Clause 123 - Climate change levy: electricity produced

Finance Bill – in a Public Bill Committee at 10:00 am on 20th June 2002.

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Question proposed, That the clause stand part of the Bill.

Photo of Christopher Chope Christopher Chope Shadow Spokesperson (Transport)

Most Committee members will have received a communication from the Association of Coal Mine Methane Operators, which, while welcoming clause 123, says that it will not deliver the full benefits. The organisation says that to tackle comprehensively the problem of coal mine methane escaping into the atmosphere from disused mines, the industry needs the same energy prices that are available to other renewables, such as methane from landfill sites, which would enable it to capture the emissions from a further 300 abandoned mine sites. It is arguing that coal mine methane should be defined as a renewable source under the Utilities Act 2000. I know that an amendment to that effect that was tabled has not been called, but I hope that the Economic Secretary will take the opportunity offered by this clause stand part debate to answer the charge that the Government are going so far to help coal mine methane operators, but not far enough. As this organisation says:

''Much of the benefit of this welcome measure has been eroded by the continued fall in electricity prices . . . restoring the industry to its price position of about 18 months ago''.

I hope that the Economic Secretary can do something to assure those who are responsibly trying to make something productive out of coal mine methane.

Photo of John Healey John Healey The Economic Secretary to the Treasury

The clause will exempt electricity generated from coal mine methane from the climate change levy. It may help the Committee if I explain why methane is so important in this context. Methane is a potent greenhouse gas that escapes into the atmosphere from abandoned coal mines; it has a global warming potential 21 times greater than an equivalent unit of carbon dioxide. Trapping coal mine methane in order to generate electricity results in environmental benefits, as well as giving economic benefits to former coalfield areas. Using coal mine methane to generate electricity reduces its global warming potential by about 85 per cent. The exemption will be reviewed after 2004–05 in light of further data on the environmental benefits being delivered by the technology. Provided further monitoring shows that coal mine methane continues to deliver environmental benefits, the Government would expect to continue the exemption. It is fair that I point out to the Committee that introduction of the measure is subject to EU state aid approval.

I shall try to be helpful by telling the hon. Member for Christchurch that there are several reasons why his may not be the best solution to assist the coal mine methane industry, and may not be appropriate for our environmental objectives. First, including coal mine methane in the renewables obligation would potentially displace renewable sources such as offshore wind, wave and tidal power. Secondly, if the obligation target were increased to make way for coal mine methane, there would be a substantial additional cost to the electricity consumer that has not yet been justified. I am keen to point out to the hon. Gentleman that that is not to say that the Government are unsympathetic to what the industry is attempting to do. Indeed, we support the industry and are actively looking at appropriate means by which we can support it in its efforts to expand the use of emissions from abandoned mines, which would otherwise vent out into the atmosphere, with an environmental impact that I have already discussed.

Finally—this may be the answer to the hon. Gentleman's point about the amendment's not being selected—giving coal mine methane a renewables obligation is outside the scope of the Finance Bill, which is limited to matters of national debt and public revenue.

Photo of Christopher Chope Christopher Chope Shadow Spokesperson (Transport)

The Economic Secretary says that he is looking at treating coal mine methane as a renewable source of energy. When he does that, will he look at what happens in Germany, where renewable resources legislation introduced in 2000 treats coal mine methane as a renewable source of energy? As a result, the industry receives an incentive worth 5p per kWh compared with the United Kingdom rebate

of only 3p per kWh. Some 80 coal mine methane projects are being planned in Germany, and the industry says that it could be a case of a British technological lead in a new industry being lost to the Germans. Is the Economic Secretary concerned by that?

Photo of John Healey John Healey The Economic Secretary to the Treasury

Perhaps I can make it clear to the hon. Gentleman that we are looking at the support that we can give to aid the expansion of the industry. We have looked at the question whether coal mine methane should be a designated or renewable source of energy. In doing so we were aware of the situation in Germany, but concluded that that would not be the right step to take.

Question put and agreed to.

Clause 123 ordered to stand part of the Bill.