Committee (2nd Day)

Part of Energy Bill [HL] – in the House of Lords at 4:15 pm on 9th September 2015.

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Photo of Lord Oxburgh Lord Oxburgh Crossbench 4:15 pm, 9th September 2015

My Lords, Amendment 34A seeks to impose certain open discussion on the possibility of imposing on importers or extractors of fossil fuels certain obligations with respect to managing the emissions associated with them. To backtrack for a moment, we are building up towards the Conference of the Parties in Paris later this year. One cannot avoid the feeling that there is something in the air, including President Obama’s initiatives on climate change in the United States, the new undertakings offered by China and the letter from half a dozen major oil companies to the United Nations urging for a high carbon price in order to manage global emissions. There is a general recognition that, unless something changes, business as usual will mean an inexorable march towards a 4-degree world. I do not think that anyone really wants that.

There is no single silver bullet to avoiding this but, having said that, I do not think that there is any credible solution to the problem of global emissions that does not involve carbon capture and storage. The Minister has already made reference to that. Despite the Government having made a continuing and substantial effort, one of the difficulties with CCS is that progress has been glacially slow. The discussion about carbon capture and storage has now been going on for more than 10 years. Perhaps I may remind the House that that was the time from the beginning of the space race to putting a man on the moon. What we are talking about is not space technology, but something much more readily tractable. It is a matter of getting the will and the institutions to get something done in time.

There are various reasons why we have not made progress. It was expected that the Emissions Trading Scheme would be successful, but it has failed to achieve a sufficiently high carbon price to promote carbon capture and storage and to drive substantial change. One of the problems is that many parties—I do not mean in the political sense, but the many interest groups and stakeholders—support carbon capture and storage but none can make the business case for urgent action or commit substantial resources, whether they be coal companies, oil and gas companies, electricity generating companies or cement companies. All have an interest in carbon capture and storage, but it is not the specific responsibility of any of them. In that sense, CCS is an orphan technology. It has numerous well-meaning aunts and uncles, but no parents who will really acknowledge it. Therefore, there is no one to take driving and fundamental responsibility for pushing it forward.

The amendment provides an opportunity to discuss a proposal that has its origins primarily in the universities of Edinburgh and Oxford, but which has support from a number of others. For those who might want to look at this proposal, which I have to say is immature in a number of ways, it can be found on the website of Scottish Carbon Capture and Storage in its third working paper for 2015. I am told that that reference is now in place. The amendment, which I will describe in a minute, would provide carbon capture and storage with very clear parents with a very strong interest in ensuring that the offspring thrived. Basically, what is proposed is a regulatory requirement,

“on producers and importers of fossil fuels to sequester, or pay for the sequestration of, a small but rising fraction of the carbon content of the fossil fuels they extract or import into the United Kingdom”.

This would be a major change in the way that CCS activity is supported. It would involve no call on the public purse. The call would be on the purses of the importers or extractors. Carbon capture and storage would be driven by what is exclusively a market mechanism. That is how the attention of these major corporations would be very securely obtained. They would find a way to do this as efficiently as possible.

This mechanism is relatively easy to implement. It would attack a number of problems that are currently major stalling blocks for carbon capture and storage. One of the big problems is how you get the infrastructure in place in the North Sea: who will take responsibility for it? If CO2 is captured on land, who will pay for a pipeline or for the storage? It would be absolutely clear who had to do this if this way of supporting CCS was introduced. We would find that the major corporations that operate in the North Sea would simply continue the kinds of co-operation that they have at present to make joint use and maintenance of pipelines et cetera where that is appropriate.

As this kind of mechanism is phased in, the other carbon levies, of which there are several, could be phased out. Nothing desperately urgent is proposed but these things could be merged. Costs are obviously important. The estimate of the groups in Edinburgh and Oxford is that if a mechanism like this were introduced gradually, at the very first stage there would be, for example, some tiny fraction of a penny increase on the cost of petrol. Rising over 10 years as the fraction of emissions for which the companies were responsible increased, it could go up to 2p, but it is not big and could be introduced gradually. The big point to bear in mind is that we could do carbon capture and storage for all our CO2, even on the more extravagant estimates, for a tiny fraction of the change in value which we have seen in the oil and gas markets. We are talking about something very small here by comparison with the fluctuations which we have seen over the last 12 months.

I hope I have said enough to indicate that there is a germ of an idea here. It still needs fleshing out and all sorts of implications need to be teased out in more detail. On the other hand, there is sufficient here for all stakeholders, including the Treasury, the Government as a whole, the industry and consumers for this to be worth looking at in more detail.

On Monday, the Minister emphasised the government interest in CCS and he has re-emphasised that today. There was reference to getting maximum economic recovery from the UK shelf and North Sea. It is very hard to claim that one is getting maximum economic recovery if one does not include the use of the shelf for carbon capture and storage because this has the potential to be a much more valuable industry than the residual oil and gas.

Finally, doing this would be a shot in the arm for the industry in northern and north-west England. Jobs would be associated with it. It would allow the oil companies to provide jobs for many of the people they are having to lay off. Furthermore, there would be jobs in construction, particularly in north-west England. In short, I think this issue merits much more detailed scrutiny. We also have to recognise that time is not on our side in two ways: from a climate change point of view; but, even more importantly, in the North Sea, where gas and oil fields are being closed down. Many that are potentially usable for CCS may be sealed permanently and cannot be reopened without considerable expense unless we move very fast indeed. I beg to move.