My Lords, I thank the Minister for that interesting reply. I know he did not mean to, but he misrepresented my argument to a large degree, in that I am one of the House's greatest advocates of the EU ETS. However, as most environmental reports say—including, I believe, the Stern review—it is not the only instrument that needs to be used.
I did not mention California; I meant to, but I forgot. I am glad the Minister did, though, because when I was on the climate change committee for the draft Bill we received evidence from California. One of the main objectives there was to introduce, along the west coast of the United States and into British Columbia and other western provinces of Canada, an emissions trading scheme based on the EU ETS, which is seen as the leading international cap-and-trade system. It is a priority of California to introduce such a system for carbon emissions in addition to, not instead of, a regime for regulating emissions standards for its power stations. It sees the need to have more than one policy instrument in this area.
I was interested to hear the arguments of the noble Lord, Lord Jenkin. Normally I treat his advice and comments very positively, but one of the few issues I disagree with him on in this area is the "dash for gas" argument. I was surprised, too, that the Minister used it. It is clear that the reason there might be another dash for gas is that coal will not be able to be used so much. But that is exactly the purpose of the EU ETS; there is no difference between the outcomes of this instrument and the EU ETS, particularly as the Government themselves wish to put carbon units out for auction for the energy industry. That will have exactly the same effect in terms of any preference for construction of gas powerhouses as emissions standards regulations will have.
With regard to uncertainty, I have agreed many times with the noble Lord about the fact that carbon pricing has been so variable that that is very unuseful to industry and long-term investment in terms of carbon pricing and the decisions it has to make. We accept that. It is one of the problems in terms of a market-based EU ETS, but we know it is the right way to go. With regard to government regulation, you can give signals to industry with either a stepped regime or announcing well ahead, as happens in the automotive and many other industries; those show much more clearly than pricing mechanisms what is expected of it in the future. When it comes to major investment, what will concern the power industry is not the major regulations that go through a proper consultation procedure, start at a particular time in the future that is reasonable and have sensible stepping thereafter. That is not generally an issue with industry; rather, this is about the unknowns and the risk factors. As I said previously, one of the issues that came out of the Stern review was that you cannot have just one policy instrument for various areas: you need more than that.
We talked earlier about carbon capture and storage, and the noble Baronesses, Lady Young and Lady Wilcox, were right in saying that sensible, future regulation will stimulate carbon capture and storage investment far more than the competitions that we have been talking about.
Lastly, I think that the Minister missed my final paragraph. In his response, he said that there was a problem; that such action needed to be taken at a European level; and that there was a risk that if we went ahead with the proposal, energy from elsewhere in Europe might undermine our own industry. I made an offer to the Government accepting that, saying that one of the ways out was to give a commitment to use the national omissions reduction plan and the large combustion plant directive, and to take it on in the Council of Ministers. That meets the Minister's point exactly and, in a way, I would accept that as at least an act of good faith towards my proposal.
I believe that this issue is fundamental to the way in which we move forward. It is related to investment in energy plant that will exist beyond our tight 2050 targets, which I welcome. I think that on this issue the Government need to bite the bullet and I wish to test the opinion of the House.