am grateful to the Minister for giving way again. She questioned the scale of existing CCS projects. The Sleipner project in Norway currently stores 1 million tonnes of CO2 a year in the Utsera saline formation, which is expected to have a total capacity of about 600 billion tonnes. What kind of scale is she imagining?
Unfortunately, I do not have to hand the document to which the hon. Gentleman is referring. Although my understanding is that the facility concerned is not a coal plant that generates electricity, which is what this Bill deals with, the hon. Gentleman is absolutely right that the Norwegians have done groundbreaking work on the storage of CO2. That is very valuable, and is part of the knowledge that we have today. The results achieved in Norway enable us to say with confidence that we know that the storage end of the chain seems to be practicable. However, we are talking about an operation involving generation, transport and storage, and no system covering those three components on a large scale exists in the world today.
No, as I need to move on a little. I have a lot to say and I regret that it may take me a little while to get through it all.
The House will recall that I was talking about new clause 8. The final element of the report will be a review of whether Government policies should be revised in order to achieve our stated goals. I think that it is very important that I draw that to hon. Members' attention.
A key part of the new clause is the requirement for the Secretary of State to take into account points raised by the independent Committee on Climate Change. That will ensure that reports will have to consider the advice of the organisation best placed to judge progress in delivering carbon reductions. I think that that answers to some extent the point raised by my hon. Friend Paddy Tipping.
This new clause, with the first report due in 2012, will guarantee hon. Members the opportunity to scrutinise progress towards our decarbonisation objectives and, importantly, to challenge the Government's actions. It will ensure that the Government undertake a regular review of key policies. It will ensure regular assessment as to whether policies require revision in order to deliver on our commitments. It is the backstop that will ensure that there is only a limited role for unabated coal in the future.
Amendments 5 and 9 make consequential amendments to part 1 of the Bill, and amendment 36 is a consequential amendment to the long title.
The new reporting clause is designed to give confidence to those who argue for an emissions performance standard. We share the concern across the House for greater progress on decarbonisation of our energy supplies. We agree with the Climate Change Committee that a step change in the pace of emissions reductions is required. We reflect this need in the measures set out in our low carbon transition plan, which will deliver emissions reductions to achieve our target of 34 per cent. over 1990 levels by 2020. They will also enable us to meet our statutory carbon budgets.
Emissions from the power sector are already regulated through the EU emissions trading scheme, which is at the heart of our domestic and EU efforts to tackle climate change. Phase 3 of the scheme, starting in three years' time, provides a significantly stronger framework than previous phases. An EU-wide cap will ensure a more ambitious, certain and consistent approach across the EU, and in the UK there will be 100 per cent. auctioning of allowances to the power sector, which will ensure that the cost of carbon is better integrated into business decisions.
I acknowledge, however, that the EU ETS on its own is not sufficient to reduce emissions from the power sector to the extent required. That is why the transition plan contains a raft of measures aimed at promoting the development and deployment of renewables, new nuclear and, of course, clean coal.
Our policy measures for clean coal are specifically designed to deliver a package that will enable us to meet the Climate Change Committee's recommendation that there should be only a limited role for unabated coal in the 2020s. There are four elements to the package, as follows: all new coal-fired power stations must demonstrate CCS at commercial-scale, around 400 megawatts of output; four commercial-scale demonstration projects on coal-fired power stations will be funded by the CCS incentive delivered by this Bill; demonstration stations will be expected to be retrofitted to their full capacity by 2025; and, finally, a rolling review of progress in the development of CCS technology will culminate in a report by 2018 that will consider the case for new regulatory and financial measures to drive the move to clean coal. I think that that goes some way to answering the questions raised by Mr. Weir.
No other coal-dependent country has a policy that says that no new unabated coal-fired power stations will be built. No other country has a statutory financial incentive capable of raising the sums required to support the capital and operational costs of four large-scale CCS projects over the next 10 to 15 years.
At the moment, I cannot answer that question, but I can tell my hon. Friend that, in devising the scheme, we have taken proper account of where the balance of interests lies. It is in the interests of all our consumers to have security of supply. We believe that coal must remain in the mix, and that the incentive could ensure that.
As always, we will consult at length about how the levy is framed. When the proposal is put out for consultation, the impact assessment will make clear what the effect will be, but we do not envisage that a disproportionate burden will fall on consumers in this country. We all know that we have to move to low carbon, and that everyone has to make a contribution. It is the Government's policy to try to protect those consumers with the least means to pay their energy bills.
I was setting out the elements of our plan for CCS. Far from being a laggard, as is often suggested by the Opposition, Britain is leading the world on this agenda, as is widely acknowledged by other countries. The new reporting requirement in new clause 8 guarantees that Parliament has the opportunity to challenge the Government on delivery of this programme to monitor our wider decarbonisation of the electricity sector, and to consider whether an emissions performance standard might be needed in the future. The introduction of an EPS now, as required by new clauses 6, 15 and 25-all of which are supported by some Labour Back Benchers, as well as by the Liberal Democrat and Conservative parties-would not lead to greater emissions reductions than those delivered by the framework that I have just set out and the EU ETS.
Does my hon. Friend agree that the EPS could scupper the whole carbon capture project? The fact that the target cannot be reached in the initial phase means that the project would automatically have to come to an end. The EPS would therefore defeat the whole purpose.
My hon. Friend anticipates me. I have just said that the introduction of an EPS now would not lead to any greater emissions reductions. In my next sentence I intended to say that instead it could prevent any new investment in coal, and thus the demonstration of CCS and the development of clean coal. My hon. Friend is right.
My right hon. Friend suggests that we set a level and says that no level is set in the new clauses. That is not quite true. A level is set in one of the clauses that we are about to debate.
What we are saying clearly is that an EPS, whether it is set at a specific level or whether it is entirely open, will undermine the coal programme that we set out, all the provisions in the Bill, and the investment that companies will be prepared to make if-if-there is support for CCS. They will not be prepared to make that investment in circumstances in which there is uncertainty about layering over some other standards.
The hon. Gentleman will have to answer questions about the level at which the standard would be set, when it would be introduced and what he understands would be the effect on investment in new coal. I suggest to him that the effect would be no new coal. If that is the Conservative party policy and intention, he will have the opportunity to tell the House this afternoon when he makes his own speech.
I shall try to make progress. The energy industry, the CBI and the TUC have all told us, in no uncertain terms, that an emissions performance standard introduced now will significantly undermine investment plans. If there are no new coal power stations, that puts at risk the whole demonstration of CCS in the UK. Does that matter? We think it does. It matters because CCS has the potential to play a critical role globally in tackling climate change. It matters because fossil fuels play a vital role in our energy mix, and CCS is the only technology that will allow them to continue in a low carbon future.
I know the Minister does not have detailed figures, but surely she must have some idea of the relative costs to the consumer and the taxpayer of cleaned-up coal power, compared with wind power, wave power and so forth. We need to know that to inform our judgment.
I am sorry. Perhaps I did not respond sufficiently to my hon. Friend Mr. Anderson who asked the question, and I am happy that it has been repeated. I say again that the design of the levy and the consultation have yet to come, but in our discussions we anticipated the cost to the householder being 2 to 3 per cent. on bills by 2020, arising specifically from these provisions. We all have to bear some burden for developing the low carbon economy. The Government will do that in a proportional way and we will try to protect the poorest.
By acting early on CCS we open up opportunities for UK businesses in a major future market, sustaining 30,000 to 60,000 jobs. But it is not just coal that is at risk. The extension of an emissions performance standard to gas-fired power stations, which is required by new clauses 6 and 15, would delay, and possibly deter altogether, investment in new gas projects.
That is no small matter. Around 18 GW, which is about one quarter, of current electricity capacity is expected to be lost over the next decade as environmental standards for coal and oil power stations become more stringent and some nuclear plants close. A significant proportion of the new capacity that wills fill the gap is gas-fired. Any delay in investment caused by the regulatory uncertainty associated with an emissions performance standard will pose significant risks to the security of our energy supplies.
I turn to the situation that we expect to be in by 2025, which is at the heart of new clause 25. Let me make it clear that the charge made by Greenpeace in The Guardian today is unfounded. It will not be possible for
"big energy companies to pollute far into the future from new coal-fired power stations like Kingsnorth".
Greenpeace say it will, and I say it will not be possible. These are the reasons. We have made it clear that we expect that the CCS demonstration plants will retrofit CCS to their full capacity by 2025. Our aim is that any new coal-fired power station built after 2020 is 100 per cent. CCS from day one.
The hon. Lady repeatedly uses words such as "expect" and "aim". That is what fuels the scepticism of Greenpeace and many of the rest of us. What happens when an expectation is not met? Will she tell us what would happen to a power station in those circumstances? An expectation has no legal force.
This country would not have got very far in its development over the industrial ages if the attitude that the hon. Gentleman portrays had been taken. We would not have had all the great innovations and the marvellous work of all our engineers. There were always expectations. There must be expectations if we are to achieve. To go forward and get things done, we must have expectations. We have expectations.
A moment ago the hon. Gentleman was shouting from a sedentary position that CCS was a proven technology, and he cited Norway. He cannot have it both ways. Either he thinks the technology will work- [Interruption.] Yes, my hon. Friend the Member for Blaydon is absolutely right. Being a Lib Dem, Martin Horwood can it have it both ways. The question is whether the technology is demonstrated at research and pilot level, which it is; whether it is promising, which it is; and whether it is a technology in which companies with enormous expertise are prepared to invest, which they are. It is all those things.
It is reasonable to have expectations, but suppose the hon. Gentleman's pessimistic outlook were confirmed and all that were to fail. We have said categorically that there will be a rolling review. We are debating a clause that provides for a strict reporting regime. The House will always know what is happening in this field and Government policies can be adjusted. We have said that that rolling review will conclude by 2018. If the CCS technology is not working and is not deployable, we will have to introduce other means of curbing and decarbonising. We have said that clearly again and again. [Interruption.]
Charles Hendry says that that is such a threat. One of the potential measures that could be introduced is the EPS, which he seems to favour so much. We have said that the proper way of dealing with the situation is to consider, measure and analyse what is happening with CCS. If it is a success, as we hope, we have solved the problem. If it is not, we have to move to another technology. That is the time to consider an EPS, not now.
It would help me in the debate to understand better whether the Government are concerned about the timing of an EPS or about whether it is right in principle to introduce it. I agree with my hon. Friend's argument about the nature of development. Putting the standard before the development is like putting the cart before the horse. Our railways would not have developed if the standards were in place before the railways were built. Is it a question of timing? In principle, I support an EPS to stop any backsliding at a future date. That is the danger. If market conditions price coal at a certain level, certain future Governments might want to backslide on the whole deal.
I could not have put it better myself, and I am grateful to my hon. Friend, because the question is essentially one of timing: introducing an EPS today would be premature and undermine investment; and, as we progress with CCS we will be able to judge whether we require an EPS or, possibly, another mechanism. The Independent Committee on Climate Change has said that there could be as many as four ways of making further progress on decarbonisation, of which EPS is one. My hon. Friend may be right and EPS may become the favoured means if we have to deploy other means than CCS, but at this stage it would be premature to decide that an EPS was the right instrument, because several could be used and EPS is just one of them.
As a consequence of the policy of new coal, CCS and retrofitting, by 2025 all new stations would be achieving abatement well above the EPS in new clause 25. It defines the EPS as limiting carbon dioxide to 25 per cent. of the emissions that would exist if CCS were not in place, but including a specific measure in legislation now might cut across the future methods of delivering our stated policies, and as I have clearly indicated it would not add anything to decarbonisation.
Even the Independent Committee on Climate Change does not recommend the introduction of an EPS now. Instead, in its report of October last year, it identified a number of options, as I just indicated, for delivering the necessary investment in low-carbon generation. They include a carbon price floor, a feed-in tariff and a low-carbon obligation, as well as a low EPS.
Does my hon. Friend agree that setting a target that is too low would have the same effect as setting a target that is too high? There would be no incentive to develop a coal station to a level that was always going to increase in the future. If we set the target at such a low level, however, that is what we will get.
My hon. Friend is absolutely right, and I know how much expertise he has in this field. I remind the House that the CCS technology promises to take out 90 per cent. of carbon dioxide emissions.
The Independent Committee on Climate Change report to which I referred clearly states that the committee
"does not yet have a view on which measure would"- be-
"best...but believes that all should be seriously considered in the near term".
We know that the scale and pace of change that is needed to deliver low-carbon energy will test the current energy market arrangements, and that is why we are assessing the existing framework to ensure that we can deliver the investment that is needed. We will publish the initial findings of that work at this year's Budget. It would not be sensible to commit to one particular measure now, before that work is completed, particularly when very significant risks, which I have outlined, are attached.
The introduction of an EPS does not depend on the Bill. If at some point in the future we decide that an EPS is required to deliver decarbonisation of the electricity sector, we already have a well established and comprehensive framework for introducing it under the Pollution Prevention and Control Act 1999.
It would clearly be advantageous if, by developing that technology, we could then assist other countries. We would secure a larger reduction in emissions globally if we were able to do that. Will the Minister indicate how our timetable for creating the prototypes will fit in with our development and export of that technology, if successful, so that other countries might use it and lower their own emissions?
My hon. Friend is absolutely right. Given the extent to which the developing economies and the great emerging economies, such as China and India, will continue to use coal, CCS is absolutely vital to tackling climate change, as I said at the beginning of my speech. If we are able to develop the technology speedily in this country, there will be real export potential. Co-operation is already under way between the UK and China and the EU and China. The EU will also fund some CCS projects, of which we hope at least one will be in the UK, and they will be combining all the information. CCS is very much a global project, but at the same time, from the point of view of British industry, if we get ahead we will be in a very good position to help other countries and benefit financially.
Amendment 1 relates to the CCS levy, which would be used to fund a new financial incentive to support industry in bringing forward a programme of four commercial-scale CCS demonstration projects and, should it prove necessary, the retrofit of any unabated coal capacity at those stations. The amendment would insert a provision in clause 4 exempting from the levy electricity that is produced from renewable sources.
I made it clear in Committee, however, that we will not apply any exemptions or reduced levies based on the source of the electricity generated, and that includes renewables. For the foreseeable future, we will continue to depend on flexible fossil fuel plant to ensure that the electricity system can respond to changes in supply and demand, thus keeping our electricity system stable and ensuring security of supply. We know that that flexibility is likely to become more important in the future as variable renewal generation increases.
The CCS levy will support the development of a low-carbon technology that will benefit all electricity consumers and, in the longer term, provide an additional form of affordable low-carbon generation. That is why the levy should apply to all types of supply. The one necessary exception that we foresee may be the exemption of electricity that is exported from the UK. Our intention is that the detailed policy for the levy, together with the draft regulations, will be subject to formal public consultation in the summer. Clause 4 also requires that regulations be laid in draft and approved by both Houses of Parliament before they are made.
New clause 8 would put in place a reporting mechanism that provided for the scrutiny of progress on CCS and any adjustment to a policy that already provides the most comprehensive plans in the world for the development of clean coal. The introduction of an emissions performance standard at this stage would undermine the very basis of those plans, threaten much-needed investment and jeopardise our energy security. The Government will therefore oppose new clauses 6, 15 and 25.
As we start out deliberations on Report, it is appropriate that we put on the record our general gratitude to the Government for the way in which they have listened to the concerns expressed about some of the issues.
I would not go that far, but we are grateful for the way in which the Government listened to many of the discussions that took place and to the representations in Committee. Indeed, they have re-tabled some of the amendments that they voted against, and we greatly welcome that change of heart. We hope that that road to Damascus has not ended just yet, and that, on further reflection, they will continue on it.
We absolutely agree with the Minister of State, Joan Ruddock about the need to act urgently. We will lose one third of our coal-fired generation plant by 2016; the remaining oil plant, which is mainly used for peaking capacity, is due to close at the same time; most of our nuclear power stations, apart from Sizewell B, are due to close by the early 2020s, and there is an urgent need to build new capacity. However, if we look at the time scale, we know that the nuclear fleet, if it goes ahead, will begin to come into play only by the end of this decade; that carbon capture with coal can be commercial, again, only by the end of this decade; and that the scale of the Government's targets and objectives on renewables pushes their introduction out towards 2020. Therefore, there is a significant need for new gas generation in the system. The reality, though, is that as a result of the delays in starting to build those plants, our energy security has been put at severe risk, which has resulted in a scramble to try to put in place the required new-generation capacity. Indeed, the Government's own documentation, including the low-carbon transition plan, referred to the risk of potential power cuts by 2017, while this morning, in evidence before the Select Committee, the regular cited his concerns and those of Ofgem about the picture in the middle and latter part of this decade.
We entirely accept the role that CCS and coal can play in the mix. It is a new technology, and it is one where we absolutely should be leading the world. The Minister said that Britain remains a leader, but she must be in danger of believing some of her own rhetoric. At the evidence sessions before we started the Bill's consideration in Committee, we heard many people say that we were losing our global opportunity, and we heard companies say that they had closed down their projects in Britain because of the approach adopted to them. Jeff Chapman, who heads up the Carbon Capture and Storage Association, said that Abu Dhabi and China will probably be the first two countries in the world to have commercial CCS facilities.
Britain must do much more to recapture the necessary sense of urgency, which is why we have been urging the Government to speed up the competition-a competition which Paddy Tipping has described as a competition without end. Real frustration is felt about the pace of progress. The Government should have included the pre-combustion option at the outset. They should be taking a much greater strategic view about how one encourages clusters by requiring oversized pipelines to be installed from the outset. We have heard from the Government about the establishment of the office of carbon capture and storage, but, a year after its announcement, I gather it is still little more than a blank piece of paper. We urgently need to grasp the issue and to make progress if Britain is to show the leadership of which it is capable in this area.
Certain aspects of new clause 8 are good. The requirement to report to Parliament is an important improvement to the process, but that should not be undertaken every three years: there should be an annual report to Parliament so that we can take account of the progress made. We all know from the evidence we gather as individual Members of Parliament that this is a fast-moving technology, and the current technology is significantly further forward than it was just a year ago. A requirement to report to Parliament only every three years does not give us the opportunity to take account of such progress.
I do not dissent from the specific point that the hon. Gentleman is making. However, would not an even better form of conducting our business be for Parliament to have an annual energy debate every year, just as we have annual defence debates and suchlike, so that we could review our whole energy policy? We should ensure that we do not just go from a five-year or a 10-year energy White Paper, or energy policy, without keeping it under review and make the changes on the way that the country would expect.
The hon. Gentleman is entirely right. We seem to have a new Ministry every year, and a review, White Paper or consultation every year, so we should at least have an annual debate led by the Secretary of State to discuss the whole energy picture.
On the specific issue of the emissions performance standard, on which the Minister, understandably, spent so much of her speech, our concern is that the Government will create precisely the fear among investors that they want to avoid. The Minister talks about removing the uncertainty, but the uncertainty is already there. Subsection (3) of new clause 8 says:
"A report under subsection (1) must...include a review of whether, having regard to the other matters contained in the report, any government policies should be revised and, if so, why"- that is, essentially, whether an EPS needs to be introduced. Speaking at the Coal UK conference earlier this week, the Energy Minister in the other House, Lord Hunt, said:
"A rolling review process, which is planned to report by 2018, will consider the appropriate regulatory and financial framework to further drive the move to clean coal. in the event that CCS is not on track to become technically or economically viable, an appropriate regulatory approach for managing emissions from coal power stations will be needed."
We have there a tacit acceptance that an EPS is hanging over the industry as a sword of Damocles. In a letter that the Minister has sent to many Members of Parliament-it appears not yet to have found its way to my Conservative colleagues, but I am sure that that is due to postal delays-she tries to reassure MPs by saying:
"Such changes could include introducing an EPS once some experience of CCS has been gained."
The EPS is hanging over the industry, so the doubt is already there. In the boardrooms of Essen, Madrid and elsewhere around the world, people are having to look at the realistic prospect of an EPS being introduced in Britain. At this stage, however, because of the way that the Government have gone about it, those industries do not know whether it will be imposed retrospectively or on new plant, at what level it will be introduced, if it will be imposed on peaking capacity, or if it will be imposed on plant in its start-up phases. An incredible amount of doubt exists, which the Minister's approach has itself created, and that is why we need to go further in providing clarity.
I have made it absolutely clear today that we are providing for CCS to become operational, and that we have a rolling review of that. The companies want to have this opportunity. If they are in any doubt about whether we favour an EPS now, I think that I have made it absolutely clear that we are completely opposed to that, and we will vote against it. Perhaps the hon. Gentleman has not read the letter from the CBI, which says that it is completely opposed, too. That should be enough of an indication as to where industry stands.
I understand what the Minister is saying. Key decisions will be made by E.ON in Essen about whether it wishes to go forward with new coal plant at Kingsnorth, should it come through with the project. As a result of new clause 8, it knows that in 2011 the Government could say, "It's not looking as good as we thought-we're now going to have to go down the route of the EPS." [ Interruption. ] No, the Secretary of State is wrong-the assessment has to be made every three years, so it will happen in 2014 and 2017. In the boardrooms of the companies that are making these decisions, people know that at any point in the next few years Ministers could suddenly say, "Yes, we're going to have an EPS after all", but no clarity has been provided to them about how that standard would be introduced and the consequences that would follow.
I am grateful to my hon. Friend the shadow Minister, who has, not surprisingly, made a much more convincing case than the Minister, and has taken seriously security of supply. Given that subsidies will be an issue in this new technology, and that penalty payments for excess carbon are also an issue, the Government must set targets for the amount of carbon in order to justify the subsidy or the penalty payments, so why are they denying it?
As always in such matters, my right hon. Friend is absolutely correct. What we have is an extremely interwoven web of a range of different issues. Complex decisions will need to be made, but given the Minister's approach, it is less likely that we will secure investment in new coal.
Everything that I have said today about the rolling review and the reporting clause in new clause 8 is predicated on the fact that we believe that CCS will succeed. The companies think that CCS will succeed. There is therefore no reason for them to suspect that we are going to introduce an EPS, because if we succeed, there is no rationale for doing so. It is but a backstop in the event that CCS does not succeed.
A company that is allocating hundreds of millions or billions of pounds to new projects must look at the long-term environment in which it is investing. What we are seeking to do, in conjunction with many of the Minister's hon. Friends, is to provide that clarity in the shortest possible time scale. This is about securing investment rather than driving it away. Business is not overwhelmingly concerned about the principle of the EPS but about the level of it-that will determine whether investment is or is not made.
As far as I recall, the hon. Gentleman supported the mechanism that was contained in the carbon budgets system in the Climate Change Act 2008, which provides not only for carbon accounting and budgeting but for a five-yearly review of what is happening, not only on the basis of where we are going but of a review of whether there should be corrections to that course. That does not spread uncertainty, as I am sure that he would agree, because he supported it. Does he not accept that this is a similar mechanism, which, by the way, he should address in terms of what happens with marginal coal plants as the process continues over the years? Does he consider that this system, in sustaining marginal coal plant in the system through the years, may be a better system than the indeterminate approach that he suggests in his proposal?
I have great respect for the hon. Gentleman, but there is a fundamental difference here. We are talking about policies that will help to drive investment decisions, which need to be made in a relatively short period. The people who are making them need to know the long-term scenario in which they are investing and the environmental and financial criteria that will be relevant. If there is no clarity, persuading people in boardrooms in Madrid and Essen will become that much more difficult. What we seek to do-we have broad cross-party agreement on this-is find a way to provide that certainty but at the same time help to deliver on the low-carbon commitments on which we all agree.
The hon. Gentleman assumes that a change in Government policy would mean the introduction of an EPS or similar mechanism, but there is another danger. The only coal plants likely to be built in the next few years are those that will be subject to the levy and will effectively be subsidised. We may get to a point in 2020 at which the plants have been built but CCS is not working or is not economic, and there is then a real danger of a change in policy, with the Government saying, "We will not go ahead with this, because we have invested so much money in these plants." We could therefore end up with higher emissions in the long run unless there is an EPS from the beginning that would force down the emissions or mean that the plant would not proceed.
One concern is that the Bill states that the levy may in due course be used for retrofitting. It does not state that there is an automatic right for it to be so used. Although the Minister has said today that it could be, there is no legal basis for her words in this House being used in a court in years to come. It is the words printed in the Bill that will be used. Accordingly, an element of doubt will remain. People will say, "Yes, I may get the levy for the first 300 MW, but what about for the next 900 or 1,200 MW, or however much more there will be?" Companies will say that that is not guaranteed, so we need to consider what the likely framework is and how we can give them the assurance that they need.
What we want is an emissions performance standard that helps to give investors certainty, so that when they come to make their decisions they know exactly what the investment criteria will be. That is why I believe-
The hon. Gentleman is making the case that industry requires certainty, so I invite him to provide us with the evidence given to him by companies that have contacted him to argue in favour of an EPS at this time.
What companies have told us is that they are concerned about an EPS that is too high and that would deter investment. They accept, however, that an EPS set at the right level could help to provide certainty and drive things forward. That is why I believe new clause 15 is very much better than new clause 8. As always in these matters, I pay tribute to Alan Simpson, who has campaigned on them for a very long time and has a tremendous understanding of them. I am glad that he and we were able to reach agreement on a new clause that we could support.
The critical point is that new clause 15 would put in place a time scale. It is a tight one, suggesting that proposals should be established for consultation within six months and confirmed and laid before Parliament within 12 months. In the time scale in which decisions would have to be made, businesses in Britain or elsewhere would know exactly what would be expected of them for some decades to come. That degree of clarity would be extremely helpful to them.
New clause 15 would also provide clarity about what factors should be taken into consideration. It mentions evidence from the Committee on Climate Change, affordability and other issues affecting consumers, which we should bear in mind, and security of supply.
The hon. Gentleman's remarks about giving the market a clear signal would carry some weight if such a signal were contained within the new clause that he and my hon. Friend Alan Simpson have proposed. However, it leaves the EPS so open-ended that it could mean absolutely anything. It could even encompass the emission levels of a current plant. Without having some definition of what the EPS would be, the market still would not have a clear signal.
The hon. Gentleman is right, but we were determined not to put that figure in the Bill, because that would be counter-productive in the long term. No decision on new coal will be taken in this country in the next six months, and no new investment decisions are likely in that time. Under new clause 15, within those six months industry would know the recommended figure and whether it would be enforced within the following six months. Within the time scale for new investment decisions, there would be complete clarity for investors so that they could make the appropriate decisions.
One of the points made by people who prefer the market approach is that the market is better than the state because it will always find innovative ways to do things. We heard that argument this morning in the Energy and Climate Change Committee. If that is the case, what does the market have to be worried about? If the EPS is not in place, it will find innovative ways of addressing the matter. If the hon. Gentleman does not believe companies can do that, will he tell the House which companies they are, as my hon. Friend the Minister asked?
Markets work better if people understand the framework within which they are investing. If a big cloud of doubt is hanging over them, it is very difficult for them to make a rational long-term decision. We are saying that within six months, confirmed within a year, we would provide greater clarity. That is how we can provide support, advice and help to potential investors.
The hon. Gentleman is a highly respected member of the Energy and Climate Change Committee, but on this occasion his arguments have more holes than Swiss cheese. Will he confirm or deny the story in The Guardian this morning suggesting that although he and his Front-Bench colleagues will troop through the Division Lobby in support of the new clause, his Back Benchers are on a one-line whip?
It is a great shame that Tim Webb did not check the story with us before he wrote it, as we could have told him that it was without foundation. I am not aware of a single colleague who has said that they want to be away tonight because this issue is inconvenient to them. [Interruption.] The Secretary of State may have heard of them, in which case he may wish to name them. As far as we are concerned, some people will be away doing other business that was planned a significant time ago, but the story in The Guardian is without foundation.
I wish to address some of arguments the Minister used in the letter that she sent to her Labour colleagues. She wrote that an EPS
"could mean no investment in new coal at all thus making the development of carbon capture and storage (CCS) technology impossible in the UK."
That is absolute nonsense. The levy will pay for the demonstration projects and there is scope for it to pay for retrofitting 100 per cent. of the plant's capacity, so that all those bidding under the CCS competitions would know that all their extra costs would be covered. The Minister paints a picture of what the EPS would do that takes no account of the level at which it might be set after further consultation. She writes:
"There is no EPS anywhere in the world that operates along the lines of NC6."
However, the important new clause is new clause 15, which addresses the concerns by highlighting the range of different issues that would be taken into account in deciding the level at which the EPS would be set.
I am afraid that the Minister is rather partial in the quotations that she uses. She has undoubtedly used the truth, but I am not sure that it is the whole truth and nothing but the truth. Her letter quotes the CCC as stating that it
"does not yet have a view on which measures would best tackle the risks."
She leaves out the section in which the CCC states that it
"believes that all should be seriously considered in the near term", which must include an EPS.
I have to say that more MPs will have read her letter than heard her speech. Looking at the number who are present in the Chamber to take part in the debate, there is no doubt that many more will have been swayed by what she tried to tell them in writing. I hope for her sake that more read the letter than heard the speech.
The Minister also expresses a view that an EPS could cover gas as well as coal, which of course is true. Indeed, both she and the Secretary of State have referred to the fact that both coal and gas would be likely to be involved in CCS. However, investors in gas-equally as much as those involved in coal-need to know what will happen in years to come. Leaving things so open could drive away the crucial investment that we need in new gas capacity in this country, because not only coal will be affected.
In conclusion, an EPS, set at the right level, encourages investment, because it gives the clarity that investors need on long-term policy making. The Government need to give long-term clarity to investors in coal with carbon capture, just as they have done for investors in nuclear and renewables. The latter already have such clarity in the shape of the policy framework and the funding regimes, which ought to be applied to coal with carbon capture. New clause 15 is proposed by a broad coalition, and I hope that when the Minister reflects on this debate, she is prepared to reconsider her position on it.
It is worth registering that there is an overwhelming consensus in the House that we need to take effective action in response to the threat of climate change. The statistics issued by the Department for Energy and Climate Change are very interesting in that they emphasise the importance of the energy and electricity supply in that context. The figures from 1990 to 2008 are striking because they show that energy supply and transport account for well over half of total emissions, and that emissions from energy supply are more than 50 per cent. more than for transport. The Government are right to believe that energy supply is at the centre of where we need to take action to tackle climate change. The nub of the argument is whether there should be an emissions standard or standards in relation to our power stations. There is a strong case for having more than one emissions standard, and I am of that view, and a case for more effective regulation of our power stations in future.
Government new clause 8 is constructive and takes us forward. Proposed subsection 2(a) states that the report will tell us
"whether use of carbon capture and storage technology in generation of electricity on a commercial scale has been, or when it will be, successfully demonstrated".
We should not forget that. It is implicit that such technology may not be successfully demonstrated and that any emissions reductions may not be cost-effective. Of course we can have CCS in some form or other, but the question is whether we can develop it effectively to reduce emissions sufficiently significantly-by more than 50 per cent., as my hon. Friend Colin Challen indicated-and whether that will be cost-effective. We should not lose sight of the fact that that is where we are.
There is a consensus in the House that we should go down the road of providing financial support for CCS. That is fine, and it is important that we acknowledge that Government new clause 8 is constructive because it provides for a report. However, it is essentially retrospective, in the sense that we will always be looking back and seeing what happened, which is very different in principle from setting out standards that will apply in future. Of course, there could be different standards for new coal, old coal, gas and, indeed, in theory, for every single power station. The problem is sufficiently important that we must drive down emissions for new power stations and old.
I shall just touch on the two new clauses that attract my interest because I know that other hon. Members wish to speak. I am grateful to my hon. Friend the Minister for drawing my attention to the fact that the proposal for an actual emissions standard that must be met is a Liberal new clause. I pay tribute to my hon. Friend Alan Simpson for his tremendous commitment to taking action on climate change and for the amount of work he has put into the matter in recent years. He may disagree, but new clause 6 is far better than new clause 15. New clause 6 is similar to the measure he proposed in Committee. New clause 15 refers only to new power stations. I am not suggesting that we ignore them, but that measure envisages a hugely different degree of intervention and regulation.
I was attracted to the formulation of my hon. Friend's proposal in Committee and to new clause 6 because they emphasise the plural. In theory, we could have one EPS for every station in the country, and every station would have to be below it. My view is that it would be more practical to have different emissions standards for different classes of power station. That is another reason why I find new clause 6 more attractive than new clause 15, but it would nevertheless be an advance if it were possible to win support for the latter.
Again, there is a consensus not only that CCS should be encouraged, but that we should be prepared to put quite substantial sums of money in the way of the companies. The companies that will provide the framework for research and development are large, transnational companies. However, we must try to ensure that we get value for money. It would not be unreasonable for the heads of some of those large companies to say, "Look, we want as much money as we can get with no strings attached," given that they are in business and that they want to get on with research, investment and, of course, making a private profit.
That is an interesting point, but I will not respond directly to the right hon. Gentleman because I do not have time. However, I do not see the logic of the argument that setting a standard will somehow deter investment, because the reality is that companies want a rough idea and framework for the future. He is criticising the new proposals and saying that we should not support them because they do not give figures, but, obviously, their strength lies in the fact that there will be a year's consultation and discussion, after which the Government can decide on the appropriate EPSs for our various power stations.
New clauses 15 and 6 are not asking for an awful lot. No one is trying to lay down a prohibitive standard-or standards-that will frighten off investors. We should remember that the investors we are talking about will get large sums in subsidy from the levy towards their research and development.
I am not knocking new clause 25, and I will be interested to hear what the hon. Gentleman and others say about it; I was trying to concentrate my remarks on the principle of the EPS.
Finally, the case for publishing the emissions standards within a year has to do with transparency. If we did that, we could have proper dialogue and debate both in Parliament and outside, and real transparency.
Is my right hon. Friend confident that within a year we can correctly define the emissions to a target standard? New CCS will not be up and running within 12 months: it will be far later than that before the technology is proven. Any definition at this stage, or in 12 months, will be premature.
I agree with most of what my hon. Friend says, but the standards will not be set in stone. They will not stay the same for the next 10 years. Individual standards will be the standard for the year or three years to which they apply-
Well, it is less uncertain than zero standards. We are responding too kindly to the understandable position of the transnational companies which want the money without strings attached.
I join Charles Hendry in giving credit to the Secretary of State and the departmental team for the progress they are making in, for example, tackling climate change and addressing issues such as carbon capture and storage. It is worth casting our minds back to the days before the appointment of the current Secretary of State to a time when we had no Committee on Climate Change, no Climate Change Bill and no feed-in tariffs. We did not even have the expectations that we now have for CCS by the 2020s, and there was limited competition to incentivise it. We should recognise the progress that is being made.
However, this debate takes place in inauspicious times. According to an opinion poll this morning, there is growing scepticism about the reality of climate change and the anthropogenic causes of it. There is growing scepticism in the media, in newspapers such as the Daily Express, and among those on the Conservative Benches. Indeed, I see that Mr. Redwood and Mr. Binley are breathing down the neck of the hon. Member for Wealden. That kind of scepticism is on the rise, but it is important that we reiterate that the overwhelming scientific consensus is still that climate change is certainly happening and it is overwhelmingly likely that it has man-made causes.
We also meet in the context of the failure at Copenhagen to agree a rigid international framework for tackling the next phase of carbon emission reductions worldwide. The world's Governments are drinking in the last chance saloon when it comes to tackling climate change in time.
Other hon. Members have referred to the warnings from the Committee on Climate Change, the newly established Government advisers on this subject. It says:
"Progress in reducing emissions in the five years before the first budget period"- the first carbon budget period-
"both overall and in most sectors, was far slower than now required to meet budget commitments. A step change in pace of reduction is essential."
The committee's report refers specifically to some of the issues that we are discussing today. Of the power sector it says:
"Investment in low-carbon generation is risky and may not be pursued sufficiently under current market arrangements."
In other words, the current market arrangements are those prevailing under the European emissions trading scheme.
The right hon. Gentleman makes an important point. That is an issue that might in the end lead to derogations from European directives to keep aged power stations online or to allow more importation of gas, which would not be a satisfactory outcome. We certainly need action now, not only to promote CCS but to promote greater seriousness about renewables. For example, we need a stronger feed-in tariff for renewable energy and many other such actions to address the issue that he is talking about.
The Committee on Climate Change also said in its report that the current market arrangements-in other words, those prevailing under the European trading scheme at the moment-are insufficient and leading to a perception of risk in investment in low-carbon generation. It states:
"A new framework to support investment in CCS generation is required."
It also talks about reviews, as the Minister did. However, it mentions
"financial support for roll-out, limits on generation from conventional coal beyond the early 2020s, and timely commencement of a second demonstration competition".
I suspect from the Minister's remarks that she may have misunderstood the Committee's advice. That does not mean that we should wait until 2018, 2019 or 2020 to do something about an emissions standard or a limit on generation. We have to give signals that we intend to take such action right now-as early as possible. In fact, the Committee is even more specific about that later in its report, when it says:
"It is likely that there will be a period where CCS is deemed viable but where the carbon price is insufficiently high to cover the CCS cost penalty. In these circumstances, a successor support mechanism would be required. An early signal that such a mechanism would be introduced as appropriate should be provided to reduce risks for investors in the first set of partially fitted CCS plants."
That does not mean an early signal once we have discovered that it is too late; it means an early signal now.
The hon. Gentleman clearly misunderstands the committee's report. It has argued that we need to indicate that we will be prepared to use the mechanism for retrofitting; we have done exactly that and it is in this Bill. We have responded precisely to what the Committee said. If he reads the whole report, he will see that it speaks of the need for the review to conclude in around 2020. Our review will conclude two years earlier and also contains the interim reporting stages in new clause 8.
I am sorry to disagree with the Minister, but I do not think that that clear signal is being given at the moment. In answer to the hon. Member for Wealden, the Minister talked about how an emissions performance standard might undermine the whole investment market, and the hon. Gentleman gave a very good response to that point- [ Interruption. ] I do give credit to Conservative Front Benchers occasionally. They know about business and investment, if nothing else-[Hon. Members: "Oh!"] I withdraw that uncharitable remark. We need those early signals now in order to create the investment framework. The truth is that businesses respond to clear long-term signals. The investment decisions in CCS have to be made now, and they are being made all over the world.
I do not know whether I necessarily agree that the Conservatives understand business. They certainly do not understand the CBI, which seems to know a bit more about this issue. How many research and development projects set themselves interim targets? It is a gradual slope up towards-we hope-100 per cent. sequestration. Putting targets in could hinder development and put companies off research and development, as the CBI has pointed out. That does not mean that if the Government-
I am sorry, but I cannot keep taking interventions. I must at least reply to the point made by John Robertson.
That does not mean that if the frameworks and signals are given by the Government and regulation, businesses will not respond to them. No business wants to be constrained, but when constraints are set clearly and well in advance, they will respond.
I am sorry, but I need to make some progress.
There are signals from other sources that the current market arrangements are insufficient. We have the European emissions trading scheme. The Environmental Audit Committee, on which I sit, commissioned-well, requested-an important report from the National Audit Office, which reported last March. It stated:
"The range of uncertainties associated with Phase III"- of the ETS-
"means that no forward price for Phase III allowances has been established. It is through establishing a long-term stable carbon market with forward prices that the EU ETS should incentivise long-term investment in low carbon technologies. Until this is created the EU ETS is unlikely to be demonstrably achieving its objectives."
"The absence of long-term carbon price signals has a particular effect on some key sectors, such as the power sector, because of the long asset lives associated with new investments."
We even have academic support.
There is one flaw in the argument about the signals for investment that an EPS can provide. If we are worried that too strict an EPS will disincentivise investment, surely to incentivise investment, it would have to be a very lax EPS, which will get us nowhere.
I hate to say it, but I think that the hon. Gentleman is misunderstanding how a market works. Constraints can drive investment in different directions. That is the whole basis of the idea behind a carbon price and an ETS. A counter example is what happened in Norway, which, not having our opportunity to be part of an ETS and to have an EPS, introduced a different incentive-a carbon tax. The result was not to stop investment in those technologies, but actually to drive investment, and it has put Statoil-the Norwegian energy company-at the absolute forefront of those technologies worldwide.
I would like to mention a fantastic institution situated close to my constituency. The International Energy Agency greenhouse gas research and development programme, based at Stoke Orchard near Cheltenham, has credited that carbon tax and those price signals with driving investment by private industry, including Statoil and others, in these technologies, and with putting Statoil and others at the forefront of that technology.
Does the hon. Gentleman accept that investment decisions are not just about whether we build new things, but about whether we keep existing things open? Does he also accept that after 2015-16, about 10 coal-fired power plants will continue to operate on the basis of fitting scrubbers to their chimneys under the large plant directive? We ought to ask whether those plants should continue to exist abated in the 2020s. Does he consider that they are necessary to balance the system, or does he think that they should close immediately after 2015-16? Furthermore, does he believe that a three-year review, at the time when those decisions to close or open are being made, might be the best method of ensuring that those plants know that they are going towards carbon sequestration and that they can stay open for a time as marginal suppliers in order to balance out the system and keep that new investment coming in?
I might have lost track of some of the questions in that intervention, but broadly speaking I think that the hon. Gentleman is absolutely right-he is expert on these issues. Retrofitting and the attitude to the maintenance of existing plant are obviously critical, and the signals sent by proposals for an EPS would be important in achieving that. The flaw in the Government's position, and in the Minister's constant use of words such as "aim" and "expectation", is that they do not give that concrete signal. They give the encouragement to investors that they might be able to exploit the loophole, whereas the Committee on Climate Change has made very clear its expectation, and has advised the Government, that unabated coal power should form almost no part of our energy generation after the 2020s, regardless of whether CCS is economic or not.
I have made it absolutely clear today that we agree with the independent Committee on Climate Change. That is a fact. We are giving the clearest signal to industry that we will provide an investment framework that will enable it to invest in a way that can be profitable, but is at the same time carbon constrained. That is the best framework that exists in the world, and it is the only financial mechanism being provided in the world to achieve that. I cannot think of anything better, or that could provide greater certainty, to offer industry.
Except that we have a range of options based on emissions performance standards that absolutely would give greater certainty. Earlier the Minister asked for one example of a business that was asking for such certainty, and I can give her that example: Progressive Energy, one of the major investors in carbon capture and storage technology. Progressive Energy says:
"It would be extremely unwise to rely on the carbon signals coming from the Emissions Trading Scheme to ensure that investment is made to limit CO2 emissions from coal generating plant...an EPS has real value in providing a market signal against which investment decisions can be made."
If not an emissions performance standard, what is the Government's suggestion for something concrete that we can put in the Bill? We have had no alternative suggestion, and now we have a range of new clauses. The Government's new clause 8 is a welcome response to the pressure that they have been put under on the issue, but it is all about reporting, and not about actually doing something. We have a range of new clauses, from the Conservatives, from the Liberal Democrats and from Alan Simpson. They have been criticised in turn, for being too specific or not specific enough, but surely one of them must be acceptable to the Government as a way forward.
May I take the hon. Gentleman back a little? Has he talked to industry about investment in this area? If so, will he tell us who he has talked to and what they said?
I have lost count of the number of private companies that I have talked to in my role as shadow Environment Minister for the Liberal Democrats. I have talked to and been in correspondence with a considerable number of companies, including Progressive Energy, as well as with many academics and many people in business. As an officer of the all-party group on corporate responsibility, I meet private companies all the time. However, as I said before, my experience in business is that business sectors rarely set out to have themselves regulated and constrained more-that is simply not how business works-but they will respond to those regulations and constraints, albeit only when they are given clearly. As the hon. Gentleman's hon. Friend the Member for Wealden, said eloquently from the Conservative Front Bench, only when those signals are given clearly and unambiguously will business respond adequately.
Let me ask the hon. Gentleman to answer my question again, bearing in mind that my Front-Bench colleague gave an answer to it, and that I know that he has spoken to those in industry, and also what they have said.
I do not think that that refutes my point-that businesses never set out to regulate themselves-but anyway, we have been round that course at least three times, so let us move on.
New clause 25 is the most robust and specific of the three new clauses on offer. It would make it absolutely clear that an EPS must be introduced, and it would set a clear target of 75 per cent. for emissions captured, compared with the equivalent had CCS not been fitted.
I have a short question. I just want to know what the basis for that calculation is. How does it tie in with the carbon budgets and all the other things that we are doing?
That calculation is realistic, given that the current technologies in many places are already delivering about 85 per cent. capture. Indeed, we discussed a proposal in Committee for a target of 90 per cent. capture. That was not supported, so we are trimming a little and trying to see at what level we can command support from the Government. The calculation is led by the science, yet it is an acceptance that we are perhaps having to moderate our ambitions a little, but- [ Interruption. ] Sorry, it was the Environmental Audit Committee, of which the hon. Gentleman is a fellow member, that advocated an emissions performance standard of around 90 per cent. We are going below that, which is the very least that the science demands-and indeed, the level would be increased in time.
Rather less robust is new clause 6, tabled by the hon. Member for Nottingham, South, which we on the Liberal Democrat Benches are perfectly happy to support. Equally, it would mandate an emissions performance standard, but rather less specifically. Then we have the most flexible proposal, or the weakest, depending on one's point of view: new clause 15, which has the virtue of being supported by those on the Conservative Front Bench. Compromising on comprise, we are equally happy to support that, too, if it is the best that we can get today.
There is clearly some opposition to an emissions performance standard. E.ON has provided us with a helpful brief, which says:
"from our perspective as an investor in new generating capacity...an EPS creates new risks which will substantially increase the discount rates we apply to new investments, and ultimately determine whether we proceed with an investment or not."
That is quite a mild rebuttal. It does not say that it will not proceed; that would be foolish, of course, as its investors would query whether it was sensible. E.ON also says in its brief that it recognises that an emissions performance standard can have a useful role in defining what individual new fossil plants will have to achieve in terms of CO2 abatement.
I have already cited Statoil in Norway, which has invested in the Sleipner project, as well as in the Algerian project at In Salah, and in Snøhvit. That has all been driven by the market intervention of the Norwegian carbon tax. Other economic incentives have driven investment in other parts of the world, including the potential for enhanced oil recovery in some places. That is clearly not happening in this country, however.
A further reason for the Government to clarify the situation is the legal uncertainty to which my hon. Friend Simon Hughes referred in Committee. This relates to the European Union's view on whether an emissions performance standard would even be legal. I want to refer to the report by the legal organisation Client Earth, which outlines a scenario in which we hesitate and do not place the position beyond doubt in law, thereby ending up in a situation in which
"the post-combustion CCS demonstration project is deemed ...to be 'not on track'".
In such a case, a subsequent emissions performance standard would become highly controversial. The energy companies could then take the British Government to law to challenge the legality of any UK CO2 emissions performance standard.
Client Earth does not think that the standard would be unlawful but states that it is
"concerned that the European Commission has proposed an amendment to the definition of 'permit' in Directive 2008/1/EC (the IPPC Directive) as part of a process to recast the IPPC Directive that is currently going through the European Parliament. The European Commission's proposed amendment, although categorised by the European Commission as minor, could remove the ability of the UK to introduce the CO2 EPS. The UK should take all steps to resist the European Commission's proposed amendment and ensure that the scopes of the IPPC Directive and Directive 2003/87/EC (the EU ETS Directive) remain mutually exclusive."
"To resolve this legal uncertainty the UK should now amend the Energy Bill currently going through Parliament to include a UK CO2 EPS and notify the European Commission of its intention to rely upon Article 193 of the TFEU", which I think is the Lisbon treaty. I realise that the very mention of the Lisbon treaty could cause apoplexy on the Conservative Benches, but it might be coming to our aid in this particular instance, because it should force the Government to resolve the legal issue.
In Committee, and today, the Minister of State made some quite alarming responses, implying that no action was likely in connection with introducing an emissions performance standard, even as a fallback, until after 2018. I would be grateful if she could confirm whether the Government intend to introduce such a standard at any stage before that. This kind of uncertainty creates other risks, and I want to ask her another specific question. How secure is the funding even for the competition project? Let us imagine for a moment that the Labour Government are re-elected and enjoy another Parliament in power. In those circumstances, how secure would the investment in this project be, if the Treasury were to say, "Actually, the rest of the world is so far ahead of us now that it isn't worth our while spending this money in the UK. We'll simply end up buying Chinese technology." Would the Minister care to intervene on me?
I would be happy to accept the hon. Gentleman's invitation. The information on the competition will be available to Members a short time from now. There is no question about the funding, because it is part of the levy system. We have made it absolutely clear that the new levy arrangements will cover the winner of the competition. In addition, there will be another three carbon capture projects on coal-fired stations.
The truth is that I said repeatedly in my earlier remarks that the reporting regime would begin with a report no later than in 2012, then again in 2015 and once again in 2018. If the hon. Gentleman read the clause, he would see that that if a conclusion were reached-based on all the considerations that he wants to be taken into account at each stage and on advice from bodies such as the Climate Change Committee-that we were not making sufficient progress, so CCS would not provide the answer to our decarbonisation goals, it would of course be possible to consider an emissions performance standard at any point. I stress again that the Climate Change Committee has itself said that the EPS is but one of four measures that it believes might appropriately be taken if CCS were not successful. That is why we have a rolling review-to make that judgment.
I have to say that that is one of the vaguest and most non-committal statements that we could expect to be made. Let me quote once again one of my favourite sources, the International Energy Agency greenhouse gas programme. Its report on worldwide investment supports the view already expressed that the rest of the planet is getting on with this. It says:
"Considerable work on CCS is being conducted throughout the world and these efforts are growing rapidly. Many scientists, engineers and geologists are now devoting their efforts to all aspects of CCS."
It also says:
"The Canadian province of Alberta alone is planning to spend C$2 billion on new CCS projects. The Australian government has established its low-emissions coal initiative with funding of AU$500 million and has announced an international carbon capture institute funded at AU$100 million. Together, these and other countries are funding a diverse array of projects on every aspect of CCS and this funding is expected to grow."
The Minister asked about capture as well as storage projects. The three fully operational large-scale projects that I mentioned have storage-they include capture, of course, because carbon cannot be stored without having been captured-but while it is true that they do not capture from coal-fired generating power stations, they include capture from mixtures of gases from industrial processes.
The IEA report includes a list of dozens of projects worldwide-dozens of storage projects, but also dozens of capture projects. The truth is that more progress is being made in Norway, the United States, China, Brazil, Canada, Australia and Algeria on projects that include not only capture and storage, but transportation as well. Long pipelines are already in place and there is huge investment. The reason for it is obvious-that the prize of developing successful commercial-scale carbon capture and storage for coal-fired power stations will be fantastic. It presents a wonderful opportunity and for whichever countries or companies crack it, unbelievable numbers of jobs and revenue will follow from the successful exploitation of these technologies. While we hesitate, the reality is, sadly, that we may have missed the boat, so we will end up buying in this technology from China or the United States, which will cost the UK economy even more, because we will be expensively retrofitting something that we have not developed ourselves.
That is the unfortunate scenario that we face. We have been here before on renewable energy: despite this country's massive resources, we have ended up being overtaken by many other countries. We should have had a natural advantage in carbon capture and storage because of the North sea and its related oil and gas technology, but we are in danger of squandering it. The amending provisions offer an opportunity to try to catch up.
The hon. Gentleman knows that my argument is that those same amending provisions totally undermine the investment programme that we have set out. I remind him that no other country in the world has a statutory funding mechanism, as is proposed in the Bill. He mentions various projects, but I do not believe that a single one of them includes capture, transportation and storage all within the same project on the scale that we envisage-capturing from coal-fired generation. He will not find a single example that combines all those elements, or a single example of a statutory funding package. He quotes the billions of investment, so I remind him that we are looking here at a potential of £9.5 billion being raised through the levy mechanism. That is an unprecedented amount-again, not found anywhere else in the world.
When we are discussing an investment designed to achieve a certain goal, it is easy enough to say that it is impossible to produce any examples of anyone anywhere in the world who has achieved that goal. The truth is, however, that there are dozens of capture projects-some relating to coal, some to gas, and some to other industrial processes-dozens of storage projects, and hundreds of miles of pipeline. All the individual technologies are being developed. Of course it is true that we have not yet achieved the goal for which everyone is aiming-that is rather self-evident-but every other Government in the world have provided much more encouragement, which is why those projects are all up and running.
Let me again cite the IEA greenhouse gas R & D programme. The hon. Gentleman will have to forgive my pronunciation, but coal-related CCS projects include Cato/Castor/Brindisi, Ciuden, Calide, Mountaineer-I have to say that I do not know the locations of all these-ZeroGen Phase 1, Boundary Dam, Stanwell, FutureGen, GreenGen Phase 1, ZeroGen Phase 2 and Nordylland, which I think is Norwegian. The UK competition is also mentioned.
There are, in fact, plenty of projects around the world trying to exploit that technology. Of course it is true that we have not yet developed fully fledged commercial-scale capture of carbon from a coal-fired power station. That is what we are all trying to work towards, and we would not be having this debate if it had already been achieved. I think that this is a rather tortuous and superfluous argument.
The opportunity exists for a clear signal to be given to markets and investors in the United Kingdom, which would avoid the scenario that I have described, in which we end up buying the technology from abroad, and ultimately costing the UK economy more.
I am sorry, but I will not give way again. I have already given way many times; I have been very tolerant.
Let me briefly commend amendment 1. It is clearly nonsensical to impose a levy designed to combat carbon emissions on technologies that do not produce any carbon emissions. The Minister has tried to mount a defence of the imposition of a levy on renewable technologies as well, but that would have a serious consequence. At the margin-and some renewable technologies are at the margin of viability; investment decisions may hang on fine financial judgments-the imposition of such a levy could stop renewable energy projects proceeding. I urge the Minister to reconsider her attitude to the amendment.
Order. The Front-Bench speeches have taken just over an hour and a half, and we are still dealing with the first group of amendments. We have barely two hours left for consideration of the remaining amendments. I cannot comment on that; it is not my job to interfere in a rattling good debate, and I realise that Front Benchers have been provoked by interventions, which is always a feature of good-quality debate. Nevertheless, Back Benchers might try to be a little more concise so that we can enable every Member to speak, and make some progress.
I intend to speak primarily about new clauses 6, 15 and 25. I shall seek to press new clause 15 to a vote at the end of the debate.
I do not think that the issue is the detail of what is or is not in an emissions performance standard. The question is whether or not we want a regulated energy market. Although my personal preference was for the clarity of new clause 6, I think that new clause 15 is capable of commanding the most support and consensus. Certainly the groups with whom we have worked outside the House have been happy with us to proceed with it on that basis.
I want to distance myself philosophically from a number of the comments that have been made about the need to make progress before setting standards. We would not be at all happy if someone trying to sell a house told us that it was foundation-ready. We have moved beyond the stage of messing around. All the great global controversies have arisen when people have proceeded with developments willy-nilly only to ask when catastrophe has struck, "Why were there no clear foundations to what they thought they were doing?" The people responsible should be imprisoned for allowing such developments to go ahead.
It seems almost nonsensical to me that we are having this debate. Every one of us could walk out of the Chamber today and on to the high street and buy a fridge or a freezer, and we would expect to know its energy rating. When people buy houses now, they expect to know the property's energy performance rating. We are saying in advance that post-2016 all new housing will be of eco-housing standard, so we stack standards ahead of the game-we define the game.
Let me finish my little opening rant first.
In response to those who say that setting standards would somehow deter investment, I would refer to a fascinating seminar held this morning by the all-party group on social science and policy. It was addressed by the head of Deutsche Bank's global climate change research unit, who said that if we put together transparency, certainty and longevity, we provide what investors are looking for. He went on to say that investors in renewable energy ought to be differentiated from energy companies. And it is worth noting that many energy companies have said, "We don't like transparency. We like to do deals behind closed doors. That is how we can get the greatest arm-lock to lever resources out of Governments, taxpayers or customers."
Transparency is not the flavour of the month for existing energy companies, so it does not surprise me that they would not welcome the introduction of an emissions performance standard. For everyone else, however, from citizens to Government to investors, it is a no-brainer that that is a good idea. That is why we should address this issue within a framework that requires the Government of the day to come back within a 12-month period with a scheme that sets out the details of where we go from wherever we are, so that this would not be the end of the game.
The people from Deutsche Bank said to us this morning, "Look at the object lessons to be learned from Germany, where the introduction of feed-in tariffs has been followed by a series of reviews. That has happened because the regulatory framework drove the agenda for change." It drove the investments and innovation processes, and that is why they were able to go through a series of review processes that pushed way ahead of where the initial framework had envisaged that they could get to when they started out.
It seems to me that we get in a panic about power stations. The reason for that might be that when the energy sector was deregulated we gave it the powers to create the current oligopoly, which sees itself as beyond public control and accountability.
The hon. Gentleman's little rant has reminded me of a point that was made to me by people working in the refrigeration industry. Regulation to ban chlorofluorocarbons because of the damage to the ozone layer was introduced before the industry came up with the solution. It was driven to find a solution because regulation was already in place.
Absolutely, and we could broaden that point. The same sort of debate took place in California when the state wanted to introduce tighter controls on emissions from vehicles. At the time, the motor industry said, "This will kill the industry. There will be no new investment," but California had the courage to say, "Get lost. If you want to be a player on our roads, you've got to play by the standards we set."
I remember days during my childhood when schools were closed because of pea-soup fogs, and we all had to walk home because the buses were cancelled. Fortunately, the Government of the day introduced clean air Acts. They did not introduce tradeable breathing quotas, or personal soot allowances; they introduced clean air legislation that told industry that it had to clean up its act.
I am thoroughly enjoying this rant. My hon. Friend may wish to cite examples of established technologies to aid his argument, but what he proposes is not really the way to do it. Where were the standards governing fridges when they were first introduced around the time of, or just after, the first world war? Standards develop, because they must react to what we find. We cannot say that projects should have to be subject to standards when we do not yet know whether these things will even work.
No, the truth is that we must accept that we have what we have today; we cannot turn the technology clock back and we will have to work out how we deal with retrofitting and setting performance standards for the running of what we have. A range of low-carbon, hybrid vehicles are on the market and we accept that that is the new standard. We also accept that older vehicles have to have an annual MOT which sets a standard defining what is roadworthy.
This new clause puts a duty on the House-it is not a permission-to introduce a standards framework. What should or should not be in that framework and the different levels at which the standards should be applied to existing plant and new types of plant should be argued out within the year of that process. The House should not allow itself to get distracted by trying to anticipate those details ahead of the time period that is supposed to be set aside for that process.
In summary, the new clause provides for the introduction of a framework of emissions performance standards that will apply to all new power stations; sets out a clear timetable; acknowledges that decisions need to be based on a recognition of the advice that comes from the Committee on Climate Change; and provides for account to be taken of the impact of any policy changes on energy prices and energy security. All those things were built in to try to incorporate a recognition of concerns that were raised by Ministers and by the industry in response to the initial consultation.
I, too, am greatly enjoying my hon. Friend's presentation. If it is his intention that new clause 15 replace new clause 8-I presume that it would do were it to be passed by this House-an emissions performance standard would apply only to "new electricity generation plant." That is what new clause 15 states, but that provision was not in his original proposal. Does he, thus, accept that existing generation plants would be unabated and move into the 2020s with no emissions performance standard applying to them whatever?
That was one of my misgivings about the compromise that we reached on new clause 15-I always say to people that I am permanently undone by my excess of reasonableness. It would have been better had we stuck to new clause 6, but in order to get something through that commits us to a statutory framework, I can live with the notion-and so can groups outside this place-that we can work within what we have in new clause 15 and come back, as we will have to do, to address how we retrofit what already exists.
I wish to run through the arguments that have been floated against the proposal. The biggest scare story has been that any standards framework will deter new investment. It was helpful to hear Deutsche Bank trashing that this morning. It made the point that when energy companies talk about new investment they will invariably come to the banks to raise the finance and it is the banks that are saying that they want TLC-transparency, longevity and certainty. That is the framework that they see as helpful in setting an emissions performance standard.
The issue about investment being driven elsewhere has been raised. Probably the best example from our shores that I can cite is the decision made by the company formed by BP and Rio Tinto-this relates to the projects of their hydrogen energy company. The original proposal was to build a power station in Peterhead, Scotland, but that was withdrawn and the decision was taken to build the power station in California, where a requirement for an emissions performance standard is already in place. The company was saying to us that if the combination of finance and regulation is put in place, that delivers the certainty that allows investors to invest. It seems nonsensical to claim that to have standards would deter investment rather than the contrary, which is that it would give the certainty to investment that investors are looking for.
Is there not another issue? The Minister has said that the difference for investment in this country is that £9.5 billion will be available through the levy that is not available elsewhere. That is a powerful incentive for big companies that want to build carbon capture and storage and show that it can work-and then, perhaps, take advantage of that elsewhere in the world.
That is exactly the point. As Mr. Redwood said earlier, if the Government are making a commitment on such a scale-£9.5 billion-worth of investment support-why are we not placing performance conditions on the sector? It seems to me that if we take one step back and address the performance of the sector to date, what we have is another example of chronic market failure and a sector that is being driven by short-term calculations. As my right hon. Friend the Secretary of State said on "Channel 4 News" just a week or so ago, the profit margins that are now being enjoyed by the energy sector are at-I think that these were his words-"pretty much record levels."
When such largesse is being handed out, why on earth are we afraid to place conditions on it so that the outcomes for the UK economy and the UK environment are massively and substantially enhanced? The Government should be willing to place conditions on how we support industry rather than throwing money out of the window in the hope that those companies that have held the country in this arm-lock will behave differently from how they have behaved in the past. Many in the sector are already arguing that to set conditions would be a technology driver and would force the pace of innovation and change. We should not be afraid to address that.
The second argument against the introduction of EPS is that CCS is somehow the answer. CCS will be applied to four pilot projects. My hon. Friend Paddy Tipping was right to say that it might have great potential, but it also carries huge uncertainties. I am not certain whether I believe that it can deliver, but, at this stage, it is an unavoidable gamble that we have to take. However, we need a plan B. To say that somehow standards of performance run counter to that process, rather than reinforcing the urgency of the upward trend, is to miss the point completely and surrenders to the notion that we are held hostage to an ever increasing set of demands for public or customer finance to try to make something work when it might well not. This is an extra safety net rather than an obstacle on the road to progress.
I am delighted that we agree on something. Will my hon. Friend concede that we are not clear not only about the technology and about whether it can work-Martin Horwood did not give us an example of a coal project that was working anywhere in the world-but, more importantly, about the economics of carbon capture and storage? Until we can develop and refine that, it is premature to introduce emissions performance standards. We need the learning from CCS before we introduce an EPS.
That is quite wrong. We have to say that if someone is going to build a new coal-fired power station they should, in any case, expect to set an emissions performance standard for that station. What is done in CCS should be an enhancement of that. We cannot say that we should build anything that does not have an emissions performance attached to it now. That seems crazy. How can we set ourselves national targets if we begin from a presumption that we are not going to measure anything? That is why we should have the courage to set for ourselves an emissions performance standard.
I concede that the only project that I have been able to find is one that has not been mentioned; it is in the United States. An American Electric Power company CCS retrofit project in West Virginia has so far been able to capture carbon at a rate of 1 per cent., but it hopes to raise that level to 7 per cent. That is a salutary measure of both the starting point and the extent of the road ahead of us. Having said that, I return to the point that this gamble is unavoidable: we have to take it, but we should not do so without setting safety net standards in relation to power stations having CCS.
Does the hon. Gentleman agree that we have been down this road before with sulphur dioxide? There was a belief that we could not collect sulphur dioxide from our coal-fired power stations, but we set a standard and made it an expectation. Stations were then retrofitted, and those that could not be retrofitted were closed. This is a similar road, so it is not as though we have not been here before.
Absolutely. That is precisely the point that the Climate Change Committee made to us: we need a step change in our thinking that engages with the transformation of what we have, while making a shift to what we need for a more sustainable future. This is a time to be brave and interventionist. My biggest disappointment in this regard is about the argument that is used against us-that we should leave everything to the emissions trading scheme. For a start, the Climate Change Committee has specifically said that it does not believe that it would deliver. All the evidence suggests that the scheme, which has been a monumental failure so far, has become a cheats' charter. In the pre-conferences before Copenhagen, many of our new EU partners were deeply resistant to strengthening carbon-reduction commitments and emissions trading. I fear that the system will turn into a carbon casino which will end up benefiting no one except those who speculate on carbon price changes. That is why the House has nothing to lose and everything to gain from committing itself to the introduction of an emissions performance standard.
My greatest worry is about Parliament and the Government being afraid to take that stance. If we continue to rely on a market for which we have aspirations, aims, ambitions and bundles of encouragement, but precious little to show that any real market transformation is taking place, then all we are doing is playing into the hands of the climate change protestors who believe that the Government of the day have lost the will to tackle the transformation agenda now-not at some stage in the future when we have passed the tipping points of climate change.
For those who say that the public have to step in and challenge unacceptable levels of pollution, that case is reinforced when we, as a Government, refuse to set any limit on how low the standards can go. If my amendment were made, the Government could set standards that were low enough for the industry to fall over, but I hope that if they did so they would be rebuked by the House and the country. I hope that having a debate on this and having an obligation will fire in us the courage to find the will to drive this agenda in ways that we have not been doing.
I think that this evening's vote will not necessarily be divided between left and right, between Tory and Labour or between Lib Dems and nationalists. People outside the House will see the debate as one that divides the vertebrate from the invertebrate. I want a Parliament that is unafraid to do some bullying of the big guys in the playground who terrorise the lives of ordinary citizens and energy consumers. I want us to tackle those bullies, rather than the small kids in the corner. If the House had the courage to do that, I think that the public would rise up and give us a huge cheer. It may be one of the few we ever get.
Alan Simpson has made a spirited contribution. I feel equally passionate about a subject that needs more prominence in this debate-how we keep the lights on.
So far, the debate has generated a bit of heat and very little light. The danger of the way that the policy is drifting under this Government is that we may end up with a perfect regulatory system in due course, were they to stay in office, but that we will have no power stations to produce the power that we need and on the scale that we need. That will be because so many will have been retired for one reason or another-nuclear stations for technical reasons, and coal-fired stations for emissions reasons.
When I come to judge this interesting debate, I will have in mind a central question: that is, which amendment would help us to get to an answer more quickly on the provision of more capacity? Surely it is more capacity, above all else, that we need to put in the front of our minds today, so that we do not end up switching off the lights.
Of course, Energy Ministers past, present and future will tell us great things about CCS, new technologies and exciting opportunities. However, I think that any present or prospective Energy Minister will agree with me that the one thing that the Government really must not let happen on their watch-or on the watch of their successor, because we will know whom to blame-is that the lights go out.
My hon. Friend Charles Hendry rightly said in his opening remarks that he was very exercised by the need to see projects and plans coming forward quite soon, to ensure that replacement power stations are available after 2015 and 2016, when the old coal and nuclear stations retire. He will be worried to hear that, when I came to the debate, I was genuinely open minded about the virtues and wisdom of the amendment that he wishes us to support this evening, should it be pressed to a vote, as it may well be.
However, I have listened carefully to the debate, and am persuaded that new clause 15, proposed by Alan Simpson and supported by the Conservative and Liberal Democrat Front Benches, does make sense. I believe that it would remove just a little bit of the uncertainty that is gripping the energy market in this country and preventing people from coming forward with the projects for the new gas, coal and nuclear stations-whatever they may be-that we desperately need if elderly people are to be kept warm in the winter.
We need those new stations if this country is to have the reasonably priced power that our industry will need to have a chance to compete, and if we are to keep the lights on in the House of Commons, which we hope in due course will be a place of enlightenment generally, providing the better policies and debate that will enable us to go forward to a better future. New clause 15 could provide the clarity that we need-it has been lacking over the last decade, under successive Energy Ministers-as to what kind of performance standards the Government expect, and how they will reward investors who meet the targets and penalise those who do not.
The Government are trying to suggest to us this afternoon that requiring them to set up targets and standards now will only delay matters more, but I do not see how they can possibly believe that. Given that all CCS projects rest on levy finance, subsidy and grant, any Government seeking value for public money will surely have to say what they expect from those projects.
It would be completely nutty for the Government to say to industry, "Here is a great pot of money. Go away and play, and we will like what you come up with."
I thought that the right hon. Gentleman at one point in his career had something to do with deregulation. Now he is arguing for more regulation: is that really a convincing stance, or is it simply politically convenient for him to take it at the present time?
The hon. Gentleman is right that I have consistently wanted far less regulation that the Government have thrust upon us. I have been the co-author of a report that set out large quantities of regulation that I would love to see removed, which I think would make Britain a better place. But I have always believed that where the Government are up to their eyes in something, as they clearly are in carbon management-this is a Government project which only they can lead; the private sector is not going to do it, and it is something that the Government want to do-where the Government are leading such a project, it would be absurd for them not to say what they expect of people who are to receive public money.
I see the Minister nodding wisely in agreement. She will have to tell the industry exactly what she wishes it to deliver for the prospective amounts of grant and money that the Government intend to offer. Similarly, Ministers have had to start to set out, in conjunction with their partner Governments in Europe and on a global scale in environmental agreements, what they expect industry generally to hit by way of targets for their various carbon trading schemes and their penalty and tax schemes.
The Government have already done that for motorists. We know what our cars must deliver by way of various outputs from the exhaust, and different levels of tax are imposed, depending whether the Government disapprove a lot or a little of the particular vehicle that we have chosen to buy and to use. The Government cannot avoid doing something similar in respect of power generation, given that they wish to live in such a highly regulated world, with complicated systems of carbon trading and of levy, finance, grant, subsidy and altering market prices in order to achieve their aims of carbon management.
I do not see why the Minister is so adamant that the one thing that could get in the way at this stage is a requirement that she sets out what she is trying to achieve. My worry about new clause 15, which was supported by my hon. Friend the Member for Wealden and first inspired by the hon. Member for Nottingham, South, is that it delays everything further. I understand that there needs to be time to consider what the targets and objectives should be, but one would have hoped that after five or 10 years of endless debate about all this, the Government might now be able to share some figures with us so that we can inform our judgments. Leaving it another six months is another unwarranted delay.
I can see that the House recognises that the Government have not done their homework and are not yet prepared to come forward with any factual basis for giving us the kind of figures that industry needs for investment, so they need another six months. Most sensible investors would say, "Until we know what the terms of trade are, we can't respond to such initiatives." They will say, "We know we are going to live in a very rigged and organised market. We know that the Government are going to intervene massively in this market in all sorts of ways-penalties, subsidies and incentives," but until they know exactly what it means in pounds and pence for any given investment, they will surely be reluctant to come forward.
On such occasions Labour suddenly becomes an advocate of the free market, in a way. Labour Members look at me and say, "As somebody who supports freer markets, surely you understand that it is up to the market now to settle these issues. The market will decide how many new power stations we want, and which ones it is going to build." The Government misunderstand that that cannot happen in this case because the market is so managed, organised and regulated. If they wish to regulate a market to such an extent, they make themselves responsible for the results.
If the Government regulate a market as much as they have already regulated it, they need to make clear the missing bits in the jigsaw in order for the private sector to be able to participate and to trade on sensible terms. It is the Government who will decide exactly how much money people make on any of these projects, because it is the Government setting the carbon levels, the emissions levels and so on and having a very bid impact on the cost base, so if the Government wish to speed these things up, they have a duty to come forward now with some figures.
I asked the Minister in an intervention, which she kindly took, whether she could share with us some of the background figures that the Government must have on the relative costs of the different ways of generating power, both before and after all the Government interventions through penalties and subsidies. In order to come to an informed view on clean coal, we need to know how it is likely to compare in terms of costs and carbon output with alternatives, with gas and with the other technologies on offer.
After so many years of Green Papers, White Papers and energy policy debates, surely there must now be some understandable figures that can be shared with intelligent Members who want to discuss the issue seriously in order to establish some idea of the pecking order. I should welcome clean coal technology that worked quickly, based on British coal, because I am worried not just about the security of supply domestically and whether we have enough power stations, but about the security of supply of the raw material.
I do not like Britain being as dependent as it is on imported oil and gas, so any technology that moves us away from that dependency is welcome. I start with a prejudice in favour of coal-based power, but I need to know whether that is realistic. There must have been enough studies now to establish some idea of the subsidy, levy intervention and support that would be needed to make those putative technologies competitive. We could then make a better judgment about whether coal can carry on providing for our existing electricity output, which it does from the older stations; whether we are talking about an expansion, which might be welcome; or whether we are talking about a sharp reduction.
If we are talking about a sharp reduction, we must be precise about our regulatory structure for the gas-fired stations that we will need in order to provide the replacement capacity; and we must get on with the nuclear debate in order to find out whether nuclear power is a safe and economic way of filling the gap after 2020, because it clearly cannot do so in time for the gap that will emerge after 2016.
I am persuaded by my hon. Friend the Member for Wealden to support amendment 15, which he supports. It makes a statement to Ministers, but I, like its mover, the hon. Member for Nottingham, South, do not think that it is the definitive answer. I urge the Government to look again at what they can publish and make available, because if they do not do so I cannot see why people would want to come forward with investment projects. If we do not start investment projects now, we will find it very difficult to provide sufficient power at sensible prices after 2016 in order to keep our economy working.
I congratulate my hon. Friend Alan Simpson on his excellent work. Even if he does not get new clause 15, he will get new clause 8, and, although that may not be entirely what he wants, it is better than nothing, because it points to a future in which an EPS may emerge.
The Opposition Front Benchers have, to coin a phrase, something of the night about them. They have rather cynically taken up a populist cause, as they did with Heathrow runway three, while behind the scenes they support a massive expansion in carbon emissions-in that case, in aviation. This afternoon, they have not said anything at all about the level of the emissions performance standard, or how it would be applied and so on. We did not hear an alternative policy explaining how much more money might be invested in CCS to achieve an EPS. There is a lot to explain, but tomorrow's press will present the debate simply as a collection of invertebrates giving into Government bullying. It would be quite wrong to characterise the debate in that way, but the press will no doubt have their field day-fed by people from Conservative central office.
I support an EPS, but the question is about timing. The principle is correct, but the timing is of the essence. We have heard examples of where standards exist, but they are applied to existing technologies that we well understand and whose development we can predict. I am not sure that we know how CCS will develop and if, indeed, it will be successful. Indeed, I regret that the Minister was not able to define CCS, and I hope that we establish a definition, because without one we cannot establish a standard. Should CCS be defined as more than 50 per cent. carbon capture, more than 75 per cent. or 90 per cent? The Environmental Audit Committee said that 90 per cent. was the right level, and I agree.
A couple of years ago, several Labour Members visited a CCS pilot project in eastern Germany, close to the Polish border, at a place called Schwarze Pumpe, which might be on the list of stations that Martin Horwood has. It is a coal-fired power station that produces millions of tonnes of emissions a year-not comparable to Drax, but pretty big-and its little pilot project captures 36,000 tonnes a year. That is state-of-the-art technology, so there is a big gap and a long way to go, and the issue is not just about the technology, but about the legality. Where do we put the stuff? It is okay to say that we can put it in the North sea, which has a huge capacity, but is it necessarily correct to do so? What are the legalities of storing something in these reservoirs for centuries? Who is responsible for them over time? Is that going to be included in, or excluded from, the standard?
The hon. Gentleman raises an important issue. Does he accept, however, that there is plenty of scientific evidence that there is trillions of tonnes-worth of storage capacity around the world in various geological formations, which is a very safe way to store CO2, in contrast to something such as radioactive nuclear waste, because in time it is absorbed by the rocks and aquifers?
There is a great deal of truth in what the hon. Gentleman says. However, even with the small, state-of-the-art pilot project in Germany, people have to be convinced about having the carbon under their land. It is not always out in the North sea, which sounds very nice and offshore, as if it will never come back and bite us. In storing something like that underground, one has to find the legal methods of doing it. All these things have a long way to go in development: this is new stuff, and new thinking is required.
The trouble with new clause 15 is its time scale. It starts off by saying,
"The Secretary of State may by regulation introduce" an EPS, but then one turns over the page, where it says,
"The Secretary of State must set out his proposals for consultation within six months of the passage of this Act", and that the whole thing has to be in place within 12 months. I do not know where "may" fits into that, as the Secretary of State is being told to do it within 12 months. It is unlikely that during those 12 months we would have acquired sufficient knowledge to have a standard. We could end up with a standard-my right hon. Friend Dr. Strang gave this away-that was very flexible. I would want a gold standard, not something that could be repeatedly raised and lowered like the tide according to where the science was at any given time.
That was not my intention. Obviously, we would have a whole year to work it out and, with all the advice that the Government put in, make a judgment. Let me add in passing that this is essentially about supporting coal, and we should not lose sight of the fact that a coal power station, for every gigawatt hour it produces, emits twice as much CO2 as a gas-fired power station.
I entirely accept the urgency of this. I want an EPS to be in place at some point in the not too distant future. New clause 8 would allow for that and, as the Minister has said, existing legislation permits it. We will have this standard when we better understand the technology, legalities, disposal, transport and all the rest of it, and I do not think that that can be established in 12 months.
This is hopelessly unambitious. The Norwegian projects at Sleipner and Snøhvit have been injecting 1.7 million tonnes of CO2 a year since 1996. Many of these technologies are very well established, so we do not need to wait for a great deal longer before setting the standards.
In that case, what has been amiss? Why does every country not have this standard right now, fully implemented, with 100 per cent. or 90 per cent. capture? The hon. Gentleman is talking about a different process, as I understand it. These might be emissions that are pumped back down to help to get oil out, or whatever-I do not know the exact circumstances. There are plenty of pointers to show that this technology may well work, and we are allowing up to 2020 or 2025 to see that it does. I am sure that by that time we will be able to get these standards in place.
I regret that I am unable to join my hon. Friend the Member for Nottingham, South in the Lobby. I support the EPS approach, but the time is not quite right to establish something that then will not become our flexible friend. The danger of setting the standard too low, as I suspect that it would be if we introduced it early, is that one would effectively give a permit to pollute further down the line when we found that the technology could go beyond the standard. At this stage, we have to accept new clause 8 and hope that through that mechanism we will get the progress that we want.
This has been a fascinating debate about whether we should have performance standards, and there is much at stake for this country and for my children and grandchildren. It is a pity that we have not spent more time talking about that, because in many respects their future well-being depends on the matter. We ought to put it into perspective a bit.
I have been working for a clean coal sector within our energy provision for quite a long time, and I have been disappointed by the progress in the House since I have been here. I must say, however, that the pace of progress has increased remarkably since the current Secretary of State has been in his position, and I am delighted that that is the case. I was disappointed that the CCS competition was not worked out in quite the efficient way I had hoped. To be fair, the Minister of State has admitted that, which I welcome. I also welcome the fact that the next three of the promised four projects in Britain's CCS programme will be undertaken under different criteria. There is an important learning curve, and we have grabbed it and taken it on board.
I shall briefly mention the technology involved. There are already more than 70 projects in existence throughout the world, and carbon storage has been well handled by BP in the middle of the Algerian desert for 13 years. Anyone who goes down to Sunbury to look at its centre where CCS is controlled and researched will be amazed by the progress that has been made, how much monitoring is undertaken and how safe the process is. I am worried for my grandchildren, not about leaks of carbon dioxide but that the power stations will cease to produce the energy that we need in this country. My right hon. Friend Mr. Redwood said that too, although we come to different conclusions.
New clause 8 is particularly important. I am disappointed that the Minister decided to go for a three-year reporting term. I would prefer an annual report, not least because energy provision will be the most crucial and worrying area of activity, and one of the most doubtful, for our well-being and that of our children and grandchildren. The development of CCS in the next 10 years will be absolutely vital for the well-being of this country, which is why I would have hoped that we could return to it every year. There are many questions that we need to keep track of and find answers to.
The pace has picked up enormously, and in my view it will continue to do so. We will be hanging on the back of global development in CCS in the next 10 years, and we need to be as well informed as we possibly can be. That is why I urge the Minister, even at this late stage, to rethink the timing of reporting. I believe that we need an annual report.
I need to question the Minister also on the content of the report. I notice that subsection (2)(a) of new clause 8 states that the purpose of the report is an assessment of
"whether carbon capture and storage technology in generation of electricity on a commercial scale" has been successfully demonstrated. "On a commercial scale" means that all three elements of CCS must have been demonstrated-taking the carbon from the generation station, transporting it to the aquifer and shoving it down the aquifer. It also requires getting the coal in the first place, so we need to keep track of many issues with regard to CCS on a commercial scale. I ask the Minister whether a number of them will be included in what I hope will be the annual report to the House.
Of course we will need to talk about sites following the decision on the three projects that we hope to make progress on-a decision that we hope the Minister will make by the end of this year. As an aside, I was delighted to learn that she expects to make a decision quickly on the competition for the initial experiment and the first station. I hope that happens within weeks rather than months and I look forward to it.
Will the report include the concept of clusters, which is vital to this country and its people, who will want to know where the jobs and the power stations will be, and how we are going to plan such things in the years to come? There is also the issue of a pipeline network. The size of the pipeline is crucial. If we have a relatively small pipeline and a cluster thereafter, we might be unable to progress with further stations because the pipeline cannot take the carbon. That would clearly be crazy, so we need to think about the size of the pipeline and how the pipeline network will service the transportation of the carbon that we extract from the coal.
We need a real understanding of how we are going to shove the carbon down into the aquifers. There is no doubt that we are immensely well blessed with aquifers in the North sea, because we can not only create a global trade in storage, which will enhance Britain's income, but enhance the production of oil and gas. It is estimated that if we do that properly, we can get an extra 15 per cent. more oil out of the North sea, which is a prize worth grabbing when we are being told from certain quarters that our production will peak by 2015. We need to understand aquifers.
Longannet is talking with Shell about stuffing the carbon down into the aquifers, but we need more information, and to track the situation. In Sunbury, BP has worked on tracking the carbon using satellites, which is a most remarkable technology. Technology to work out the dispersal of the CO2 underground in the aquifer, which is important, is also in place. We are behind not on technology but on putting the stuff together on a commercial scale of, say, 800 MW. That is what we are testing for-the technology is already there. Will the report also be about aquifers and the potential for Britain to sell aquifer space to other producers of CO2? That business is growing quickly and dramatically throughout the world.
I am listening carefully to the hon. Gentleman. The Minister was right to say that the Bill tries to put three technologies together, which has not been done elsewhere, which we accept. However, in reality, the end bit-storage in aquifers in the North sea and elsewhere-is not in the gift of the Government but of oil and gas companies, which still own them. Does he share my concern that many aquifers will disappear quickly, because they will collapse, and that unless the Government, through the reporting mechanism, which is important, state how we are going to maintain them in the short term as well as the long term, we will lose an opportunity to be world leaders in storage as well as outcome?
I fully appreciate the hon. Gentleman's knowledge in this field and his support for this project. We worked together in Committee, when that knowledge was very well displayed.
It is reckoned that about half the wells that are currently usable will have closed by 2015 unless we do something. That is an important date, because the issue is not only the ability to shove the stuff down the wells, but keeping it there. If wells are not maintained, they deteriorate very quickly, and once they are capped they become useless. We need to take that into account, and I wonder whether the report will do so.
I wish to stray a little on to the issue of coal communities, because the provision of coal is an important matter. British coal is a massive resource that we need to tap. We have 300 years or so of energy beneath our feet, which means energy security in sizeable abundance. I hope that the coal community aspect is a consideration for the Minister in terms of the report.
We should not forget the potential investment opportunities in an export industry that could retrofit some of the 20,000 coal-fired power stations that are capable of it. What a fantastic market that could be, if we could sell a product to those power stations worldwide. We know that a new coal-fired power station is opened every week in China at present, so there is massive potential, but we have to be in the market now. That is why we need investment, and I hope that the Minister will be able to tell us that that particular area of activity will be covered in the report.
I welcome the Government's approach to this issue. I believe that there is a general consensus across the House that we are proceeding to attempt to exploit a carbon-free resource that lies in abundance beneath our feet. If we do that successfully, quickly and properly, my children and my grandchildren will thank us. If all I ever do in this House is play a small part in that process, I will consider my time here successful. I congratulate the Minister on the Bill and I wish it Godspeed. I look forward to working with whoever is concerned with this issue in the years to come.
I am with Mr. Redwood on this. Like him, I want to see British coal burned cleanly. There are those who oppose the coal industry internationally, but I know that fossil fuels will be burned into the future. I am also with Mr. Binley, because he spelled out all the things we need to do to ensure that CCS works properly. We need to get demonstration plants up and running in this country very quickly.
I am aware of your strictures on time, Mr. Deputy Speaker, and I wish to speak from a local point of view. I represent a coalfield area, in which deep coal is still mined-and there is very little of that happening in this country now. Our miners are the most efficient in Europe. What stands in the way of progress in the future is not economics, but the environment. The big challenge ahead of us is to ensure that we can burn coal more quickly. If we can do that, the coalfield in Nottinghamshire will survive into the future.
I am delighted that the Secretary of State met representatives from Welbeck colliery last weekend, because although the colliery is mothballed at the moment, it could reopen. It faces the task faced by the whole energy sector-that of attracting investment. The colliery needs an investment of £200 million and that money is not available on the market at the moment, because it is deemed too risky.
I totally support the idea that we should incentivise our coal industry, provided that we have the technology to clean up the carbon. I think that the whole House-by and large-agrees with that, but does the hon. Gentleman agree that there is a cruel deception in this issue? Much of our coalfield closed down because the foreign owners of our power stations could buy coal from Australia, Poland or Indonesia more cheaply than they could get it out of the mines in Nottinghamshire. What comfort has the hon. Gentleman had from the Minister that somehow British coal will be subsidised to enable the generators to use it?
I do not think that there will be a subsidy on coal. It is clear that coal costs have been driven down, and will continue to be driven down into the future. Ultimately, that is clearly an issue about security of supply, which is the point made by the right hon. Member for Wokingham. In the future, all sources of energy will be in demand internationally, and we need to secure our base through British coal.
I want Welbeck colliery reopened, and reopened quickly. It would cost £200 million. Discussions are taking place with the European Investment Bank, which likes the project, but there are hurdles to be overcome, and the hurdle that it cannot jump at the moment is that which the EIB wants it to jump: coal from Welbeck should be burned cleanly. The issue for miners in Nottinghamshire, UK Coal and the Government is how we get there. After much discussion, the consensus is that very quickly we have to get a demonstration plant up and running in Nottinghamshire or Yorkshire where that coal can go to. The demonstration model, backed by the levy in the Bill, is the way to do that.
Like Charles Hendry, I spend a lot of time talking to energy providers, and it is clear to me that they are dependent on the new mechanism. It is also clear that they are most concerned about the introduction of an EPS. It is interesting that in this discussion no one has been clear about what the levels in the EPS are to be. People say, "It's going to happen within a year. We can define it within a year", but CCS will not be up and running within a year. Let us be absolutely clear about this: it will be five years, at least, before we know how to put that technology together.
Like the hon. Member for Northampton, South, I know that we can put the technology together, but I am not clear about the future costs. The perception is that the cost of burning coal, with CCS on top of it, will be 10 per cent. greater than for present conventional mechanisms. We need to get the experience and to demonstrate not just the one project, but the four that have been mentioned. It is clear, therefore, that we have to make progress quickly, and I am delighted with the acceleration that has taken place within the new ministerial team, on this issue, at the new Department.
Obviously, as we have discussed at length, there is no existing large-scale CCS on a coal-fired power-generating station, but there is a wealth of experience on the cost of this technology, because, as various Members have said, it has been around for a long time. The IEA greenhouse gas project has a wealth of data on the economics of CCS. It ranges from that which is commercial now-for instance, where there is advanced oil recovery, where storage is right next to the plant and on particular types of recovery-right through to that which is quite expensive, very distant from the aquifer and so on. That experience and those data are already readily available.
I take that point, and I am delighted that the hon. Gentleman has acknowledged at last that there is no large demonstration coal plant anywhere in the world-it has taken us all afternoon to get there, but finally he has admitted it.
That is not what I said. There already are demonstration projects, including Schwarze Pumpe and another one in China, but there is not one on a commercial scale for an existing power station.
I will check the hon. Gentleman's words on the record, but for now I am delighted that he has accepted that there is no commercial plant dependent on coal anywhere in the world.
We have to demonstrate that we can achieve that here, and the way to do that is through the mechanisms that my hon. Friend the Minister spelled out at the beginning of this debate. We have taken the trick: we have got the way forward, but we need to back it. It is no good talking about trying to define an EPS into the future, because we do not have the knowledge to do it now. Let me tell my hon. Friends that this debate is not between vertebrates and invertebrates; it is between those of us who are progressive and reformist, and those who are absolutist. The history is clear: in the end, reformists always win the day. And let me say this to my hon. Friend the Minister: please go forward quickly.
I am pleased to follow Paddy Tipping. I agreed with much of what he said, but I will be supporting the EPS. I do not consider myself to be a vertebrate or whatever-I am a very cautious person-but we need to pin things down.
In introducing this debate the Minister talked about the need to decarbonise the energy supply. I do not think that anybody in the House would disagree with that. I agree entirely that we have got to get CCS to work. Coal and gas are important to our current energy supply and are likely to remain so for the foreseeable future, so CCS is vital. Indeed, I am pleased to see that there will be a change, with gas perhaps being allowed later. However, if we are to persuade people of the need to pay for CCS, we will have to show results.
Much has been said about investment today. The CBI has sent me-and, I am sure, every other Member-its paper on investment, which says:
"An EPS could deter investment in CCS which would have an adverse impact on energy security", and continues:
"Introducing an EPS risks the unintended consequence of diverting investment away from UK clean coal, and towards CCS projects in countries where the risk profile is lower."
That is a point of view, but as was pointed out earlier, there is one thing being done in this country that is not done elsewhere, and the Minister said it herself. No other country has a statutory funding mechanism. She has talked about £9.5 billion from the levy for four demonstration plants. That is a considerable amount of the investment that will be needed for those four plants, but the money will not come out of thin air; rather, it is money from the levy on the energy companies, the cost of which will be met by the consumer at the end of the day. We are therefore talking about giving £9.5 billion of consumers' money to the energy companies to demonstrate CCS, and possibly also for retrofitting.
Earlier Martin Horwood mentioned the increasing scepticism about climate change shown in polls of late. However, another type of scepticism is increasing, and that is scepticism among energy consumers, who are being asked to bear more and more costs, for environmental issues, helping with the grid and so on. As we are in a period when wages are not rising and are not likely to rise for the foreseeable future, yet energy bills continue to rise, and more and more is being put on those bills, there is a squeeze on the energy consumers who pay them. If we are going to take consumers with us down this route, we have to convince them that we are getting value for money for the huge amounts that we are putting into CCS and other things. One way to do that is by putting the EPS in place.
I understand the point that the hon. Member for Sherwood made about timing, and he is right. A year is a short time when we are talking about CCS, which we have talked about for many years but have never really got off the ground, for various reasons that I could go into at length, but will not. We have to show the consumer that we are putting real pressure on the companies to perform, to ensure that the money is well invested, that we will have a CCS system that works and reduces carbon emissions, that the cost is worth while for reducing the long-term emissions into the atmosphere and for helping to meet our challenging targets for carbon emissions reduction.
I understood the points that the Minister was making earlier, and I do not disagree with a lot of them, but the reality seems to be that the only new coal plants that will come into being in the next few years will be those sanctioned through the levy. No one in their right mind will operate a coal plant without the levy.
To digress slightly, we talked about gas earlier, and I made the point in Committee about the terms of the national planning statement in England, which I think will prevent new gas plant from being developed. We took that up with the Minister, Lord Hunt, when he appeared before the Committee, and he promised to look into the matter again. This needs to be sorted out, because it could stand in the way of the development of gas plant.
The EPS will show a determination to ensure that consumers are getting value for money and that they are actually going to get somewhere with these companies. It will show that we are not just giving them money to build new plant. This brings me to my worry about new clause 8. I do not doubt the Minister's sincerity on the new clause. I do not doubt that the Government intend its effect to be that, in reviewing the measure in future, we will consider an EPS if we are not making fast enough moves towards decarbonisation. To me, however, that is not what the new clause actually says.
The new clause says that we will look at
"whether coal-fired generating stations for which appropriate consent is given on or after 1st January 2020 that are built in Great Britain can be expected to be constructed so as to enable use of carbon capture and storage technology on all their generating capacity".
Subsection (3) then says:
"A report under subsection (1) must also include a review of whether, having regard to the other matters contained in the report, any government policies should be revised".
It does not talk about whether policies should be strengthened, or whether we should consider introducing an EPS; it simply talks about whether they should be revised.
We should bear in mind the fact that by that time the energy companies will have invested money in the plant, and the Government will have invested £9.5 billion-perhaps a lot more. If, disastrously, carbon capture and storage is not working economically, there will be massive pressure on the Government of the day. Let us remember that 2020 is two Parliaments away, and with the best will in the world, whatever happens later this year, the Minister is unlikely still to be in her post-no offence meant to her, of course. In those circumstances, there will be massive pressure on the Government of the day to allow the plants to continue to operate without CCS because of the money that has been put in, and because of the effect on the energy system if they were taken out of commission.
For all those reasons, it seems perfectly sensible-indeed, absolutely essential-that we make it clear to the energy companies from the outset that there must be an emissions standard and that they must meet it. We are putting this money in to help us to achieve our carbon reduction targets, and if we do not do that, there is real dangers ahead. I also suggest that we would have grave difficulty in convincing the energy consumers-who, ultimately, are paying for all this-that that is the right thing to do. I will support the emissions target tonight, and I hope that the measure goes through. I foresee great difficulty if it does not.
I agree with my hon. Friends the Members for Sherwood (Paddy Tipping) and for Morley and Rothwell (Colin Challen) that this debate might, unfortunately, be characterised as a debate between vertebrates and invertebrates. I believe, however, that it is about whether a very good existing policy on carbon capture and storage should be strengthened, or whether, in seeking to strengthen it, we could end up with no carbon capture and storage, and no coal plants, at all.
The debate is also about where we want to get to in terms of using low-carbon coal, if we decide we are going to use further coal power for energy production. It is also about whether we have new coal plants-if we do not have any, we will certainly not have any carbon capture technology, because the one follows from the other. As I said in an earlier intervention, the debate is about whether we take seriously what we are going to do about existing coal plants for our future energy economy, bearing in mind that we want that future energy economy to be low carbon, and perhaps to involve some coal for low-carbon energy.
If we want certainty about what will happen to investors in new coal plant, as well as investors in existing coal plant, if they continue to use those assets to develop energy-or not, as the case may be-we need to look no further than the Committee on Climate Change. In a recent report, it said explicitly that
"there is no role for unabated coal-fired generation beyond the 2020s on the way to an 80 per cent. emissions reduction in 2050".
That is a very clear statement, which is, in fact, rather more radical than an emissions performance standard, in saying that by the 2020s investors in coal-either in existing power stations or new ones-will not be able to use those stations for energy generation unless it is abated. Full stop. That seems to me to provide complete certainty about the future basis for investment. This is essentially the position we are now in, as we look at carbon capture and storage.
The question then arises: if we adopt one or more of these amending provisions, where do we stand in terms of the aim? If new clause 15 were adopted, the No. 1 point is that no new coal-fired stations might be developed in the first place-for reasons connected with the economics of developing the power stations and the imposition and overlay of an EPS on an existing series of projects for new coal-fired projects. As new clause 15 specifically points out, the suggested EPSs should apply only to new coal-fired plant. We could thus end up with the worst of all worlds-with no new coal-fired power stations and with no emissions standards for existing coal-fired power stations. That would indeed be a magnificently perverse outcome for those who claim that they are fighting on behalf of the vertebrates against the invertebrates.
My hon. Friend is right that that might be a problem with new clause 15. However, he should bear in mind what successive Ministers have repeatedly said-that there is nothing to stop the Government from introducing an EPS on their own account now. The new clause could cover the aspects that are omitted in relation to existing plans, but the real question is whether there is the political will for an EPS. It actually comes down to something as fundamental as that.
I take my hon. Friend's point, but we are debating real amendments before us, which would have a real effect, so if we go into the Lobbies to vote on those provisions, the outcome will be that one amending provision or another will be passed. New clause 15 clearly states that an EPS of any description-it is not quantified-will apply only to new power plant.
Here, I am sorry to say, I am reminded of the contribution of Mr. Redwood-a man who lives and dies by markets-because he appeared to confuse markets with marketplaces. In energy, we do indeed have a very constrained market, but we also have a marketplace for balancing our energy supply between what is demanded, which is variable, and what is supplied, which is also variable. Not only do we have a variable supply, but we have the introduction of a variable-in a different sense-renewable supply against a baseline supply which is not variable, but which may come within the marketplace on a variable basis.
All those elements must be balanced against each other if we are-as the right hon. Gentleman said-to keep the lights on. If we wish to keep the lights on, as well as moving to a low-carbon economy and retaining an element of coal, we must take careful account of how the existing coal-fired power stations-not necessarily the most economic-remain in the marketplace in terms of the balancing mechanism that I assume will continue be used to ensure that our energy supply demand matches our energy supply over a period of years.
If we are to do that, it is imperative that the existing coal-fired power stations are clear about two facts. They must be clear about the fact that they will not receive rebates after the 2020s, and they must be clear about the fact that a number of them will stay on line after 2015-16. We should consider what will happen if, as a result of anything that we do today, a commercial decision is made that causes those 10 stations to close, given that they will not be receiving receive rebates for very long.
Mr. Willis mentioned flue desulphurisation. The decision in that instance was made not on the basis of whether it was suitable for those stations, but on the basis of the economics. A number of coal-fired stations were closed under the large plant directive because it would not have been economic to fit desulphurisation equipment. The 10 stations that will continue to operate do have that technology, and can operate for a while: indeed, Drax can operate for a number of years.
The question that we must ask ourselves is: do we wish those power stations to disappear from the marketplace in the not too distant future? If so, we shall be faced with the additional prospect of either the market or the Government building new power stations and mothballing them in order to keep the marketplace working in terms of energy supplies. That is a second possible perverse outcome of what we think we are trying to achieve today.
I believe that new clause 8 represents a considerable improvement on what we were offered in Committee. It sets out what we should seek in terms of progress; it sets out our aims; it sets out how we can get there; it sets out what we do if we are beginning to fail to get there; and it sets out the ultimate outcome. That seems to me to ensure that the outcomes that we want will be achieved and the risk of perverse outcomes minimised. I therefore cannot support new clause 15, and I urge the House to support new clause 8.
It is impossible for us to conduct this debate without understanding the background: what is actually going on in the world of energy supply. The debate is long overdue, and, given the position in which we now find ourselves, perhaps too late. Ofgem's recent report "Project Discovery" has been a wake-up call for many-perhaps for Ofgem more than for anyone else. This morning, at a meeting of the Energy and Climate Change Committee, its chief executive, Alistair Buchanan, spoke to us along with some colleagues. He told us that he had been surprised and exposed by events that he had not anticipated. I was quite concerned when he said that. He mentioned six things that identified his concern about the stage we have reached in developing an energy system that is fit for the future. I think that most people who are involved in energy debates would understand five of them.
Mr Buchanan spoke of reasonable doubts about security of supply. Those have existed for some time. He also mentioned an overall rise in prices since 1998, climate change and the legislative programme from Europe, the closure of coal plants-which has been dictated by that programme-and the risk posed by gas imports. That risk has been clear for at least five years, given, for instance, the closure of pipelines from Ukraine. A huge element has been the length and depth of the financial crisis. It is clear that Ofgem, along with many other people in the country, could not have been expected to forecast that or work its way around it.
The country faces an energy challenge that is probably unique. Much of what we have is not fit for purpose. In particular, we face the huge issue of security of supply, while seeking massive investment from the markets. Ofgem predicts that we will need to raise £200 billion by 2020. That is a huge sum of money, and Ofgem put it into context today when it said that £100 billion was invested in the water industry over 20 years, and we now need £200 billion over 10 years-twice as much over half the length of time, when we have had serious economic problems. We are certainly in straitened times.
Alistair Buchanan highlighted that in his report. Project Discovery states that
"although investor confidence appears to be recovering...there is still a question as to whether the high levels of investment needed...will be available at a reasonable cost".
I asked the Minister earlier to give us an idea as to what the cost to the consumer would be, but she was unable to do so, because we do not know. We do not know what we will be charged by the private companies going forward.
Alistair Buchanan went on to say that
"we are entering a phase of substantial new investment in energy markets globally...If the GB market is perceived as a higher risk than those overseas, returns will need to be higher in order to attract sufficient investment. Furthermore, international competition for constrained skills, equipment and other resources could push up costs."
There is a huge difference between that and what he said four years ago. In a speech to the International Energy Agency, he said that the development of gas coming into Teesside
"shows that the markets deliver entrepreneurial solutions and that markets deliver."
They are clearly not doing very well going forward.
What is the situation in the country now? We are importing 43 million tonnes of coal a year, and we are burning 65 million tonnes of coal a year, and we are running out of UK gas and oil. We are also in limbo between old nuclear build and new nuclear build. We are closing down all the coal-fired power stations, too, and the electricity grid is clearly not fit for purpose for this century and going forward. There is also a huge issue of lack of skills. One point that has been continually repeated in our Select Committee debates is that energy companies have not invested in skills because of the overriding objective of keeping prices down and giving shareholder dividends. Although we need to develop new technologies, we do not have the people with the skills to do so. The industry has not developed these new skills, and we are dependent on coal and gas imports from very unstable states.
Mr. Redwood spoke earlier about his concern about where our coal comes from. Let me repeat something that I have said more than once before in this House, especially as the Minister with responsibility for coal is present. There is a moral point to be made about the fact that we import coal. We are importing coal from China, where 6,000 miners a year are dying. Tonight in China, 20 men will not go home because of a lack of safety standards. In Ukraine, for every 1 million tonnes of coal that is got out of the ground, seven people die. That is the reality of getting cheap imported coal. If we are happy with that, we are not the people we should be in this country.
Investors in the industry are constantly looking for support from the public purse. From all the debates we have had over the past 25 years about the privatisation of public services, I have understood that the whole idea is to transfer the risk: if we transfer the services out of the public sector, we also transfer out the risk. The truth, however, is that whenever the risk returns, these investors are suddenly standing with their hands out, and with their hands in our pockets, demanding that our customers and electorates pay for their shortfalls.
The European energy system works in a different way from ours. In the rest of the European Union, countries base their energy debates and demands first of all on social obligations. We base ours on price-led mechanisms, so it is no wonder that when times are tough gas goes into Europe and out of Britain. Twenty years have passed since we were told to "Tell Sid." Well, the chickens are coming home to roost, because companies here need to find £200 billion and we are on the back foot. The companies will be coming to the Government-regardless of which party is in charge-and saying, "We need you to help us. We need you to help us at a time when money is more expensive than it has probably been for a long time." We are paying the price for being in an ideologically driven situation, and it is the very same ideology that got us into this mess in the first place.
This Bill is a small step towards putting some of that right. As has been acknowledged by Members on both sides of the House, there is no doubt that a significant sea change has taken place in the past two years, particularly with the creation of the new Department and the new drive to try to put the British coal industry, in particular, and the British energy system back where they should be. Nobody wanted to talk about energy during the first three years that I was in this House. It took the huge petrol price increases of two years ago to frighten people; the reality was that we were being held to ransom by the oil companies and we needed to start doing things. If that has been a push in the right direction, thank God it has.
We have great potential in this country. The coal industry remains massively untapped-we have tapped into only 10 per cent. of the coal supply in this country. In addition to the nuclear power potential, we know about the potential of offshore wind and tidal power. Those sources all provide excellent opportunities, but we must ensure that we have a package of incentives and developments that make them work. We have a massively bureaucratic system at the moment. It is in place to try to drive the market, work with it and make it operate, but the system is confusing, costly and comfortable for business.
The Select Committee is to publish a report-I believe that this will happen this week-on the need to develop new networks for the grids. Some 17 acronyms in that report relate to trying to dictate the market, including: BETTA, which stands for the British electricity trading and transmission arrangements; LENS, which stands for the long-term electricity network scenarios; and ENSG, which stands for the electricity networks strategy group. All those things have been put in place to try to make the market work in the way that it should be working in any case.
This is a huge challenge for the future, and hon. Members will not be surprised to learn that I do not believe that the market will provide in the way that this country really needs and that I am convinced that the Conservative party will not be able to work with the market in the way that is right for this country. We need to get this Bill through and we need this Government returned to make sure that we put this right.
I shall try to respond to the points that must not remain on the record without a response being given and on which I have been asked questions.
I asked Charles Hendry to provide the details of the companies that supported his view that an EPS set at the right level would encourage investment. I must tell him that the Scottish and Southern Energy Group has said that
"even legislation which provides for an EPS to be introduced at a level to be decided later, could deter investment, because it increases political risk".
RWE has said that
"the threat of any introduction of an EPS would act as a strong deterrent for investment in new plant".
I believe that he is unable to support his arguments and, thus, his case for an EPS.
Will the Minister confirm that she was saying just a little while ago that the Government themselves would look at an EPS if that was necessary in a few years' time? Therefore, the EPS is on the agenda, so it is just a question of whether the EPS is set in the next few months to give clarity ahead of investment decisions or whether it hangs over companies like the sword of Damocles and possibly undermines those investment decisions.
The quotes that we have seen and the conversations that we have had with the companies have all been based around the provisions of this Bill, what they mean for investment in this country now and how those investment decisions would be undermined by the introduction of an EPS now, as proposed in the new clause that the hon. Gentleman supports.
Martin Horwood said that there was a need for clear signals to be given. I do not believe that there could be a clearer signal than the framework that we offer in this Bill, the levy that it contains and the certainty that companies can have that they can invest at a time when they are being asked to do so in technology that in its complete form-from capture to transportation to storage-has not yet been proven. He cited a range of projects that appear in an IEA report. I have to tell him that I have now had the opportunity to check all those projects and I have found that some of them are not operational, some will not necessarily be taken forward and none is on a commercial scale. I hope that he will therefore understand that what is proposed by our framework is necessary, because those projects are not on a commercial scale, and the support that we rightly offer through this Bill is what industry needs.
The hon. Gentleman asked about EU law and suggested that there was an amendment to a directive that could be a threat to any future EPS. We have been in discussions on the matter and we remain convinced that the proposed amendment does not threaten any attempt by a sovereign state to introduce an EPS at any stage in the future.
I am glad to see my hon. Friend Alan Simpson in his place. I think that he compared me to a worm today, which I am very surprised at-he compared me to an invertebrate, and the best known invertebrate is a worm. He spoke at some length about how he thinks that an EPS can incentivise, and made comparisons with the German feed-in tariffs and catalytic converters in cars. My hon. Friend Colin Challen intervened and made the following point, but it needs to be emphasised. There is a fundamental difference between creating incentives to bring on and to produce more use of existing technologies, and creating the incentives required to enable people to take on a huge risk where the technology is not yet entirely proven. We reject absolutely the comparisons made by my hon. Friend the Member for Nottingham, South, which do not support a case for imposing an EPS such as that which he suggests at this stage.
When EU law sets standards, it does so on the basis of the best available technology-that means not just the technology that is available for lab-scale prototypes but that which is economically and technically feasible. That is the judgment that we must make when we are considering the investment programme that we propose and how an EPS would undermine it.
My hon. Friend the Member for Nottingham, South also asked, as did my right hon. Friend Dr. Strang, why the Government would throw such enormous sums of money at the private sector without setting any conditions. First, let me remind the House that conditions already exist in our climate change levy and the EU emissions trading scheme. We are already in a carbon-constrained economy where all fossil fuels are subject to some constraint, and that is recognised and codified in the carbon budgets that we have set through to 2022. They, of course, are statutory.
Obviously, conditions will be set on the projects through the incentive. There will be performance standards, which will need to include the meeting of an agreed schedule for the storage of CO2 and the amount of CO2 that is to be stored. There will need to be monitoring of the CCS projects, as well as the collection, collation and reporting of information to an agreed standard. The information will then have to be shared. We will have to ensure that the CCS projects fully meet any relevant safety and other standards. So, there will be standards. In addition, the payment made to companies will not just be given to companies willy-nilly. It will be awarded to companies based on the amount of CO2 that is saved.
As for Mr. Redwood, whom I see nodding-perhaps he is glad to have had that information-he asked for more information. He asked about the overall investment and I repeat what I said earlier: the estimated cost of the investment is £9.5 billion. He spoke well and in a way with which we would all agree about energy security. It is fundamental to what we are doing and the Bill is intended to assist with energy security. He said that the Government need to be clear about the missing bits, and we think that we have done that by saying that we need new nuclear projects, by making massive renewables incentives available to industry and by saying categorically and specifically in the Bill that we need four new coal-fired power stations, which we will enable to come on stream by making the CCS levy available. He can find further details about finance in the annexe to the low carbon transition plan, but that will be revised soon so he is welcome to write to me if he wants further detail, which I may or may not be able to give him. Where I am able to, I will do so.
I very much appreciated the speech of Mr. Binley, and I think that we all appreciated his enthusiasm for carbon capture and storage. He was at the meeting of the all-party group on coalfield communities that I addressed yesterday. It is important that people across the House have a commitment to coal and to the future in the way that he expressed. I cannot give him the satisfaction of agreeing to move from a three-year reporting period to a one-year reporting period, but I will say that, as he well knows, it is up to all Members of the House at Question Time, in Opposition day debates and on other occasions to obtain more frequent responses from Ministers if that seems appropriate. He asked specifically about the nature of reports. I can give him the assurance that all matters such as clusters, the concept of pipeline networks and storage capacity-indeed, all the potential uses that he could think of-can be covered by reports, and we anticipate that they will be.
Mr. Weir asked about a subsection of new clause 8 and the fact that we have said clearly that we will be in a position, through the reporting regime, to consider whether we need to revise policies. He has interpreted that to mean that we will revise matters in 2020. On the contrary, we have three-year stages, so there will always be the potential to revise policy as we go along. The difference between our position and that of putting an EPS in place very quickly is that we will have knowledge of how CCS is going and will therefore be able to make better judgments not only about whether an EPS might be required at any stage, but on whether any other measures are required. Companies clearly understand that we are putting our confidence in CCS and we are making it possible, but sensibly and rationally. We will revise matters on the basis of how well things are going and what is achieved.
My hon. Friend the Member for Blaydon rightly said that I did not respond immediately to his question about the likely effect on customers' bills. I responded to that point later, but he might not have heard that response. We think that the levy that we propose would have an effect in the region of 2 to 3 per cent. on a customer's annual bill.
Finally, I thank my hon. Friends the Members for Morley and Rothwell, for Sherwood (Paddy Tipping) and for Southampton, Test (Dr. Whitehead), all of whom I believe are environmental vertebrates, certainly in my experience, in their enthusiasm- [ Interruption. ] There has been an in-joke all afternoon about the vertebrates and the invertebrates. My hon. Friends have demolished the arguments in favour of introducing an EPS under any of the new clauses, and have demonstrated the perverse outcomes that could result if we were to vote in favour of any of them. I commend new clause 8 to the House.
Question put and agreed to.
New clause 8 accordingly read a Second time, and added to the Bill.
On a point of order, Madam Deputy Speaker. We understand, of course, the sequence of votes and debates but, for the purposes of clarification, would you be kind enough to confirm that you will permit a vote on new clause 15? It was in the group of amendments that we have just debated. Will we have a vote on it at the end of the time allocated for the Report stage?