‘(1) By June 2017, the Secretary of State must develop, promote and implement a comprehensive national strategy for carbon capture and storage (CCS) for the energy industry to deliver the emissions reductions required to meet the fifth and subsequent, carbon budgets at the scale and pace required.
(2) In developing the strategy, the Secretary of State must consult—
(a) HM Treasury;
(b) the Department for Business, Innovation and Skills;
(c) the Oil and Gas Authority;
(d) the National Infrastructure Commission;
(e) Scottish Ministers;
(f) Welsh Ministers, and
(g) other relevant stakeholders including the CCS industry.
(3) The strategy must include though shall not be restricted to—
(a) the development of infrastructure for carbon dioxide transport and storage;
(b) a funding strategy for implementation including provision of market signals sufficient to build confidence for private investment in the CCS industry;
(c) priorities for such action in the immediate future as may be necessary to allow the orderly and timely development and deployment of CCS after 2020;
(d) promotion of cost-effective innovation in CCS; and
(e) clarification of the responsibilities of government departments with respect to the implementation of the strategy.”
(4) The Secretary of State must report to Parliament on the progress of its implementation of the strategy every three years starting in 2020.”.—(Callum McCaig.)
This new clause would compel the Secretary of State to bring forward a strategy for carbon capture and storage for the energy industry
Brought up, and read the First time.
With this it will be convenient to discuss the following:
New clause 6—Emissions trading: United Kingdom carbon account—
In section 27 (net UK carbon account) of the Climate Change Act 2008, after subsection (2) insert—
“(2A) No carbon units deriving from the operation of the EU Emissions Trading System may be credited to or debited from the net United Kingdom carbon account for any period commencing after
New clause 7—Carbon capture and storage strategy for the energy industry—
‘(1) The Secretary of State must—
(a) develop, promote and implement a comprehensive national strategy for carbon capture and storage (CCS) for the energy industry to deliver the emissions reductions required to meet the fifth and subsequent carbon budget, as advised by the committee on climate change;
(b) develop that strategy in consultation with HM Treasury, the Department for Business, Innovation and Skills, the Oil and Gas Authority, the National Infrastructure Commission, energy intensive industries and other relevant stakeholders including the CCS industry; and
(c) have that strategy in place by June 2017 and report to Parliament on the progress of its implementation every three years thereafter.
(2) The strategy provided for by subsection (1) shall, amongst other things, include—
(a) the development of infrastructure for carbon dioxide transport and storage;
(b) a funding strategy for implementation including provision of market signals sufficient to build confidence for private investment in the CCS industry;
(c) a strategy for international co-operation on the development and implementation of relevant technologies;
(d) priorities for such action in the immediate future as may be necessary to allow the orderly and timely development and deployment of CCS after 2020.
(e) a strategy for co-operation through the European Union.”
New clause 8—Decarbonisation target range—
(2) Leave out subsection (2) and insert—
“(2) The Secretary of State must by order (“a decarbonisation order”) set a decarbonisation target range, which shall be reviewed annually thereafter.”
(3) Leave out subsection (5) and insert—
“(5) The decarbonisation order shall be made within six months of the adoption of the fifth carbon budget set by virtue of the duty of the Secretary of State under section 4 (2) (b) of the climate Change Act 2008.””
New clause 9—Amendment to Energy Act 2013: Capacity agreements—
After Section 28(4) of the Energy Act 2013, insert—
‘(4A) Electricity capacity regulations introduced by subsection (1) for any fossil fuel generating plant granted 15 year capacity contracts under the capacity agreements established by this section shall be subject to the Emissions Performance Standard as established by Section 57 (2) of this Act.””
New clause 10—Emissions trading: United Kingdom carbon account—
In section 27 (net UK carbon account) of the Climate Change Act 2008, after subsection (3) insert—
‘(3A) In respect of any period commencing after
New clause 11—Zero net UK [carbon] emissions—
‘(1) The Climate Change Act 2008 is amended as follows.
(2) After section (3) of the 2008 Act, insert the following—
3A Net UK carbon emissions target: zero emissions year
‘(1) The Secretary of State shall set a date by which net UK emissions must be zero or lower (“the zero emissions year”) by order no later than 12 months from the date on which the Energy Act 2016 comes into force.
(2) It is the duty of the Secretary of State to ensure that the net UK emissions for the zero emissions year and each year thereafter is zero or less.
(3) If an annual statement of UK emissions under Section 16 for a year after the zero emissions year shows that net UK carbon emissions are more than zero, the Secretary of State must, as soon as reasonably practicable lay before Parliament a statement which—
(a) explains why the zero net emissions target has not been met, and
(b) sets out proposals and policies to ensure that the target will be met in subsequent years.
(4) The Secretary of State may by order amend the zero emissions year.
(5) The power in subsection (4) may only be exercised if it appears to the Secretary of State that it is appropriate to do so due to significant developments in—
(a) scientific knowledge about climate change, or
(b) European or international law or policy.
(6) An order under subsections (1) or (4) may only be made by statutory instrument that has been laid in draft before, and approved by a resolution of, each House of Parliament.
(7) Before laying a draft of a statutory instrument under subsection (6) the Secretary of State must obtain, and take into account, the advice of the Committee on Climate Change.
(8) As soon as is reasonably practicable after giving its advice to the Secretary of State, the Committee shall publish its advice in such manner as it considers appropriate.
(9) If an order under subsections (1) or (4) sets or amends the zero emissions year in a way that is different from the recommendation of the Committee under subsection (7), the Secretary of State must lay a statement before Parliament explaining his reasons for that decision.
(10) When the Secretary of State comes to any decision under this section, or the Committee on Climate Change considers its advice in relation to any such decision—
(a) the matters listed in Section 10(2) must, and
(b) other matters may, be taken into account.”
New clause 12—Strategy for a Just Transition away from fossil fuels—
‘(1) The Secretary of State must develop a comprehensive national strategy for the UK energy sector to move away from fossil fuels and towards 100% renewable energy by 2050, under the framework of a Just Transition outlined in subsection (5)(a).
(2) The strategy must be developed by June 2017 and the Secretary of State must report to Parliament on the progress of its implementation every year thereafter.
(3) The transition must ensure that UK carbon emission reductions make a fair contribution to the goals set out in the 2015 Paris Climate Change Agreement.
(4) The strategy must be developed in consultation with—
(a) energy sector workers,
(b) trade unions,
(c) the Committee on Climate Change,
(d) HM Treasury,
(e) the Department for Business, Innovation and Skills,
(f) the Oil and Gas Authority,
(g) the renewable energy industry,
(h) the National Infrastructure Commission,
(i) Scottish and Welsh Ministers,
(j) civil society organisations, and
(k) other relevant stakeholders.
(5) The strategy must, amongst other things, include—
(a) the adoption of the principles of Just Transition set out by national and international trade unions, including—
(i) full participation and engagement of workers, trades unions and communities most directly affected, and
(ii) training, education and skills policies to enable workers to make the transition to employment in sustainable, low carbon industries,
(b) an assessment of the proportion of existing UK oil and gas reserves that should remain unexploited,
(c) a strategy for redirecting all direct and indirect fossil fuel exploration and production subsidies into low carbon industry; and
(d) cooperation with EU institutions and EU member states to embed the principles of Just Transition at EU level.”
This new clause would require the Secretary of State to develop a strategy for a Just Transition away from fossil fuels and towards a renewable energy future.
New clause 1—Strategy for incentivising competitiveness of UK-registered companies in decommissioning contracts—
‘(1) By June 2017, the Secretary of State must develop a comprehensive strategy for the Department of Energy and Climate Change to incentivise the competitiveness of UK-registered companies in bidding for supply chain contracts associated with the decommissioning of oil and gas infrastructure (the strategy), which shall be reviewed annually thereafter.
(2) In developing the strategy, the Secretary of State must consult—
(a) HM Treasury;
(b) the Department for Business, Innovation and Skills;
(c) the Oil and Gas Authority;
(d) Scottish Ministers, and
(e) any other relevant stakeholders that the Secretary of State thinks appropriate.
(3) The strategy must include, though shall not be restricted to—
(a) an appraisal of tax incentives that can be extended to oil and gas operators to incentivise their use of UK-registered supply chain companies; and
(b) an outline of other appropriate support that can be provided by the Government, or its agencies, to UK-registered companies which express interest in bidding for decommissioning contracts.”
This new clause would compel the Secretary of State to bring forward a strategy for ensuring that UK-registered supply chain companies benefit from decommissioning contracts.
New clause 4—Contract for Difference—
After section 13(3) of the Energy Act 2013 insert—
‘(3A) An allocation round must be held at least once in each year which the carbon intensity of electricity generation in the United Kingdom exceeds 100 grams per kilowatt hour.”
This new clause would compel the Secretary of State to hold a Contract for Difference allocation round at least once in each year that the carbon intensity of electricity generation in the UK exceeds 100g per kilowatt hour.
New clause 5—Amendment to the Petroleum Act 1998: definition of “the principal objective”—
In subsection 9A of the Petroleum Act 1998, leave out subsection (1) and insert—
“(1) The “principal objective” is the objective of maximising the economic return of UK petroleum, while retaining oversight of the decommissioning of oil and gas infrastructure, and securing its reuse for transportation and storage of greenhouse gases, in particular through—
(a) development, construction, deployment and use of equipment used in the petroleum industry (including upstream petroleum infrastructure), and
(b) collaboration among the following persons—
(i) holders of petroleum licences;
(ii) operators under petroleum licences;
(iii) owners of upstream petroleum infrastructure;
(iv) persons planning and carrying out the commissioning of upstream petroleum infrastructure;
(v) owners of offshore installations.””
Government amendments 48 and 49.
Amendment 47, in clause 8, page 6, line 10, at end insert—
“Hierarchy of matters relating to decommissioning
The need to consider the most advantageous use of North Sea infrastructure for the overall benefit of oil and gas extraction prior to the decommissioning of such sites”
To require the OGA to have regard to the need to ensure most advantageous use of North Sea infrastructure for the overall benefit of oil and gas extraction prior to the decommissioning of such sites when exercising its functions.
Government amendment 51.
I was struck when, in the earlier debate on the previous group, John Redwood, who is no longer in his place, talked about how to find an environmentally sustainable way of getting power from the island of coal in a sea of oil and gas. I take it that he was referring to Great Britain in that regard. There might well be a way of achieving that in an environmentally sustainable way—through carbon capture and storage. My new clause 3 calls on the Government to bring forward a proper, well thought out and extensively consulted on plan and strategy for carbon capture and storage for utilisation in both the energy industry in particular and industry more widely, including energy-intensive industries, which might move offshore if they are not able to consume power in an affordable way that meets our higher environmental standards.
We have talked about the discussion and report from the Energy and Climate Change Select Committee, which referred to the innumerable sudden changes to policy as having an impact on the reputation of the United Kingdom for investor confidence. The decision to withdraw the £1 billion funding available for the CCS competition at the same time as the Secretary of State for Energy and Climate Change was in Paris leading the “high-ambition coalition” on behalf of the country at the Paris talks is perhaps the most grave of the changes.
I very much agree. I remember sitting on this very Bench, looking through the Budget statement and being somewhat relieved that the rumours I had heard about this competition being scrapped did not appear to be in that statement. Lo and behold, however, an announcement was made to the stock market a few moments after the Chancellor had left the Chamber, removing that funding. I understand that no greater certainty was provided to the companies involved in both White Rose and Peterhead.
Further to that point, on the very morning of that Budget, I intervened on another Member and asked the Minister to provide assurances that both the Peterhead and the White Rose projects would not be cut, but no answer was forthcoming. There was nothing in the paperwork that day to show that this was going to happen.
I agree with my hon. Friend. The fact that different parties have the same essential view not only about the Government’s abysmal handling of this process, but about how to salvage something from the ashes of the carbon capture competition suggests that there is not a huge amount of difference between my new clause and new clause 7, tabled in the names of Labour Front-Bench Members. The main difference—we discussed the issue in Committee—is that our provision includes the devolved Administrations as bodies that should be developing a strategy. I know that the Scottish Government—who, working with DECC, pursued what should have been the second phase of carbon capture and storage at Grangemouth—have high ambitions for the deployment of CCS and share the concerns of many Members here about the way in which the Government have handled this matter.
As for short-sighted decisions, I understand that the White Rose project had substantial European Union funding associated with it. The potential for Peterhead to use carbon capture and storage—or potentially carbon capture and utilisation to create a virtuous cycle for enhanced oil recovery—was there, but that potential has now been lost. The suggestion from the Energy and Climate Change Committee that this will make meeting our climate change commitments all the harder, highlights the need for the strategy that I am proposing.
We have seen the Government being all over the shop when it comes to CCS. One minute they are for it; another minute they are against it. One minute it is not working; the next minute it is looking promising for the future. These represent severe mixed messages for investor confidence, when we need clarity. If we are to get investment from industry—I hope we do, and I gain the impression that Members of all parties want to see this become a reality in the UK—we need an unequivocal statement from the Government. Then we need an unequivocal strategy, which is what I am calling for today.
There is tie-in between the utilisation of the infrastructure in the North sea and what can be deployed for CCS. I believe that it is also incumbent on the Government to bring forward a strategy for decommissioning, which is the subject of my new clause 1. Decommissioning is one of the sad realities of the North sea that is going to happen. We all, or at least the majority of us, hope that this will happen at some time in the future. The Government can take steps to deal with that. The industry has called for tax cuts, and loan guarantees for oil and gas companies are also a key part of ensuring that decommissioning happens as far in the future as possible. It is, however, going to come.
Decommissioning provides a huge opportunity, when there is upwards of £30 billion-worth of work to be done. A large part of the bill will be paid back by reimbursing the companies for previous tax paid. They have built up the tax to offset against decommissioning costs. Essentially, as we go forward, the Treasury will be footing the bill for a large part of decommissioning.
It strikes me and my party that we need to ensure that the greatest possible benefit comes to these shores. The east coast of this island is ripe with opportunities for ports and the like. Frankly, they should be champing at the bit to see the work come ashore. I believe that the Shell platform at Brent is coming to Hartlepool. That is a strong commitment and an investment in infrastructure, but also in skills.
The hon. Gentleman is spot on about Teesport work at Hartlepool and the decommissioning of rigs. Does he agree, however, that including the decommissioning of rigs also provides potential for extra surveys of where rigs are currently based to investigate syngas potential? The infrastructure is already there for looking at sub-sea coal, for example.
A large number of things need to be done before we commence wholesale decommissioning, and this includes the widest possible consideration of what the infrastructure could be used for. The proposals and possibilities are perhaps not endless, but they are numerous. Whether we are talking about carbon capture, storage of hydrogen or looking for further hydrocarbon resources that are yet to be discovered, there are vast possibilities. While the infrastructure is there, the opportunities for doing other things with it will remain; once it is gone, the opportunity is gone. The Oil and Gas Authority—which a large part of this Bill deals with, although not the aspects we are debating at this precise moment—has done a lot of work on that and is to be commended on that development.
Decommissioning is a reality. If we are smart collectively —if we can line up the ducks, in terms of the supply chain, skills and investment in the ports and suchlike—there could be a massive windfall. We have considerable leverage, as funders of a large part of this work, through tax receipts offset against previous earnings, and we should be looking to maximise that economic potential, in the same way that we were looking to maximise the economic recovery of the North sea.
On the point about that opportunity, does my hon. Friend agree that decommissioning goes hand in hand with the critical assessment, evaluation and management of the infrastructure that surrounds these isles to enable access to marginal fields, which would not otherwise be available, were the critical infrastructure not kept in place, as part of an overall plan with a long-term vision for the energy supplies of these isles?
I agree with my hon. Friend, and that is something the Oil and Gas Authority is set to look at. It will also be hugely beneficial to the oil and gas industry, so that work needs to take place. We need to be aware of what opportunities exist, but we also need to remember that this Government have a duty to support the oil and gas industry at this time, so I reiterate the calls made by myself and others in my party to see substantial movement in Wednesday’s Budget.
It might seem somewhat ironic to some that I am moving from how we best exploit the North sea to how we best tackle climate change but, as I have said a number of times in this place, because we have been a major producer and user of hydrocarbons, there is a moral duty on us to do what we can. I note new clause 11, standing in the name of Edward Miliband, among others, which is not something I would be ready to support, although I wholeheartedly endorse the principle. This is something we need to do, but I would see new clauses 4, 8 and 10—which deal more closely with the short term—plus the issue around carbon capture and storage, as being the correct pathway.
It strikes me that we are very much at a crossroads when it comes to the deployment of technology. It is likely—or, I am hopeful—that a zero-carbon future can be achieved, but the pathway to that is not clear to me, and I do not think it would be clear to the Government if they were to commence that work now. I would rather see things that are in the gift of the Government at this precise moment in time—if they were to focus on them, to deliver on them and act sooner rather than later—because the more work we do now, the less we have to do in future. It is about timing and priorities. The concept is to be wholeheartedly commended and supported, but I am not quite sure I am there when it comes to prioritising it now.
Finally, I would like to talk about new clause 10, to which I was happy to add my support—I imagine that a number of others who also put their name to it will talk about it in greater detail. Our carbon accounting mechanisms need to be brought into line with what is happening and going to happen. The fact that we can get to the stage where upwards of half our emissions do not properly factor into our carbon accounting means that we cannot set about achieving what we must in an open and honest way. Following on from Paris, numerous people have said that we need to get serious about this. If we are to get serious about taking the steps we need to take to make our contribution to tackling climate change, we absolutely have to be clear about what we are counting, which is the basics of this. The bean counting of climate change might not seem particularly appealing to some, but it is fundamental. If we do not know what the emissions are and we are not counting them properly, how can we tackle the challenge of reducing them properly?
I rise perhaps early in this debate but, in the absence of alternatives on this side of the Chamber, I am happy to follow Callum McCaig. I agree with much of what he said about carbon capture and storage, but my comments will be about new clause 10.
I do not agree with the thrust of new clause 10 and want to set out to the House why not, but first let me be clear: I, like possibly everybody in this House, also regard man-made climate change as a clear and present danger. The concern I have, though, is that we in this country are acting increasingly unilaterally in what we are doing to fix it. Indeed, the emissions trading system was an attempt to find a pan-European solution to a pan-European problem and I do not want us to turn our back on it.
I speak also for the 900,000 people who work in energy-intensive industries in this country and the many other millions of people who work in manufacturing industries. The central premise of my remarks is that I do not believe it is possible to rebalance our economy, to have a march of the makers and to do more in the north of the country predicated on electricity prices that are approximately double what they are in continental Europe. Of course, nobody in this House wants higher electricity prices, but the fact is that some of our actions are resulting in higher electricity prices, in so far as similar actions are not taken by our trading partners. This morning, our energy-intensive industries were paying something like 9p a unit of electricity; in Germany and France, they are paying 4p a unit. Broadly speaking, the gap between UK and EU electricity prices is 80% to 90%. I am an MP for the north of this country. I want to see manufacturing re-established much more strongly in the north, but it cannot be re-established on the basis of differentially higher electricity prices.
In reference to new clause 10, it quite obvious that the market in the European ETS is set, yet we decided as a country—or rather, the Government decided—to introduce the carbon price floor, which exceeded the EU ETS, so this is an issue for those on the Government Benches. Our European competitors also weight the cost of energy far more to the consumer rather than industry, which is ultimately a Government decision, and by and large the costs are generally the same, varying from country to country.
The hon. Gentleman makes two points, the first of which is about the carbon price floor. As it happens, I do not support policy in that area. The consequence of that policy is that we are now importing electricity produced on the continent by power stations that do not pay the carbon tax at the level we do. As my right hon. Friend John Redwood said earlier, that is no sort of economic and industrial policy. I have forgotten the hon. Gentleman’s second point. Perhaps he could just remind me.
That is true of Germany in particular. Apparently—I am not an expert in this area, but I hear Ministers from the Department for Business, Innovation and Skills talking about this—there is an issue with state aid, which does not apply to Germany because it started doing that in advance of state aid rules being set up, which is why it can charge such a differential and apparently we cannot. I agree that that is unsatisfactory.
I was talking about the 900,000 jobs in energy-intensive industries that we in this place need to be cognisant of as we legislate and move forward. These are jobs in steel and what is left of our primary aluminium industry—there were three smelters in this country until a few years ago; there is now one left, in Scotland, and a consultation is under way on its closure. This stuff matters. Of course, so does climate change. My only point is that we must get it right. There is a balance to be struck, and the people who pay for that balance cannot be the people who work in some of those industries.
I have four points to make about what I believe is an increasing difference between the approaches of the United Kingdom—with our climate budgets and our Climate Change Act 2008—and the European Union. The first relates to the Paris agreement which was reached in December, and which we have discussed in the House before. Some people describe it as a triumph, and in many respects it was. I personally do not think that it will be enough to limit the temperature rise to 2.7°; I think that that is an optimistic analysis. However, the key fact that we, as legislators, need to understand is the fact that the United Kingdom did not have a submission to the “intended nationally determined contribution” process. Europe did, and Europe’s submission was a reduction in carbon emissions by 40% over 40 years. The UK is part of Europe, and it is therefore implicit that we must do the same, but the commitment for which we have legislated is to reduce emissions by—
I recognise that the hon. Gentleman is talking about individual states’ emissions and Europe-wide emissions, but I have a responsibility for people who work in energy-intensive industries, and I know that a far more acute problem for the Government is the problem of Chinese dumping. Of course we cannot talk about that now, but it is far more serious than anything that it coming out of the European Union.
I agree that Chinese dumping is an issue. I also agree that business rates are an issue. However, I think that the hon. Gentleman is wrong if he is suggesting that energy prices are not an issue as well. The steel industry, and indeed the aluminium industry, are not under such pressure in parts of Europe as they are here.
What the hon. Gentleman is saying contradicts comments from Eurofer and UK Steel. The two primary issues for energy-intensive industries, especially the steel industry, are market economy status for China and Chinese dumping. I am sure that the hon. Gentleman will return to the point about the EU emissions trading system, but those are the main concerns of the industries themselves.
The hon. Gentleman’s position strikes me as rather odd. I agree with him that the EMS status is important, that dumping is important, and that business rates are important, but, as is made clear in report after report—there is one from the aluminium industry in my office now—so are energy prices.
I do not think that I am making a massively controversial point. I am merely saying that in an industry that uses significant amounts of electricity, it is not a competitive advantage if our electricity costs more than other people’s. I agree with the hon. Gentleman that Chinese dumping is probably more significant, but we are talking about economics, and in economics everything happens at the margin. The stuff that I am talking about matters to our manufacturing industry. My central point is that if we are intending to have a march of the makers that involves a rebalancing of industry predicated on high electricity prices, it is going to be tough.
As I was saying before the hon. Gentleman’s interventions, the cross-European Paris INDC submission is about 50% less onerous than the requirements of our own Climate Change Act. When I first saw that statistic, I thought it odd. Why had we allowed this to happen? Given that we have a stringent, rigorous and, in many respects, very good process involving carbon budgets driving down emissions, and all that goes with that, why did we become involved, at a big world summit, in a European submission that was so feeble? Although the requirements of the European submission are so much lower than those of the UK, in terms of the Climate Change Act, it is not allocated by country, even now. I believe that that process will start this year, or perhaps next year.
My second point relates to the European emissions trading system itself. New clause 10 was deemed necessary because it was felt that the system was not acting as enough of a brake on carbon emissions. The European price of carbon—which is implicit within the system—is too low: it is about €5 a tonne, as opposed to the €23 a tonne or so that we are paying. In 2013, precisely that point was debated in the European Parliament. It was proposed, in an amendment, that the emissions trading system should be “re-baselined” in a way that would have made it meaningful. The amendment might have prevented the need for a carbon price floor in the UK, and created a carbon price that properly reflected where the market needs to be in order to drive actions. However, the European Parliament did not pass it, probably in response to the vested interests of big manufacturers in a number of big countries in Europe. I think that that was a pity.
As a consequence, here we are now, saying that the EMS is not fit for purpose, that the accounting that it implies—which was intended, in the Climate Change Act, to serve as a way of controlling generated power—does not work, and that therefore we are doing something different. However, the right answer is not to turn our back on the European system. I am a Conservative. I may be an “inner”, but only just. It is odd that those in the Opposition parties who are deeply committed to the European ideal should turn their backs on this European solution.
My third point is that there is no country-based reporting or control of emissions in Europe. Since 1990, Austria has increased its emissions by 13%, Ireland has increased its emissions by 7%, and Holland has kept its emissions static. During the same period, the United Kingdom has reduced its emissions by some 28%. If the European Union were serious about getting to grips with emissions, and getting to grips with individual countries that are tackling the problem, it would have addressed that fact.
My final point is that we are seeing dysfunctional member state behaviour. Germany and Holland are building brand-new coal-powered stations—lignite-burning stations. I believe that those countries not only do not engage in carbon capture and storage, but have made it illegal, which does not suggest that they understand the challenge that must be faced.
I have just been given a note saying that I should wrap up. Let me end by saying that, while there is no doubt that we all agree that climate change is a clear and present danger, we must bring the rest of the world with us, and by turning our back on arrangements such as the European emissions trading system and allowing the EU to put a submission into the Paris COP talks that is frankly feeble, we are doing the opposite. We will not solve the problem of global warming by fixing our 1.5% of total global emissions.
I want to speak about new clauses that relate to a number of aspects of the Bill, and to the position in which we find ourselves in relation to a low-carbon economy for the future.
New clause 7 is very similar to new clause 3, and concerns an issue about which I think both Opposition parties feel very strongly: the need to develop a systematic strategy for carbon capture and storage. We have heard several references to what the Conservative manifesto at the last general election did or did not say, but the Government mentioned CCS in that manifesto. They also mentioned the least-cost routes to decarbonisation. Clearly—this is certainly the advice of the Committee on Climate Change—they will have to think carefully about CCS when they respond on the fifth carbon budget this summer, because CCS, among other things, represents a substantial implementation of least-cost routes to decarbonisation in the long term. The shameful pulling of the two CCS pilot projects mentioned by Callum McCaig, in essence on the grounds of cost, represents a missed investment opportunity that could have reduced the cost of decarbonisation at a later date. That cost is an important element of our approach to a future CCS strategy. It is important to be clear that the cancellation of the projects does not and should not mean the end of CCS in this country.
We will have to bring about large-scale CCS sooner than many people believe, if we are to stay even remotely on course to meet our climate change targets in the longer term. That is especially true because CCS relates not only to energy production but to energy-intensive industries and other intensive carbon emitters. The effect of the cancellation of the CCS pilots will be that this country will have to start importing technology from the rest of the world instead of taking the lead in technology as we might have done if the pilots had gone ahead.
I absolutely agree with the hon. Gentleman. How likely does he think it will be that any private money will ever be forthcoming, given the somewhat irrational manner in which the funding for the projects has been abandoned in this country?
The right hon. Gentleman makes an important point. Indeed, a carbon capture strategy that sets out a longer-term route for our carbon capture and storage would play an important part in ensuring that investment for CCS was available. He also makes the point that the cancellation of those pilot projects has cast quite a pall over the future investability of carbon capture and storage projects, despite the fact that many such projects are now getting under way across the world.
It is important to reflect on how we will import the relevant technology under a new CCS strategy and how we might keep as much as possible of the rest of the supply chain and other CCS arrangements in the UK, particularly the substantial developments and intellectual property gained from the White Rose and Peterhead projects, which must be retained in the UK for use in future CCS developments. All of that should be part of a strategy, but we simply do not have one at the moment. Having a strategy in place would enable us at least to recover substantially from the immense setback caused by the cancellation of those pilot projects. The new clause calls for such a strategy to be articulated at an early stage and for us to be clear about exactly how and why we will keep CCS on track for the future.
We have heard about targets today, but new clause 8 does not set a new target. It relates to the undertakings in part 1 of the Energy Act 2013 relating to setting a target for the decarbonisation of the energy sector by 2030. Part 1 makes it clear that the Secretary of State has a duty to ensure that the carbon intensity of electricity generation in the United Kingdom is no greater than the maximum permitted level of the decarbonisation target range. There is a clear undertaking in the Act to set a decarbonisation target range and a requirement for the Secretary of State to take related actions.
As I have mentioned, that target already exists. It has done so since the Energy Act 2013 was passed. The outstanding issue at the time was not whether there should be a target but what the target range should be. Under the legislation, it is up to Ministers to clear up that matter through secondary legislation. It is not a particularly small matter: it is in the gift of Ministers to decide whether the target for decarbonisation is strong or not. During the passage of that legislation, it became clear that Members across the Committee envisaged the target being strong and in line with the aim that carbon reductions should make a proper contribution.
Unfortunately, during the passage of this Bill in another place, we heard about a letter to the Opposition from the Minister in the other place. In Committee, I quoted the Minister stating in that letter that
“a power was taken within the Energy Act 2013 which gives the Secretary of State the ability to set a ‘decarbonisation target range’ for the electricity sector, for a year ‘not before’ 2030. This allows a target to be set on the same date or after setting the Fifth Carbon Budget which must be set before end of June 2016 (measured in emissions intensity in grams of CO2 per kWh)…it is the intention of this Government not to exercise this power. This position is consistent with our manifesto pledge not to support additional distorting and expensive power sector targets.”––[Official Report, Energy Public Bill Committee,
Clause 8 does not propose an additional distorting target. It is a target that was included in the Energy Act 2013, and it is incumbent on the Government to take action on the decarbonisation target range through secondary legislation. It is extremely disappointing that the Minister in the other place indicated that the Government were not going to exercise this power. The new clause would require the Secretary of State to set a decarbonisation target and discharge section 1 of the Energy Act 2013. I am sure that, in the light of our discussions this afternoon, Members would agree that it is extremely important that such targets should be placed as waystations on our way to 2050. That is what the new clause seeks to achieve.
New clause 9 addresses an aspect of that decarbonised structure for energy in looking at the perverse results of the first two capacity auctions in not procuring any long-term new large generating plant; instead, almost the only long-term outcome was the procurement of diesel sets as generators. More than 1 GW of generators was procured, and they are more polluting than coal, which the Secretary of State has pledged to take off the system by 2025. The new clause adds to the 2013 Act’s requirements relating to fossil fuel-generating plant that is granted a 15-year capacity contract. That plant must adhere to certain conditions if the contract is to be granted. One of those conditions is the emissions performance standard. Section 57 of the Act contains a target or formula that, under subsequent secondary legislation, has led to a performance standard of 450 grams per kWh being established.
The new clause clearly does not seek to capture gas, because new plant for gas comes in at about 370 grams per kWh and is below the emissions performance standard. It refers to diesel coming into the provision of electricity, particularly in the context of what has happened in the two previous capacity auctions. Those diesel engines escaped the provisions of the 2013 Act because they were individually below the size at which plants were caught by the legislation. However, in terms of their individual emissions, they are among the dirtiest of the energy generation devices.
Diesel is exempt from present EPS levels because of the individual size of the reciprocating sets, and it has therefore cumulatively obtained a substantial proportion of long-term capacity payments coming into the system. Diesel sets have been able to get into the capacity auctions not because they are particularly cheap to run but because until recently they were already receiving a substantial underwriting from the Treasury through the enterprise investment scheme payments for the establishment of such plants. It appears that the payments were originally introduced to encourage the plants to be established for standby purposes, but they have of course been used for other purposes in the capacity auction. Although that route has been changed in the autumn statement, the most polluting generating plants have managed to get two lots of subsidies for generating and have got in through the capacity auction process as well. That is not only bad climate policy but bad public policy in general.
The question of diesel sets was discussed in Committee, and in a recent ministerial statement on changes to the capacity auctions, the Government undertook to look again at the matter. They suggested that this might happen through proposals to change the air quality regulations under the large plants directive, which might include diesel sets. However, they said that those changes might not occur until 2019 at the earliest, which would be too late for the next series of capacity auctions. The new clause seeks the most straightforward route to ensuring that diesel is not the perverse beneficiary of auctions as of now.
New clause 10 looks further forward, to the fifth carbon budget, but perhaps not quite so much further forward, in that we will have to decide on the fifth carbon budget by the summer. The new clause seeks to strengthen the Government’s intention to use their powers to ensure that we keep on track by outlawing the use of private trading sector credits at and after the fifth carbon budget. David Mowat made some valuable points about that.
Hon. Members will recall that when the Bill arrived in the House from another place, clause 80 sought to simplify the accounting of the UK’s carbon budgets under the Climate Change Act 2008. That clause was removed during the passage of the Bill in Committee. This new clause seeks a slightly different route to the goal of more effective carbon accounting in the fifth carbon budget and beyond. It seeks to make the Government directly accountable for emissions in the sectors covered by the EU emission trading system when determining whether the UK is staying within its national carbon budgets. The EU ETS covers emissions in the electricity sector and heavy industry, and the carbon accounting regulations currently allow the Government to ignore emissions from those sectors when determining whether the carbon budgets have been met. For that reason, the UK’s carbon budgets, as currently designed, fail to provide a framework that offers investor confidence in the UK power sector. In particular, it provides no assurance that the Government will put in place the necessary measures to ensure that the power sector is largely decarbonised by 2030 despite the fact that the Committee on Climate Change has repeatedly indicated that the power sector must reduce emissions to below 100 grams per kWh by 2030 in order to maintain a cost-effective trajectory to our 2050 climate target.
If the accounting rules are changed, the Committee on Climate Change has indicated that it will provide new advice on the appropriate level for the fifth carbon budget, and the committee will for the first time be able to recommend a budget that reflects a cost-effective pathway for UK emissions across the economy. The new clause differs from the original clause 80 in a key respect: while clause 80 prevents any carbon units in the EU ETS from affecting the UK carbon account, the new clause specifically prevents the carbon trading behaviour of private firms from affecting the national accounts, which is what allows the Government to ignore emissions from the ETS sectors. Under the new clause, the Government would retain the option of purchasing and cancelling ETS carbon allowances to offset UK emissions at state level, an environmentally preferable form of carbon-offsetting compared with the many types of international offset credits available to the Government. If exercised, the offsetting option would also strengthen the EU ETS.
Finally, amendment 47 reminds us of the first part of the Bill and the wide consensus for change regarding North sea oil. It seeks to give the Oil and Gas Authority new powers and oversight to ensure that decommissioning is used to best advantage in the North sea. Decommissioning should not operate in the short-term interests of those involved in it but in the longer-term interests of the co-operative use of infrastructure, which hon. Members have touched on, and for the benefit of not only the production of future, more marginal fields over the next period, but the future possible use of the North sea as one of the world’s finest repositories when carbon capture and storage gets under way. The amendment would add an important tool to the Oil and Gas Authority’s arsenal and I hope that the Minister will accept it.
I rise to speak to new clause 11, which was tabled in my name, that of my hon. Friend Paul Blomfield and those of Members from five other parties across the House. I thank the hon. Members for Westmorland and Lonsdale (Tim Farron), for Brighton, Pavilion (Caroline Lucas), for Beverley and Holderness (Graham Stuart), for Central Suffolk and North Ipswich (Dr Poulter), for Belfast South (Dr McDonnell) and for Arfon (Hywel Williams) for their support. I also thank my Front Bench team and Baroness Worthington in the other place for her support and advice.
The new clause would insert the commitment to zero emissions in the Paris climate change agreement into our domestic law, with the Committee on Climate Change advising on when it should be achieved. It is the right thing to do and the science is clear: the world needs to get to zero emissions early in the second half of this century, and it is worth reminding the House of the debate’s context.
We know from recent scientific analysis that 2015 was the hottest year on record. The record for global temperatures has been broken in each of the past five months, with February’s record broken in shocking fashion. Atmospheric concentrations of CO2 are now higher—this is hard to get your head around—than they have been for at least a million years. That is what the scientists tell us and it highlights the necessary urgency, which is shared by Members on both sides of the House.
My proposal makes economic, moral and political sense. It makes economic sense because we have to get to zero emissions eventually. It will be tough, so we need to start planning now. We are already aware of some of the tools we will need, but not all of them. We need clean energy supplies, a revolution in the household sector and reforestation. As Callum McCaig, who speaks for the SNP, said, we need carbon capture and storage to trap emissions. We will also need other technologies that are in the early stages of development. Crucially, we need to start the work now so that we can get to zero emissions at least cost. The economic case is proven by the support from the business community, and I thank Aviva, GSK, Unilever, Kingspan, Kingfisher and the broader “We Mean Business” coalition for their backing. The proposal also makes moral sense. Achieving zero emissions is necessary, so it would be irresponsible to pretend otherwise. Future generations will look badly on a generation that stuck its head in the sand and refused to plan ahead.
My proposal makes political sense. Those of us across the House who care about such issues were pleased with the Paris agreement, but the danger is that we could lose momentum or go backwards, and there are some early straws in the wind suggesting that might happen. We need to build on the momentum, not squander it. David Mowat is right that we need to close the gap between the Paris ambition to keep global warming to no more than 1.5° C and the reality of the current pledges, which are off track. We can make a difference. We may contribute only 1.5% of global emissions, but look at the experience of the Climate Change Act 2008—the hon. Gentleman and I have discussed this matter outside the House—which was passed with the support of all parties. It pushed others to follow us—perhaps not as much as we would have wanted, but others did follow.
The hon. Member for Aberdeen South is right about getting things right in the short term, but the long term affects the short term. The 80% target that we put into law in 2008 shapes the current discussions and holds Governments of all parties to account and the same would be true if we put zero emissions into law. Since we know that that will have to be the backstop, we might as well get on with it.
I have enormous respect for the right hon. Gentleman. I applaud his positive steps and everything that happened in the 2008 Act, but we must be economically realistic. I wonder whether this is the right time and whether it might be better to ask the Committee on Climate Change to have a closer look at the proposal. After all, we are in the process of agreeing the first carbon budget, so perhaps all the energy should be put into that.
I agree with the end of the hon. Lady’s point. My proposal is deliberately pragmatic. It would put zero emissions into law, but the date would be decided by Government on the basis of advice from the Committee on Climate Change. That is right and it would be the lowest-cost way of proceeding. We need the experts’ advice. After all, they were appointed with cross-party support.
I am delighted to say that since I made this proposal three months ago I have had constructive discussions with the Government. I will not try to predict the reaction of the Minister of State, but I want to record my thanks to her, the Secretary of State, and the Minister for the Cabinet Office for their willingness to engage. I hope that we can move the idea forward in the months ahead and demonstrate once again the cross-party commitment to tackling climate change that is shared by the vast majority of hon. Members. I look forward to the Minister’s response.
New clauses 5 and 6 stand in my name, but they are covered by other new clauses, so I do not intend to press either of them to a vote; the other new clauses lead in broadly the same direction.
First, let me deal with carbon capture and storage. When I intervened on Dr Whitehead, the term I used in relation to the Government’s decision to pull the funding from the project was “irrational”. I hope I was not unkind to the Government in saying that, but if it was not irrational it must have been ideological. In any event, it certainly did not make any sense. A competition was running and the point at which they withdrew the funding was significant. Had they allowed the competition to run a little longer, it might have reached the conclusion that there would be no more money to be spent—who knows? We will never know now. The decision was irrational, because of the impact it will have on getting our own CCS sector up and running in this country. As he said, the work on this is being done elsewhere and inevitably we will end up playing catch up and importing expertise that could have been generated here. Who will ever suggest that a shareholder put money into CCS in this country? This is the ultimate failure of evidence-based policy. Notwithstanding the provisions on the amendment paper tonight, I now wonder whether it is worth calling for any more rethinks, because even if we got new Government commitment, who on earth is going to believe it, given events thus far?
The hon. Friend Member for Aberdeen South (Callum McCaig) made the point that there is a synergy between CCS and the issues relating to decommissioning in the North sea. For some years, the technology used in CCS has been routinely and effectively used in the North sea in enhanced oil recovery; gas has been used to extract more oil from other parts of the existing substantial infrastructure network. It gladdens my heart that the Oil and Gas Authority goes from strength to strength, as I have followed the project closely from its inception, from the work of the Wood commission and through the creation of the shadow authority. To get the maximum benefit, it will be necessary for the OGA to get on, use the powers that we have already given it and those we give it in this Bill, and come forward with the strategy that will make these things happen.
Of course, for there to be a strategy there will first have to be survival, and the very real danger at the moment is that the age of the assets in the North sea, especially those in the north North sea, will mean that the critical mass may tip over and there is then a rush to decommissioning. Not only could any such rush be bad for the economy of the north-east of Scotland, and the Northern Isles in particular, but it would be tragic if it meant that the infrastructure was removed and the opportunities to develop CCS at some future date were therefore then lost.
I made the point about a large part of the tax liability for decommissioning falling on the Treasury. If there is the rush to decommissioning that the right hon. Gentleman describes, the Chancellor will find it more difficult to meet his fiscal target, as he will have to hand out the cash. Does the right hon. Gentleman therefore agree that there needs to be proper support from Government to delay that?
There absolutely has to be that support. We have seen the tax intake from the North sea fall off a cliff. I cannot recall the exact figures, but I seem to recall that about £20 billion is set aside to deal with this rush to decommissioning, if it occurs. That is a future liability at the moment, but if the liability were to appear on the left of the sheet, the Treasury would be dealing with a double-whammy; it would not only be losing the income, but it would suddenly be liable for expenditure at an earlier stage. The real significant event in that regard will take place not tonight but on Wednesday, when the Chancellor comes forward with his Budget. The Minister and the Secretary of State will doubtless have heard the measured and well-thought-out requests from Oil & Gas UK, and I trust that even at this stage they will be using all their influence in government to ensure that as many of these requests as possible are delivered when the Chancellor stands up.
Edward Miliband spoke to his new clause 11, and he has been absolutely right in how he has brought it forward. It is measured and it future-proofs the commitments. Given the substantial commitment the Secretary of State showed in relation to the Paris negotiations, it would be a suitable way for this House to give that commitment some legislative heft.
I wish to speak mainly to new clause 12, which stands in my name and deals with the need for a strategy for a just transition from fossil fuels and towards 100% renewable energy. I also wish to highlight a few of the other proposals in this group that I support.
First, I wish to speak in favour of new clause 11, tabled by the former Secretary of State, Edward Miliband, and to thank him for the constructive work he has been doing on promoting zero emissions. The new clause would put one crucial part of the Paris climate agreement into UK law. The somewhat convoluted text of that historic agreement makes it clear that globally we must reach net zero emissions in the second half of this century. Many argued that this long-term goal should have been stronger, including by making explicit reference to phasing out fossil fuels. None the less, it seems immensely reasonable for the UK Government to set a date for zero emissions, on advice from the Committee on Climate Change. It seems like a win-win, both economically and environmentally, to have that date set, so that we can have a clear direction of travel and clarity for investors. I am reassured to hear that the right hon. Gentleman has had constructive conversations with the Government and I look forward to hearing their response.
I also support new clause 10, which deals with carbon accounting and the ETS, as it would mean the UK taking responsibility for making our own carbon emission cuts and is another immensely reasonable proposal. The need for such a change is underlined by the recent incredible claims that a new dash for gas would be compatible with our climate obligations. The UK’s renewable energy potential is vast. The costs of solar and wind power are falling, and the need to leave the vast majority of fossil fuel reserves in the ground gets more mainstream by the week. There is no longer a case for using the EU ETS as an excuse for not meeting our own carbon budgets by cutting our own emissions here in the UK. The global carbon budget is rapidly shrinking and there is simply no room for free riders. The UK should be leading the race to a zero-carbon economy, not weaselling out of making a fair contribution, which is why new clause 10 is so important.
My new clause 12 deals with a just transition, which is another aspect of the Paris climate agreement that should become a central tenet of the UK’s climate and energy policy. A just transition is about the essential steps a country needs to take to transform into a zero-carbon economy in a way that creates new jobs and supports and engages workers and communities currently reliant on high-carbon sectors.
Does the hon. Lady think the German strategy, energiewende, offers a way forward for the UK? It is about that transition from fossil fuels to renewables, with specific targets?
I thank the hon. Gentleman for his intervention and I agree with what he says, as that strategy does point to a helpful direction of travel.
As we would expect, trade unions are at the forefront of campaigning for a just transition, in the UK, the EU and globally. During the Paris climate talks, the unions made an incredibly powerful case for stronger ambition and faster action to cut emissions, and for making this transition away from fossil fuels. Central to that is the huge opportunity for job creation in new low-carbon industries. I spoke a moment ago about win-win situations, but I should have said win-win-win, as we have the jobs, the economy and the environment and energy advantages of having a clear direction of travel for this transition.
The European Trade Union Confederation, which represents 90 trade unions from 39 countries, was very vocal on this issue. As it explained, a just transition means achieving ambitious climate action in a way that benefits the whole of society and does not simply pile the costs on the least privileged. It defines key elements of a just transition, some of which are incorporated in my amendment. For example, participation is included, as consistent and strong worker participation is essential so that change can be managed in a socially acceptable way. Secondly, on jobs, Sharan Burrow, the head of the International Trade Confederation, argues that there are no jobs on a dead planet. This is about not whether we embark on a transition, but a proactive approach to ensure that that transition happens in a way that protects, maintains and creates decent jobs and wages.
Thirdly, the ETUC looks at what this means in practice, which is essentially a Government-led active education, training and skills policy and a social safety net through active labour market policies, strong social protection and support measures. There is no lack of clarity on what a just transition might look like. At the minute, the political commitment and an inclusive plan of action are sadly lacking. During the Paris climate talks, Unison’s national officer for energy said:
“Thanks to the efforts of trade unions…the EU is committed to supporting the principle of Just Transition, but this commitment needs to be delivered in a meaningful way otherwise it is just words on paper.”
The same is urgently needed in the UK, although here we also need a first step, which is the commitment to the principle of just transition as well. I hope that, as what I have described here is fairly straightforward, the Government will at least support that part of my amendment.
New clause 12 also requires the Secretary of State to be clearer about the proportion of existing UK fossil fuel reserves that should remain unexploited. The Energy Minister answered a parliamentary question a few months ago in a very helpful way, repeating the fact that the International Energy Agency has suggested that around a third of global fossil fuel reserves are burnable under a 2° scenario. That means that two thirds are unburnable, and that is for a 2° scenario and not a 1.5° one. It is also a 2012 statistic. I would be really grateful if the Department gave us an up-to-date figure, both globally and for the UK, so that we have a bit more clarity on the matter.
Major new research from University College London found that, globally, 82% of fossil fuel reserves must be left underground. Mark Carney, the Governor of the Bank of England, warned recently that the vast majority of fossil fuels are essentially unburnable.
The Government, as we know, have signed up to the Paris agreement, which goes even further, especially with the 1.5° goal. As delegates in Paris heard, that is essentially the balance between life and death for many citizens in poorer countries that are the most vulnerable to the impacts of climate change. Therefore, on unburnable fossil fuels, we need an up-to-date, clear number to aim for and concrete policies to get us there.
New clause 12 also requires the Government to redirect fossil fuel subsidies to low carbon alternatives. Ministers rather stubbornly stick to their own special definition of what a subsidy is—it seems to have a particular meaning only in energy circles, but that meaning allows them to claim that they do not have any subsidies. By any other definition—for example, that of the World Trade Organisation or the OECD—this is clearly nonsense. A study by the Overseas Development Institute revealed that the Government give the fossil fuels industry nearly £6 billion a year in subsidies, mainly through tax breaks. That is almost twice the financial support they provide to renewable energy providers, which urgently needs to change. The barriers to 100% renewable energy are not about technology or even about money, but about political will and vested interests. Those who argue against 100% renewable energy seem to think that perhaps they are the only people who are clever enough to know that the wind does not always blow or that the sun does not always shine, but they are not, and they need to get up to speed with 21st century innovation and technology. For example, why is the UK doing so little on things such as energy storage, energy efficiency and demand-side response? Those are practical, affordable and modern ways of meeting peak demand, rather than the backward thinking that simply says build more power stations.
During the Paris climate talks, a group consisting of 43 companies committing to get all power from renewable sources issued what it called “An entrepreneurs call to climate action”. That was a joint statement from 119 chief executive officers with international operations calling for 100% renewables by 2050, keeping 1.5° in reach, and an urgent end to fossil fuel subsidies. Those are the voices to which the Government need to listen. They should also be listening to leading academics. For example, last year, Stanford University laid out a road map for 139 countries to power their economies with solar, wind and hydro energy by 2050. It said that the world can reach 80% wind, water and sunlight by 2030 and 100% by 2050, with no negative impact on economic growth.
Here in the UK, a report last September from consultancy Demand Energy Equality detailed how the UK can get 80% of energy from renewables by 2030. Even if that were not the case, the sensible course of action is not to turn our backs on a goal of 100% renewables, but to invest in the research and development to ensure that we can get there. This is about fairness and justice as well as about jobs and creating a modern, resilient and successful British economy.
During the Paris climate talks, the Climate Vulnerable Forum issued the strongest call to date for full decarbonisation of the world economy, 100% renewable energy by 2050 and zero emissions by mid-century to keep the world on track for under 1.5° of warming. That group, which represents some 200 million people and which has contributed less than 2° of global emissions would suffer around 50% of climate impacts. This Energy Bill should be heeding that call for 100% renewables and putting in place policies to lead the way in getting there.
In conclusion, those are the reasons I have tabled new clause 12 on just transition. The Government urgently need to recognise the imperative of leaving the vast majority of fossil fuel reserves in the ground and to stop squandering taxpayers’ money in a suicidal search for new sources of oil and gas that we simply cannot afford to burn. In doing so, there is a huge opportunity to embrace the employment potential of renewables and energy efficiency, and to collaborate with workers, trade unions, industry and others to build a just transition to a secure sustainable economy for workers of today and the future.
I rise specifically in support of new clause 7 relating to carbon capture and storage both as chair of the APPGs on CCS and energy intensive industries and as a Teesside MP who sees it as a major generator of jobs and potential saviour of many of the country’s manufacturing plants.
The absence of CCS policy in the UK is a major concern, being a critical technology for reducing emissions from steel, cement and other industrial processes, as well as power stations. In the past 72 hours, another steel company at Stillington in my constituency had decided that it will close its doors in May with the loss of 40 jobs, so it is critical that we start making the right decisions now.
The Chancellor’s decision to axe the funding to develop the two power station projects on Humberside and at Peterhead was a major blow not just to those two projects but to the entire industry and also very specifically to Teesside, where the country’s first industrial CCS project is still being planned by the Teesside collective.
When the Energy Minister attended a packed meeting of the CCS all-party group just over a month ago, she claimed that the economics did not add up, despite the fact that the final business cases were yet to be submitted. She said that an updated policy would be developed by the autumn, but then went on to suggest that we learn from other countries as they develop their CCS industries. Well, that is not good enough. Britain has tremendous capability in this area, and could be leading where the Minister says that we should follow. I am also worried that the Chancellor does not even understand what CCS is—a worry made all the worst when I asked him a question at Treasury questions a few weeks ago. I asked him what funding would be available for CCS projects once the Department for Energy and Climate Change comes up with its new policy in the autumn. He answered:
“We have set out our capital budget and our energy policy, which will see a doubling of the investment in renewable energy over the next five years.”—[Hansard, 19 January 2016; Vol. 604, c. 1269.]
There was no capital for CCS projects there. The Chancellor talked not of CCS but of renewable energy. I would like to think that he was just dodging my question, but I am not too sure that he understood it or the need for him to send a signal to industry that he was personally committed to making CCS a reality in our country.
New clause 7 provides the Government with a new opportunity to demonstrate their commitment to CCS and to develop a real strategy with a real intention to make the UK a leader in the field.
CCS is vital, because it gives a means by which steel—and other existing energy intensive industries—manufactures the very foundation product that then goes into wind turbines and other mechanisms that we need for renewables. This is absolutely and fundamentally dependent on carbon-intensive technologies, such as virgin steel capacity and oxygen burning intensive processes. If we want a renewable strategy, whether 42% or higher, we need to have steelworks that burn in the traditional sense.
My hon. Friend and near neighbour makes the point clear.
Being a leader is critical to our energy-intensive and other industries if we are to overcome the competition threat from across the world. It is no use hanging back when other nations look like stealing a march on us. I have mentioned the Teesside Collective project to develop an industrial CCS project on Teesside, home to some of the country’s most energy-intensive industries. I invite the Minister and the Chancellor to the next meeting of the all-party parliamentary group on
The Government have made clear their intention to build a new series of gas-fired power stations and nowhere is better placed than Teesside to build one. Not only does a site exist there, but so does the infrastructure to put the electricity out directly into the national grid. Developers Sembcorp believe it could house a conventional combined cycle gas turbine plant or an integrated gasification combined cycle plant, both of which could incorporate carbon capture. Although Sembcorp could develop its own power station, a potential partner is looking to install a 300 MW gas-fired power plant on the plot.
I know that some may have reservations about the use of fossil fuels, but what an opportunity for the Government to put some meaning into the much abused term, “northern powerhouse”—a large-scale power plant, an opportunity to develop it with CCS, but with the immeasurable bonus of doing it with the Teesside Collective and developing an exciting project that could mean boom time for Teesside, with the kind of inward investment that only people in the south believe can be a reality.
I appreciate my hon. Friend’s generosity. He is right. At a time when Teesside has seen so many job losses in the past few weeks, carbon capture and storage could provide a huge opportunity for people there. Does he agree that in order to enable a transition to a low-carbon economy, we need to ensure that such jobs go to local people, and that nationally agreed terms and conditions are not undercut by recruitment from overseas?
Indeed. I know that local trade unions have been campaigning on this. There are examples on Teesside of companies undercutting what is, in effect, a living wage for the skilled people on Teesside.
I know that projects such as a power station are always fraught with planning complications, but I hope that when the time comes the doors of Ministers in both the Department of Energy and Climate Change and the
Department for Communities and Local Government will be open to ensure a quick decision on the planning application.
It is difficult to see how some of our industries, many of them critical to our economy, can remain located in the UK without CCS if our long-term national carbon reduction commitments are to be met. The Government appear to have no strategy for CCS development, let alone a means of funding it.
New clause 7 could compel Government to fill this huge hole in their energy policy platform. It does everything that any self-respecting Government would want to do, but, more than that, it could send that much wanted signal to the sector that Ministers are serious about carbon capture and storage, understand it and are prepared to deliver, and our country could benefit from potentially hundreds of thousands of jobs if they got it right.
I shall speak briefly in support of new clause 11, to which I am delighted to have added my name, and I pay tribute to my right hon. Friend Edward Miliband for the amendment, the consensual way in which he has built the discourse around it, and the work that he did as the country’s first Secretary of State for Energy and Climate Change.
Climate change is an issue on which all of us have been lobbied by many groups. Most strikingly for me, I was lobbied last year by a group of students from Notre Dame school, a secondary school on the edge of my constituency, who came to Westminster to make the point that their generation was conscious of the consequences they would face if our generation failed to act. It is an incredibly powerful point, but our responsibility goes beyond the immediate generation.
A report published only last month in the journal Nature Climate Change pointed out that much of the discourse has been focused on the consequences of failing to act by the end of this century. Looking beyond that, the problems are even more serious. According to one of authors,
“We are making choices that will affect our grandchildren’s grandchildren and beyond.”
“We need to think carefully about the long timescales of what we are unleashing.”
That was Professor Daniel Schrag from Harvard University.
The need to act, and to act more ambitiously, has never been clearer. The agreement of the Paris summit is a step forward, but as last month’s report highlighted, even if global warming is capped at Governments’ target of 2 oC, which is already seen as difficult, 20% of the world’s population will eventually have to migrate away from coasts swamped by rising oceans. Cities including New York, London, Rio de Janeiro, Cairo, Calcutta, Jakarta and Shanghai would all be submerged. We have seen the struggle to grapple with the refugee crisis that has grown over the last couple of years, a crisis driven by war in one country and a number of other related conflicts. Imagine for a moment what we will face if 20% of the world’s population is forced to do what people have always done when their homes become uninhabitable—to move to somewhere better.
So we need greater ambition and a greater sense of urgency. That is provided by new clause 11. In the words of Professor Thomas Stocker from the University of Bern, one of the other authors of the report:
“The actions of the next 30 years are absolutely crucial for putting us on a path that avoids” the worst outcomes
“and ensuring, at least in the next 200 years, the impacts are limited and give us time to adapt.”
The reservations that Callum McCaig expressed in his comments on the new clause are taken into account in the careful and thoughtful way that the clause has been drafted and the role that it provides for the Committee on Climate Change. What we need is the ambition embodied in the clause. As my right hon. Friend said, we did it with the Climate Change Act 2008, passed with all-party support, which sent a signal to the world. We can do that again; we cannot afford not to. The future is bleak if we do not cut our emissions further than Paris suggested.
The role that the new clause proposes for the Committee on Climate Change is important for the robustness of that ambition and its workability. I am pleased to hear the constructive engagement that there has been between my right hon. Friend and the Secretary of State. I hope that in her comments later we will hear that together we can move forward on the issue.
Government amendments 48 and 49 add the relevant provisions of the Oil Taxation Act 1975 and the Corporation Tax Act 2010 to the legislation listed at clause 2(6), which contains the Secretary of State’s relevant oil and gas functions. This ensures that the functions provided for by these Acts fall within the definition of “relevant functions” and can be transferred from the Secretary of State to the Oil and Gas Authority by regulations made under clause 2(2).
Schedule 1 to the Oil Taxation Act 1975 and chapter 9 of part 8 of the Corporation Tax Act 2010 contain the important oil and gas functions of determining oil fields and cluster areas, respectively. These functions form the basis of oil taxation. Petroleum revenue tax is applied by determined field, and allowances are given by cluster area to reduce the amount of profits to which the supplementary charge is applied. Both of these are functions currently undertaken by the Oil and Gas Authority in its capacity as an Executive agency, and are fundamental to our tax regime and to incentivising investment. These amendments are technical in nature and simply seek to put beyond doubt that these key functions can be transferred to the OGA once it becomes a Government company, as we have always intended.
Let me briefly explain Government amendment 51, to the long title. The amendment is consequential on the removal from the Bill in Committee of the clause on carbon accounting under the Climate Change Act 2008, which was introduced in the other place. It ensures that the Bill is compliant with the parliamentary convention that Bills should move between the Houses in a proper state.
The new clauses seek to place a duty on the Secretary of State to produce and implement a CCS strategy by June 2017 and to report to Parliament on progress every three years. They also set out that the strategy must help to deliver the emissions reductions needed to meet the fifth and subsequent carbon budgets.
As I emphasised in Committee, the Government’s view remains that CCS has a potentially important role to play in the long-term decarbonisation of the UK’s industrial and power sectors, the long-term competitiveness of energy-intensive industries and the longevity of North sea industries. However, CCS costs are currently high, which is why we remain committed to working with industry to bring forward innovative ideas for reducing the costs of this potentially important technology.
I thank the Minister for her commitment to carbon capture and storage. However, in terms of our commitment on climate change, we have seen the increased construction and usage of coal-fired power stations around the world, and it has also been well noted in the House that the removal of the CCS competition was a missed opportunity. In Scotland, we still have the Grangemouth CCS project, involving a facility fitted with CCS technology that would cut 90% of emissions. Does the Minister agree that the CCS advisory group should look at that, as an opportunity to get us back on track?
What I can say is that the Government have invested more than £220 million in CCS since 2011. This financial year alone, we have invested £6 million, including £1.7 million in October 2015, to support three innovative CCS technologies—from Carbon Clean Solutions, C-Capture Ltd and FET Engineering—and £2.5 million to investigate potential new CO2 stores. We have also invested £60 million of our international climate fund to support CCS capacity building and action internationally. The hon. Member for Stockton North will be aware that DECC provided £1 million in 2014 for a feasibility study into industrial CCS on Teesside, as part of the city deal.
As I said, CCS prices are currently high, so we are committed to working with industry on bringing forward innovative ideas to reduce costs. A key part of that is our continuing investment in CCS through innovation support, international partnerships and industrial research projects.
I recognise that industry and others are keen for the Government to set out our approach to CCS as soon as possible. As I emphasised in Committee, we will do that by the end of 2016. In doing so, we will continue to engage closely with industry, the all-party group on carbon capture and storage, the CCS strategy group and Lord Oxburgh’s CCS advisory group, which is planning to deliver its findings and recommendations to the Government by the summer.
I hope I have reassured hon. Members that the new clauses are unnecessary. I therefore hope they will be content not to press them.
As I have said to the hon. Gentleman, I continue to engage with him and others, and Lord Oxburgh’s CCS advisory group will publish its findings. We will be looking at individual projects, but as the hon. Gentleman and other hon. Members will know, CCS costs are currently extremely high, so I absolutely cannot make any commitments on particular projects right now.
New clauses 6 and 10, tabled by Mr Carmichael, the hon. Member for Wigan and others, are intended to restrict the carbon accounting rules that are allowed under the Climate Change Act from 2028—from the fifth carbon budget period. Under the current rules, we count the UK’s actual emissions for some sectors; for other sectors, we reflect how the EU emissions trading system works.
The new clauses would prevent us from continuing with that approach beyond the fourth carbon budget. Instead, the intention is presumably that the UK’s actual emissions for all sectors would be counted, but without the ability to offset any of those through a system of carbon accounting. As I have said previously, we would still participate in the EU emissions trading system even with that change, and the effect of the new clauses would simply be that we would not reflect how the EU emissions trading system works in our carbon budgets.
Of course, there are arguments for and against different accounting methods, and the issue requires careful consideration of several different factors, including the impact on consumers, businesses and industry, and on our ability to meet our domestic, EU and international commitments in the cheapest way. My hon. Friend David Mowat clearly set out some of the challenges for energy-intensive industries in that respect.
It is absolutely right that we keep under review our carbon accounting practices, but now is not the right time to make the proposed changes, because we are focused on setting the fifth carbon budget. We have to do that by
New clause 11, tabled by Edward Miliband, would set a new climate change target for the UK. Specifically, it would require the Government to set a year by which net emissions will be zero or less, and to ensure that that target was met for that year and subsequent ones. The year would have to be set within 12 months of the Bill coming into force and following advice from the Committee on Climate Change.
I sincerely thank the right hon. Gentleman for raising this important issue and for his statements to the House on the matter over a long period. I know the House was delighted with the Paris agreement, which included a goal for global net zero emissions by the end of this century. My right hon. Friend the Secretary of State played a crucial role in securing support for that goal in Paris, and I thank the right hon. Gentleman for his support in securing such an ambitious deal. I am grateful for his past and continued commitment to the important subject of climate change.
The Government believe we will need to take the step of enshrining the Paris goal of net zero emissions in UK law—the question is not whether, but how we do it, and there is an important set of questions to be answered before we do. The Committee on Climate Change is looking at the implications of the commitments made in Paris and has said it will report in the autumn. We will want to consider carefully its recommendations, and I am happy to give the right hon. Gentleman the undertaking that we will also discuss with him and others across the House how best to approach this matter, once we have undertaken that consideration.
This is an example, once again, of the House demonstrating on a cross-party basis a determination to tackle climate change, as we showed in the Climate Change Act. The Government are determined to build on the momentum of Paris, and our positive response to the right hon. Gentleman today is a clear example of that. On that basis, I hope he will not press his new clause to a Division.
Next I will respond to new clause 12, tabled by Caroline Lucas. This would require the Secretary of State to develop and publish a national strategy for the energy sector towards 100% renewable energy by 2050, under the framework of a so-called just transition. I want to start by recognising the areas where I hope the hon. Lady and I can agree. She is a passionate advocate for action to tackle climate change, to which this Government are firmly committed. Our domestic Climate Change Act is world leading, and my right hon. Friend the Secretary of State played a critical role last year in securing a strong global deal in Paris. We can also agree on the important role for renewables in helping to reduce emissions. In particular, I welcome the progress we have seen so far in driving down the cost of renewables technologies such as offshore wind and solar.
While I hope that we can indeed agree on those points, we do have different views on the best way to go about reducing emissions. There are three reasons why I cannot accept the hon. Lady’s new clause. First, it goes against the principle of technology neutrality, which ensures that we can cut emissions at the lowest cost to consumers. Secondly, we already engage very widely on our approach to decarbonisation. Thirdly, the new clause overlaps significantly with the existing legislative requirement for us to publish policies and proposals for tackling climate change. We are committed to ensuring that the UK continues to do its part to tackle climate change, but we want to cut emissions as cheaply as possible and to drive down costs for families and for businesses.
Will the hon. Lady elaborate a little more on her point about technology neutrality? All I am talking about is renewables, energy efficiency, storage and so forth. If she knows of some wonderful new technology that can get our emissions down more quickly and more cheaply, I would love to hear about it.
As the hon. Lady well knows, one transitional approach to decarbonisation is to move away from coal and towards gas as a bridge to a low-carbon future. She will also be very aware that new nuclear offers a low-carbon technology for the future, and this Government are committed to supporting that.
I appreciate the intent behind much of the hon. Lady’s new clause, but I hope that she can see why I cannot accept its specifics and that she will be content to withdraw it.
I turn now to new clause 8, tabled by the hon. Member for Wigan and others. This would require the Secretary of State to set a decarbonisation target range for the electricity generating sector. We debated very similar amendments in the previous Parliament, and during the passage of this Bill in the other place and in earlier Commons stages. The Government have made our position on this matter very clear. We are committed to ensuring that the UK continues to play its part to tackle climate change, in line with the Climate Change Act and our international and EU obligations. However, we want to do this as cost-effectively as possible in order to keep costs down for families and businesses while delivering on legally binding commitments. We cannot do that by locking ourselves into additional expensive and inflexible targets relating to the power sector. There are too many things we cannot predict about how the energy system will develop over the next 15 years and beyond. The costs of getting this wrong now would be picked up by families and businesses for decades to come.
I find it strange that Opposition parties often argue that we are not doing enough to tackle fuel poverty, and yet they are urging us to sign consumers up to a distorting and expensive power sector target. Investors want to know that we have clear, credible and affordable plans. The Government are now setting out the next stages in their long-term commitment to move to a low-carbon economy, providing a basis for electricity investment into the next decade. The huge investment we have seen so far is evidence that our approach is working. Between 2010 and 2014, our policies have secured an estimated £42 billion of investment in low-carbon electricity, including £40 billion in renewables, and we have more in the pipeline for the future. I therefore cannot accept this new clause, and I ask hon. Members to withdraw it.
I would now like to deal with new clause 9, tabled by the hon. Member for Wigan and others. This seeks to introduce additional capacity market eligibility criteria requiring any new-build capacity accessing 15-year capacity agreements to be made subject to the emissions performance standard, or EPS. As I have explained previously, the new clause does not achieve its intended aim, so I am surprised to see it reappear. The EPS sets an annual limit specifically on CO2 emissions from new fossil fuel plant with an output above 50 MW. Any new fossil fuel generators above 50 MW seeking to participate in the capacity market will already be subject to this limit, so nothing would be gained by introducing this as a further eligibility requirement in the capacity market. Existing generators, which form the majority of capacity market participants, cannot access 15-year agreements, so the new clause would also have no impact on those generators.
As I have set out before, the emissions impact from smaller generators that sit below the 50 MW threshold is often assumed to be larger than it is in reality. Small “peaking” generators have a relatively small impact on overall CO2 emissions due to the short hours that they run. These generators typically run for less than 100 hours a year, in the case of diesel engines, while larger fossil fuel plants will run for 2,000 hours or more. The new clause is therefore not effective, for the simple reason that the annual EPS CO2 emissions limit would be very unlikely to have any impact on small generators participating in the capacity market.
Is not the proposal that the Minister herself is putting forward for the future inclusion of small diesel sets into air quality standards subject to exactly the same problem, in that smaller diesel set generators are brought into a scheme that was originally proposed for larger generators, thereby including them in the system? That is exactly what the new clause proposes through smaller diesel sets coming into an emissions performance standard that otherwise would apply to larger plants.
As I have explained to the hon. Gentleman, his new clause would not actually have that effect.
However, I am not complacent about concerns associated with local pollutants from small generators. I am very aware of the concern about diesel, in particular. Later this year, the Department will consult on options that will include legislation that would set binding emissions limit values on relevant air pollutants from smaller engines, with a view to having legislation in force no later than January 2019, and possibly sooner. These limits would apply to generators or groups of generators with a rated thermal input equal to or greater than 1 MW and less than 50 MW, irrespective of their number of hours of operation during any given year. This shows that the Government are taking appropriate action to avoid any disproportionate impact on air quality from smaller engines where those could contribute to harmful levels of air pollutants and the exceeding of existing air quality limit values. These limits, along with other proposals we have recently announced, send a clear message about the viability of developing and running diesel generators in future. I hope that hon. Members have found my explanation reassuring and will be content to withdraw their new clause.
I turn now to new clause 5, tabled by Mr Carmichael. This seeks to reinsert the clause added by the Opposition in the other place, once again rewriting the Oil and Gas Authority’s principal objective of maximising economic recovery of UK petroleum. This topic has been debated at length throughout the passage of the Bill. The Government successfully removed the previous iteration of this clause at Committee, with the support of Scottish National party Members. Importantly, I note that it was agreed across the room, including by Opposition Front Benchers, that diluting the focus of the OGA in such a way was undesirable. In light of this, I am surprised and rather disappointed that the right hon. Gentleman has tabled this new clause, not least because of the serious implications it has for jobs and growth in Scotland. As I have said many times, any amendment that detracts from the OGA’s focus on maximising economic recovery is damaging to the North sea. Such a move is unacceptable, particularly at a time of unprecedented challenge for the oil and gas industry.
The right hon. Gentleman misses the point. The OGA is going to have an enormous brief. The point about its principal objective being to maximise the economic recovery is that that would focus its efforts on the long-term sustainability of the North sea and not what the other House tried to put in place, which is related to short-termism and trying to maximise profitability and so on. That would be counter to the interests of jobs and growth in his constituency and others. Removing the OGA’s focus on that principal objective seriously risks weakening its ability to provide support to an industry that is urgently in need of it, and the potential knock-on effect would be significant. Doing so would risk the premature decommissioning of key North sea infrastructure and would seriously jeopardise vital skills and experience, including those that could help to promote the longevity of the industry through carbon storage projects. From that perspective, the amendment is self-defeating. Furthermore, the “Maximising the Economic Recovery” UK strategy has now been published and is currently before Parliament. The amendment would undo the significant amount of work that has been undertaken with industry and would require the OGA to revise its MER UK strategy to take into account the expansion in the principal objective.
As the hon. Member for Aberdeen South has mentioned on several occasions, it is mission critical that the OGA maintains a “laser-like focus” on maximising economic recovery above all else. Without such a focus, we risk conflicting the OGA—setting it up to fail in its crucial mission to protect our domestic energy mix and to support hundreds of thousands of jobs. That is not what is best for the UK continental shelf now or in future.
I thank the Minister for drawing attention to that. It is absolutely fundamental that the OGA has that laser-like focus. It is also fundamental for the industry that the Chancellor has that laser-like focus. I reiterate to the Minister the need for her to use her good offices to make sure the industry gets the support it needs on Wednesday.
I am grateful to the hon. Gentleman for that. He will be aware that the Chancellor and the Prime Minister have looked carefully at the matter, so I hope that he will be pleased. I assure him that his interests and the interests of the UK continental shelf are being carefully considered. I hope that the right hon. Member for Orkney and Shetland will be content not to press the amendment to a vote.
Finally, hon. Members will be pleased to know, I turn to amendment 47, which was tabled by the hon. Member for Wigan and others. The amendment would oblige the OGA to consider the most advantageous use of North sea infrastructure for the overall benefit of oil and gas extraction prior to the decommissioning of such sites. I am delighted to note the support across the House for the measures to establish the OGA and give it the powers needed to maximise economic recovery. The impact of the fall in oil prices on industry makes that even more critical.
Although we are taking urgent steps to stimulate investment in exploration, it is equally important to the overall viability of the North sea that we make the best use of infrastructure in order to mitigate the risks of premature decommissioning. That requires a holistic approach in which operators, licence holders and infra- structure owners collaborate to ensure the maximum economic recovery of petroleum from the UK continental shelf. That is precisely provided by the OGA’s principal objective set out in section 9A of the Petroleum Act 1998.
The strategy to maximise economic recovery further addresses that issue. It includes duties to plan, commission and maintain infrastructure in a way that meets the optimum configuration for maximising the value of economically recoverable petroleum, taking into account the operational needs of others. The strategy and the measures in the Bill ensure that before commencing the decommissioning of any infrastructure in relevant UK waters, both the owners of the infrastructure and the OGA must ensure that all viable options for its continued use have been suitably explored. The OGA is already working to support a stable and sustainable decommissioning framework focused on improving late-life management. The OGA will publish its decommissioning sector strategy early in the summer. I hope that hon. Members have found my explanation reassuring and will be content not to press the amendment to a vote.
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