My Lords, I, too, thank my noble friend Lord Vallance and his committee for this report. I do not want to sound as though I am damning it with faint praise, but I found the appendices particularly useful and will refer to them many times. The one on Denmark is often used out of ignorance for one argument or another, as are the various comparative renewable technologies and where they stand today.

Professor Dieter Helm has been mentioned a couple of times. He is certainly one of my heroes in this area. I have read some of his other papers, and the one that I remember most was the one that said that the cost to the global economy of the measures that we need will be much higher than the Stern report suggested. That is true, and is something that I think we all understand. Stern's assumptions may have been optimistic. We all realise that the cost will probably be more than that, but we all realise what the cost will be if we do nothing. That is always the comparison.

Professor Helm also pointed out very strongly that none of the policy decisions and actions that have been taken by national Governments has so far had any effect on carbon emissions to date. One of his other very strong messages was that we are looking through the wrong end of the telescope when we look at carbon emissions by nation; we should really look at carbon consumption. This is one of his main arguments in the academic press in other areas.

In an answer to a question asked by the chairman of the committee, Professor Helm says:

"We certainly have a serious responsibility to address climate change, and we are responsible for quite a lot of the past emissions that are up there in the atmosphere, so I would not in any way want to belittle the need for the UK to make its contribution".

Although Professor Helm has some very important things to say, and although there are some very important lessons to be learnt from what he says, he understands that climate change can be addressed by policy decisions, even if he does not particularly like those decisions. We must remember this area behind the report. We cannot ignore it. The whole raison d'être of renewables is the climate change agenda. We cannot get away from that. We cannot look at renewables without seeing that agenda and, to a lesser degree, the agenda of energy security. Clearly the energy security challenge could be met completely by a coal-based solution rather than a renewables solution, but if we believe that climate change is an issue, renewables can contribute as well. We cannot have a scenario in which renewables are not an essential part of the answer to the climate change challenge. The follow-on from that is that if renewables are part of the solution, some people will see nuclear as also being part of it, and others will see carbon capture and storage.

The big area which the report does not address—quite understandably, as it is not within its remit, which it makes clear—is energy savings. Only through those combinations do we as a nation state, let alone the rest of the world, have a chance of meeting the sort of targets that we are setting. We on these Benches are very sceptical about nuclear, but even if you believe in nuclear it is not the whole answer, if only because it provides a completely baseload solution. You also need a variable input. Renewables can be intermittent. Wind power is certainly intermittent, but the National Grid has told me that intermittency of up to the low 20 per cents is not a great issue in terms of the instability of the national grid and the electricity supply. We are nowhere near that at the moment, although by the time we reach the 2020 targets we could be if the other technologies do not come in. It is certainly not a reason for stopping investment at the moment.

The big tragedy about renewables is that we are left with pretty much only one technology that we can drive forward at present. That is certainly how it appears to be, although that is more and more disputable in certain ways. There could be all sorts of other areas. I particularly congratulate the report and my noble friend Lord Vallance on having stressed the whole area of heat, where there is clearly an important need to increase our renewable technology, and as a proportion of renewable energy as a total.

Earlier today we discussed the possibility of biogas going straight into the national grid. To give National Grid plc its due, it referred to it as the "stretch option" and it is probably about as stretched as elastic could ever get. But it shows, under a regime where we decide that these types of measures are necessary, what could be achieved. There are other technologies. Unfortunately, hydroelectric, which would also give some storage ability in terms of electricity, is somewhere near its capacity, but we also have geothermal, which we have talked about, and heat-pump technology. All these have to be a major part of meeting these targets.

One of the main problems is diversity and a problem that has been mentioned by noble Lords, particularly at the minute, is the cost of carbon. The report specifically goes through the different types of renewable technology and other energy technologies, and states their cost per unit of electricity. Clearly, those costs do not take into account the carbon. Carbon emission is not free. It is a pollutant and it has to be costed into the price of any of those technologies. The one technology that it was not able to cost, quite rightly because it has not been commercially achieved yet, was that of carbon capture and storage with coal generation. So we do not have the complete picture. But looking at these different technologies without a reasonable price of carbon gives only a very limited picture.

I would be interested to hear from the Minister how the Government are thinking about the cost of carbon. As my noble friend Lord Redesdale said, we have an EU ETS sceptic. To a large degree I am much less so, but at the moment it is hard to look at the EU ETS and see how that will help to drive forward investment by commercial businesses in terms of low-carbon technologies. It is taking away that incentive of a stable carbon price. Probably, this is where the Government rightly disagree with a number of their European partners. But we have given away all those carbon permits for free. They have an actual value, so when there is a liquidity crisis in the economy and it looks as though those permits will not be needed for a considerable time, what does any finance director say? He says, "Sell the assets I don't particularly need or I won't need for a long time ahead that have got liquidity value. Get those out". And there will be a fall in the carbon price. The knock-on effect would be that all other boards of directors and people looking forward to investment would not see the right price signals in terms of future low-carbon technology investment.

What lessons come out of this report? I believe it is that renewables are essential and have to be part of the solution, but that we need a number of different renewables than we have at the minute. It will be very tough to meet the 15 per cent target. The whole difficulty has been a lack of research and development, as the noble Lord, Lord Layard, said, in the distant past. We need to continue to ramp up that investment. We are suffering now from a lack of investment in the past because of low energy prices, particularly the low price of oil over the past two decades prior to two or three years ago.

We need to decarbonise our electricity supply because, ultimately, it gives us not just the electricity proportion that we have now, but also much greater flexibility. It could substitute for transport fuels in the future and other forms of energy consumption. It is relatively portable, or it can be. We need to invest much more in heat technologies. I also believe that we should not give up on biofuels, which are increasingly contentious. That will be a part of the future, not just in second or third generation, because biogas gives us an opportunity to move forward in terms of those fuels. The noble Earl, Lord Selborne, spoke about the use of waste oils, which is very important. Biodiesel can be very effectively produced from those waste products. Can we make sure that the fiscal regime works for that?

We need research and development, but we need to increase our multinational collaboration in this area, despite all the difficulties that there might be with intellectual property and so on. We have to find a way to do that. We need to make sure that we have a much better indicator of the price of carbon, maybe through taxation rather than just cap and trade systems. The noble Lord, Lord Broers, summed up the whole matter: we have to get on with this agenda. Stern was absolutely right, although we may have to adjust the figures. But it is clear that the earlier we find effective solutions to the problem of emissions, the easier, or less difficult, it will be. We need to get on with it, which is why we need wind power, an existing technology. We certainly need to bring all those others on board to make sure that we have a full range of instruments to fight this challenge in the future.