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My Lords, I draw noble Lords’ attention to my entry in the register of interests, particularly my commercial interests in the clean energy economy and my membership of the boards of the Environmental Defense Fund Europe and the Climate Group.
I congratulate the noble Lord, Lord Teverson, on securing this important debate and on his excellent speech. That should come as no surprise as I have engaged with him over many years. He is not only very knowledgeable on this issue but has a broad horizon. The points that he made were very apposite.
I am very excited that after what one might politely call a lull, this Government have finally got their green mojo back. It cannot go unnoticed that we now have three important Ministers at the heart of government re-energising and driving the green agenda forward again. I was delighted to see the Climate Change Minister promoted to the Cabinet in the recent reshuffle. She is the author of the clean growth plan and I know from personal experience that she is fizzing with ideas and absolutely determined to turn them into action. I am delighted to see that the Secretary of State for Business, Enterprise and Industrial Strategy remains in his place—I am sure that was always the Prime Minister’s plan—to drive forward that industrial strategy, which has a rich green vein running through it. I know that he is absolutely committed to the decarbonising agenda. Perhaps for many the greatest surprise of this parliamentary year was the vigour with which the new Secretary of State for the Environment has grasped this agenda. Those of us in particular who may not see eye to eye with him on his Brexit views could not fail to be impressed by the reforming zeal which he has brought to that brief. He has turned Defra from an outpost and backwater in Whitehall to probably the most exciting department in government. That is great. I can honestly say that I have not been this excited about the Government’s green agenda since 2006, when I was pulled to the top of a glacier in Norway alongside David Cameron by a group of rather photogenic little huskies, who together helped us push the green agenda to the top of the political agenda back here at home.
Following that politically important trip, I was very proud to play my part in taking the Climate Change Act through the House of Commons for the Conservatives. The great thing about that Act, which had a few critics at the time, was the strong cross-party consensus that underpinned it. It is a tribute to the Labour Government of the time that they brought it forward, but in Committee, the other place and here, Parliament was at its best, and being constructive.
The criticism we faced on the climate change legislation was that we were unduly precipitate in acting the way we were, legislating in quite a dramatic way and responding to a threat that was not yet proved. Some of the assumptions that we put on the face of the Bill, requiring emissions reductions for decades to come, were very bold indeed. We had no way of knowing whether we would be able to achieve them. I am particularly proud that, thanks to that strong cross-party action, we have an Act in which targets are being met. We have met the carbon budgets up to 2017. Although there is more action required to deliver the carbon budgets in the coming decades, I am confident that there is the will in government to close the relatively small gap that will see us through to the 2030s.
I do not want to sound complacent. I do not pretend that this is going to be easy—the easiest things are probably behind us now. We can all marvel at the fall in the cost of clean energy. It is quite extraordinary. When I became a Minister in 2010, the subsidy for the smallest solar installation was 43p per kilowatt hour. To all intents and purposes, there is barely a solar subsidy now. At a commercial level, solar farms are going into operation without any subsidy at all, but the profitability of solar continues to grow. This is fantastic and confounds all of those sceptics and naysayers. It fully warrants the Government’s intervention and public investment in those early schemes and tariffs.
Here we are in 2017. Not only was the UK the first country to introduce binding domestic climate change targets but, in 2016, as the noble Lord, Lord Teverson, said, we were instrumental in helping secure the Paris Agreement. Since 1990, our national carbon emissions have fallen more and our national income has risen faster than any other nation in the G7. We have proved once and for all that you can reduce pollution while increasing prosperity.
The latest figures from the National Grid indicate that last year was the greenest year ever for the energy sector. Between June and September, almost 52% of electricity generation came from low-carbon sources and we now have the largest installed offshore wind capacity in the world. The cost of offshore capacity is tumbling thanks to that early Government support. We are also continuing to phase out coal; the leadership that the UK Government are taking on that is particularly commendable. However, all of this investment historically and in the future is dependent on raising sufficient scale of finance. As the noble Lord, Lord Teverson, said, the amount that we have to secure is mind-boggling.
My first real engagement with this agenda came in 2010, when I attended my first international climate conference as a Minister. That was in Oslo, just after the May general election. At the time, the international community was doing its best to pick up the pieces after the disappointment of Copenhagen in 2009. One of the few positive things that came out of Copenhagen, thanks to Gordon Brown, was the commitment that the UK secured to mobilise $100 billion in climate finance a year, by 2020, from developed to developing economies. However, that was about as far as it went. It was a vague ambition—an aspiration. It was not at all clear where that money was going to come from or where the split between the public and private sector would be, which was open to a broad interpretation.
On the flight home, sitting with my private secretary, I began to scribble a few questions on the back of an easyJet napkin. Which institutions will create these products? Which fund managers will buy these products? Which investment banks will invest in creating these markets, and, in fact, which markets will support these products? There were so many questions. When I came back, therefore, I convened a round-table discussion of a few people from the City. That small discussion became something called the capital markets climate initiative, which in turn, by the time I ended my tenure, had grown to include about 60 or 70 UK institutions from the City. I became incredibly impressed by the way in which City institutions are keen to engage on this agenda, prepared to think beyond tomorrow to years to come, and prepared to innovate to design the type of financial products we need. However, there is still a strong requirement for government leadership—for government to convene, and, when necessary, to intervene in the market. As the noble Lord, Lord Teverson, said, there is still a need for international leadership.
We therefore need to look carefully at the recommendations of the green finance task force that the Government have set up, particularly as it relates to transparency—as the old adage says, “If you don’t measure it, you can’t manage it”. We also require far more of our institutions—in fact, the vast majority of our City institutions—to engage much more strictly with this agenda and to be much more open and transparent in the investments they make.
I was interested in a report that Christian Aid produced and kindly sent to me ahead of this debate, entitled Our Future in Their Plans: Why Private Finance is the Public’s Business, in which it commended Aviva and Legal & General for their response to Paris, their clear targets and their positive engagement. Unfortunately, nearly all the other institutions that were measured fell far short of what we need in the current post-Paris age to deliver those 2020, and indeed 2050, climate targets.
I am an optimist, but we need the Government to continue to lead if we are to maximise the impact that the City of London and British financial institutions can have, not just here in the UK but around the world, in helping stave off the worst impacts of man-made global warming.