I beg to move amendment 11, page 1, line 4, after ‘ensure’, insert—
‘that a decarbonisation target range is set and that’.
With this it will be convenient to discuss the following:
Amendment 12, page 1, line 5, leave out
‘a decarbonisation target range is set, that’ and insert—
‘such a target range is set’.
Amendment 13, page 1, line 8, leave out ‘may’ and insert ‘must’.
Amendment 14, page 1, line 11, at end insert—
‘(4) Subject to section 2(1) the decarbonisation level must not exceed the level deemed consistent with a low-carbon trajectory as advised by the Committee on Climate Change’.
Amendment 15, page 2, line 2, leave out from
‘and the first decarbonisation order may not’ to ‘Climate Change Act 2008’ and insert—
‘a decarbonisation order must be made by
Amendment 16, page 2, line 6, leave out ‘A’ and insert—
‘Subject to section 2(1), a’.
‘Before exercising the power to make a decarbonisation order the Secretary of State must obtain and take into account the advice of the Committee on Climate Change.’.
Amendment 18, page 2, line 32, leave out ‘The matters are’ and insert—
‘In providing its advice to the Secretary of State the Committee on Climate Change must take into account the following matters’.
Amendment 19, page 2, line 46, at end insert—
‘(3) As soon as is reasonably practicable after giving its advice to the Secretary of State, the Committee must publish that advice in such manner as it considers appropriate.
(4) If in making a decarbonisation order the Secretary of State makes provision different from that recommended by the Committee, the Secretary of State must, on making the order, publish a statement setting out the reasons for that decision.’.
Amendment 20, in clause 3, page 3, line 2, leave out from ‘a report setting out’ to the end of subsection and insert—
‘and publish a delivery plan setting out proposals to achieve the duty in section 1 to ensure that the decarbonisation target range is not exceeded.’.
Government amendments 51 and 70.
I draw the attention of the House to my entry in the Register of Members’ Financial Interests, in particular to my interests in the energy industry.
In doing so, I emphasise, as I have done before, that my views on climate change and on the need for Britain to move more swiftly to a low-carbon economy and to cut its dependence of fossil fuels were formed two decades ago when I had ministerial responsibility for this area of policy.
I have not changed these views at any time since and have repeated them publicly and privately on many occasions throughout the past 20 years. My views have never been influenced at any time or in any way by my financial interests, all of which were acquired after I left the shadow Cabinet in 2005. That was 12 years after I accepted the overwhelming scientific consensus on this subject and began campaigning for a more urgent response to the challenge of climate change. Various bloggers, columnists and others, including one or two of my hon. Friends, who insinuate otherwise and who ignore the scientific consensus, invariably overlook my strong and consistent support for nuclear power, which is a low-carbon technology that should be part of Britain’s energy mix.
I am grateful for this opportunity to debate amendment 11, which stands in my name and the name of hon. Members from most parties. It is based on a unanimous recommendation made last July in the report of the Energy and Climate Change Committee on the draft Energy Bill. I am glad to say that the Government accepted many of the Committee’s recommendations, and by doing so materially improved the Bill, and I congratulate my right hon. Friend the Secretary of State and his team on their response to our report and on the outcome of their negotiations with the Treasury on a range of issues, including the levy control framework.
For a variety of reasons, however, the need for the amendment is even greater now than when my Committee’s report was published. First, despite some positive signs on the Government’s support for low-carbon electricity generation, the publication of the gas strategy on the very day of the autumn statement confused many investors. The possibility that the Government might sanction 37 GW of new gas-fired generation capacity rests uneasily with their acceptance two years ago of the fourth carbon budget, which covers the period 2023 to 2027, and raises the fear that the purpose of next year’s review of the budget is to water it down and weaken the incentives for low-carbon investment.
As a member of the Energy and Climate Change Committee, I want to compliment the hon. Gentleman on his chairmanship. He has done an excellent job. Does he agree that unfortunately the Government have dragged their feet over the Energy Bill? They did not give us enough time to scrutinise it. The Bill then disappeared for a while and came back at short notice. Does this smack of a Government who are putting their heart and soul into energy?
It is certainly true, as the hon. Gentleman says, that we waited a long time for the draft Energy Bill. I think that the industry, the non-governmental organisations and the academic world were all hoping to see it appear a lot earlier than last summer. Our Committee was given a very limited period—about half the time normally given to Select Committees to comment on a draft Bill. We completed our work—with great assistance not just from my colleagues on the Committee, but from the staff—in about six weeks. Having received our recommendations at the end of July, we waited another five months before the actual Energy Bill was published, although I recognise that some of that period was used in the negotiations on which I have already congratulated the Secretary of State. The Public Bill Committee stage was completed in the first week of February, however, and we have now waited a further four months to get to Report, so the matter has not been conducted with the urgency that I think the needs of the situation required.
The understandably envious glances cast across the Atlantic by the Treasury at the transformation of the US gas market in the wake of the exploitation of shale gas have not passed unnoticed. Not surprisingly, there are now doubts in the minds of many prospective investors about the depth of the Government’s commitment to decarbonising electricity generation.
Incidentally, the Energy and Climate Change Committee was one of the first bodies to urge the Government, more than two years ago, to approve more exploration and testing to establish the scale of Britain’s recoverable shale gas reserves. If our dependence on imported gas can be cut and if consumers can be partially protected against fluctuations in international gas prices, which have been the main cause of the rise in domestic energy prices in the last few years, that is wholly to be welcomed. However, my Committee also warned, in a more recent report on shale gas, that it would be rash to base energy policy on the assumption that Britain will soon be a major shale gas producer. The opposition to exploring for shale gas in Sussex, which is already emerging, is a foretaste of the battle for public opinion, which must be won before domestic production of shale gas on even a modest scale can occur. The case for a diversified energy mix is therefore as strong as ever.
Secondly, although we hear regular warnings about a looming capacity crisis in electricity generation and the consequent risk of power cuts, there is a curious complacency about the Government’s attitude. Investment in new generating capacity is now at a low level. The nuclear talks between the Government and EDF remain unfinished. Even if, as I now hope and expect, they are brought to a successful, albeit belated, conclusion, it will be 2020 at the earliest before a single kilowatt of electricity is generated by a new nuclear power station in Britain. New investment in coal is unlikely to occur until an economically viable form of carbon capture and storage is available. Despite the huge potential market for CCS, there is no sign anywhere in the world of that happening. I am an enormous fan of CCS—it is the single technology that the world most urgently needs to address climate change—but we might have to wait another decade or even longer for a breakthrough on that front.
Meanwhile, coal can be imported cheaply from America, so our remaining coal-fired power stations are running flat out. Gas generation—the great white hope of many people—is currently so unprofitable that, far from large-scale new investment taking place, some plant is currently mothballed. Critically, potential investors in gas generation are holding back until the details of the Government’s proposed capacity mechanism are known. I urge my right hon. Friend the Secretary of State to publish the details as soon as possible.
With a decision on nuclear still awaited and with fossil fuel generating investment at a standstill, it might be thought that money would pour into low-carbon renewables, but even there the picture is unclear. For example, according to new figures from Bloomberg, the flow of funds is actually slowing down. Doubts about whether a future Government will remain committed to supporting low-carbon technologies after 2020, fears that instead they will bet the farm on another dash for gas, and a lack of clarity about the level of strike prices to be proposed for the new contracts for difference regime have all unsettled investors. The only certain consequence of this is that investment will be slower and the risk of a capacity crisis greater.
What the hon. Gentleman has just said exactly echoes what businesses in my constituency are telling me. The lack of certainty and the suggestion that the Government will now delay setting targets until 2016 mean that businesses simply do not know within which parameters they are operating. They do not know whether they should go ahead and invest in the technology.
I agree with the hon. Lady and will develop that very point.
The element of perceived political risk is leading investors to seek higher returns from their investments in the UK energy market. Higher returns to investors mean higher prices for consumers. Amendment 11 directly addresses these issues. By itself, it would not immediately alter the low-carbon pathway on which the Government have already embarked, most notably in its acceptance of the fourth carbon budget. However, the prospect of the fourth carbon budget being watered down in next year’s review is simply another unwelcome uncertainty. The amendment would remove that uncertainty by requiring the Secretary of State to set, no later than
But will my hon. Friend concede that if we put up more wind farms, we would also have to build gas-fired power stations as back-up because the wind might not blow? That would be an awful lot dearer than just building the gas stations. How much is he planning to add to people’s electricity bills?
I recommend that my right hon. Friend look at the latest report from National Grid, which shows that the amount of back-up required for wind farms is extraordinarily low. More importantly, on the broader point about costs, I am sure he will be aware—because he takes a close interest in these matters—that nothing in the amendment would affect the cost of electricity between now and 2020 because the support for low-carbon technologies during that period is capped by the levy control framework. The amendment would have no impact on electricity prices for consumers for the next seven years.
I am sure that my right hon. Friend also takes a close interest in what electricity prices will be in the 2020s, and it is theoretically possible that approving this amendment could lead to higher prices during that period. That would depend heavily on an assumption about what gas prices will be doing in the 2020s, and I would not be confident to make such a forecast. If he is really concerned about the cost to consumers—a concern that I share—he should address his attention in the short term to the Treasury, which has imposed a minimum floor price for carbon. That will have the effect of raising electricity prices before 2020. It is an imposition that applies only in the United Kingdom and therefore puts us at a competitive disadvantage with the rest of the European Union. I hope he will join me in making continued representations to the Treasury to drop that policy.
As currently drafted, the Energy Bill gives the Secretary of State a power to set a decarbonisation target for 2030, but it does not compel him to do so. It also prevents him from exercising that power before 2016. Suggestions that the amendment would force him to set the target at 50 grams per kWh in 2030 are mistaken. It would merely require him to set it in accordance with advice received from the Committee on Climate Change. There is nothing in the amendment that would require him to set a particular figure. If the Committee were to recommend a figure higher than 50 grams per kWh, the Secretary of State would have to heed that advice. If he did not do so, he would have to explain why.
The Committee on Climate Change itself would not have a completely free hand in determining its advice to the Government. It would still have to take account of all the matters referred to in clause 2(2). I remind the House of five of those key points. The Committee would have to take account of
“scientific knowledge about climate change…technology relevant to the generation and storage of electricity…economic circumstances, and in particular the likely impact on the economy and the competitiveness of particular sectors of the economy…fiscal circumstances, and in particular the likely impact on…public borrowing”— and—
“social circumstances, and in particular the likely impact on fuel poverty”.
My hon. Friend began by saying that the whole purpose of his amendment was to provide certainty. He is now saying, “This won’t be certain because it will depend on half a dozen things that we cannot forecast.” Why does he imagine that people will invest on the basis of a legal obligation to do something in 2030 that it is impossible to do now, and that they will not invest on the basis of subsidies that are available now and that can be removed only as a result of breach of contract?
I am not sure that I completely follow my right hon. Friend’s concerns. Those points in the Bill will simply ensure that, in the event of an unexpected substantial change in economic circumstances or the emergence of a new technology, the Committee on Climate Change would have an opportunity to review its advice. Indeed, I would hope that it would want to do so in normal circumstances anyway. Moreover, investors are accustomed to having to adjust their decisions and expectations in the light of changing events.
I am seeking, through the amendment, to remove another element of uncertainty. I want to ensure that the Government’s current commitment to moving down a pathway of slowly decarbonising the British economy and reducing its dependence on fossil fuels, which is particularly relevant to the electricity generating industry, is reinforced by accepting an obligation to set the target in secondary legislation during the next 10 months. I believe that that would be wholly helpful to investors. It would give them a more secure and predictable framework in which to make their decisions, as well as having an effect on the returns that they might expect.
In Northern Ireland, Airtricity’s electricity prices have gone up by 17.5%, and Northern Ireland Electricity’s prices have risen by 18%. What elements of the Bill will give consumers confidence that prices will not rise above affordable levels, given that prices are heading in the wrong direction at the moment?
On the wider point about future prices, it would be dishonest for anyone to suggest that we could protect consumers against the probability of higher energy prices. The world’s demand for energy is expanding very quickly, particularly in the Asian economies, and that will probably lead to higher prices. What the Government can do, and what the Bill is aiming to do, is at least to minimise those price rises. A number of measures can be taken to achieve that, including improving competition, ensuring that consumers are better informed and deploying various smart technologies on a large scale. Also, as I have said before, it would be helpful if Britain were able to go ahead and identify the scale of our recoverable shale gas reserves and then exploit them. That would certainly reduce our dependence on imports, and it might give us some protection against price fluctuations.
The amendment is not so revolutionary as some people seem to think. It seeks to bring forward by a couple of years something that the Government are contemplating doing anyway. If it is true, as the Secretary of State said yesterday, that we are heading for a substantial decarbonisation of electricity anyway—I am sure that, if he said it, it must be true—what possible objection could there be to the amendment? There is now widespread support for such a measure. Only two weeks ago, the Committee on Climate Change published a report recommending that a target for reducing carbon emissions from electricity generation by 50 grams per kWh to 2030 should be set in legislation, with the flexibility to adjust it in the light of new information. The amendment provides for precisely that.
A wide range of businesses and trade bodies have backed the proposal. The Aldersgate Group, whose members include Microsoft, Marks & Spencer, Aviva, Sky, Pepsico, British American Tobacco and many others, is a strong supporter. Many companies with an interest in the supply chain and with the potential to create jobs in Britain want to see the amendment accepted. A wide range of voluntary bodies is also campaigning for it, including the National Federation of Women’s Institutes, the Church of Scotland, the Methodist Church, the Baptist Union of Great Britain, the United Reform Church and the Quakers in Britain. I mention the Churches because, in the recent debate on gay marriage, I found myself on the opposite side from most of those organisations, and I am delighted to be allied with them on this issue.
I am listening closely to what the hon. Gentleman is saying. Does he agree that the purpose of setting a decarbonisation target now is surely related to the supply chain? Companies are looking at bringing developments on stream around 2020, as many of them have a long lead-in time, and they want to know now that there will be a market for them after that date.
That is certainly one of the reasons for the amendment. It would help to create more jobs in the UK if the supply chain companies received reassurance in that regard.
Even among hon. Members there are signs of enthusiasm for my amendment. At the Liberal Democrat party conference last September, the Chief Secretary to the Treasury proposed a motion to establish a
“target range of 50-100g of CO2 per kWh for the decarbonisation of power sector in addition to existing carbon reductions.”
If every Liberal Democrat Member of Parliament who supported the Chief Secretary on that day were to join me in the Aye Lobby at 4 o’clock, the amendment would be carried. I am sure that all my hon. Friends on the Liberal Democrat Benches are keen to take this opportunity to strengthen their well-known reputation for consistency.
Had my hon. Friend been able to attend the Conservative party conference—where, incidentally, he would have been very welcome—he would have found a fringe meeting attended by myself and two others, at which this motion was carried with acclamation.
My hon. Friend will be well aware that one of the biggest road blocks to achieving progress in this area is the Chancellor of the Exchequer. It is not the Liberal Democrats who are standing in the way of the progress that we need to make. He needs to work with his own colleagues to persuade the Chancellor of the Exchequer to come on board.
I say to my hon. Friend that there are two people who could give a decisive signal to the Chancellor of the Exchequer this afternoon by voting for the amendment: one is the Chief Secretary to the Treasury and the other is the Energy Secretary—both members of my hon. Friend’s party, with which we are delighted to be in coalition.
Given that the hon. Gentleman has chosen to reduce this issue to a political knockabout, it would be interesting to ask him, if he is so committed to his amendment, what meetings he has sought with the Treasury to discuss it.
I frequently pass the time of day in the warmest possible terms with my right hon. Friend the Chancellor of the Exchequer when we are voting in the same Lobby, which from time to time we are.
Even the Government seek powers in the Bill as it stands to introduce a decarbonisation target, but for some reason they do not want to do so until 2016 at the earliest. The problem with the Saint Augustinian coyness and this promise of possible future chastity in the matter of greenhouse gas emissions—“but, please God, not just yet”—is that by 2016 many investment decisions will have been made. If these lock Britain into a high greenhouse gas emission future, they will either prevent us from meeting our climate change commitments or else will lead to the construction of fossil fuel generating capacity, which will subsequently have to be scrapped.
The year 2016 is also after the next general election. Delaying a decision until then creates another needless but harmful element of doubt about the Government’s true intentions. I therefore urge hon. Members on all sides of the House to support this amendment. Doing so will remove an element of uncertainty whose presence hampers investment, increases the risk of a capacity crisis and raises electricity prices unnecessarily. The amendment will not impose on the Government today any commitments that they do not already claim to embrace. Furthermore, it will not remove the need for even greater priority to be given to demand-side measures and to energy efficiency—issues that I wholly support. By itself, the amendment will not raise electricity prices in the next seven years by a single penny because the total sums spent on subsidising low-carbon electricity in the period up to 2020 has, as I have mentioned, already been capped by the levy control framework.
That is quite a challenge because we cannot predict exactly which will be the most cost-effective technologies. I very much hope, incidentally, that we will move swiftly away from a situation in which the Government set the strike prices for contracts for difference on a centrally determined basis, and that they will allow different technologies to bid in an auction process so that we can be sure that we are getting the best value for money. It may well be that some technologies that we do not yet know about will offer better value than offshore wind farms, for example, which look to me as if they are going to be at the costly end of the spectrum. Even today, it is possible to see solar and an array of wind farms—I visited them in my constituency last Friday—operating. The farmer who showed me these with great pride—he was lucky enough to make his investment before the rates were cut a year and a half ago—pointed out that his sheep enjoyed sheltering under these panels and that there was some evidence to demonstrate increased productivity from the sheep as well as the generation of renewable power.
I think I have probably said enough about the Treasury’s floor price for carbon for the House to realise that I am not a supporter of it. I stress that we need to recognise that it is raising prices, adding to consumer and business bills and making British business less competitive relative to the rest of the EU, and it manages to do so in a way that does not cut carbon emissions by a single kilogram.
Without amendment 11, the Bill, whose early passage through Parliament is desperately needed for economic and security reasons as much as for environmental ones, will be needlessly weakened. I commend the amendment to the House.
The Secretary of State is in a bind. His party believes in a 2030 decarbonisation target—it is Lib Dem party policy, after all. His party put the issue in its manifesto. Many of his MPs went further and actually signed a separate pledge in support of a decarbonisation target. Have they not learned the Lady Bracknell rule of politics: to break one pledge may be regarded as a misfortune; to break two looks like contempt for the electorate? The Secretary of State is, however, a decent fellow and he has told me from that Dispatch Box that he favours a 2030 decarbonisation target and would be happy to implement one were it not for the fact that he struck an agreement with the Chancellor. I understand that he refers to this agreement as “the grand bargain”. Hardly: it is more of a Faustian pact.
The Secretary of State was right to negotiate £7.6 billion under the levy control framework to support renewables up until 2020—but bargain this was not. Old coal will be allowed to provide base load beyond 2023; gas will be incentivised to provide base load right the way up until 2045. All pretence of meeting our carbon budgets and emissions targets will be abandoned, and the jobs and growth that leadership in low-carbon industries would generate will be lost. The combined value to the UK economy of all this is worth many times more than the paltry £7.6 billion that the Secretary of State has negotiated up to 2020. A grand bargain? Not since Esau sold his birthright for a mess of pottage has a worse deal been struck.
Just 10 days ago, the UK’s independent Committee on Climate Change produced its report on the electricity market reform. The report compared and analysed the relative benefits of investing in a portfolio of low-carbon technologies through the 2020s rather than investing in gas-fired generation. The report finds that investment in low carbon would save consumers between £25 billion and £45 billion. If, however, one uses the higher-end estimates of gas and carbon prices, the Climate Change Committee’s estimate then rises to £100 billion.
Of course. The hon. Gentleman must be forgiven for not having a memory retention of more than 10 seconds. I did, in fact, say that the lower-end figures were £25 billion to £45 billion, and that the higher end of the spectrum led to the estimate of £100 billion. There we have it. If we compare the £7.6 billion that the Secretary of State has negotiated with the lower-end range of £25 billion to £45 billion, we see what the Climate Change Committee has said the gas strategy might cost us in comparison with a low-carbon investment strategy.
Critically, the Climate Change Committee says:
“Only if the world abandons attempts to limit risks of dangerous climate change would a strategy of investment in gas-fired generation through the 2020s offer significant savings.”
Is it not the case that the climate has been changing for the last 4.5 billion years, while surprisingly there has been no increase in temperatures for the last 15 years, so growing numbers of people think the whole thing is hogwash, and they are going to support quite reluctantly what the Government are doing as the least worst option?
Yes, the hon. Gentleman is right to say that the climate has been changing over billions of years. If, however, he cared to read the report from the Met Office and from meteorologists around the world, he would find that the fluctuation over the past 10 years, to which he referred, relates to the context and background diminishing rather than the effect of emissions reducing. Again, if he bothered to read the report, he would find that it says that once the background comes back to normal or back to the average, the effect of the increased emissions would then produce a correspondingly sharp rise in climate change. The hon. Gentleman is right to say that there have always been changes in the climate and there are risks that we must factor in, but when we do so, we must take full account of the scientific data. Failing to do so is the mistake he made in his intervention.
So here we have the United Kingdom Government, who proclaim themselves to be a leader in the international climate negotiations in the run-up to the United Nations framework convention on climate change agreement in 2015, adopting a national strategy that their own independent expert advisers have told them will make economic sense only if the world abandons its attempt to avoid dangerous climate change. If it were on “Mock the Week”, we should all be in hysterics.
This is not the advice of some partisan body funded by industry. It is the advice of the independent committee that we established and expressly charged with the task of advising Parliament on the most cost-effective measures that can be taken in order to deliver on the UK’s legally binding commitment to reduce greenhouse gas emissions by at least 80% by 2050. What that committee is telling the Secretary of State is that the £7.6 billion that he has negotiated needs to be set against at least £25 billion to £45 billion of increased costs to the UK public. The House should not wilfully choose to disregard the advice of the Committee on Climate Change unless it hears very specific evidence from Ministers that refutes its conclusions. To disagree with the Committee without such evidence would be wilfully to embrace higher energy prices than are necessary to our emissions objectives, and to accept lower economic growth and the likelihood that this policy will fail.
Amendments 11 to 20, which we will press to a vote this afternoon, require the Secretary of State to set a 2030 decarbonisation target for the electricity sector by
“must not exceed the level deemed consistent with a low-carbon trajectory as advised by the Committee on Climate Change”.
I am most grateful to the 43 Members on both sides of the House who have chosen to add their names to the amendments. They, like the hon. Member for South Suffolk and me, believe that a 2030 decarbonisation target is essential to the success of the Bill. Let me repeat those words: “the success of the Bill”. We are not trying to wreck the Bill, for it is too important to play politics with. Ministers should distinguish between those who bring a spade to bury their endeavours and those who, like the hon. Member for South Suffolk and me, bring a spade to shore them up. I am conscious that the Government Whips have been given a good deal of extra work by the amendments, and I will happily buy a refreshment for any of them who feel aggrieved by having to argue with their colleagues against both common sense and principle.
So far, we have identified a number of arguments that have been adduced in the Government’s defence. Front Benchers have been keen to tell their troops not to worry, because they have introduced a provision to set a decarbonisation target in 2016. Well, that is not strictly accurate. The Secretary of State did not need to give himself the power to set a decarbonisation target in the Bill, because he already had that power under the Climate Change Act 2008. What the Government actually do in the Bill is make it illegal for him to set a 2030 decarbonisation target before 2016. There is no compulsion for him to set it even after that date; there is only a permission and an acknowledgement that he may do so.
The Government specifically claim that the enforced delay makes sense, because by that time the Committee on Climate Change will have published its fifth carbon budget, which covers the year 2030. They say that it is best to consider the committee’s budget recommendation along with any decarbonisation target. Interestingly, the committee itself does not agree with that view. In fact, it has repeatedly disagreed with it. In its recent report on electricity market reform, it is quite explicit in saying:
“We recommended to the Government in summer 2012 that a carbon-intensity target aimed at reducing 2030 emissions to around 50 gCO2 /kWh should be set under the Energy Bill, which is currently progressing through Parliament.
In response, the Government has taken a power in the draft Bill which would allow it do this in 2016. It has argued that setting a target any earlier would be premature, given that the fifth carbon budget covering the period 2028-2032—and setting the economy-wide emissions limit for 2030—will not be legislated until 2016.
However, it is not necessary to wait for the setting of the fifth carbon budget to take a decision on the 2030 carbon intensity target, given clear evidence to show that investment in a portfolio of low-carbon technologies is a robust strategy with low regrets and significant potential benefits across a wide range of scenarios.
Neither is it necessary to wait for the fourth carbon budget review in 2014 to set a carbon-intensity target. Although the Government has linked its approach to EMR implementation with the review of the fourth carbon budget, it will remain economically desirable to invest in a portfolio of low-carbon technologies whatever the outcome of the review, given the 2050 target in the Climate Change Act.
Moreover, delay in setting the target will allow current uncertainties to be perpetuated, with adverse consequences for supply chain investment and project development”.
The committee concludes:
“We therefore continue to recommend to the Government and to Parliament that a carbon-intensity target aimed at reducing emissions to around 50 gCO2/kWh should be set as a matter of urgency.”
Does the hon. Gentleman not accept that there are already many positive signals for investors in the marketplace? There is the 2050 target, there is the levy control framework that enables billions of pounds to be contributed by central Government, and there is the Government amendment to the Bill, to which the hon. Gentleman has referred and which allows the Secretary of State to take those measures in 2016.
Is the hon. Gentleman not as concerned as I am—and, indeed, as Professor Dieter Helm was when he gave evidence to the Public Bill Committee—about the possibility that including additional targets that impose restrictions on the marketplace will simply lead to higher costs for both British business and consumers?
I agree that it is important to address the question of what the costs to British industry and British consumers will be. As the hon. Gentleman will accept, the independent Committee on Climate Change has already addressed that question, and, indeed, its remarks and recommendations were based precisely on its assessment of the likely costs and benefits and the signals that currently exist in the market; but he has made a fair point. We certainly need to ask what signals exist, and what effect either costs or benefits are likely to have on our national well-being.
It is heartening to know that the Government want to hear what the Committee on Climate Change wants to say in three years’ time. Perhaps they will now extend that courtesy further by not just hearing but listening to what the committee is saying today.
The other argument that the Government Whips have deployed against the amendments is that sector-specific targets without road maps are meaningless. That is, to a degree, relevant to the point made by Mel Stride. This is not only about the targets; it is also about the road maps relating to the implementation of those targets, and that, of course, is precisely why we have a levy control framework. It is also why the EMR report of the Committee on Climate Change calls on the Government to extend to 2030 funding allocated to support the development of less mature technologies under the framework, to present
and to publish in the EMR delivery plan
“the amount of capacity that the Government intends to contract” over the next period.
The final argument that we have heard from Ministers is that they do not wish to sacrifice jobs and growth for the sake of the environment. That is the most fallacious argument of all. It was dealt with very well in some of the pre-Committee hearings. Andrew Buglass from the Royal Bank of Scotland told the Energy Bill Committee that there is a cliff edge and that cliff edge is making it very difficult for supply chain investors to invest in the UK. Overcoming the insecurity created by the 2020 cliff edge does not require more public money or even the promise of more money. It requires coherence in the form of a 2030 target that proves to industry that the demand for low-carbon energy will continue to rise beyond 2020.
“is absolutely critical from the conversations I have with potential supply-chain investors because they quite rightly point out that it is very difficult for them to take investment to their board if they really only have visibility on three or four years-worth of work.”––[Official Report, Energy Public Bill Committee,
We must put that target in place if we are to incentivise potential investors and achieve the investment in low-carbon industry that we need.
I support the decarbonisation target. Does my hon. Friend agree that this issue is not just about what DECC is doing, but it is also about what the Department for Business, Innovation and Skills is doing? There are many investors looking to invest in constituencies across the country, but they will not make that investment if the uncertainty arising from the Government’s current position persists. It is therefore vital that we get some kind of assessment of where that investment can go, because that will help to create the green jobs that we all want.
My hon. Friend is absolutely right. One of the great mistakes this Government have made on energy policy is to confine it simply to energy itself, and not to consider it in the wider context of British industry. That is why I am delighted that the new Minister for Energy, Michael Fallon, has a spanning brief over the two Departments. I hope he will be able to bring that to bear, because we must see how our energy policy is related to our exports. Unfortunately, last night the Government did not accept the amendments on carbon capture and storage, but we must understand that the growth of CCS as a new technology in this country will impact not only on our own energy policy here in the UK, but much more widely in terms of the exports we can make abroad and the impact we can make on climate change across the globe and in countries such as China and India, which will be using coal for the next 30 or 40 years. That is the true prize. Our own energy consumption and our own emissions are small compared with those of the rest of the world, but the impact that our industrial policy can make is enormous. That is why we have to integrate energy and business, as my hon. Friend says.
Potential investors in the UK have a policy risk concern; they are concerned about what the future shape of our energy policy might be. Siemens told us if we wait until 2016 to set a decarbonisation target for 2030, it and many of its competitors are likely to delay or cancel planned investment in the UK. The Energy Secretary is shaking his head. I know he is not shaking his head to indicate he disagrees that that is what Siemens said, as he has read the Hansard Committee reports and he knows that is precisely what it said. He may disagree with those comments, but that is what industry is telling us, and we ignore what it is saying at our peril.
The hon. Gentleman mentions Siemens. In Germany emissions per capita and per unit of GDP are higher than in the
UK, and in the UK they are falling more quickly, yet he seems to think that the best way forward for us is to have targets and increasingly to act unilaterally. Why are our European neighbours going in the opposite direction?
That point is often made; it is often said that Germany is getting rid of its low-carbon nuclear and is embracing coal as the fuel for the future. The hon. Gentleman is diligent on these matters, and I am therefore sure that he has examined the Pöyry report commissioned by his Government—by DECC—which was published in April 2013 and which made it clear that this is not a sustainable pathway for Germany. It concludes:
“It is our opinion that there will be no major new unabated coal or lignite projects in Germany for the foreseeable future beyond those currently under construction. Our view appears to be endorsed by the German companies: three majors have very publicly announced that they have no intention of building additional coal-fired power stations in Germany until at least the end of the decade.
The Netherlands has many parallels to Germany in that legacy circumstances are responsible for a wave of new coal-fired power stations, but that these conditions are highly unlikely to repeated.”
It then goes on to talk about Spain.
The hon. Gentleman knows that the decision on nuclear in Germany was taken at a time when highly political conditions were in play. Those conditions are not going to be replicated in the future, and, importantly, the business sectors in these countries have seen that this is not a credible future pathway.
Order. Before the hon. Member for Ynys Môn intervenes, I should point out that although Barry Gardiner is, as usual, entirely in order as there is no time limit, he is a sensitive fellow and I therefore know that he will wish to take account of the fact that several other Members might also wish to volunteer their opinions in the course of the debate.
I will be brief, but my hon. Friend’s comments on the German issue have provoked me to intervene. He is right that there may be no new-build coal power stations in Germany, but German business is concerned that it will be importing nuclear from France or coal from Poland, and that carbon issues will therefore be imported.
If the hon. Gentleman will forgive me, I will not, as I have tried to give way as much as possible and I wish to respect Mr Speaker’s advice. I am conscious that I have spoken at great length, so I will now conclude my remarks.
“Projects can take 4-6 years from investment decision to construction and operation. We are already close to the point where lack of a post-2020 market driver will seriously undermine project pipelines. Supply chain investment decisions depend on reasonable assurance for manufacturers that a production facility to be constructed during this decade, costing hundreds of millions of pounds, will have an adequate market for its products well into the 2020s.
Postponing the 2030 target decision until 2016 creates entirely avoidable political risk. This will slow growth in the low carbon sector, handicap the UK supply chain, reduce UK R&D and produce fewer new jobs.”
The Government must reconsider.
These amendments have attracted significant debate and interest across the House. Let me say, first and foremost, that the Government share the view that decarbonisation of the electricity sector, done in the right way, is vital. It will help us to: deliver secure and affordable energy for the long term; diversify our energy mix: insulate the economy from price spikes in the international energy market; and meet our long-term, legally binding goals on renewable energy and climate change. It is because decarbonising energy generation is one of the central pillars of this Government’s energy policy that we introduced these new provisions into the Energy Bill, in order to take that critical step of enabling a legally binding decarbonisation target range for the electricity sector to be set in 2016. That would be the first of its kind in the world.
Amendments 51 and 70 refine these provisions by adding the target range duty to the list of considerations to which the Secretary of State must have regard when exercising certain electricity market reform functions, such as when making regulations relating to contracts for difference and the capacity market. That will help to ensure that, when a target decarbonisation range is set, the Secretary of State is obliged to take his duty to meet that target range into account when exercising his functions in respect of electricity market reform.
The Minister referred to the amendments introduced in Committee as being ones that enabled the Government to set a target, but he is as aware as I am, and as many others are, that that is not what they do; they say that the Government “may” set a target. If he is now saying that the Government will set a target, will he support the amendments proposing to change the wording from “may” to “must”?
The amendments we introduced in Committee allow the Government, if they so wish, to set a target. I will come on to deal with that point, but let me turn first to the amendments tabled by my hon. Friend Mr Yeo and Barry Gardiner. I do not believe that these amendments take the right approach for the following reasons.
First, now is not the right time to set a target range. Hon. Members say that doing so will improve investor certainty, but this Government are already giving clear signals about the future of our electricity sector, and I shall address that in a moment. Secondly—this answers the point made by Tom Greatrex—it would be a mistake to impose a legal obligation now that a target range must be set. Decarbonisation of the electricity sector is inextricably linked to that of the entire economy, so a decision to set a binding target range should be taken in 2016 when we consider the trajectory of the whole economy towards our 2050 target. Thirdly, the Committee on Climate Change is the wrong body to set a legal constraint on what the level of the target range should be.
I wish to expand on each of those three points. Hon. Members say that we must set a target now because investors need greater certainty. The Government agree wholeheartedly that investor certainty is essential to delivering our energy and climate change goals at the least cost. That has been a fundamental part of our policy to date and it will continue to be a high priority moving forward. However, it is very important to recognise that we already have legal targets and measures that clarify the long-term future of electricity generation in this country. They include: the 2050 target to cut emissions by at least 80%, which is likely to require the entire electricity sector to be decarbonised; the fourth carbon budget that runs up to 2027, which requires this country to halve its emissions in the whole economy—we have set out in the carbon plan the likely implications of that for the electricity sector; and the 2020 EU renewables directive, which will mean 30% of electricity generation coming from renewables in 2020, compared with around 10% today. We shall also be arguing, as the Secretary of State announced last week, for the most ambitious greenhouse gas emission target ever to be set in the European Union of 50% by 2030.
In addition, we have committed ourselves to providing clarity on the trajectory of the electricity sector up to 2030 by issuing guidance to the National Grid Company on an indicative range of decarbonisation scenarios consistent with the least-cost approach to achieving our overall 2050 carbon target. Of course, we must also not forget that what matters most for investors now is not simply words and aspirations, but funding. That is what we have got through the Government’s decision to increase support for low-carbon electricity year on year to £7.6 billion by 2020, a tripling of support between now and 2020 which provides a clear and durable signal to investors.
Was my hon. Friend, like me, struck by the comments made by the chief policy officer of the CBI at the weekend? She said:
“It is clear that investment decisions will stand or fall on the details of the Contracts for Difference, the capacity mechanism, and the levy control framework—not on a carbon intensity target.”
My hon. Friend anticipates me; I was certainly due to quote the CBI in support, and I will come to that in a moment.
Finally, in this regard, I should mention this Energy Bill, which puts in place the most significant reform of our electricity market since privatisation, in order to attract the £110 billion of investment we need over the next decade to replace current generating capacity, upgrade the network and cater for rising electricity demand. That will provide further support for investors. For example, the Government’s delivery plan, which is due to be published in draft in July, will provide draft strike prices for renewables projects that wish to take up contracts for difference. They will provide further certainty about potential future revenues to developers of such projects, at an earlier stage than under the renewables obligation. We expect this approach to bring on significant investment in renewable technologies, enabling the Government to meet their objectives on renewable energy, decarbonisation, security of supply and affordable energy for consumers.
This Bill has already been welcomed by investors. John Cridland, director general of the CBI, has said that it sends a
“strong signal to investors that the Government is serious about providing firms with the certainty they need to invest in affordable, secure, low-carbon energy”.
The chairman of ScottishPower has said:
“our investment plans will create 4,500 jobs…along with thousands more jobs in other industries, and a further increase in the £1 billion we spend each year with UK suppliers.
We are able to make that sort of investment because we have confidence in the UK, and in its energy policy and regulatory regime.”
The Minister states that trajectories are already in place, not only for electricity generation and decarbonisation, but in this Bill. Bearing those in mind, will he now, this afternoon, rule out the implementation of any element of the gas strategy that his Department has recently published, particularly the one suggesting that a possible scenario might introduce gas to twice the emission levels put forward by the targets he has set out today?
No, I certainly will not do that; gas is a key part of our carbon plan, and I hope that the hon. Gentleman will look at the gas strategy as a whole.
Setting a target now to come into effect next April would mean not waiting to consider what is happening in the wider economy, for example, the progress being made in the commercial deliverability of carbon capture and storage, how that could contribute to decarbonising our energy supply, and the take-up of electric vehicles in the coming years. Therefore, setting a target now risks imposing additional costs on the economy and on consumer bills in the future in order to meet the target, and that would not be helpful for anyone.
The Government believe that the right approach is to make a decision on whether to set a target in 2016, when we can consider the whole picture. That already means setting the target range 14 years before it is due to be met. That is even longer than is required under the Climate Change Act 2008 in respect of carbon budgets, which are set 12 years ahead. Setting it now—in effect, asking Ministers to set it at Christmas—means that we would be doing so 17 years ahead. I suggest to the House that there is no certainty for investors in setting a target before we can possibly know how we can meet it.
That takes me to my second point, which is that the Secretary of State can only make a decision on whether to set a target when considering the trajectory of the whole economy towards our 2050 target in a way that is consistent with the overarching framework provided by the Climate Change Act. The timing is important. There is significant interaction between the electricity sector and other sectors of the economy, especially those, such as heat and transport, that might well become more dependent on electricity as we move into the 2020s and 2030s. That will in turn have an impact not only on overall demand for electricity but on when that electricity is needed.
Such questions must all be considered together when thinking about the best way to decarbonise electricity generation as part of a least-cost route to meeting our obligations under the Climate Change Act. It is therefore vital that a decision to set a target range is not taken in isolation, which is the approach suggested by my hon. Friend the Member for South Suffolk and the hon. Member for Brent North, but in the context of considering the pathway of the whole economy towards our 2050 target. That date will be in 2016 and not before, because 2016 is when we are due to set in law the level of our economy-wide fifth carbon budget, which will cover the corresponding period between 2028 and 2032. At that point, we will be able to consider the pathway of the whole economy towards our overarching 2050 target and understand better the most cost-effective way to achieve that. If at that point in time it is decided that a target range is the right approach, we will have the legal authority under the Bill to act swiftly to set a binding target at the right level.
I believe that my hon. Friend Charles Hendry was right to say in an article last weekend:
“My difficulty with the target…is that we would be requiring it to be set without knowing that it can be met, and that cannot be a responsible decision for government to make, when the costs of getting it wrong would have to be picked up by consumers for decades to come.”
His argument is that given the uncertainties about the relative costs and potential of different low-carbon technologies, it would not be right for a Government to set a target now without first having thought through precisely how a particular level would be achieved. I agree with him and believe that that is why we should consider setting a target range in 2016 in the wider context of setting and determining how we will meet the fifth carbon budget.
That takes me to my final argument, which is that amendment 14 requires that the level of the decarbonisation target range must not exceed that recommended by the Committee on Climate Change. I fully agree that there should be a role for the committee and our proposed approach takes that into account.
Some have not passed climate change legislation, of course, which is why they are not bound to set targets.
By waiting until 2016 to make a decision on whether to set a target, the Government can take on board the advice provided by the Committee on Climate Change on the level of the fifth carbon budget, covering that period, as part of its responsibilities under the Climate Change Act. That advice must include views on the whole economy, including the electricity sector.
It would be wrong to blur the lines of accountability between the Committee on Climate Change and the Secretary of State, as the role of the committee is to advise the Government and not to set policy. That point was made neatly by Dame Joan Ruddock, who was the Minister in charge of the Climate Change Bill in Committee in 2008. She said:
“The committee will have a vital role in providing impartial advice and scrutiny, but we do not think it appropriate for an unelected body to make, or be seen to be making, policies. The individual decisions that will directly affect families, communities and businesses should be made by Parliament and the Government.”––[Official Report, Climate Change Public Bill Committee,
That could not be clearer and I agree that it should be for the Secretary of State to decide the level of any decarbonisation target range, because it is he who ultimately bears the responsibility and is accountable to Parliament. Of course, he should take into account the committee’s advice, just as he does now when setting the carbon budgets, but that advice should not impose a legal constraint.
In conclusion, I do not doubt the good faith of my hon. Friend the Member for South Suffolk and the hon. Member for Brent North. I do not doubt their intentions or their environmental commitment. Nobody can know for sure how our economy will change over the next 17 years, yet my hon. Friend wants to impose this obligation on us now, from April. If he is so sure about the future growth of our economy and so sure about the path of energy supplies and the changing pattern of energy costs, there is only one thing I can say to him. He quoted St Augustine, and I am only reminded of Melbourne’s remark about Macaulay, when he said, “I wish I was as certain of anything as he is of everything.”
One thing about which I am pretty certain is that the world’s concern about climate change will be more intense in 2030 than it is today. The probability is that through a combination of emissions trading systems and carbon taxes there will be a high carbon price in 2030, and I believe that the most competitive economies in 2030 will be those that have reduced their dependence on fossil fuel consumption.
I can certainly agree with my hon. Friend that the concern might well be more intense, but whether we will be so certain, I am not so sure. Indeed, I have read a report of a speech delivered by my hon. Friend during the recess, in which—I was somewhat puzzled to see this—he said about climate change that
“the causes are not absolutely clear. There could be natural causes, natural phases that are taking place.”
Let me make the record absolutely clear. I said that during the 4 billion year history of the planet there have been much greater changes in climate than anything that is likely to result from a 50% increase in greenhouse gas concentrations, but that those changes took place before there were human beings, which are one of the most recently arrived species. If we are to support life for 7 billion going on 9 billion human beings in the style to which we have rapidly become accustomed and to which many still aspire, the one absolute precondition is climate stability.
I am sure that those who support my hon. Friend will be grateful for that explanation. The quotation I have seems pretty clear to me, but it is for him to explain it. If he is not so sure any more, why should the rest of us be so sure?
I would say to my hon. Friends that they should let the Opposition, as they always will, be opportunistic. Let the Opposition please the lobbyists by suddenly supporting a target that they never endorsed in 13 years in power. I ask those of us here who share the responsibility of government to be a little more careful not to risk higher bills now for our hard-pressed industries and constituents, not to force out generating plants before we have the new investment that the Bill will deliver and, above all, not to drive up costs for those industries struggling to compete against lower energy costs abroad.
Let us have economic and industrial policy that is coherent, and energy policy by design, not decarbonisation by dogma or by default, which can only drive our industries offshore. There is a better way forward, and it is in the Bill. Let us be the first Government ever to enable a legally binding target to be set at the right time: when we set the fifth carbon budget in 2016. We can then better assess the real prospects and costs of carbon capture and storage; properly measure what is happening to the whole economy; and better judge the transition to a greener future against the costs that our consumers and businesses must bear. I urge all my hon. Friend not to rely on blind faith, but on the practical steps that we are taking in the Bill to decarbonise our economy while ensuring security of supply at least cost to our constituents.
There are many reasons to support the decarbonisation amendments, and many hon. Members—most recently Barry Gardiner, who is just leaving the Chamber—have set them out with great expertise and eloquence. From a security perspective, I want to underline that the stakes could hardly be higher. It is clear that those who will suffer the most harm and hardship from the impacts of climate change are often the poorest and most vulnerable, here in the UK and globally—those who have contributed the least to the problem. In that respect, this crisis is not unlike the banking crisis.
As many business leaders and experts such as Lord Stern have said, there is no business as usual at all in a 3° or 4° warmer world. A couple of years ago, at the launch of the UK’s climate adaptation plan, the big idea was managing the unavoidable and avoiding the unmanageable. “Avoiding the unmanageable” means keeping global temperature rises below 2°. For years, that line in the sand has been recognised by the UK and most other Governments, and enshrined in legal documents under the auspices of the United Nations framework convention on climate change and the G8. That is the basis for the UK’s Climate Change Act 2008, and our carbon budgets, which the policies in the Bill will, or perhaps will not, deliver. Internationally, citizens and Governments of low-lying island states risk their entire nation being literally wiped off the face of the map, even with a 2° rise.
I read recently that Tuvalu would be wiped off the face of the earth within 10 years if we did not do something about global warming. The only problem is that the article was 10 years old, and all those islands are still there. Is this not just more exaggeration from those who want higher electricity prices as a result of decarbonisation?
I do not really know where to start to respond to such an ignorant intervention. I will not even bother wasting my time with it.
As I say, a couple of years ago, we were talking about the fact that entire nation states face being wiped off the face of the map. If the hon. Gentleman cared to look at the situation in Tuvalu, he would realise that it is getting more and more serious. If such a real and present threat were facing the UK, would we not join their calls for much more dramatic emission reductions, to keep the global temperature rise to less than 2°—perhaps to 1.5°? Would we not go, as many nations are, for 100% renewable energy over the next few decades?
I cite those statistics because I want to remind the House what we are talking about. Much of the debate so far has rightly been about the cost of decarbonisation, and about the targets and so on, but the bottom line is that what we are discussing is literally life and death. People’s life or death is at stake today. That is why we need to use this opportunity to make sure that the Bill is as ambitious as it can be.
I have talked about what I would regard as the moral case for swift action. We have heard a lot about the economic case. There is no shortage of companies telling us that a decarbonisation target is essential. The joint letter of more than 50 Aldersgate Group members, for example, said:
“the Government’s perceived commitment to the low carbon transition is being undermined by…the absence of a specific carbon intensity target.”
Many other companies would say the same.
I would like to focus on the impact internationally of what we do at home. A domestic decarbonisation target is crucial if the UK is serious about securing a global deal on climate. We hear a lot from the Government about the need for international action, and it often sounds as though they are saying, “Let’s wait until there is international action before taking action here at home,” but as someone who would know about this, John Ashton, would say, action at home first is absolutely critical if we are serious about getting global agreement.
John Ashton, as many hon. Members will know, was the Government’s special representative on climate change, a Foreign Office diplomat who has spent many decades working on the subject. Last month, he talked about the need for global agreement, explaining that
“British diplomacy can influence this, perhaps critically; the argument that we are just too small to count is nonsense. But our diplomacy starts at home.
I have been personally involved in British climate diplomacy for most of the last 15 years, at the heart of it for much of that time. Nothing that we accomplished could have been accomplished if we had been faltering at home as we are now. You cannot expect others to act as you ask, or even listen to what you say, if you are not doing yourself what you want them to do. If we in Britain appear to be giving up…we will be out of the game. That is why I spent so much of my time as a diplomat, close to half of it, on domestic policy.”
Let us not think that domestic policy and global policy are not linked. They are essentially linked. If Britain is to maintain its position as a real leader on climate change, we absolutely have to act at home. The decarbonisation target is a crucial part of that.
Indeed, I would say that the target does not go far enough, although of course I will support it this afternoon. Let us remember the context: a target of 50 grams of carbon per kWh by 2030, which is what the amendments that we are considering are essentially proposing, is absolutely the minimum that we should seek to achieve. The Climate Change Act 2008 and the carbon budgets that flow from it reflect the overwhelming consensus, stated many times by the Government, that we have to keep below 2° warming, but current carbon targets give us only a 37% chance of doing that. I want to emphasise that, because I sometimes think that when we discuss targets in the House, we assume that if we meet a certain target, that gives 100% certainty of a given outcome. Clearly it does not; it is about a balance of risks. How many of us would get on an aeroplane if we were told that it had only a 37% chance of reaching its destination in a safe way? A 37% chance is pretty low, yet those are the odds that we are arguing about even now.
I wish the argument was about not whether we should decarbonise straight away or by 2016, but the extent, far-reachingness, speed and ambition with which we should do it. That is the debate that we should be having, instead of arguing about whether we should be going in this direction at all. An honest reappraisal of our targets is needed, with science, and the implications for young people, vulnerable communities and future generations, at the forefront of our minds.
The hon. Member for Brent North, who is a leading advocate for action on climate change globally, raised the challenge of the need for tighter targets in his Westminster Hall debate. I would like to know his view of John Ashton’s stark conclusion that the UK could never have achieved anything close to its previous international influence against the backdrop of current policies. Credible domestic targets and action are crucial.
As well as science-based targets, we need an honest reappraisal of the role of fossil fuels and the fossil fuel lobby’s enormous influence over policy making. To say, “Gas is lower-carbon than coal, so let’s get fracking” is disingenuous at best. Gas is still a high-carbon fuel, and gas prices are projected to rise in future, irrespective of shale gas. That is according to most of the expert analysis that I have seen, certainly from independent sources without direct or indirect financial or family ties with Cuadrilla and the wider fracking fraternity.
Through the Bill, Ministers are putting in place mechanisms that offer vastly greater support to nuclear power than to renewables. The Bill is about gas and nuclear; it is not sufficiently about a low-carbon future. Through it, Ministers are offering long-term guarantees for high-carbon gas generation until 2045, and a way for the same gas companies that are putting up bills and raking in profits to take even more money from taxpayers and bill payers through the capacity mechanism. The Secretary of State is offering long-term guarantees and assurances for high-carbon gas generation, and tax breaks for fracking. Ministers have not chosen to give anything like a similar degree of certainty for wind, wave, tidal, solar, biomass, hydro or geothermal power—nothing beyond 2020. That is made even worse by the Government’s opposition to proposals, backed by industry, for 2030 targets for either renewables or efficiency.
The Government had the opportunity, in the Bill, to drive a radical transformation in ownership and control of energy away from the big six to communities, localities, individuals, private companies, public authorities, joint enterprises and co-operatives. Instead, they have chosen a support mechanism that only really works for the likes of EDF, npower, Centrica and E.ON, which will tighten their death-grip on us.
In light of these actions, it looks extremely unlikely that the UK stands much of a chance of achieving the carbon reductions necessary, or even of remaining on track to meet the 2050 target without a 2050 decarbonisation target. I end with another quote from John Ashton. When asked for his view on the decarbonisation target, he stated:
“I can’t myself see how any MP who votes against the target will thereafter be able credibly to claim that they support an effective response to climate change.”
I know that will not bother some in the House, but I hope that for many other Members it will concentrate their minds on the vote.
I remind the House that I have declared in the register that I offer advice on global economies to an investment business and an industrial business.
I oppose the amendments in the name of my hon. Friend Mr Yeo and others, and I do so primarily because it is high time that this House heard a voice for the consumer of energy. I am extremely worried about energy prices. The Labour Government did some good work, highlighting the serious problem that they called fuel poverty. They rightly identified the fact that at the time of their Government many people in our country found it difficult to pay the energy bills because they were already high. In recent years—the end of the Labour period and now under the coalition—those bills have gone up considerably further.
People facing fuel poverty have also had the great problem that in recent years we have had a succession of particularly cold and bitter winters, with heavy snowfalls and ice, and a series of rather cold and damp summers. Although I will not go into the arguments about how we can measure rising temperatures and how much global warming we are actually experiencing, the cruel fact of life for people facing rising energy bills is that they need to use more energy because it is so cold and they need to keep warm. We even had snow and frost in May this year in England, at the very time that energy prices were being put up, partly by market forces and partly by a deliberate act of policy by the Europeans to try to make energy dearer to put people off using it. We need to take on board the fact that there is a serious problem of people affording the heating bills.
This is doubly damaging in an economy that is experiencing a fragile and modest recovery and needs a faster recovery. Energy is taking too much of the family budget. At the very time when we want people to have more money to spend on other things to create demand and jobs around the economy generally, a large chunk is being taken up by those rising energy bills, both because of price and because of the need to burn more as a result of the climate conditions outside. We also see that there is an additional problem, which my right hon. Friend the Minister referred to at the end of his speech: British business now faces considerably higher costs for the energy it needs to use than competitor businesses in America or throughout much of Asia. It should be a grave worry to everyone in the House who is concerned about jobs and about the creation of more industrial activity in Britain that we are deliberately creating very high priced energy in this country, which is a major impediment to industrial development.
I welcome the Chancellor’s statement some time ago that he wished to see the “march of the makers”. I welcome the idea that we need to build up stronger and bigger industry to go alongside the successful job creation that we have had in financial and professional services and related areas. It would be good for our economy to have a more diverse and flourishing structure. We have some very good industrial businesses, but we do not have enough of them and the sector is not as large as I think any major party in the House would like to see.
So if we are all serious about wishing to have an industrial strategy that works, and if we are serious about wanting to create a climate in which business can flourish and more industrial jobs can be created, surely we must tackle one of the main costs that business faces—the cost of energy. The Government are well aware of the problem and have responded to lobbying by high energy-using industries, such as steel, glass and ceramics, where energy is a massive part of the total cost because extreme heat is applied for the transformation of the materials in the process. The Government are providing some kind of subsidy to those heavy energy users in a desperate attempt to prevent some of those factories and process plants closing, but even with the subsidy the production costs are much higher in Britain than in America, China or other parts of Asia, so we are still at risk of losing more of that business by closure, and we are certainly at risk of not attracting the new investment in those types of industry that we might like as part of our industrial strategy.
The Government also need to understand that it is not just transformational processes such as steel or glass production that have an energy cost problem; it is more or less any kind of industry with an automated plant. If we wish to be competitive in a western country against countries in Asia which have relatively low labour costs, we need to automate. We need to have a very degree of machine power so that all the mundane jobs can be done by intelligent machinery to keep costs under control. But we lose the advantage of being able to automate and use high technology if the cost of the energy to drive the machinery is so uncompetitive. We will soon lose the advantage as well because a country such as China is industrialising not only very rapidly, but with the application of far more technology and labour-saving equipment going into its factories. So we have a double problem in that such countries are automating and they have much cheaper energy.
I urge the Government to take our problem of energy prices extremely seriously. American energy prices are typically a third lower than United Kingdom energy prices, so if energy is 10% or 20% of the cost of the given process and the given industry, we can see immediately that there is a 3% or 6% cost advantage just from the energy bill, which in very competitive world markets can be an important distinction. When we look at the success that America is now having in building her recovery longer and faster than the European countries, it is clear that part of that success comes from the accent placed on cheap energy. The United States of America has not put through legislation similar to the legislation passed in 2008 by the Labour Government—legislation that I did not feel able to support at the time because I thought it would be damaging to prosperity and would put up our energy bills too much—and we see that America is also reaping the benefit of the shale revolution. I hope that the words of the Prime Minister and the Energy Minister will result in action, because the United Kingdom has an opportunity with shale as well, but America not only has found the shale and is keen on the shale, but is now extracting such large quantities of shale gas that it has much, much cheaper gas prices than the United Kingdom, of benefit to consumers and to American industry.
We should beware of the fact that when countries assembled to try to take on the Kyoto work of carbon targets, it was noticeable that only the European countries were left in the game. Even Japan, which had obviously been the host to the original Kyoto proposals, was no longer willing to sign up to such targets.
China is allowed to have a totally different approach to carbon targets because it is a growing economy. I have a great deal of sympathy with its need, but China is not being asked to cut its carbon emissions in the way that the United Kingdom is being asked to cut emissions. When the Kyoto process was last looked at to try to get much tougher targets across the world, the only countries that were still prepared to be in the game were the European countries, so the European economy as a whole on the continent is saddled with dangerously high prices and restricted ability to generate power in different ways, and the United Kingdom has the particularly virulent strain of this disease because of the House’s passion to legislate for dearer energy.
Does my right hon. Friend agree that to an extent the EU may even be dropping out, leaving us with unilateral measures of the carbon floor at £16 a tonne, when in the emissions trading scheme, which is barely working now, it is less than £2?
My hon. Friend is right, I fear, but that goes a little wider than the amendment. What we are trying to do today is to stop making matters worse by encouraging the amendment, which would mean that the United Kingdom got even more out on a limb. As he implies, the Germans, having decided against nuclear for a variety of good and political reasons, are clearly going to use a lot more coal, and I cannot see how they can conceivably do that and hit all the targets. They will just move on and in due course Germany’s influence in the European Union may well dilute the target more in the European Union as a whole and leave the United Kingdom even more exposed.
Is my right hon. Friend as concerned as I am that any free trade agreement between the US and the EU may turn into one-way traffic for manufactured goods? Perhaps that is why the Americans are at the negotiating table now. They see the competitive advantage that they will have on energy costs.
My hon. Friend is absolutely right. The Americans are playing a blinder on all this, and we need to understand that the American economy is now getting itself back into order, which we should welcome as they are an important ally and a big trading partner, but we should also be warned that they are doing things to have competitive energy that we are clearly not prepared to do.
I hope that the House will join those on the Government Benches in voting down the proposal. It makes a bad situation worse, and I urge Ministers to understand that their prime duty is to keep the lights on and their secondary duty is to make sure that the power is affordable, both so that granny does not have to shiver when we have a cold summer or winter and so that we have some industrial jobs left by not trying to be holier than thou and ending up unemployed.
I rise to speak in support of amendments 11 to 20, which, as Mr Yeo said, stand in the names of a range of Members from almost every party in the House, and certainly from every part of the UK, including Members from both governing parties. In particular, they include my hon. Friend Barry Gardiner and Andrew George, who is no longer in his place, but who secured a Westminster Hall debate on the issue just prior to the Queen’s Speech.
I begin by paying tribute to the lead proposers for their efforts in securing cross-party support for the amendment. There have been three Ministers in eight months so it is easy to lose track, but Charles Hendry, who unfortunately cannot be with us this afternoon, spoke in a debate in the House last November about the need to take energy policy out of politics, because investors need to know that there is support for long-term measures. That is key, and it is in that spirit that the amendment is offered to the House this afternoon and that the Opposition will seek to support it in the Division Lobby.
As the hon. Member for South Suffolk and others who have spoken have made clear, the crux of the amendment is that if, as the Government keep repeating, their intention in relation to energy policy is to seek renewal of our energy infrastructure in a way that safeguards security of supply and reduces our carbon emissions, and does so in the most affordable way, then the greatest prize in securing that investment is clarity, predictability and purpose. That is precisely what a decarbonisation target provides, and it does so in conjunction with the carbon budget and other measures in the Bill. That is why I believe that there is, or certainly was, near universal support for a decarbonisation target. My right hon. Friend the Leader of the Opposition called for it last year. As we have already heard, the Chief Secretary to the Treasury moved such a motion at the Lib Dem conference last year. Two years ago, the Prime Minister himself said that decarbonisation is necessary if we are to meet our ambitious climate change commitments. As we heard from the Chair of the Select Committee, it unanimously concluded that
“providing greater clarity about the contribution that the power sector is expected to make towards meeting these targets would help to provide certainty to investors. The Government should set a 2030 carbon intensity target”.
Many Members present today served on the Bill Committee and they will recall that the Secretary of State said in evidence that he supported a 2030 target. He is no longer in his place, but when asked whether he supported a target he said:
“I do not think that it is a secret. That is my position and the position of my party. We are in coalition and we have had discussions with assertive colleagues.”––[Official Report, Energy Public Bill Committee,
A number of others are assertive about the importance of the target, however, and I am talking now about those outside of the House and politics. There is strong support for this in the energy industry, business in general, academia, public bodies, the Government’s own advisers on these issues, the Committee on Climate Change, as we have already heard, organisations and industry, including companies as diverse as Microsoft, Sky, Unilever, the EEF—to respond to the point made by Mr Redwood, the steel industry is a member of the EEF, which supports a 2030 decarbonisation target—the Carbon Capture and Storage Association, Oxfam, the Catholic Fund for Overseas Development, the Environment Agency and many more, not just those who seek to benefit directly from the investment that we know needs to happen. Memorably, when the Secretary of State was challenged in Committee by my hon. Friend Luciana Berger to name a company that opposed the target, he was unable to do so.
The arguments in favour of the decarbonisation target are as important as those who have pledged their support for it. The first comes from a jobs and growth perspective, on which the hon. Member for St Ives focused in the recent debate that I mentioned earlier. It is important to recognise that a target would
“stimulate green growth in the economy and create a framework where there is greater certainty and confidence among businesses to invest in renewable energy.”
That is from the text of the motion passed at the Liberal Democrat conference last autumn. The Committee on Climate Change, as we heard my hon. Friend the Member for Brent North say in a comprehensive manner, recently made the economic case for a 2030 target. The evidence that we heard in Committee from the representative from RBS, the lead investor in renewable energy in the UK, on behalf of the Low Carbon Finance Group, reinforced that point, as have a number of potential investors, including Siemens and Gamesa, which are looking to site offshore wind fabrication plants, possibly in the UK.
In our discussions yesterday, there was passing reference to the cost of offshore wind, but the best way to ensure that costs are reduced and to get the wider economic benefit that comes with that—as we have heard, that economic benefit will not necessarily be in the part of the country where there is more economic activity, but in those areas that are suffering the most—as the Department for Business, Innovation and Skills has made clear in some of its publications, is by securing the manufacturing jobs here as well. Outline agreements from these companies are jeopardised when what they hear are mixed messages, what they see is a lack of clarity in UK policy and what they speak of is a lack of confidence in being able to make the case to their global investment boards that the investment should come here as opposed to anywhere else.
The Minister talked repeatedly about investment and my hon. Friend refers to the uncertainty of investors. Does he recognise the analysis by Bloomberg New Energy Finance that investment in renewable energy has fallen drastically since the Government came to power? What does that say about the Government’s ambition to be the greenest Government in history?
My hon. Friend is absolutely right about the worrying signals on confidence. That is part of the case being made today for the target. We need to have that confidence if we want to get that investment, those jobs and that manufacturing capacity, quite apart from the other benefits in terms of security of supply and carbon emissions. That is why I am sure that those industries and companies will be concerned to hear the tenor of some of the Minister’s remarks, which seemed to be going further back even than those of his predecessor, who I think was moved to the Loftus road of Government, the Cabinet Office, the home for displaced Ministers, in suggesting that this is something that we might not want to do in the future. Mr Hayes made it clear in Committee that he felt that this was not a debate about the principle of a target, but about when it was going to be set. It seems that the Minister has rowed back further from that position.
Does the hon. Gentleman agree that if we set a territorial decarbonisation target, we can make industry off-shore, hit our decarbonisation target and retain the subsidy on shore, but the jobs will have gone elsewhere?
If we want the best chance of getting those jobs in the UK, the best chance of Siemens building its offshore turbine factory in Hull and the best chance of Gamesa building its factory in Leith, and to get the wider jobs and growth benefits, we need a target. If costs are disproportionately high in the UK we must look at the cause—a carbon floor price that is completely different from what is happening elsewhere in Europe.
That is the real focus on where those costs are higher. If we want those economic benefits, we need the target, because that is what industry needs to make those decisions, to convince those global boards that have a number of different options about where to make that investment and to make sure that it happens within the UK.
The point that I am trying to make is that if this country wants to make a decent impact on reducing its carbon, we need to address our consumption patterns, not our territorial emissions.
What we have learned from the past three years, as was pointed out by my hon. Friend Anas Sarwar, is that confidence in investment in the UK among those new industries has fallen and is falling. What we have learned from what is happening now is that people are not making decisions because they are seeking clarity and certainty from the Government on a range of matters to do with the Bill, including the specific issue we are discussing. If the right hon. Gentleman is concerned about manufacturing industry, he should support the target, which will help give clarity and certainty and ensure that manufacturing jobs come to the UK.
What I learned from the time towards the end of the Labour Government is that a focus on industrial strategy is absolutely key in diversifying our economy, and that the significant increase and activity in the renewable and low-carbon industry, which was happening and is now under threat, resulted from a clear set of signals from the Government. That is what we need from the Government now, but we will not have it unless the target is included in the Bill.
I will make progress, as other hon. Members wish to contribute. Before the interventions, I was touching on some of the points implicit in remarks made by some Government Members about costs and gas. Rejecting a 2030 target will almost certainly lead us to another dash for gas. As I said in Committee and all the way through our consideration of the Bill, gas has an important place in our system. As I have made clear, I do not take an ideological position on shale gas either; it needs to be properly regulated and monitored, but we need to explore what is there before we can know what we can get out of it.
Making simplistic extrapolations from what has happened in the US indicates a bout of wishful thinking, and a hope—and risk—in respect of something that might well not turn out to be the case. We need gas and will continue to need it; it is important for our security of supply and for our being able to deal with peaks in demand. However, the combination of a failure to decarbonise our electricity sector and increased reliance on gas leaves us more exposed to the volatility of that globally traded commodity.
It is essential that there should be diversity in our energy supply even before we consider any of the impacts in relation to emissions and the climate. The danger is that we will be left open to a greater reliance on gas and consumer prices going up even further. Various hon. Members have referred to the increase in cost to consumers, but they know as well as I do that the greatest element of that cost increase in the past three years has related to wholesale energy prices.
Sometimes there are discussions about how far companies properly pass on savings when the costs fall, but over the three years wholesale prices have certainly increased and that is the greatest single part of the increase in energy bills paid by my constituents and those of the right hon. Member for Wokingham and other hon. Members. The target is also vital for that reason.
The problem is the Government’s approach to decarbonisation and how it is characterised in their amendments in Committee. The Government may or may not, at some point in the future that is yet to be defined—it may never be defined or indeed reached—set a decarbonisation target range for the carbon intensity of electricity generation in Great Britain. The definition of carbon intensity itself and the means of calculating it can be changed by the Secretary of State—and, by the way, the Secretary of State can revoke the order. That is hardly the sense of clarity that the amendment seeks.
The illogicality of the Government’s argument is summed up in amendment 52, which the Minister only barely referred to; it would require the Secretary of State to publish an annual report from 2014 setting out how he had met the duty to meet a decarbonisation target. I suspect that that report would be very thin, simply reading: “A target will not be set until 2016. There is nothing more to report—move along now.”
“I see the strong merit of the argument for a decarbonisation target”—[Hansard, 17 April 2013; Vol. 561, c. 124WH.]
But he also said that we should wait to set it. The Minister’s predecessor said in Committee:
“The principle, that it would be useful and of value to set such a target, is established.”––[Official Report, Energy Public Bill Committee,
If that is the case, there is no reason why the Government should not at the very least support the amendments that change “may” to “must”. However, as we have heard from the tenor of the Minister’s and some other hon. Members’ remarks, that is not what the issue is about.
The issue is about a deep division in the Government and a damaging and risky outlook that a dash for gas is the best course of action for our energy policy. That is obviously what the Chancellor thinks, but it is not what the Chief Secretary to the Treasury thinks, unless he has changed his mind. The Committee on Climate Change does not think that; nor does industry or the 200 organisations that support the amendment. As I said, the Secretary of State has supported a target and he does not think that either, although he has lost out in discussions with what he referred to as “assertive colleagues”.
There is an opportunity for Parliament to be assertive this afternoon—assertive about security of supply, about jobs and growth, about investment, about clarity of purpose and in our support for the important amendments before us.
I rise to speak with a fair amount of trepidation; I feel like Lord Cardigan, commander of the gallant 600, charging into the valley of death. Half a league onward, as they say. [Interruption.] Yes, some did make it through; I shall hold on to that fact.
I have spoken to many individuals, companies and organisations over the past few weeks and months and asked each of them what they felt was needed in the Energy Bill. To be frank, nearly all of them asked for different things. This is a mammoth Bill trying to do lots of different things and everyone is clear that those things need to be done in the right way.
I have talked to small generators—new entrants to the market. They would like a decarbonisation target, and so would I, but what they would like more is for their route to market to be easier and free from too great a reliance on the big six suppliers—whether that is through a green power auction market or other means. I know that a great deal of work has already gone into this, but it is essential that the Government table amendments that offer a long-term solution and not merely transitional help.
I have also talked to large generators, which are already investing billions of pounds in new infrastructure. They would also like a decarbonisation target, as would I, but what they would like more is for the strike price to be set at a level that gives certainty in their markets and allows them to plan for the next 20 or 30 years and access finance over that time scale.
I have talked to consumer groups, acting on behalf of hard-pressed electricity customers. They would like a decarbonisation target, as would I, but what they really want is a meaningful simplification of tariffs. They want a single, consistent unit price to allow people to compare and immediately identify cheaper alternatives, forcing suppliers to keep prices down, improving competition and making it easier for consumers to switch.
I have talked to companies, large and small, involved in the manufacturing supply chain for renewable energy. They, too, would like a decarbonisation target, as would I, but what they want more is for access to ports to be sorted out or for the tripling of the levy control framework to happen in a controlled and steady way, rather than being backloaded towards 2020, so that their new technologies get a chance to establish themselves and deliver the tens of thousands of jobs that green growth can bring. Small and medium-sized enterprises more generally are most exercised by uncompetitive energy contracts and unfair renewal terms.
I have also talked to community groups, and guess what? They would quite like a decarbonisation target, but what they crave is an increase in the small-scale feed-in tariffs threshold for community energy schemes from 5 MW to 10 MW. The danger is that, as community schemes become more successful, they may hit 5 MW. An increase in the small-scale feed-in tariff limit will ensure that we do not inhibit their development. That is real and meaningful help for community energy schemes, making routes to market simpler and more attractive for them.
What about investors—investment banks and pension funds? Would they like to have a decarbonisation target? Of course they would, but at the top of their shopping list are things such as detailed contract for difference terms that are fit for purpose, a credible contract for difference counter-party that the market can trust and believe in, an easier route to market for independent generators, and no strike-price auctions before the electricity market reform regime has been operating for a number of years and the financial community has grown comfortable with other aspects of the contracts.
What about the environmental non-governmental organisations? I have talked to them too. I have received emails and letters from them, and I have had posters put up in my constituency and adverts placed in the local newspapers, and they seem to like the idea of a decarbonisation target for the energy sector. However, I am sure that if they were honest they would say that they would like the bigger prize of an EU-wide binding emissions reductions target of 50% by 2030—something for which the Secretary of State has been able to gain cross-Government support in the past couple of weeks, against all the odds. I congratulate him on managing that feat.
What about me? In common with my right hon. Friend the Secretary of State, I would like to have a decarbonisation target, but what I would really like is not to have to generate the stuff in the first place, because that is better for all concerned. So I want realistic assistance for domestic and business users to incentivise them to use less energy, and I want the capacity mechanism to be designed in such a way that demand-side reduction can play a major part in removing our need for spare capacity generation. Those are my priorities.
We can bide our time on that until we get to that group of amendments.
I have been told not to deal with it; I think the direction I was given is quite clear.
Of course I would like a decarbonisation target, but that was not in my party’s manifesto; indeed, it was not in any party’s manifesto. Nor was it in the coalition agreement. In fact, there is only anything about it in the Bill at all because of the efforts of a Liberal Democrat Secretary of State, ably backed up by the present incumbent. Of course I would like more, but as 15% of the coalition Government we cannot always get exactly what we want. [Interruption.] It is 15.5%, in actual fact.
I came to this place from business: a place where making a contract and signing up to it really means something. If one side reneges on that contract along the way, they can expect there to be consequences. We have already seen examples of that in this Parliament. It would be great to see much more of the processes, attitudes and behaviours seen in business than the opportunism, time-wasting and theatrics that we see far too often in this Chamber. Again, however, we cannot always get everything we want.
There are many things I would like to have seen in the Bill, but many more are included that all sorts of organisations want us to get right. For the Minister’s perusal, here is my Christmas list: an easier route to market for independent generators, a strike price that provides certainty in the market, simplification of energy tariffs, the levy control framework to be implemented in a controlled way, an increase in the small-scale feed-in tariffs threshold for community energy schemes, credible counter-party and contract terms that are fit for purpose, and a binding EU-wide emissions reductions target of 50% by 2030. It is not a long list.
Last year—I thank the Secretary of State for this—I got a green deal that is set to support 60,000 installation jobs this year, up from 26,000 in 2012, and a green investment bank investing £635 million in green infrastructure projects. If, at the end of this legislative process, I get everything on my list, I will say thank you again. I am damn sure that I do not intend to be the spoilt child stamping my feet and whining, “But I didn’t get my decarbonisation target,” because, after all, if I got everything I wanted this year, what would I ask for next year?
I trust Mike Crockart will support a number of later amendments on demand-side reduction and routes to market for independent generators and community energy. He put his finger on some of the problems that several people have been grappling with as the Bill has made its way through the House.
It is very odd that when the Bill first made its way to this House in draft form it had no target in it, and yet it was all about low-carbon electricity, routes to market for low-carbon energy generators, the future of large-scale low-carbon energy and how that might be supported to play a much increased role in our energy mix over the next few years, and how the whole electricity market would be decarbonised over the next period in line with what DECC had previously published as its plans for a radical decarbonisation of the electricity market over that period. The Bill was the embodiment of how those changes would be made—how, over the next period, our energy markets, particularly our electricity market, would radically change how they move forward and how they supply energy to us. The Bill also contains emissions performance standards that reduce the emissions that plant may make, also in line with the decarbonisation of our energy over the coming years.
It is blindingly obvious that a Bill of that kind should have a target at the front in order to underpin all the other things that it is doing. Not having that target is rather like someone carefully strapping a belt around their waist and then sallying forth having forgotten to put on the trousers that the belt was supposed to be supporting in the first place. When the Bill first arrived, the lack of a target was a puzzle to a large number of people. In a sense, the hon. Member for Edinburgh West has started to unpick some of that puzzle. As my hon. Friend Tom Greatrex outlined, we know from what the Secretary of State has said to the Energy and Climate Change Committee on more than one occasion that he was very keen on having a target in a Bill and was engaged in work on that target, the details of which he could not yet vouchsafe to the Committee.
In fact, the Secretary of State was engaged in discussions with the Treasury about what might go at one end of the Bill and what might be negotiated away at the other end to secure the things that he thought were quite important, relating particularly to supporting low-carbon energy in the way that I have described. The result, as we discovered fairly recently, is the announcement of the extension of the levy control framework from 2015 to 2020, with a figure increasing from the current amount of £2.3 billion to, allegedly, the whopping figure of £7.5 billion in 2020.
We need to be rather careful about immediately jumping for joy about that aspect of the negotiation, because as soon as we unpack the figures we realise that each year the levy control framework takes along with it the accumulated underwriting of whatever has been commissioned in the year before. That means that by the time we get to 2020, the accumulated contracts for difference, or ongoing renewables obligation certificates, that are caught up in the £7.5 billion make up a good proportion of the total. The actual amount of support contained in the levy control framework up until 2020, per year for new entrants—that is the key thing to look at in terms of the development of low-carbon energy, particularly round 3 offshore wind and the like—turns out to be not much more than is being undertaken at the moment. The idea of its ending up at twice the current level is rather belied by the figures in the levy control framework. Nevertheless, the Secretary of State felt that he had got a good deal.
It is not, however, a particularly good deal and it is clear that the inclusion of a target in the Bill was sacrificed. A belt and trousers had not previously been available, but on
A couple of important things need to be considered during the intervening period. First, the gas strategy set out by the Department of Energy and Climate Change over a number of years assumes a relatively low level of gas over the long term and, while it views gas as essential, it sees it as a back up for other, renewable forms of generation. The recent gas strategy includes an option to reverse that approach and puts gas at the centre of a future strategy. It includes gas plants running at maximum capacity, grandfathered for a long period and playing the main role—not the back-up role suggested by the low-carbon strategy exemplified by the Bill—in energy generation.
Explicit within that gas strategy is the need to take a decision in 2014. The strategy specifically says that, depending on what happens in Europe, a decision will have to be made as to whether to increase the carbon target. Accommodating the strategy could therefore result in a target of about 200 grams of emissions per kWh by 2030, rather than the 100 to 150 grams envisaged previously by the Department and endorsed by the Committee on Climate Change. A significant decision might be taken in 2014—way before 2016—which could blow the potential 2016 target out of the water.
Secondly, regardless of the negotiated outcome, the levy control framework has been extended to 2020, but we have not heard what will happen beyond then. There has been no indication of what support might be given to low-carbon energy after 2020. There is a cliff face.
Is not the reason for that that the levy control framework and the contract for difference required to back it up are really aimed at meeting the 2020 target of the European renewables directive, rather than the 2015 carbon target?
The hon. Gentleman makes an interesting point. It may well be the case that the specific mechanism of the levy control framework relates to meeting that target.
As I have said, I am not sure that the framework as it stands addresses the target in the way we might think. Nevertheless, in order to achieve the target, those companies investing in new, renewable, low-carbon plants, offshore wind and all sorts of other low-carbon arrangements that are at the heart of the Bill have to start on the work now on projects that will come on stream in six, seven, eight, nine and 10 years’ time. However, those companies, which are at heart of the engine of this Bill, will not do that under the current circumstances, because they have to take decisions now and if they see that they will face a cliff face of some height in 2020, they may well decide that they do not want to use their initial investments for that purpose because there will be no business for them after that time.
I have a specific example, which the hon. Gentleman has prompted me to give. I recently visited Vestas offshore wind research and development centre on the Isle of Wight. The centre is researching the future of the next generation of Vestas offshore wind blades and other mechanisms. It is researching, among other things, 80-metre blades and doing a great deal of stress testing and research and development, and in the process it is fabricating those blades. As a result, the centre has in place on the Isle of Wight a single-line manufacturing capacity that could produce a large number of 80-metre offshore blades in the UK.
If nothing happens after 2020—we should bear in mind that making blades as close as possible to large offshore developments is, significantly, commercially advantageous—it is extremely unlikely that Vestas will change its R and D facility to a production facility, because it will not make blades in this country for development in the south China seas. That could lead to the development of a UK offshore wind industry being based on no supply chain whatsoever, because in order to carry out developments we would have to source from elsewhere. That would be of considerable expense to consumers, which would not be the case if we adopted a longer-term approach.
The oddity of there not being a target in the Bill raises questions about the strategy to create certainty for the process by which the new form of low-carbon energy market will be brought into being. The idea of enacting the Bill without including a target is bizarre, but that is the position we are in. Including a target would not just be the right thing to do; it would be a practical element of what the Bill is about. It would also be a practical way of ensuring that electricity market reform and the Bill itself work. There are a number of reasons to support the inclusion of a target, and the final bizarre thing to note is that a large number of hon. Members present know that to be the case and want the Bill to include a target.
A number of hon. Members may decide, for all sorts of reasons, that it is expedient not to vote for a target. If that is the case, let me be clear that they will undermine the very purpose of the Bill. They will also undermine what we all voted for with regard to the Climate Change Act 2008, which ensured that we can reach our low-carbon future in a coherent and controlled way, using the best of our resources and technology and our supply chains, and developing a low-carbon economy that can reach the targets in a way that is good for the consumer and for society. This is that important. That is why I hope that hon. Members who may be equivocating over whether to go for the deals—the Faustian pacts that have caused the Bill to reach its current state—will come out in favour of what their own heads tell them, namely the logic of including a target to make sure that the Bill is shaped as well as it can be for the future.
I am pleased to follow Dr Whitehead, but I am not sure whether I agree with him about the logic, let alone the coherence, of the Bill or the amendment. He says that many hon. Members will want to vote for the amendment for logical and coherent reasons, but I do not believe that that is so. Many hon. Members—a very high proportion—although rather less of my constituents vote almost always on the green side of any argument. They vote almost ideologically—they support the greener side of any issue under discussion. The problem with that approach is that it has led to a network of legislation and other commitments in this country that are internally incoherent and make no sense. Instead of hon. Members looking at the matter in the round and seeing how they could best obtain their overall objective, be that decarbonisation or otherwise, they support each and every of various, disparate initiatives that add up to a whole that does not make sense, even in terms of those objectives.
Those promoting the amendment say that they want to bring certainty for investors, and yet the Minister, too, says that that is his objective. The Minister mentioned that he wanted to protect and insulate consumers from price spikes. The problem is that the method by which he seeks to do so, and administers in the Bill, locks in high prices, so that for a very long period, whatever the uncertainties, our consumers will be locked in.
The primary purpose of the Bill is not the decarbonisation of electricity, but to set up the “contract for difference” model that allows the Government to sign long-term and very expensive contracts with all manner of energy producers—the Government will pick winners through an opaque process—and give certainty to investors that our consumers will be forced to pay those prices and have them added to their electricity bills throughout the length of contracts that could contain a change-of-law clause that it might not be possible to unpick in future should we want to do so. That is what worries me about the Bill. We are changing the pie-in-the-sky, Alice in Wonderland policy objectives that the previous Government proposed—only four or five current Government Members voted against them—but we can undo a Government policy objective for 2050 if we find that it does not make sense or is overly expensive. This Bill, however, essentially makes such a reverse undoable because it moves the policy from the sphere of legislation to that of contractual commitments.
It is sensible that the control levy framework is scored as public spending—I welcome the fact that the Government and the statistics office have ensured that. However, under the framework, the plan is to increase the cap on spending from £2.35 billion to £9.8 billion by 2020. All hon. Members who have spoken in the debate have said that the sum is £7.6 billion, but it is not. The sum is £9.8 billion, unless we say, “It’s £7.6 billion in real terms from a previous year.” Our constituents will pay £9.8 billion in 2020. For most of our constituents for the past few years, wage increases have been lower than price increases.
Does my hon. Friend agree that there is a danger that the Bill could mean that poor folk in constituencies such as mine are priced out of heating their homes in order that rich people in London can feel good about supposedly saving the planet?
Yes, there is an element of that. Moreover, we will be unable to do anything about it, because a future Parliament will be stuck with the contracts.
I fear that the sum might be larger than the £9.8 billion. Policy Exchange has released a well-considered analysis that adds up the total additions to gas and electricity bills within the levy control framework to £16.3 billion. Even that does not take into account two significant factors: first, the carbon tax floor, which is a tax and not in the levy control framework, which applies to spending; and secondly, the cost of banning coal production—coal production will be banned by shutting down plants through the EU directive, and through the domestic and unilateral legislation to ban the construction of new coal-fired plants. We could be looking at amounts equivalent to 4p, 5p or 6p on income tax.
Almost all hon. Members seem to be prepared to drive that measure through, but almost all of my constituents that I speak to do not want to pay those amounts on their electricity bills. We are forcing the measure through. Obviously, lobbyists and the industry understand this complex area, but it is important that Members get to grips with the Bill and the extent to which CFDs will drive higher prices. The more I understand the Bill from the point of view of my constituents, the less keen I am on it.
The amendment confuses two issues, the first of which is the Climate Change Act 2008 commitment to an 80% reduction in carbon gases by 2050. The commitment applies to the whole economy, but the amendment seeks an electricity decarbonisation target. The Minister persuasively drew attention to that inconsistency. If we are looking to hit the 80% reduction target in 2050—the target strikes me as an enormously ambitious and costly one, and I doubt it will be met—we need to decarbonise large sections of the economy, and not just the electricity sector. As part of that, we must persuade significant sections of the heating and transport sectors to convert from current fossil fuels to electricity. However, the amendment would accelerate the decarbonisation of electricity still more, which will shove up the cost of electricity so much that it will be hugely unattractive for those sectors to switch to electricity from their current fossil fuels. Therefore, even on its own terms, the electricity decarbonisation target risks setting back its avowed goal of helping towards the purported 2050 target for the decarbonisation of the economy as a whole.
None the less, one might say in the amendment’s favour that it potentially exposes the contradictions in current policy. We have heard a lot of the “grand bargain”. Mike Crockart was honest in setting out how much the Lib Dems have gained from it and how little they have given up in consequence. I do not, on balance, support the amendment, but I am not sure why the pass has been sold on so many other issues to avoid having to make a decision in 2014—we are quite happy to kick it down the road and make it in 2016.
The inconsistencies in the proposals are significant. Barry Gardiner—I am pleased he is still in his seat—suggested that it would be cheaper to go down the route of renewable electricity rather than electricity largely from gas. He cited a Committee on Climate Change report, but did not mention the basis of its calculation. The report states:
“Beyond 2030, bills would fall in a low-carbon system as new low-carbon capacity is commissioned at lower cost than the older capacity (assuming learning in deployment leads to cost reductions). In contrast, for a system with a major share of generation from unabated gas, bills would continue to increase as carbon prices continue to rise.”
The basis of his argument is predicated on the assumption that the massive carbon tax will rise—that is within the system, but also endogenous to his own model.
Had the hon. Gentleman paid attention, he would have noticed that I mentioned the basis on which the Committee on Climate Change made its assessment. The Committee concluded that we could assume that the price of carbon will not continue to rise only if the rest of the world gives up its aspiration to avoid dangerous climate change. Only in that scenario could it make economic sense for the Government to pursue the strategy he suggests.
On both the occasions that I sought to intervene or have an exchange with the hon. Gentleman, he replied that the problem was my failure of understanding rather than his failure of explanation. Might we perhaps together put on the record the key facts behind that assumption?
The carbon tax has just been introduced from nothing to £16 per tonne. It will go up to £32 by 2020, go up still further to £76 by 2030, and, incredibly, by 2050 it will be a minimum of £200 and perhaps £500 per tonne of carbon. That compares with less than £2 per tonne of carbon in the current EU trading system. If we assume enormous exponential rises in carbon tax, it will obviously be cheaper for consumers and producers of electricity to use grotesquely expensive renewables rather than cheap fossil fuels that have a vast tax is imposed on them. Even in that scenario, there is the benefit to the Treasury of the tax revenue. In many other areas of this debate, there is not that counter-benefit. The Treasury could use that revenue to fund the levy control framework, so that using gas would be enormously cheaper overall than using renewables.
I would like to trouble Members with one other quotation, because I think it sums up the Bill better than I can:
“The Government’s proposal for Electricity Market Reform (EMR), based on signing long-term fixed price contracts (Contracts for Difference) with its preferred mix of generators, is unsuited to a world of uncertainty. It is predicated on an assumption of relatively high future gas prices. It risks imposing large expense on UK energy bill-payers if that assumption proves wrong.”
Rather than the Committee on Climate Change, which the hon. Member for Brent North is so keen on citing, perhaps I should look at what the Department of Energy and Climate Change says. I do not agree with all its analysis, but in the impact assessment of the renewable energy strategy, the Department estimated that the net cost up to 2030 would be £12 billion on an assumption of high gas prices. On its central assumption of gas prices, it estimated the net cost would be £56 billion, yet it admitted that if gas prices were lower, the net cost of renewables up to 2030 would be £95 billion. That money would be added to our constituents’ electricity bills.
The uncertainty around the gas price is enormous. The estimates from credible authorities have been coming down. The International Energy Agency’s estimate has come down by 20%, and even DECC’s estimate has come down by 10% in just one year. If there is any serious exploitation of shale in this country, the EU and elsewhere that is similar to what we have seen in the US, the whole assumption of high and rising gas prices on which the whole energy strategy is based will be shown to be completely wrong and that will lead to us to locking ourselves into contracts that will cost our constituents enormous sums of money utterly unnecessarily.
“This conclusion”— the conclusion that he has just rubbished—
“is robust when possible impacts of shale gas on the gas price are accounted for. Shale gas could play a role in the gas mix that helps to balance intermittent power generation, and meet demand for heat, provided appropriate environmental safeguarding regulations are put in place.”
Yes, it is robust in that sense, but the reason it is robust is because almost any conceivable change in gas price is completely swamped by the enormous increase in the carbon tax from £16 now—and less than £2 in the ETS—to up to between £200 and £500 per tonne by 2050. Of course the conclusion is robust. If we assume that there will be a massive tax on carbon, it will be cheaper to have lower carbon rather than higher carbon, but so what? CFDs are included in the Bill, but they have virtually nothing to do with this amendment. We keep on hearing that it is about electricity decarbonisation, but it is not. That was only inserted in the Committee stage of the Bill.
The amendment is about hitting the renewable energy directive for 15% of all energy production in this country—not just the electricity sector, which makes up approximately a third—to be from renewables by 2020. However, that will set back decarbonisation across the whole country, because it is a very expensive way to decarbonise. All the savings we can make through energy efficiency, better insulation of people’s homes, or, I hope the Minister will not mind me saying, through different lighting that saves money across the network, are no good or will only work on the denominator, because we are forced to hit, by 2020, the 15% renewables target—33% of electricity—set by the EU Commission. That will be grotesquely expensive and will lead not to innovation in low-carbon technologies, but to the rolling out of fairly mid-tech current generation onshore and offshore wind at twice the price. That will absorb a huge proportion of the £9.8 billion and lead to very little advance in technology compared with what we could do with proper R and D focused activity. That will happen not because of decarbonisation, but because the EU directive that states that this must be done through renewables.
Domestically, we are making the situation even worse by inserting further restraints, such as a 12.5% cap on biomass. One way to get closer to hitting the EU target is to use dual firing, where half coal, half wood pellets emit approximately the same amount of carbon as gas, earning a half-renewable credit on the real constraint, the 2020 EU target. We are not allowing that, however. We could pay other countries—Germany, Spain and perhaps Poland—to do a lot those things far cheaper than we could do them ourselves. We have a new Government in Iceland, and £2 billion is the estimate of the capital cost of an interconnector to Iceland for its renewable electricity. These measures are not being considered. Even if the objective is to reduce carbon, that can be done so much cheaper than the proposals that will be forced through by the Bill, which will be millstone around our constituents’ necks for decades to come.
I understand fully the call in the amendment for the decarbonisation of the energy sector, and for a target to be enshrined in the Bill. What the target should be and whether it would be realistic is debateable. There have been wide differences and many suggestions about what an achievable target might be.
If the target is too ambitious, it will be impossible to achieve. We need to bring some form of reality into the debate and forget the pipe dreams of what people would love to see. This is about what we can actually achieve between now and 2030, and between now and 2050. Is it achievable to decarbonise the energy sector to the degree of 50 grams of CO2 per kWh? That is one suggestion, and I am sure that plenty of Members believe that that is achievable. I find it difficult to believe, however.
Unlike Mike Crockart, who had a shopping list of issues he wanted to discuss today, I want to focus on carbon capture, coal burn and gas burn—fossil fuels. I want to accentuate the positives in burning fossil fuels with carbon capture. I believe, and the expert advice shows, that it can contribute greatly towards an agreed decarbonisation target. The trick is to transfer the high-carbon electricity generation to low-carbon electricity generation. [Hon. Members: “How?”] Carbon capture and storage is the answer. People seem to forget that fossil fuels provide 70%—not 7%, but 70%—of the UK’s electricity supply, and that is set to continue for the short and medium term. Coal burning is set to increase not just in the UK, but across the world, over the next 20 to 30 years. For whatever reason, however, the role of coal, particularly in the UK, is often pushed aside, swept under the carpet, totally ignored. This is done deliberately in the Commons by many Members of Parliament, despite the fantastic role that the miners of this country have played. They have worked hard for many generations, producing the wealth and fuel to generate this country, so it is unacceptable that they should be ignored.
Only three years ago in 2010, the UK market demand for coal was roughly 54.1 million tonnes. That is what we burned in 2010. During the same period, only 18.4 million tonnes were produced here, with a rough 50:50 split between open-cast and deep-mine sectors. Beyond doubt, then, a lot of imported coal is required to meet the nation’s demands. Coal imports have easily exceeded indigenous coal production since 2003. Coal is not going away. It is here to stay, in the UK and globally. We will not be able to persuade the likes of China, India and America to stop burning coal; they are burning coal unabated right now—that is a fact of life.
There have been quite a few references to China, but China has set very ambitious carbon-intensity reduction targets, including a 45% reduction in carbon intensity by 2020, so actually it is stimulating huge investment in renewables and low-carbon technologies, including carbon capture and storage. The hon. Gentleman must see the potential in that strategy as well.
Absolutely. I fully agree with the hon. Gentleman. The Energy and Climate Change Committee, of which I am a member, visited China the year before last and saw the potential in China. Much was said in the meetings we had, but I would like to see happening on the ground what they said would happen in the future. It is looking not to decarbonise, but certainly to make huge reductions in emissions, and again I will want to see over perhaps 10 years what achievements can be made. I hope that it happens.
I am sure that the hon. Gentleman is correct, but it would not be too difficult in China to make a little headway, given how much carbon it produces. The trip to China was a learning curve. I am sure that other Members present were on that delegation. I think we ought to focus on its proposals for renewable energy, carbon capture and storage and the rest and take a leaf out of its book, although I will want to see how much progress it makes in the not-too-distant future—perhaps five or 10 years.
The amendment is concerned with coal and decarbonisation. At the same time as importing huge amounts of coal from Russia, China, South Africa and Australia, we have allowed our coal industry to be destroyed. The Minister might wish to refer to that. Only a couple of months ago, there was a big fire at Daw Mill colliery, one of the biggest collieries in the world, and the situation still has not been remedied, despite the Government’s promises to look after that and, with UK Coal and Scottish Coal, the open-cast mines in what is left of the UK coal industry.
I congratulate my hon. Friend on the points he is making, which are not often made in this place. In my constituency, we do not produce coal, but we import it, mainly from Colombia, through Hunterston. There was a proposal to build a new coal plant at Hunterston, but that might not be going ahead now. It would probably have been a carbon capture plan using predominantly imported coal, because, I understand, the types of coal produced in Scotland probably would not have been suitable. I know that he is a strong supporter of carbon capture. How do we ensure that we use indigenous coal?
That is an excellent and important point that I will come to shortly. We have understood for generations that we closed profitable coal mines the length and breadth of the country, knowing full well that carbon capture was in the background. We have done nothing to protect the British deep-mining coal industry, and that has cost thousands and thousands of jobs. We have dillied and we have dallied with carbon capture and storage, including over the past three or four years. The first announcement was made by the previous Labour Government, who committed themselves to carbon capture and storage in 2007. Where is it? It is not here. It has been kicked into the long grass.
My view is simple. We should look to exploit the coal reserves up and down the country, with carbon capture and storage onsite and with clean coal power stations. That would decarbonise the electricity sector and go a long way to ensuring that we can meet the targets. It might even mean that we could reach 50 grams of CO2 per kWh. I am not too sure about that, but it is the answer. The demand for coal is significant here. Electricity consumption is set to increase, as too is the consumption of coal, but as mentioned by several Members on both sides of the House, by 2015, approximately 9,000 MW of coal-fired plant is to be closed down, as a result of the large combustion plant directive, so the UK will become increasingly dependent on imported gas for electricity and domestic heating purposes.
What impact will the burning of gas have on our ability to meet our targets? People do not want to recognise that gas is a fossil fuel—coal is not the only fossil fuel—and emits just less than the suggested emissions performance standard of 450 grams per kWh, so when we talk about allowing gas to be burnt unabated, we must think of the consequences. It will mean that we will be unable to achieve any of our decarbonisation targets for 2030 or 2050.
Do people in this Chamber believe that shale gas will be the answer to our problems? Too many questions need to be asked about shale gas, although we need the general public to support it before anything else. There are a lot of problems with fracking. What is the cost of exploitation? We do not know what it is. Is it safe?
What are the emission levels? I am not saying it is not safe, by the way; I am saying that there are a lot of things we need to get right. As a member of the Energy and Climate Change Committee, I support the fact that we have said that the exploitation of shale gas should not have been delayed, but should have gone ahead months ago, if not a year ago.
I have listened to the hon. Gentleman’s arguments. Does he accept that in America, shale gas has been not only exploitable, but exploitable at reasonable prices? It has turned the American economy around, to the point where manufacturing that had been outsourced to other parts of the world is now being brought back to America because energy costs have been reduced.
Order. Decarbonisation is the focus. While I am on my feet, I would also like to gently remind all Members in the Chamber that this debate will end at 4 o’clock. The mover of the amendment will get a few minutes at the end, but a lot of Members who have been sitting in the Chamber all this time are still waiting to speak, so may we have some consideration to get them in as well?
Order. My comment was not directed at you, Mr Lavery, but sitting in the Chamber all day yesterday does not necessarily qualify you for that. I was referring to the number of interventions by some who have already spoken and by those who have not been here all afternoon—and the fact that you have been on your feet for some time. I was just trying to help you along and explain the shortage of time.
Once again, thank you very much for your guidance, Madam Deputy Speaker.
The shale gas issue, which Sammy Wilson referred to in his intervention, is important. By the way, the situation in the USA is completely different from what might happen in this country. I hope that shale gas is everything that everyone wants it to be—no one would be more pleased than me if it was. We are looking, but if we are to achieve our targets, we have to get carbon capture and storage. We have to be serious and urgent about it if we want to decarbonise the electricity sector. There is no other way to do it. Coal power plant with CCS can diversify the UK’s fossil fuel requirement and, in addition, deliver national security of supply.
In summary, as I have explained—I am not sure whether I have explained it enough—fossil fuels provide 70% of the electricity generated in the UK, and that is likely to continue. Fossil fuels represent a major source of CO2, and CCS is a key technology that enables fossil fuels to become a low-carbon source of electricity. Fossil fuel electricity generation is not subject to the intermittency of renewables or the inflexibility of nuclear, is an important tool in meeting variations in demand, and, with carbon capture, will allow the UK to maintain diversity of fuel and energy sources. Fossil fuel with carbon capture and storage would undoubtedly enable the UK to decarbonise, in line with so many people’s hopes and aspirations. The message from me is quite simple. The Government need to stop dithering with carbon capture and storage. They should give equal importance, attention and focus to CCS as they have to securing nuclear power into the future. We should support the British deep-mine coal industry or forget any ambitions to meet the target of a decarbonised UK by 2030.
At the outset I should draw attention to the Register of Members’ Financial Interests. I have interests in family farms in Suffolk where renewable energy projects are being pursued. However, this afternoon I shall largely concentrate not on land, but on the coast and developments at sea, with a focus on the nuclear industry and, predominantly, the offshore wind industry.
My Waveney constituency, Britain’s most easterly constituency, stands to benefit from some of the larger projects that will hopefully flow from the Bill, such as the construction of the Sizewell C nuclear power station in the constituency of my hon. Friend Dr Coffey and the development of the East Anglia Array, the largest round 3 offshore wind farm, for which Lowestoft, the largest town in my constituency, is the nearest port. These projects provide a once-in-a-lifetime opportunity to bring jobs and prosperity back to an area that has been hard hit in the last 30 years by the dramatic decline in the fishing industry, the closure of factories and the rise of package holidays, which has hit the domestic tourism industry. If we can build a strong domestic supply chain for low-carbon energy generation, we will have an opportunity to reverse that decline and properly rebalance the economy. This opportunity is not restricted to East Anglia, but is repeated all around the coast of the British Isles. To me, the issue before us in this debate is the role that having a decarbonisation target in the Bill could play in building a domestic supply chain and creating jobs.
It is important to emphasise that there is broad agreement, at least between the Front-Bench teams, on this Bill’s direction of travel—the promotion of a mixed energy supply economy with appropriate demand-side measures. This collegiate approach is needed to attract much-needed investment—an estimated £110 billion by the end of this decade and £330 billion by 2030—in the UK energy sector. For the Government and the Opposition to be singing from completely different hymn sheets would have unnerved investors and seen them fleeing these shores. Instead, despite differences, largely of emphasis, most of the feedback that I receive from industry is that the British energy sector as a whole is a good place to do business. What we are debating is what needs to be done to make it the world leader—the come-to place.
In considering whether there should be a decarbonisation target in the Bill, I have had regard to the evidence and opinions provided by a wide variety of colleagues, local and national businesses, and non-governmental organisations. Let me go through some of these; there are differences of opinion between some of them. The CBI is of the view that the most important factor driving investment decisions is electricity market reform—the proposals in the Bill on contracts for difference, the capacity mechanism and the levy control framework. It is vital that this debate on the decarbonisation target should not hold up the Bill from receiving Royal Assent. Electricity market reform will be the main catalyst for the investment we all seek. Likewise, it is important that the draft strike prices are published on time next month.
I take note of EDF’s findings. EDF, too, emphasises the importance of a decarbonisation target not preventing the Bill from passing through Parliament in a timely way. EDF expresses the opinion that if such a duty is to be provided for, it should be in secondary legislation, subject to adjustment in the light of new evidence. That would help to ensure that the required pathway to 2050 is realistic and deliverable. I am also mindful of the importance of a Europe-wide target and the need for agreement at EU level. The EU emissions trading scheme should be the key target in decarbonising European economies.
The issue that especially concerns me is that if no target is provided before 2016, investors’ uncertainty will be prolonged. There is a particular risk to the investment in round 3 projects, from which my constituency and East Anglia have the opportunity to benefit through economic development providing new opportunities for local businesses and creating new jobs.
The forthcoming publication of the offshore wind strategy is welcome, but the feedback that I receive from industry is that, on its own, it might not be enough to maximise inward investment. I have studied closely the Committee on Climate Change’s recent report, and in particular its conclusion that a decarbonisation target would help to deliver savings of £25 billion to £45 billion on consumer energy bills. Further, it emphasises the need for a strong signal about the future direction of travel in order to support supply chain investment, which has long payback periods, and the development of new projects that have long lead-in times. There is a risk that, due to a lack of visibility beyond 2020, supply chain investment and project development might not proceed, as the Government have not yet clearly set out their intentions for that period.
In considering energy policy generally, regard should be given to three factors: affordability, security of supply and environmental responsibility. At this time of prolonged economic downturn, there is a fourth: the opportunity to promote economic growth and attract inward investment in order to rebalance the economy towards the regions in favour of engineering and manufacturing and to create jobs.
The decarbonisation target is not a silver bullet. On its own it will not achieve those objectives, but it could well be an important piece in a jigsaw that will attract investment, help to build a new domestic supply chain, help to bring down costs in emerging energy technologies such as offshore wind, and enable UK businesses to win contracts, thereby creating home-grown jobs. There is a concern that, without such an objective, investment in renewable technologies in the UK could slow down significantly. In such a scenario, UK energy bill payers could in effect be supporting jobs elsewhere in Europe—in Denmark and Germany, for example. That would be a poor deal for British households.
I have listened carefully to the arguments this afternoon, and to the passion with which my fellow Suffolk MP, my hon. Friend Mr Yeo, put forward his case. I am also grateful to the Minister for setting out his case to me. I listened carefully to him, as I promised I would do. He set out his case well, and in many respects it was compelling. My one concern, however, is the delay until 2016. By that time, important investment decisions might well have been made for round 3 offshore wind projects. The orders might already have been placed, and my concern is that not enough of them will go to British businesses. The amendment would improve the prospects of securing that investment in Britain, across East Anglia and in my Waveney constituency. It is not an easy decision to vote against one’s party, but on balance I sense that the interests of my constituents and of businesses in the Waveney area would be best served by the inclusion of a decarbonisation target in the Bill. I shall therefore be supporting the amendment.
Order. We still have four speakers wishing to speak in the debate, as well as Mr Yeo, who I am sure will want to speak briefly again at the end. I call Mike Weir to speak, ideally for four or five minutes.
I strongly support the amendments in this group. It is imperative to decarbonise the energy sector, and I believe that including a decarbonisation target in the Bill would give a clear and unmistakeable message that we intend to do so. The first reason for adopting such a target is that we must reduce our carbon emissions. The energy sector is a major contributor to carbon emissions and the Committee on Climate Change has made it clear that decarbonising power is the cheapest way of meeting our overall carbon budgets.
There is, at best, a mixed message coming from the Government on how they intend to proceed with the decarbonisation of energy. In the Bill Committee, witnesses told us time and again of the need for a decarbonisation target to ensure that a clear message was sent to those involved in the industry. The mixed message coming from the Government could seriously harm our efforts to attract not only new renewables generation but, crucially, the supply chain that will ensure that we reap the economic benefits and the jobs that go with them. In opposing the decarbonisation target, Ministers have made the point that other nations do not have such a target. That is true, but many of those countries are already ahead of us in creating a supply chain that can supply investment in renewable energy in their territories. We are trying to attract that supply chain here and to ensure that it is established so that we do not simply continue to import the infrastructure that we need to create green energy for the future.
Much was said earlier about the situation in Germany. Although it is true that Germany does not have a decarbonisation target, it recently announced a very ambitious 2030 renewable target, which includes 25 GW of offshore wind and a budget of €23 billion. I understand that France, too, is considering moving towards such a target, so there is movement elsewhere within the EU on such targets, and we should not be left behind.
In the evidence session, Danielle Lane of DONG Energy made it clear that the 2020 target is presently at the cliff edge, and that the industry needs certainty about the direction of travel after 2020—a clear sign that after that date there will continue to be a clear commitment from all parties to continue along the route of decarbonisation.
The issue is very important to Scotland, where the development of green energy is a vital part of the revitalisation of our manufacturing industry. It is interesting to note that the Scottish economy has achieved some growth over the last two quarters, much of it through the energy sector. Scotland’s offshore potential is huge—25% of the entire European potential. If we are able to harness that, we could attract billions of pounds- worth of investment and create tens of thousands of highly skilled and sustainable jobs. Indeed, Scotland’s offshore wind route map outlined the potential for £30 billion-worth of investment with up to 28,000 direct and 20,000 indirect jobs by 2020.
We already have strong offshore experience in the oil and gas industry, particularly in the north-east, and many of these skills could be transferable to new offshore renewable energy developments. I would cite the example of offshore wind, which I believe has a strong vibrant future. There are plans to install up to 10 GW of capacity in Scottish waters over the next decade, including three projects off the coast of my Angus constituency. Many more sites, alongside commercial wave and tidal generation, are being looked at for deployment in the 2020s. We must ensure that we send a clear and unambiguous message that we want these developments, and that we will continue to push for the decarbonisation of the energy sector.
It is important to set the targets now because companies are looking at long-term investment. It will be many years before these investments come on stream, but the decisions affecting 2020 are being looked at in the boardrooms now, and if we delay in putting forward our plans for decarbonisation, we may well lose out on all the potential.
Over the last few years, both private and public investment has been made to help stimulate sustainable, long-term growth in offshore renewables, including developing the technology. The deep waters off Scotland’s shores have specific problems, but many of them have already been tackled by oil and gas development, which might point the way to dealing with offshore wind arrays and onshore development at our ports such as Dundee, and, in my own constituency, Montrose. That development, however, is based on the assumption of having a long-term stable market for manufacturers.
Firms such as Gamesa, Areva, Mitsubishi and Samsung have indicated an intention to establish manufacturing plant in Scotland in order to meet the expected opportunities for offshore wind development. The difficulty we face with this Bill, however, is that we can be sure of funding only up to 2020—and then, as DONG Energy says, we face the “cliff edge” of uncertainty. Many of those who are considering investments do not feel that there is sufficient reassurance of a long-term market for their products beyond that date, which could lead them to reconsider or delay any decisions on investment. Such delays could lead to a significant loss to the economy and check ambitions to create a new greener manufacturing base, especially when, if companies decide to go ahead within the compressed time that is certain, there would be a considerable shortfall in the ability of UK-based manufacturers to meet the demand for turbines, which will inevitably lead to the importation of much of the infrastructure, creating jobs elsewhere but not in Scotland.
I finish on the point that decarbonisation is important not just for climate change benefits, but for the real economic benefit of creating sustainable jobs for the future.
In the north-east, energy in all its forms concerns my constituents almost more than any other issue. Whether it be fuel prices, energy prices, the role of wind, biomass and nuclear, opencast mining, the renewable heat incentive, solar, off-grid, liquefied petroleum gas, heating oil, gas or electricity prices, not to mention the role that climate change should play—these are all key issues for the people of Hexham.
It is definitely the case that the Government have a fundamental duty to keep the lights on and to lift the people of the north-east out of fuel poverty. Like Ian Lavery, I inherited a situation in which 24% of our population were living in fuel poverty. It is a situation that has sadly not improved that much, although I applaud what the Government have tried to do. I especially welcome the work that they have done on fuel prices, and their support for household energy.
In case I am required to do so, I make the declaration that I am a member of the all-party parliamentary group on off-gas grid and the all-party parliamentary group for the wood panel industry, and that my constituency contains employers in the timber industry.
I entirely accept that our desire to reduce carbon consumption is often incompatible with a reduction in energy prices. The fact is that renewable energies are not as efficient as coal, oil and other fuels, which often has the knock-on effect of increasing energy prices. Anyone who doubts that should read the maiden speech made by Lord Ridley in the other place last month. Notwithstanding the competing difficulties with which the Government have to deal, carbon reduction and renewable energy obligations will continue to be met, and energy companies will be required to place gas and electricity consumers on the cheapest tariffs.
I welcome the Government’s efforts in relation to the green deal, about which I should have liked to say more. It is having a considerable impact, although we need it to trickle down to local suppliers, too few of whom are providing it on an ongoing basis.
I applaud the efforts made to deal with fuel poverty through the buy oil early campaign, and look forward to doing my bit later in the year. However, it has been put to me that the success of the campaign would be massively increased if winter fuel payments were made earlier in the year, when oil is much cheaper—hypothetically, on
Having listened to what was said about decarbonisation by my hon. Friend Mr Yeo, I am sadly not persuaded. This is a debate that has seen Mike Crockart charge, with Tennyson, to the redoubts of Sebastopol, and also to the shifting climatic sands of South Suffolk. Tom Greatrex disparages the Secretary of State and sees him as the political equivalent of Queens Park Rangers, but fails to add that Hamilton Academical are not exactly in the champions league.
It strikes me as entirely sensible for the decarbonisation target to be set after the Energy and Climate Change Committee has provided its advice on the fifth carbon budget in 2016. However, while I support the Government’s strategy of shifting away from oil and decarbonising, we must be careful not to rely excessively on wind energy. The hon. Member for Wansbeck and I face twin problems in that regard, because the Northumberland area is being randomly covered with wind farms. There is no proper strategy and no local development plan, and our constituents are not encouraging the move in any way.
I urge the Government to address the future role of wind, and also that of biomass. The continuing domestic subsidy for biomass is having an impact on the jobs of all utilisers of wood. It means that the demand for timber from energy companies increases, and so too does the price. The subsidy gives those companies a competitive advantage, enabling them to purchase timber more cheaply than any other provider in the country. I repeat my calls for the subsidy to be scrapped, so that the wood panel industry—and, indeed, anyone who utilises timber—can compete on a level playing field, while continuing to decarbonise.
The Bill should be strongly supported. I shall vote against the Labour amendment—[Interruption]—which, I hasten to add, is also the amendment of my hon. Friend the Member for South Suffolk. I should have liked to include many more items on my wish list—much like the hon. Member for Edinburgh West—but, in the interests of satisfying you, Mr Deputy Speaker, I shall end my speech.
It is a pleasure to follow Guy Opperman, although I am disappointed that he will not be joining us in the Lobby.
Many of those who oppose the amendment have tried to suggest that it is pro-wind, but it is not about wind energy. I am proud to put on record that I am pro-nuclear, pro-renewables and pro-energy efficiency. I see no contradiction in holding those three views, because I want to decarbonise the economy, but I do not want to do so only for the sake of decarbonising it. Many Members who support the amendment are not—Mark Reckless has just left the Chamber—just ideological greens. I consider myself to be a practical environmentalist. I want to see the environment looked after properly, quality jobs in this country, and the promotion of quality jobs in the energy sector. I want to see our country become the world leader in all forms of new generation. I want to see us, as pro-nuclear, being the forerunner in that new technology. There is also great untapped marine energy potential in this country, and I want it to be unlocked. The Bill offers a good mechanism for doing that.
We need a target not for the sake of having a target, but to provide a proper framework. The Liberal Democrats—including Mike Crockart, who is having a discussion in the Chamber at present—should follow their consciences and vote for this proposal, because they believe in it. Yesterday, a number of Liberal Democrats voted against the Government on some amendments because it was the right thing to do, and it would be the right thing for Liberal Democrats to do again today. They should vote with their conscience and support the amendment of my hon. Friend Barry Gardiner and Mr Yeo.
We are in a good position. Whichever party were in power now, the Government would have had to introduce electricity market reform. The Minister was right to say that, but he was wrong to say nothing had been done in the previous 13 years—in saying that, he falls into a trap. A lot was done in the 13 years of the last Labour Government. They introduced a lot of proposals to help with renewables. They also brought nuclear back on to the agenda—it had almost entirely slipped off it. They introduced the Nuclear Decommissioning Authority to clear up the mess left by previous Governments of both colours, too. A lot was done, therefore, and today’s proposals build on the agenda set by the last Labour Government during their 13 years in office.
We need to decarbonise the electricity market, and that presents huge challenges. As we wean ourselves off fossil fuels, gas heating will have to be electrified, and we will therefore need low-carbon electricity. The transport system will need to be electrified as we move to high-speed trains. Our cars will need to be electrified, too. These are massive challenges, and we will need sufficient generation of low-carbon energy if we are to meet our 2050 targets.
The 2030 target puts in place the signal and the framework for now. That is why these measures are important. As my hon. Friend Dr Whitehead said, the Bill is about decarbonisation and reform of the market. In order to ensure that happens, we need the mechanisms contained in the Bill. Having a target—which the Secretary of State and his Liberal Democrat colleagues want—is the right way forward.
There is not much time left in our discussion of these amendments. I had a lot more to say, but I just want to congratulate my hon. Friend—I want to call him that—the Member for South Suffolk on introducing these amendments, along with other Members. He may not have managed to unite the Government, but he has managed to unite the Methodists and the Baptists, who are both supporting the proposals, along with many other groups across industry.
The CBI has been mentioned. It is not against the decarbonisation target; it just feels that it should not get in the way of the Bill’s progress. One way not to get in its way is to vote for the amendment at 4 o’clock. I urge Members across the House to join us in voting for this target, and thereby making Britain a leader in decarbonisation and future energy generation.
Investment in clean energy and policies to keep the lights on go hand-in-hand. We need a commitment to decarbonising the power sector by 2030 not just to combat devastating and unpredictable climate change, but to keep energy prices down and the economy growing into the second half of the 21st century. The idea that there is a binary choice between a firm commitment to green energy and keeping energy bills down is clearly a false dichotomy. Decarbonisation is fundamental to keeping energy prices down in the long term; the alternative is to remain at the whim of unpredictable yet ever-rising global fossil fuel prices.
It is therefore shocking that investment in green energy has fallen in every year since this Government came to power. At current rates, investment in 2013 will be at its lowest level since 2006. This is not just a case of “not good enough”; it is an utter dereliction of duty. The Government, riddled by indecision and infighting, are deterring investment, stopping Britain becoming the leader in Europe on renewable investment.
At the evidence stage of this Bill, I asked the Secretary of State whether he agreed with his party’s position of wanting a decarbonisation target in the Bill. He said that he did but we have a coalition Government, which therefore meant that it was not going to be there—that says it all. This issue should be beyond party politics. I welcome the fact that Peter Aldous has decided to support the amendment, and I understand that the president of the Liberal Democrats, Tim Farron, and their former leader, Mr Kennedy, are going to support it, too. I urge other Liberal Democrats, who have the choice at 4 pm as to which way to vote, to support the amendment, in line with their party policy.
This Government rightly decry short-termism, and we all support a long-term plan to improve British competitiveness and boost growth, which is why it is so disappointing that the Government cannot recognise the crucial long-term benefits of a 2030 decarbonisation target. Long-term strategy is even more crucial in energy policy, where large fixed costs must be met. Investors’ cash, which we know is highly mobile, relies on a strong and unwavering vision from the Government. Without such a vision, the UK has slumped to seventh in the world for investment in clean energy, and for the first time we are no longer ranked first globally for offshore wind attractiveness.
Decarbonising the power sector by 2030 is not just an important part of our legally binding commitment to reducing the UK’s carbon dioxide emissions by 80% by 2050—it is the totality of it. The Prime Minister once recognised that. In 2010, he told the Liaison Committee that
“if we don’t decarbonise electricity, we’ve got no hope of meeting all the targets that we are all committed to”.
I entirely agree with the statement, but, unfortunately, the Prime Minister seems to have abandoned that.
The case for a 2030 decarbonisation target is about more than preventing catastrophic climate change. There is an irresistible business case for these amendments, and it can be summed up in one word—jobs. The renewable industry currently supports 110,000 jobs and, across the supply chain, it could support 400,000 jobs by 2020. In 2012, the CBI estimated that nearly one third of the insufficient number of jobs created in the UK came in the green sector. Two thirds of jobs providing low-carbon and environmental goods and services are outside London and the south-east. Furthermore, if we use the BIS definition of “low-carbon environmental goods and services”, we find that the largest activity in the sector is manufacturing, with 20% of total sales and employment, as opposed to a figure of 13% for the economy as a whole. In 2010-11, green business grew by 2.3% in real terms, outstripping global growth, yet this Government’s dithering is scaring off investment in an industry worth £3.2 trillion.
Jobs, rebalancing the economy and economic growth are three pillars of this Government’s agenda that would be boosted by a decarbonisation target. It is at times of economic stagnation—this economy is certainly not booming—that investment is at its most economically productive. With interest rates at near zero, the Government should be prioritising investment in decarbonisation. That the “greenest Government ever” claim they want to decarbonise the economy but will not support a 2030 decarbonisation target is simply bizarre. Without such a target, I am deeply concerned that this Bill will not give investors the confidence we know they need to invest in low-carbon generation in the UK.
I pay tribute to everyone who has taken part in the debate and thank you, Mr Deputy Speaker, for the opportunity to comment briefly on what has been said. I am particularly grateful to members of my Committee who have spoken and although their full tributes have done great damage to my career prospects, they are much appreciated nevertheless—[Hon. Members: “What career prospects?”]Okay, I accept that.
I am particularly pleased that most of those members maintained the position that the Committee took last summer when we reported on the draft Bill and made a unanimous recommendation about the need for a target. My right hon. Friend the Minister set out the Government’s position very powerfully. I do not think that there was any doubt about his reasons for opposing the amendment, but nothing he has said has explained to me what, if the Government remain as serious as he says they are about meeting the fourth carbon budget, which takes us to 2027, and progressing further towards the 2050 target, the objection is to accepting now rather than in three year’s time the advice of the Committee on Climate Change about a 2030 target for decarbonising electricity generation. That seems to me to be completely consistent with everything he said.
My right hon. Friend also had some perhaps predictable fun about press reports of an answer I gave at something called the Westminster Russia Forum last week, but I am not sure that he attempted to understand the intervention I made during his speech. I do not doubt, and I have not doubted for 20 years, that the man-made increase in greenhouse gas concentrations in the past 200 years as a result of the industrial revolution is extremely likely to be the cause of the changes in the climate that we are now observing.
Leaving that to one side, however, I want to reiterate that unlike a great many people who argue about the science of climate change I see it in an historical context. The human species is one of the most recently arrived on the planet and the phenomenal success of the species—our proliferation in numbers and our control over our destinies to an extent that perhaps no other species has ever achieved—has only happened even more recently than that. The precondition for that has been climate stability.
Concern was expressed by some hon. Members about the cost of energy. I absolutely share those concerns and it is for that reason that the amendment, which I will press to a vote in three minutes’ time, does not have the effect of raising electricity prices by a single penny for the next seven years. Anyone who is concerned about short-term movements in electricity prices should be hammering the Treasury about the floor price of carbon. That is what is forcing prices up and reducing the competitive position of British industry, not the setting of a decarbonisation target for 2030 on advice from the Committee on Climate Change.
As for what will happen to prices in the 2020s, nobody can be certain, as colleagues have made clear. There is, however, a very strong probability that the cost of various renewable energy technologies will be lower then than it is today, as several are on a very rapid downward cost curve. The pace of that reduction in the price of those technologies might be even faster if the industries concerned have greater certainty that the Government remain committed to reducing dependence on fossil fuels for electricity generation beyond 2020.
There are therefore in my view overwhelming environmental reasons for supporting the amendment, but there are other reasons, too. As I made clear, it will encourage investment and bring down the cost of investment, benefiting consumer prices. By accepting the amendment, the Government would strengthen their claim to be the greenest Government ever. The credentials of all previous Governments are not that strong, so achieving that accolade is probably even now within the grasp of the Government. Accepting the amendment would be a big step towards placing Britain in the vanguard of the new industrial revolution, taking our economy to a position in which it is less dependent on fossil fuels. I am convinced that countries, industries and companies that do that will not only be doing the right thing environmentally but enjoy an economic and financial advantage by improving their competitive position over those countries that remain dependent on fossil fuels in 2030.
For all those reasons, I warmly commend the amendment to the House. I urge all my hon. Friends and, in particular, those on the Liberal Democrat Benches, to join us in the Lobby and do something that will materially improve the Energy Bill.