UK Decarbonisation and Carbon Capture and Storage — [Mr Clive Betts in the Chair]

Backbench Business – in Westminster Hall at 11:29 am on 24th January 2017.

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[Mr Clive Betts in the Chair]

Photo of Phil Boswell Phil Boswell Scottish National Party, Coatbridge, Chryston and Bellshill 2:30 pm, 24th January 2017

I beg to move,

That this House
has considered UK decarbonisation and carbon capture and storage.

It is an honour to serve under your chairmanship, Mr Betts, and to have secured this debate. First, I declare an interest. Prior to coming to this place, I was Shell’s contract lead on the carbon capture and storage project at Peterhead. I moved the project from its previous format in Longannet. Further to that, I was on the CCS parliamentary advisory group working under Lord Oxburgh. It reported to the Secretary of State for Business, Energy and Industrial Strategy in September last year with the report, “Lowest Cost Decarbonisation for the UK: The Critical Role of CCS”. I therefore have great interest in the subject, and I commend all Members who have come forward to speak in the debate.

It is prudent to consider, at least summarily, the background against which the debate has been brought to the House. Since successfully winning a narrow majority, the Conservative Government have been rapidly drawing back from the previous coalition Government’s much-lauded green policies. Tony Juniper described it in his article in The Guardian on 24 July 2015 as

“an anti-environment ideology based on the view that ecological goals interfere with the market, increase costs and are against the interests of people.”

The cancellation of the ring-fenced £1 billion funding for the carbon capture and storage competition on 25 November 2015 is just one of a succession of cancellations of green policy initiatives and renewable programmes. Those cancellations include scrapping support for onshore wind; axing solar subsidies; removing the guaranteed level of renewables obligation subsidy for biomass; killing the flagship green homes scheme; privatising the green investment bank, which my hon. and learned Friend Joanna Cherry will discuss tomorrow; removing incentives to buy greener cars; abandoning the plan for zero-carbon homes; a U-turn to allow fracking on sites of special scientific interest; dropping the green targets; and—this is what triggered the CCS parliamentary advisory group’s report and, subsequently, this debate—scrapping the ring-fenced £1 billion of funding for the carbon capture and storage competition in November 2015.

With so much backtracking on green and renewable energy initiatives, the scrapping of that funding may not have been a shock to everyone. I forecasted it, but the industry, which was four years into the £1 billion competition, was shocked. Quite honestly, it virtually wiped out the industry in the UK in one fell swoop. Dr Luke Warren, chief executive of the Carbon Capture and Storage Association, said that the decision was

“just incredible. Only six months ago the government’s manifesto committed £1bn of funding for CCS…Moving the goalposts just at the time when a four-year competition is about to conclude is an appalling way to do business.”

What does that do for investor confidence? The litany of cancelled, diluted and abandoned renewable and green initiatives, as well as those within the energy industry as a whole, have virtually destroyed investor confidence in the UK energy sector. The third report of the 2015-16 session by the Energy and Climate Change Committee, “Investor confidence in the UK energy sector”, was published on 23 February 2016. The Committee is chaired by my hon. Friend Mr MacNeil, and the report identified six factors that combined to damage investor confidence in the UK. The fourth was:

“Policy inconsistency and contradictory approaches have sent mixed messages to the investment community”.

The report goes on to cite three specific examples, of which the third is

“emphasising the important role of gas while scrapping support for carbon capture and storage.”

Earlier in the same month, the same Committee released a report, “Future of carbon capture and storage in the UK”, which opened with the warning:

“Meeting the UK’s climate change commitments will be challenging if we do not apply carbon capture and storage (CCS) to new gas-fired power stations and to our energy intensive industries.”

It goes on to state that alternatives to CCS are likely to cost the UK more in the future to meet legally binding climate change targets as set out in the Climate Change Act 2008. The report went on to criticise the Government’s focus on investment in shale gas exploration and quoted the then Secretary of State for Energy and Climate Change as saying:

“In the next 10 years, it’s imperative that we get new gas-fired power stations built.”

The report concluded that

“the manner in which the carbon capture and storage competition was cancelled, weeks before the final bids were to be submitted and without any prior indication given to the relevant parties, was both disappointing and damaging to the relationship between Government and industry.”

There will be positive news for the Government on that later in my speech.

Photo of Alex Cunningham Alex Cunningham Shadow Minister (Work and Pensions) (Pensions)

I congratulate the hon. Gentleman on securing the debate. The National Audit Office said that CCS is still proving costly. The Treasury pulled the funding away before there was an opportunity to prove whether or not it was going to be too costly. CCS would provide such a major boost to industries such as those on Teesside, which include cement, steel and fertilisers. Does he agree that it is about time the Government re-engage? They are seen as disengaged at the moment.

Photo of Phil Boswell Phil Boswell Scottish National Party, Coatbridge, Chryston and Bellshill

I completely agree with the hon. Gentleman. There are signs that the Government will be considering that. I look to Peter Aldous and the Minister to confirm that they will consider that in their strategies. The hon. Member for Stockton North is absolutely right about investment in a key industry. When I was in the project in Peterhead, the technology was basic. We were capturing 90% of the carbon. With advances in technology, we will increase that, and with economies of scale and improved technologies, it will be cheaper. While the report understands the difficult balancing act that the Government face with public expenditure, the delay in bringing forward any plans to implement CCS in the UK while proceeding with fracking means we will not remain on the lowest-cost path to our statutory decarbonisation target.

What of forward planning? On 26 February 2016 in an interview in Utility Week, the chief executive of the Committee on Climate Change, Matthew Bell stated:

“We’ve been very clear that, with the 2050 target in mind, it is much less expensive to meet if we’re able to develop successfully CCS. The government needs to come up with a very credible plan on how it’s going to push forward with CCS.”

Bell says that, without such a plan, that investment in the power sector, at least on the more conventional generation front, could suffer. Gas is being pushed by the Government as the bridging fuel in the transition towards a low-carbon economy, although no new combined-cycle gas turbine power stations have been built in the UK in the past six years.

Acknowledging what is widely expected to happen as coal-fired power stations leave the energy system, Bell said:

“Between now and the early 2030s, gas could have an increasing and significant role”.

He also said:

“However, from some point in the 2030s, if you’re going to hit the 80 per cent gas target and don’t have CCS, then gas has to be virtually off the system…That would imply that during the course of the 2030s gas has to play a declining role – but there is a big ‘if’ there as that depends on CCS.”

Sitting suspended for a Division in the House.

On resuming—

Photo of Clive Betts Clive Betts Chair, Communities and Local Government Committee 2:47 pm, 24th January 2017

The sitting is resumed and the debate can continue to until 4.10 pm.

Photo of Phil Boswell Phil Boswell Scottish National Party, Coatbridge, Chryston and Bellshill

Thank you, Mr Betts. I will continue with my quotation from Matthew Bell:

“We have a 15 to 20-year time horizon with reasonable certainty for the role of gas, then we have an uncertain period—is that enough for investors to decide to go ahead with their projects? There is a way of clarifying that uncertainty, and that is for the government to be clear on CCS.”

There is a consensus from watchdogs and experts alike. They agree that the Government have the opportunity to get this right. Getting it right, including carbon capture and storage, will be more economical for the UK in achieving our climate change targets, while simultaneously creating CCS as a leading, technologically advanced industry within the UK.

What of the costs of meeting our climate change commitments without CCS? The National Audit Office’s report of 20 January 2017, “Carbon capture and storage: the second competition for government support”, found that carbon capture and storage “formed an important part” of the Department for Business, Energy and Industrial Strategy’s role in reducing carbon dioxide emissions. The report goes on to state:

“Given its potential to decarbonise different sectors, many stakeholders still regard CCS as being critically important to the UK achieving its decarbonisation target. It is currently inconceivable that CCS projects will be developed without government support.”

That support would enable investment in CCS, creating a large-scale demonstration of CCS technical and commercial viability, and leading to further-improved CCS schemes in the UK and the development of CCS as a successful industry. Although the report is constrained by the very specific NAO brief, which was to assess how the Department ran the second competition before its cancellation, it is none the less unequivocal in its support for CCS as the least-cost route to decarbonisation.

What of the most detailed report focused on the determination of whether CCS offers the solution of lowest-cost decarbonisation? I am referring to “Lowest Cost Decarbonisation for the UK: The Critical Role of CCS”, which is cited as Oxburgh 2016, a report from the parliamentary advisory group on carbon capture and storage to the Secretary of State for Business, Energy and Industrial Strategy. The report was requested by the then Secretary of State for Energy and Climate Change, Amber Rudd. Its terms of reference were to assess the potential contribution of CCS to cost-effective UK decarbonisation and to recommend accordingly to the Secretary of State by the end of summer 2016.

The report was delivered by Lord Oxburgh and his team in September 2016. The group comprised some of the most qualified and experienced representatives of politics, industry and academia. They did not carry out primary research but instead, given the substantial volume of work already published on the subject, focused on synthesising experience and knowledge into an optimum recommendation. They also considered walking away from CCS as an option.

The report found six core recommendations that are worth repeating in full:

“1. Establish a CCS Delivery Company…A newly formed and initially state-owned company tasked with delivering full-chain CCS for power at strategic hubs around the UK at or below £85/MWh on a baseload CfD equivalent basis. Formed of two linked but separately regulated companies: ‘PowerCo’ to deliver the power stations and ‘T&SCo’ to deliver the transport and storage infrastructure, the CCSDC will need c.£200-300m of funding over the coming 4-5 years.

2. Establish a system of economic regulation for CCS in the UK…The government will establish a system of economic regulation for CCS in the UK which is based on a regulated return approach. This will draw heavily on existing regulatory structures in the energy system and hence include: a CCS Power Contract based on the existing CfD or capacity contract to incentivise CCS for power…3. Incentivise industrial CCS through Industrial Capture Contracts…The Industrial Capture Contract, will be funded by the UK government and will remunerate industry for capture and storage of their CO2. It will be a regulated contract which will have a higher price in the early period in order to deliver capital repayment in a timescale consistent with industry horizons… 4. Establish a Heat Transformation Group…The Heat Transformation Group will assess the least cost route to the decarbonisation of heat in the UK (comparing electricity and hydrogen) and complete the work needed to assess the chosen approach in detail. The HTG has a likely funding need of £70-90m.

5. Establish a CCS Certificate System”— this is completely self-explanatory—

“Government will implement a CCS Certificate System for the certification of captured and stored CO2.

6. Establish a CCS Obligation System…Government will also implement a CCS Obligation from the late 2020s as a means of giving a long-term trajectory to the fossil fuel and CCS industries. This will put an obligation on fossil fuel suppliers to the UK to sequester a growing percentage of the CO2 associated with that supply.”

Climate change bodies, politicians and industry alike almost all agree that CCS is the optimum low-cost option for decarbonising the UK, but it is generally accepted that only Government intervention will stimulate it in the UK. I therefore ask the Minister please to consider carefully carbon capture and storage as part of the Government’s new, hands-on, interventionist industrial strategy for Britain.

What is the way forward? The way to a greener industrial future and lowest-cost decarbonisation for the UK without doubt includes carbon capture and storage. The proven technology continues to improve and we should not be frightened to embrace the new technologies that continue to spring up around CCS, such as Toshiba’s new 25-MW-gross electric turbine, the headline for which reads:

“Toshiba Ships Turbine for World’s First Direct-Fired Supercritical Oxy-Combustion CO2 Power Cycle Demonstration Plant to U.S.”

That supercritical CO2 power-cycle system achieves the same level of generating efficiency as a combined-cycle power plant. It separates and collects CO2 at high pressure, eliminating the need for separate carbon capture equipment or processes, and secures full CO2 capture—I repeat: full CO2 capture—without any increase in the cost of electricity, using supercritical CO2 as a working fluid to generate low-cost electricity while eliminating emissions of nitrogen oxides and other pollutants. We must embrace such technology or risk falling further behind or completely missing out on a unique opportunity.

Where should we develop the first CCS project? We already have some shovel-ready projects.

Photo of Daniel Poulter Daniel Poulter Conservative, Central Suffolk and North Ipswich

I congratulate the hon. Gentleman on securing the debate. He is making some good points. Has he considered the impact that leaving the European Union might have on Britain’s ability to deliver on its climate change obligations? Previously, we looked towards a European-wide solution at the Paris climate change summit, so what more do we now need to do in Britain to meet those carbon-reduction obligations?

Photo of Phil Boswell Phil Boswell Scottish National Party, Coatbridge, Chryston and Bellshill

The hon. Gentleman makes a good point. Now that we have chosen this path for the country, I hope that Brexiteers and remainers alike will make the best fist of it and work collectively with our European neighbours for the best, but he is right that we should do more in Britain and should focus on that. His point is well made.

Photo of Alex Cunningham Alex Cunningham Shadow Minister (Work and Pensions) (Pensions)

Further to the previous intervention, it is all the more important that, post-EU membership, we ensure we get our emissions-trading regime correct to protect the industries I mentioned in my earlier intervention.

Photo of Phil Boswell Phil Boswell Scottish National Party, Coatbridge, Chryston and Bellshill

Again, I agree completely with the hon. Gentleman. Given the coal mining in Europe for power generation and having to deal with climate change, we certainly ought to look at that.

Shortly before the demise of the Department of Energy and Climate Change—it is now the Department for Business, Energy and Industrial Strategy—it commissioned a study from the Energy Technologies Institute to examine where CO2 clusters and commercially viable storage could be developed around the UK by 2030. The study identified five locations. Only one is deliverable right now, and I will spend a few moments describing how that so-called Acorn project could grow into a mighty oak tree of carbon capture, transport and storage.

To get a CO2 takeaway network to operate, we need to gather CO2 from multiple sources onshore and to transport it to the coast through a pipe and then through an offshore pipe to its carbon storage destination. St Fergus in north-east Scotland is the offshore oil industry equivalent of Clapham Junction. Many of the gathering pipes from the North Sea bring oil and gas to landfall at St Fergus, which has a huge amount of pipeline infrastructure and processing equipment available. With the decline of North Sea activity in certain fields, some of that equipment is no longer required.

Specifically, pipelines from St Fergus to the Atlantic and Goldeneye gas fields have now ceased hydrocarbons transport and are in fact scheduled to enter a decommissioning process. Onshore, three facilities service different offshore pipeline networks and produce about 400,000 tonnes per year of carbon dioxide, which at the moment is vented into the atmosphere. The Acorn project aims to capture and store that CO2. The SAGE—Scottish Area Gas Evacuation—plant is also in St Fergus but, given the time, I will move on to allow other Members the opportunity to speak.

What of the Government’s new industrial strategy? My colleague the hon. Member for Waveney will discuss that in more detail, so I will touch on it only lightly. Publication this month of the initial “Building our Industrial Strategy” Green Paper is the first step towards introducing a new, engaged Government-industry relationship, which is to be commended. The paper invites engagement and comment, and is most welcome. I urge the Minister to include CCS in the final strategy, and ask him to give assurances today that CCS will be considered carefully and implemented as one of the many steps into Britain’s new industrial future, which looks to both industrial development and a greener, cleaner industrial future for our children and our children’s children.

The summary of the key findings of the CCS parliamentary advisory group’s report states:

“CCS is essential for lowest cost decarbonisation

1. This report addresses the policy disconnect that arises between the previous Government’s cancellation of the…CCS …competition on grounds of cost and the advice it received from a number of independent policy bodies that CCS was an essential technology for least cost decarbonisation of the UK economy to meet international agreements (most recently Paris 2015).

2. The Committee on Climate Change…recently reported the additional costs of inaction on CCS for UK consumers to be £1-2bn per year in the 2020s, rising to £4-5bn per year in the 2040s…The group agrees carbon capture and storage is an essential component in delivering lowest cost decarbonisation across the whole UK economy.

CCS works and can be deployed quickly at scale…Current CCS technology and its supply chain are fit for purpose”— as I said, CCS works are shovel-ready—

“UK action on CCS now will deliver lowest cost to the consumer. There is no justification for delay. Heavy costs will be imposed on current and future UK consumers by a continued failure to enact an effective CCS policy…Ample, safe and secure CO2 storage capacity is available offshore in the rocks deep beneath UK territorial waters and this represents the least cost form of storage at the scale required…CO2 re-use, such as enhanced oil recovery and the production of materials such as building products, already exists and should continue to be encouraged,” but it will not be able to deal with the huge volume required to make a difference in meeting our climate change targets. The summary continues:

“The lowest cost CO2 storage solution for the UK at the scale required will be offshore geological storage in UK territorial waters. There is no reason to delay…CCS in the power sector has an essential enabling role.

CCS has direct or indirect implications for the decarbonisation of all four of the major fossil fuel consuming sectors of the UK economy—industry, power, transport and heating. They need to be considered together so that synergies of a common infrastructure can be exploited…With some 200TWh/year of new clean power generation needed in the UK system in the 2020s fossil fuels with CCS will play an important role as a cost competitive and potentially flexible power generation technology.

There is a widespread view that CCS has to be expensive. On the contrary, the high costs revealed by the earlier UK approaches reflected the design of these competitions, rather than the underlying costs of CCS itself.”

The poor design in the second CCS competition

“led to the lack of true competition and the imposition of risks on the private sector that it cannot take at reasonable cost for early full-chain” development. The summary also states:

“Previous third party analysis by the CCS Cost Reduction Taskforce and for the Committee on Climate Change as well as analysis performed for this report show full-chain CCS costs at c.£85/MWh under the right circumstances. This report concludes that, under the right conditions as set out in this report, even the first CCS projects can compete on price with other forms of clean electricity.

To ensure that least cost CCS is developed when earlier approaches have foundered a CCS Delivery Company…should be established that will initially be government owned but could subsequently be privatised” if the Government so wish. The summary continues:

“This company will have the responsibility of managing ‘full-chain’ risk and will be responsible for the progressive development of infrastructure focused on industrial hubs to which power stations and other emitters could deliver CO2 which, for a fee, will be pumped to appropriate storage.

The CCSDC will comprise two companies: ‘PowerCo’ tasked with delivering the anchor power projects at CCS hubs and ‘T&SCo’ tasked with delivering transport and storage infrastructure for all sources of CO2 at such hubs.”

It is clear that we must think and act more holistically about our energy needs and uses, and the inevitable effects of our behaviour on our planet. I hereby recommend that CCS be included in the Government’s new industrial strategy for the benefit of everyone in the UK now and in the future, as our children and our children’s children will be presented with our bill should we get this wrong again.

Several hon. Members:

rose—

Photo of Clive Betts Clive Betts Chair, Communities and Local Government Committee

Order. Five hon. Members wish to speak, and I want to start the Front-Bench wind-up speeches at 3.38 pm. That gives us about 35 minutes—about seven minutes each. Will Members keep to that guideline?

Photo of Peter Aldous Peter Aldous Conservative, Waveney 3:02 pm, 24th January 2017

It is a pleasure to serve under your chairmanship, Mr Betts, and I will do my best. I congratulate Philip Boswell on securing this debate, which comes at a particularly opportune time, following the publication yesterday of the Government’s Green Paper, “Building our Industrial Strategy.”

I served with the hon. Gentleman on the group chaired by the noble Lord Oxburgh, which published its report on the future of CCS last September. I commend the noble Lord on the way he chaired the group and for looking at all the evidence, seeking out all views and arriving at what I believe are sound and sensible recommendations that the Government should put into practice as soon as possible. It should be noted that the report has been welcomed globally and the noble Lord has been invited to such countries as Norway, Australia and Canada to talk about it.

The group’s membership was wide-ranging and cross-party, and included independent experts from the fields of industry and research. We heard from a wide range of witnesses who work in research and development, industry, and banking, as well as groups such as the Committee on Climate Change. We set out with no preconceived ideas about what our conclusions might be, mindful that the Government’s cancellation of the CCS competition on cost grounds might mean that CCS was a non-starter. We considered a wide range of evidence and concluded that CCS has a crucial role to play if the UK is to deliver the emissions reductions to which it is committed at the lowest possible cost to consumers and taxpayers.

Photo of Alex Cunningham Alex Cunningham Shadow Minister (Work and Pensions) (Pensions)

I am grateful to my fellow co-chair of the all-party parliamentary group on CCS for giving way. CCS could be a game-changer for areas such as Teesside; it could drive investment and improve air quality. The Teesside Collective is showing great leadership on plans in that area. There are also plans for a large gas-fired power station, but those are being frustrated by a complicated planning process. Does the hon. Gentleman agree that the Government need to simplify that process while ensuring that plants are CCS-ready so that we can exploit them properly?

Photo of Peter Aldous Peter Aldous Conservative, Waveney

I agree that CCS has an important role to play in the regeneration of coastal communities and perhaps areas that have been forgotten over the last few years. That includes the area that the hon. Gentleman represents, many areas in Scotland and the area that I represent.

The report contains six recommendations for how CCS can perform that crucial role. I believe that we reached the right conclusions, for three reasons. First, the UK has made commitments, through the Climate Change Act 2008 and international agreements, to reduce carbon emissions. Those were most recently reconfirmed in Paris in autumn 2015. As a result, we have a duty to put in place measures that will enable us to get on with meeting those targets at the lowest possible cost to the country’s consumers and taxpayers.

It quickly became apparent to the group that we cannot get on with that without CCS. The great advantage of CCS is that it is a highly strategic technology that can deliver emissions reductions across many sectors, including, as we have heard, power generation, energy-intensive industries, heat and transport. It should also be pointed out that CCS has the potential to safely store 15% of current UK CO2 emissions by 2030 and up to 40% by 2050.

There is a cost associated with inaction on CCS. Last summer, the Committee on Climate Change highlighted that if we take no action on CCS, the cost to UK consumers will be £1 billion to £2 billion per annum in the 2020s, rising to £4 billion to £5 billion per annum in the 2040s.

Photo of Daniel Poulter Daniel Poulter Conservative, Central Suffolk and North Ipswich

I endorse all my hon. Friend’s points. Does the history of renewable energy not show that those who invest early not only reduce their carbon footprint much more rapidly, but save money downstream? It will become much more difficult to invest and much more expensive to the UK taxpayer if we leave this decision for five or 10 years.

Photo of Peter Aldous Peter Aldous Conservative, Waveney

I agree. There is a compelling case for us to get on with this now.

The second reason why CCS is important is cost. That was why the previous pilots failed. The Oxburgh report established that the high costs revealed by earlier approaches in the UK were attributable to the design of the competitions, not the underlying costs of CCS itself. Analysis by the CCS Reduction Task Force and for the Committee on Climate Change, which was confirmed by Lord Oxburgh’s group, showed that CCS can be delivered at approximately £85 per megawatt-hour. That is competitive with other large-scale low-carbon energies such as nuclear and offshore wind.

CCS also has what I regard as a unique selling point. Some people might say, “Why us? Why the UK? Let other countries, such as Norway, do the hard legwork to get the technology off the ground. We’ll join the party later.” Such comments are wrong and misplaced, and out of context with what Britain should be doing in this post-Brexit world. The UK has a unique selling point that means that we must be pioneers in the vanguard of the CCS movement. This USP—what unites me in my Waveney constituency in East Anglia with the hon. Members from Scotland and the north-east—is the North sea, the United Kingdom continental shelf, where we have our own large safe and secure CO2 storage vessel offshore in the rocks in this country’s territorial waters. As a result of the development of the oil and gas industry in the North sea over the past 50 years, the UK has developed an enormous expertise of experience that we can harness to deliver carbon capture and storage.

Yesterday the Government published their Green Paper, “Building our Industrial Strategy”. CCS and implementing the recommendations of the Oxburgh report fit well with the Government’s ambitions and directions of travel. When I go through the pillars underpinning the industrial strategy, CCS ticks all 10 boxes. If the Government accept the six Oxburgh recommendations, they will invest in science, research and particularly innovation. Investing in CCS goes hand in hand with developing skills, boosting science, technology, engineering and maths skills, and raising school levels and lagging areas. I could go through all 10, but I sense my time is pressing, Mr Betts, so I will cut to the chase—to the final pillar of creating the right institutions to bring together sectors and places.

The strategy states:

“We will consider the best structures to support people, industries and places.”

That is a ringing endorsement for the six Oxburgh report recommendations.

On that note, I will conclude. Lord Oxburgh has provided the right framework for an exciting new industry and now is the right time to invest in CCS.

Photo of Tom Blenkinsop Tom Blenkinsop Labour, Middlesbrough South and East Cleveland 3:11 pm, 24th January 2017

I congratulate Philip Boswell on securing this debate. His contribution was really good, technically sound and showed his background in the subject.

First, let me state that carbon capture and storage is an absolutely necessary component of the solution to our energy trilemma. It offers the opportunity to meet our emissions targets, provide energy security and take advantage of the natural resources and high-level skills of our nation. It is necessary because any conceivable energy future will require the burning of fossil fuels.

I encourage anyone who doubts the significant and important role that hydrocarbons will continue to play in meeting the UK’s energy needs to read Lord Oxburgh’s report. He concludes that to meet our heating needs we must continue to rely on natural gas, produce huge quantities of hydrogen gas or supply heat through electrification, which in turn would require new fossil fuel power stations. Any of those paths will produce large amounts of CO2 and will therefore require effective carbon capture technology to meet our environmental targets.

The main challenge in developing such essential technology is achieving value for money. As the recent National Audit Office report found, the Government’s carbon capture technology competitions did not offer that. I hope, however, that the Government accept that the technology is still necessary to meet our environmental targets and will commit to creating a more cost-effective approach to building the technology in the UK, rather than letting CCS innovation, research and expertise leave the UK and create jobs, investment and opportunities elsewhere—that the Government are willing to take on some of the risks of developing the new industry in order to reap the economic and environmental benefits down the line.

I hope that in designing a new CCS competition, the Minister will take on board the NAO report’s findings to improve clarity on the risks carried by projects and on the financing the Government are willing to commit to, as well as draw on the lessons learned through stakeholders. I also hope they will look closely at the work done by the Carbon Capture & Storage Association, which points to circumstances under which CCS technology can offer value for money—namely, the strike price of £85 per MWh recommended by the Lord Oxburgh report—from the start.

I am interested to hear what other options the Minister has considered for implementing CCS, such as the possibility of doing so as part of a business model that relies on utilising indigenous sources of hydrocarbons, such as gasified coal. In short, I hope that the Government continue to explore options for supporting this vital technology. I know there are Members from all parties who would support them in doing so.

Finally, I want to point to areas where carbon capture technology is already proving cost-effective. Carbon capture and utilisation technology captures CO2 produced by manufacturing plants or smaller generators and uses that CO2 to produce highly marketable green products. A British company, Carbon Clean Solutions, currently leads the world in this technology and, as I am sure the Minister is aware, has recently successfully implemented CCU technology on a commercial basis in Tuticorin, India. Carbon Clean Solutions has successfully managed to take the CO2 produced by a chemical plant and produced soda ash, which in turn can be used to make glass, paper and a range of other products. The fact that the soda ash produced is green means it can be sold on at a premium to companies attempting to reduce their environmental footprint.

It seems bizarre that such technology, developed by a British company in co-operation with British universities and in part funded by grants from the British Government, has not been helped to take root in Britain. Although I understand that the technology does not operate on nearly the same scale or offer the same environmental impact as larger CCS projects, it also has advantages. For example, the smaller scale of the project means a smaller risk for investors. Indeed, Carbon Clean Solutions believes it requires only a guarantee on initial investment to get started in Britain, and that in turn offers the Government the opportunity to learn lessons in carbon capture technology that can then be fed into the development of larger projects.

Although the nationwide impact of CCU technology may be small, such technology could help our energy-intensive industries to reduce their emissions and give them a competitive edge. Furthermore, much of the infrastructure needed for CCU is already in place in former and current industrial areas such as Teesside. If we were to look at this project in combination with decarbonising our economy by using the gas grid, we would see a multitude of potential options for the existing energy-intensive industries to take hold of and entrench their position and also develop new green industry. That is a particular advantage, given that the NAO report highlights the “lack of supporting infrastructure” as a major barrier to investment in larger CCS projects.

Electrification obviously implies a vast amount of capitalisation—in the trillions—and a lot of capital to begin to even touch the sides of electrifying our transport, but we are the one nation in the world that has a unique gas grid that we could utilise in combination with hydrogen gas and shale gas, and using blends within the gas grid to overcome those obstacles.

Will the Minister meet me and Mr Ani Sharma, the chief executive officer of Carbon Clean Solutions, to discuss the potential of his company’s technology and how the Government can help CCU technology to mirror its commercial success in India closer to home? Carbon capture and utilisation may not have the environmental impact that successful large CCS projects would, but it can act as a stepping stone to achieving those vital CCS projects that are the only way we will be able to move towards a decarbonised energy sector.

Photo of Alan Brown Alan Brown Scottish National Party, Kilmarnock and Loudoun 3:17 pm, 24th January 2017

It is a pleasure to serve under your chairmanship, Mr Betts. I congratulate my hon. Friend Philip Boswell on securing this debate. The Government U-turns he outlined at the beginning, and current Government policy positions, suggest that they do not know their backside from their elbow. That is demonstrated not only by the shambolic handling of the CCS competition, but right across the energy sector. It is clear that there is not a coherent strategy in place that will deliver long-term decarbonisation targets, let alone a cost-efficient strategy.

The NAO report of the CCS competition lays bare that the Treasury and the then Department for Energy and Climate Change were not working together. It also shows that all Government Departments are always at the mercy of a Chancellor who is ideologically driven to cut costs and taxes and look for short-term hits. Spending more than £100 million on design costs and then cancelling the competition beggars belief. It is also astounding that, in the NAO report on the CCS competition, one of the two designs that had been progressed was not even compliant with competition rules, so a lot of money was spent for a non-compliant design. The Peterhead CCS scheme was compliant, but instead of going on and developing that and protecting jobs in the north-east, the UK Government chose to walk away. Unfortunately, to date they have walked away with nothing to show for our expenditure.

I accept that, at the moment, CCS is not a complete silver bullet. It is a developing technology and there are some possible risks associated with the long-term storage of the carbon dioxide. Equally, there are plants up and running in north America, and in terms of the financial risks, that is something I urge the Government to look at. They have already underwritten the Thames tideway tunnel to the value of nearly £5 billion at today’s prices. They also offered to underwrite £2 billion-worth of bonds for the Hinkley Point C project, not to mention the contract for difference guarantees that have been given for Hinkley, which in an NAO report last year had an upper estimate of nearly £30 billion, which is truly astronomical.

The Treasury, which spiked the CCS proposals, had no qualms about Hinkley, yet while CCS is a developing technology, so is the European pressurised reactor system proposed for Hinkley—its track record so far is that it has not been demonstrated to work, and costs continue to rise. The Hinkley strike price agreed in 2012 is the equivalent of £100 per MWh at 2015 prices, so it is pretty much along the lines of what is being talked about for CCS. The only difference is that Hinkley is a 35-year long-term deal, whereas for other low-carbon technologies we are looking at 15-year CfD prices.

If the Government are serious about decarbonisation and compliance with the fifth carbon budget, they need seriously to consider a number of energy sectors. First, they need to revisit the pulling of the renewables obligation funding, which again disproportionately affected Scotland. At the same time, they should look at the need for island-based turbines to be classed as offshore rather than onshore. They should be reviewing the rush for nuclear reactors and mini-reactors, which are also unproven, and should change the regulations that are prohibiting the development of electricity storage. The National Infrastructure Commission has estimated that lithium ion batteries now cost only 7% of their estimated 1990 cost. Pumped hydro storage is a proven technology, but Government regulations are limiting its expansion. I suggest reviewing the dash to frack if we are serious about decarbonisation.

It is a fact that investment in renewables is set to drop by 95% between 2017 and 2020 owing to Government policy, so it is no surprise that, in the Ernst & Young index on renewable energy attractiveness, the UK slipped from a ranking of seventh in 2014 to 14th by October 2016. Together with the possible sale of the UK Green Investment Bank to an overseas asset stripper, it is clear that the wrong message is going out to those who might invest in green energy. Even when it comes to tree planting, England achieved only a tenth of Scotland’s record in 2016; yet it is the Scottish National party Government who have increased their planting target. As to house building, approximately three in four houses built in Scotland are timber framed; that is closer to being carbon neutral and is more energy efficient. Only 9% of homes built in England in 2015 were timber framed, yet the Government White Paper on housing is unlikely to address that.

In conclusion, the Government must rethink their entire decarbonisation strategy, considering it across a number of Departments. The view of the Committee on Climate Change was that CCS has the potential to almost halve the cost of meeting the 2050 target for carbon dioxide reduction. It could support some remaining indigenous coal extraction in places such as my constituency. However, it also needs to be applied to gas electricity generation, given the role that that will play. In the National Needs Assessment report launched at the end of last year, it was estimated that CCS could reduce CO2 emissions by 40% by 2015, but there was a stress on the need for Government support. The Chief Secretary to the Treasury attended the launch of the report, so I hope the Government reflect on the findings. It strikes me that the Government have found £8.5 billion for corporation tax cuts, and £5 billion of capital gains tax and inheritance tax giveaways. It is time to plan for our future and give us all a green inheritance to look forward to.

Photo of Sammy Wilson Sammy Wilson Shadow DUP Spokesperson (Treasury), Shadow DUP Spokesperson (Work and Pensions), Shadow DUP Spokesperson (Education) 3:23 pm, 24th January 2017

It is a pleasure to serve under your chairmanship, Mr Betts. I congratulate Philip Boswell on introducing the debate. I suspect he will quickly find that we are not on the same side, but it is important, especially in the week when the Government have launched their industrial strategy, to have serious debates in the House on current and future energy policy. Of course, no industrial strategy can sit in isolation from a realistic energy strategy.

The first point of contention I want to make is that we seem uncritically to have accepted the mantra that we must decarbonise energy production. I know people say we have the Paris agreement, climate change obligations and so on, but we also need to look behind the mantra to see what the term means and has meant, and how it currently affects households, industry and business in the United Kingdom. The old Department of Energy and Climate Change estimated that to decarbonise the electricity and energy industries effectively by 2040, we needed 40,000 offshore and 20,000 onshore wind turbines and a new fleet of nuclear power stations, and that all coal and gas use would have to be subject to carbon capture and storage. That would happen at enormous cost, and we have already seen the impact on fuel poverty.

According to the Scottish household survey, there was a 25% increase in the number of households in fuel poverty in Scotland between 2011 and 2013. In Northern Ireland, there was an increase of nearly 100%. Why? Fuel bills go up because we have decided we want to produce energy more expensively. That is the first thing we need to realise in the debate. Decarbonisation means significant costs to the economy. Of course, this is at a time when we are talking about becoming more globally competitive, and when China and India, which signed the Paris agreement, tell us that every year they will increase their CO2 by the amount of our total CO2 emissions.

Photo of Tom Blenkinsop Tom Blenkinsop Labour, Middlesbrough South and East Cleveland

I understand the hon. Gentleman’s frustration, but I see what we are doing as investment. Renewables, whether photovoltaic or wind-generated energy, have the capacity to be used, for example, in the creation of hydrogen gas. There is a future in which we could create gas at zero cost, with surplus renewable electricity for the consumer. In transport network terms, the ability to spread that around the country is vast. I see it as an investment that is expensive at the moment, but whose rewards we will reap if we stick to those commitments.

Photo of Sammy Wilson Sammy Wilson Shadow DUP Spokesperson (Treasury), Shadow DUP Spokesperson (Work and Pensions), Shadow DUP Spokesperson (Education)

Of course the people who pay for that expensive investment are the taxpayers, because there is less money for other public services; electricity consumers; and workers who lose jobs in the industries that can no longer compete.

Photo of Sammy Wilson Sammy Wilson Shadow DUP Spokesperson (Treasury), Shadow DUP Spokesperson (Work and Pensions), Shadow DUP Spokesperson (Education)

No. I only have seven minutes and I do not want to rule out my hon. Friend Jim Shannon, or I will get in his bad books.

My second point is on the action required to do what is envisaged. As has been mentioned, part of the infrastructure is in place, and we may well be able to use redundant oil pipelines, but they must be linked to power stations, which must be where the centres of population are. I am fairly sure that we do not want to build power stations where most pipelines come ashore, unless we mean to build a huge infrastructure to distribute the power. Environmentalists have not cottoned on to the point that the plan is like fracking in reverse. Instead of fracking to get gas out of the ground, we will pump gas into the reservoirs, with all the same implications, according to environmentalists, for stability and leakage.

We in Northern Ireland are going through a constitutional crisis because of a botched energy scheme. I do not think that that warranted the outcome, but nevertheless we are living with it. I want to hear from the Minister about four things related to that. First, what will the cost be? Secondly, if there are costs involved, who pays them? Thirdly, what about the incentive structures? It is not lost on anybody that even some producers of traditional energy are now running after all of these green schemes. Why? Because the lucrative incentives increase their profits and fill their coffers—we saw that with the scheme in Northern Ireland. Fourthly, what kind of regulatory framework will be put in place?

The Government are right not to go ahead with the second exercise until they are sure of the answers to those questions. Even more fundamentally, they must ask whether the impact of decarbonising the economy on consumers, workers, industry and investment is worth it.

Photo of Jim Shannon Jim Shannon Shadow DUP Spokesperson (Health), Shadow DUP Spokesperson (Transport), Shadow DUP Spokesperson (Equality) 3:30 pm, 24th January 2017

It is a pleasure to speak in the debate. I congratulate Philip Boswell on raising the issue. I may have a slightly different opinion from my dear friend and colleague, my hon. Friend Sammy Wilson.

Photo of Jim Shannon Jim Shannon Shadow DUP Spokesperson (Health), Shadow DUP Spokesperson (Transport), Shadow DUP Spokesperson (Equality)

My hon. Friend may regret it, but it will not diminish our friendship in any way whatever. It is good to have a broad church of opinion within our party.

I will pose some questions because it is important to do so. Environmental issues are of great importance, so it is essential that our strategy is effective. I say to the Minister that I am not sure that we have managed to achieve all we could or should thus far. That is the question many have posed, including the hon. Member for Coatbridge, Chryston and Bellshill during his introduction.

It is opportune that we are having the debate on the back of the industrial strategy Green Paper announced by the Department for Business, Energy and Industrial Strategy yesterday. Many believe that the Department has not achieved value for money for its £100 million spend on the second competition for Government financial support for carbon capture and storage. Other hon. Members have said that there must be an investment to get a return, and that the return will justify the investment.

It is my understanding that CCS is a process to avoid the release of carbon dioxide into the atmosphere, and that it has the potential to help to meet the UK’s target for a reduction of CO2 emissions in both the power and industrial sectors, which is commendable. We have pledged to cut 1991-level emissions by 57% by 2030. While that is a great goal, how will we achieve it? Hon. Members have outlined potential job creation and the opportunities that will come if it is done in the right way. To achieve the goal is most certainly a challenge, given the untried nature of the technology.

Photo of Phil Boswell Phil Boswell Scottish National Party, Coatbridge, Chryston and Bellshill

I point out to the hon. Gentleman that the technology is truly tried and tested. The curious scheme in Northern Ireland aside, I would urge both hon. Members from Northern Ireland, who are my friends, to read the Oxburgh report and contrast the less than £85 kilowatt-hour that is achievable under this system with the Hinkley Point strike price of £92.50. Furthermore, the networks already exist. That is the attraction of having an existing infrastructure.

Photo of Jim Shannon Jim Shannon Shadow DUP Spokesperson (Health), Shadow DUP Spokesperson (Transport), Shadow DUP Spokesperson (Equality)

I will respond to the hon. Gentleman’s intervention during my comments. The future costs for the duration of the CCS project are unknown, and perhaps the figures do not add up on all of the lines.

Two projects that were shortlisted for the CCS process both failed to meet the proposal goals. The work done centrally by the Department in sustaining negotiations for the second competition for the project with its preferred bidders must be noted—a process is in place. The hon. Member for Coatbridge, Chryston and Bellshill has clearly outlined some of the evidence, and I will pose some questions on that. I can clearly say that I support the principle of what we are trying to achieve, but I wonder whether it can be achieved by that process. There are lessons to be learned, and hopefully valuable commercial knowledge and technical understanding of how to deploy the competition projects will have been gained, as he said. If we have that information, let us see how we can use it to further the project.

There are currently no examples of large-scale CCS projects in the UK, and only 16 operational projects worldwide. BEIS should maximize its expertise for future CCS strategies and put into practice the lessons it has learned—in other words, the evidence should be used for the betterment of delivering such projects. If and when CCS projects are self-sustaining and economically viable, we will see clean electricity from renewable sources, which we wish to see and are committed to trying to achieve. However, the sticking point is in the phrase “if and when”, meaning we could achieve those things “if and when” the Government and BEIS find a happy medium and the in-between. Hon. Members are often tasked with finding a balanced in-between or the correct way forward.

The substantial future benefit of the CCS process is to avoid the release of CO2, as several hon. Members have indicated. However, it is clear that there are serious problems and critical issues with such projects that we cannot ignore. As I have discussed, there are no large-scale examples of long-term storage projects in the UK, despite a series of UK Government and EU initiatives aimed at incentivising their development. It has been argued that CCS technology is too expensive to be commercially viable for private developers without Government support in the shape of a strike price. Government involvement is critical in taking this forward.

I am aware of the work carried out by the parliamentary advisory group on carbon capture and storage, which found that good design could make CCS affordable. However, I have reservations about the cost of CCS competitions to the taxpayer.

Photo of Sammy Wilson Sammy Wilson Shadow DUP Spokesperson (Treasury), Shadow DUP Spokesperson (Work and Pensions), Shadow DUP Spokesperson (Education)

Does my hon. Friend agree that a high strike price will be paid for out of the pockets of every one of his constituents who consumes electricity? That is the big problem with schemes of this nature, for which there is a move away from cheap fossil fuels to dear renewable sources.

Photo of Jim Shannon Jim Shannon Shadow DUP Spokesperson (Health), Shadow DUP Spokesperson (Transport), Shadow DUP Spokesperson (Equality)

The Minister will take note of my hon. Friend’s comments and am sure will respond later.

We have seen not one but two failed voyages into the unknown of CCS projects, for which we have spent £168 million with no further resolutions and only lessons learned. We do not want this to be like the Mary Celeste— setting sail, getting nowhere and disappearing. It is my understanding that the cancelling of the second competition will impact on investors’ confidence, who in future may demand better conditions before engaging with the Government again, which will prove detrimental to the cost-effectiveness of future projects.

We do not want this to harm the future and where we are going. I feel strongly that both the Government and BEIS need success guaranteed in both financial and in environmental areas before embarking on such voyages in the future, and as such I believe that every consideration must be given to how this particular project will help us to achieve our goals, and indeed whether it can do so.

Photo of Callum McCaig Callum McCaig Shadow SNP Westminster Group Leader (Energy and Climate Change) 3:37 pm, 24th January 2017

It is a pleasure to serve under your chairmanship, Mr Betts. I congratulate my hon. Friend Philip Boswell on both securing the debate and leading it in such an informed and passionate way. He set out the key issues around CCS, the history and, more importantly, the way forward.

I will also focus more on the way forward, but it is beholden upon us to look back slightly. The cancellation of the £1 billion competition that would have benefited the White Rose project and the project at Peterhead was deeply regrettable, in respect of both the way it was done—the announcement was snuck out after the autumn statement with little or no forewarning to the companies involved—and, as the National Audit Office report shows, the colossal waste of money.

At the time, I said it was clear that the Government knew the cost of everything but the value of nothing: the cost was £100 million to save £1 billion or £900 million. However, as we have heard multiple sources suggest, delays to the project could cost consumers £1 billion to £2 billion per year in the 2020s, and up to £4 billion to £5 billion per year in the 2040s. Colossal amounts of money could have been saved; if we do not act now, that will be lost through the additional costs that consumers will have to bear.

With the honourable exception of Sammy Wilson, most of us accept, although not unquestioningly, the requirement to decarbonise our energy system—that is, “energy” in its widest sense. We often focus purely on electricity, but as some hon. Members have mentioned, there are many cross-synergies among the different forms of energy. That is why carbon capture should be considered.

May I place on the record my commendation for the Oxburgh committee report—those who served on the committee and the chair in particular? It is an excellent report and, as we have heard from those who did serve, the work was done in a way that did not prejudge the outcome. The report was an open, honest and thorough analysis of the costs and benefits that CCS could bring, but it also left on the table the option of not progressing. It was produced in September 2016. As far as I am aware, the Government have yet to offer much in the way of a response. I hope that we will hear from the Minister his considerations and those of his Department on the report and how they are seeking to take it forward.

As has been mentioned, there are clear synergies with the Government’s industrial strategy. I am talking about the ability to tie in research and development and have a world-leading technology that we can develop here on these shores. As the hon. Members for Waveney (Peter Aldous) and for Middlesbrough South and East Cleveland (Tom Blenkinsop) mentioned, this technology feeds into the Government’s honest appraisal that they need to do more to boost economic growth outwith this city of London and the surrounding environments.

Carbon capture does that very well. It ties in neatly with existing and former industrial heartlands, as the hon. Member for Middlesbrough South and East Cleveland suggested. It provides the potential for existing industrial producers, which in many cases are venting pure CO2—that should not be happening in this day and age, but there is no mechanism for them to cease doing it—to maintain their competitive advantage. That is how we anchor these companies in constituencies such as the hon. Gentleman’s and in places such as Grangemouth in Scotland, where we have strong industrial hubs that can have a very bright future. They can continue to do what they are doing well now, but they can also develop new technologies into the future that the planet as a whole is going to need.

We had a degree of discussion about the clarity that will be required in terms of the process of leaving the EU. There are optimists and pessimists among us, and clarity will indeed be required. The plan of action has previously centred on European co-operation, be it the energy union, the emissions trading scheme or the united approach to the Paris talks. Whether that means that a singular approach by the UK could produce better results will probably depend on whether someone is a “glass half full” or a “glass half empty” sort of guy. I will err on the side of optimism. There is probably a degree more optimism in me following yesterday’s announcement on the industrial strategy: that the Government understand and will take this issue seriously.

The key point is that, as the hon. Member for Waveney said, this features across all the key aspects of the industrial strategy and all the areas where we are struggling or perhaps are not doing as much as we can in terms of decarbonisation. We can look at heat, transport or electricity in isolation. We can look in isolation at what we do with energy-intensive industrial producers. Alternatively, we can look at those things in the round. If we look at them in the round and see how we can apply carbon capture to those technologies, we will find a much more affordable and viable way of decarbonising. Finding those synergies, finding the areas of expertise and developing the companies that have the knowledge to do this provides us with a real opportunity.

How do we go about doing that? The Oxburgh report and its various recommendations are the blueprint. The key take-away from that for me was that what we are discussing can be done and can be done affordably. It highlighted some of the failings of the previous approaches in basically outsourcing the risk entirely to those bidding into the competition. Breaking it up and allowing different companies, with different expertise, to join in the process in the area to which they are best suited will allow costs to be reduced, to an extent where we could see a contract for difference price of £85 per megawatt-hour, which is competitive with other forms of production.

In some ways, as my hon. Friend Alan Brown suggested, CCS could be more established and cheaper than what we are pursuing at Hinkley. That shows the urgent requirement for the technology to be included in the Government’s industrial strategy and emissions reduction plan; if we do not do that now, it will, as we have heard, get more expensive.

I have been in many a debate with the hon. Member for East Antrim in which his views on this issue have been expressed. I disagree with him from an ideological point of view, but also from a practical point of view. Yes, there are costs in relation to the infrastructure that will be required to decarbonise our power system, but to suggest that there are not costs from continuing to do what we are doing is simply not correct.

Photo of Daniel Poulter Daniel Poulter Conservative, Central Suffolk and North Ipswich

Is not there also a case in respect of fuel poverty? Improving insulation and taking other demand-side measures to reduce the demand for electricity is a very good thing in which to invest. It decarbonises, but it also saves people, particularly those on fixed incomes, money on their heating bills.

Photo of Callum McCaig Callum McCaig Shadow SNP Westminster Group Leader (Energy and Climate Change)

The hon. Gentleman is absolutely correct: the cheapest fuel that we will ever use is the fuel that we do not use at all. Investing in such measures will save money and reduce fuel poverty. The coal-fired power stations to which the hon. Member for East Antrim made reference will be coming off the system anyway. They will have to be replaced, and they will be replaced by something that will not come free. It will be expensive, but it can be expensive in a way that is good for the environment and good for our industrial base, or it can be expensive in terms of its fuel and its production and the cost to the environment.

There are two ways to go about this. We can be at the front of the queue; we can be a leader and we can have first-mover advantage. That protects our business, allows us to export and allows us to save money for our consumers and industrial producers. I hope that the Minister and the Government will take that course and back CCS for the long-term future of the UK and our energy industries.

Photo of Alan Whitehead Alan Whitehead Shadow Minister (Department for Business, Energy and Industrial Strategy) (Energy and Climate Change) 3:47 pm, 24th January 2017

I was going to say that the debate had been characterised by a mighty cross-party alliance in favour of CCS, which I heartily concur with, but obviously there is this afternoon one exception to that. I want briefly to address that exception: Sammy Wilson.

The issue is basically about the imperative to decarbonise our energy supplies, and it is an unashamed imperative because we know that climate change is real and that, if we do not do anything about it, that will be disastrous overall, for us all. Indeed, we can go back, in terms of alternative costings, to the Stern report. Stern said that doing nothing on climate change would probably consume 5% of our GDP, whereas doing something about it might consume 1% of our GDP. It is a very substantial investment for the future and rather a good bargain overall, in terms of what we might put in and what we might get out.

Of course, the same applies, in the context of the energy sector, to CCS. The question is really how we decarbonise our energy supplies, using different potential scenarios, and what would happen if we did not take CCS into account as far as decarbonising our energy supplies was concerned. It is not that we cannot, but it is about the relative costs of doing that with different technologies. It is not me saying this: it is the Committee on Climate Change in setting out its scenarios for the fifth carbon budget, which, of course, the Government have now adopted as a way forward over the next period.

We have basically adopted a scenario for energy decarbonisation that has at its centre, and as part of that fifth carbon budget, that energy emissions should be below 100 grams of CO2 per kWh by about 2030. The Committee on Climate Change says that the investments we have at the moment give us an emissions intensity of about 250 grams of CO2 per kWh. If we close remaining coal-fired power stations and replace them with gas-fired generation in the short term, that would take emissions marginally further down to 190 grams of CO2 per kWh.

Of course, if all the existing nuclear power stations were also replaced by gas, and gas met new demand subsequently, emissions intensities would rise to over 300 grams of CO2 per kWh by 2030. The Committee on Climate Change goes on to say:

“Commercialisation programmes for CCS and offshore wind alongside lowest-cost investments in the 2020s in a mix of new nuclear, onshore wind, solar and offshore wind rather than expanding gas generation would bring emissions intensity down to below 100 gCO2/kWh.”

That is a very straightforward and exact road map for where we need to go in terms of energy decarbonisation.

Of course, if we did not have CCS in that scenario, we would have to do a lot of different things to replace what CCS would have done by physically taking the carbon dioxide out of the process and putting it into the ground. We would have to do something else to take that carbon dioxide out of the process. That could be a lot of additional energy efficiency or it could be or a lot of new, different low-carbon plant. We come to the question of what the alternative costs might be if we did not have CCS in the process. Indeed, the NAO report on the carbon capture and storage pilots, which hon. Members have mentioned this afternoon, clearly sets out that meeting the 2050 target for decarbonisation of our whole system, without CCS, would

“cost up to £30 billion more in the power sector alone”.

Hon. Members have mentioned what that means in terms of an annual basis, but that is the overall cost. Interestingly, the NAO cites where that particular figure comes from: of course, it came from the Department of Energy and Climate Change in 2015.

We are clear about the ends, but we are not currently clear about the means. That is where the scandalous cancellation of the two pilot projects—which, by the way, had already been included in those Committee on Climate Change estimates I just mentioned, so we are even further back from the starting line than we would otherwise have been—puts us in terms of having, at the moment, the possibility of ends.

We have agreed the fifth carbon budget. The Government are due to produce their low-carbon plan some day soon; I think it was supposed to be last year and then it was supposed to be this spring, but I see from the industrial strategy announcement yesterday that the target is now some time in 2017. I am interested to know from the Minister whether that low-carbon plan is going to be published in the early part of 2017, as I hope. If it is, I would be extremely surprised if it included no mention of the key role CCS will have to play in making that plan a reality. That is the truth of the matter: without CCS, it is very difficult to envisage a lot of the systems that we talk about in terms of low-carbon energy as a whole—not just low-carbon electricity—working very well.

My hon. Friend Tom Blenkinsop mentioned, among other things, the possible role that hydrogen might play in the future heat economy. Hydrogen can be made by electrolysis of spare electricity but it is more likely that, during the earlier period, it is going to be made using existing infrastructure by steam methane reformation. That gives us a potent fuel in terms of sorting out the decarbonisation of our heat structures, and possibly the substantial decarbonisation of our transport structures, but CO2 is a by-product that needs sequestering in the process, otherwise it is not low-carbon at all.

The essential role that carbon capture and storage will play across the board in our decarbonised, low-carbon energy economy is without question. The question is: what do we do about it? We have heard mention this afternoon of the estimable Oxburgh report, which was essentially commissioned by Government after the closing down of the pilot schemes. Without wishing to repeat some of the details of the Oxburgh report that have been mentioned this afternoon, I would say that the report does not talk about pilots and does not talk about ways of trying to introduce bits of CCS here and there. It talks about a very practical route forward, which is costed and relatively low-cost, for what Government need to do—exactly in line with what we think we are doing at the moment about industrial strategy and how we move that forward—to make carbon capture and storage a part of our energy landscape over the next period.

I commend anybody who has not read that report to look at exactly what it says. That is exactly what it does: it sets out how we move forward over the next period to integrate carbon capture storage with various measures as part of our processes. I ask the Minister whether the Government intend to respond to the Oxburgh report in the near future. If they do intend to respond, what form is that response likely to take? I hope that when the Government decide to respond, they respond in a very positive way because that is what we need right now. Undoubtedly, we need to decarbonise radically. Undoubtedly, carbon capture and storage has to be a part of that decarbonisation. Setting out a way forward for making carbon capture and storage a reality in our energy firmament is, it seems to me, a very high priority for Government at the moment.

Photo of Clive Betts Clive Betts Chair, Communities and Local Government Committee

I thank all hon. Members for being so co-operative with the time available to make sure that we got everyone in and they had a full opportunity to contribute. I now call the Minister.

Photo of Jesse Norman Jesse Norman Parliamentary Under-Secretary (Department for Business, Energy and Industrial Strategy) 3:57 pm, 24th January 2017

It is a delight to serve under your chairmanship, Mr Betts. I absolutely welcome this debate and congratulate Philip Boswell on securing it and on his very interesting opening remarks. The hon. Gentleman is a strong proponent of carbon capture and storage—he has professional experience and expertise—and this has been a valuable discussion.

I will make some general statements before responding specifically to the concerns raised. We have not got much time, so I will have to move relatively quickly. As I am sure the House understands, the Government remain very committed to tackling climate change, and remain very committed to the Climate Change Act 2008 and the implications it has and will have for the coming decades. Climate change remains one of the most serious long-term risks to our economic and national security.

As a country, we have made great progress towards our goal. Indications are that UK emissions in 2015 were 38% lower than in 1990, and 4% below those in the year before. It is appropriate to recognise that, as well to look ahead to the future to the emissions reduction plan, which we will publish in due course. I am happy to respond to the question from Dr Whitehead. My colleague the Minister for Climate Change and Industry mentioned to the Business, Energy and Industrial Strategy Committee that that would be in the first quarter. I can do no better than echo his words.

As a Government, we remain committed to exploring all technologies that can support the process of decarbonisation, including carbon capture and storage. As has been recognised today, CCS has a wide range of potential applications in which it could contribute to the reduction of carbon in our environment. Those include not merely decarbonising heating and transport, but providing a pathway for low-carbon hydrogen and producing negative emissions when biomass is combined with CCS in power generation. CCS offers a wide array of potential strategic benefits. It has been rightly noted that it has the potential to help energy-intensive industries in this country to remain competitive.

I understand some of the concerns that were raised about the cancellation of the project last year. The project was absolutely not without benefits and, as the Committee recognised, there had been investments in front-end engineering and design. It was an ambitious scheme. Everyone in the Chamber believes that the Government should be ambitious in their expectations for climate change improvement and carbon reduction, so I think it is odd to criticise the Government’s ambition, when they have sought to be precisely that.

[Mr Philip Hollobone in the Chair]

The Government absolutely believe that CCS has a potential role in long-term decarbonisation, but it must be affordable. It is worth noting that we are not by any means the only country seeking to crack CCS from a cost perspective. Projects have been deployed, particularly in north America. However, the United States, Canada and Norway have all cancelled projects, so we are taking the time to look hard at CCS to see whether we can find a cost-effective pathway.

That does not mean we have not been investing in the meantime. As colleagues know, we have made a range of investments across the piece, including in Carbon Clean Solutions, which Tom Blenkinsop mentioned—I would be delighted to meet him when officials can set it up—and in storage appraisal projects in the Northern Irish seas and the Summit Power CCS project at Grangemouth.

The Government continue to be very active. We commission research and provide support for innovation, and we remain engaged and seek to continue working with and learning from others, such as the United States, Canada and Norway. The hon. Member for Coatbridge, Chryston and Bellshill mentioned the Toshiba CCS plant in Texas. Officials have already met the promoters of that scheme and are contemplating visiting it when it is up and running to learn more as part of our overall picture. We remain part of a series of international initiatives designed to understand CCS better, and to learn from and deploy it as effectively as possible.

Therefore, we have not closed the door, by any means. Indeed, Lord Oxburgh was asked to set up and lead his parliamentary advisory group—I very much recognise the contributions made by Members in the Chamber towards it—precisely because we have not closed the door to CCS but are looking to use it, if possible, affordably and effectively. I put on record my thanks to Lord Oxburgh and the group’s members for their work.

On the specific issues raised by colleagues in the debate, I was invited by the hon. Member for Coatbridge, Chryston and Bellshill, who opened in the debate, to consider CCS as part of the industrial strategy. As I hope has been understood, we absolutely are doing that and will continue to do so.

My hon. Friend Dr Poulter, who is no longer in his place, asked whether we, as a country, would be affected by Brexit in this regard. I point out that, as a country, we are a signatory to the Paris agreement independently of the EU as well as through it, and it is therefore far from clear that Brexit will make a difference.

Alex Cunningham is right that we need to get the EU emissions trading system correct. My hon. Friend Peter Aldous, in a very eloquent speech about the offshore potential for the UK continental shelf, said that we must be pioneers in CCS, but I slightly disagree with him on that point. There is an honourable place for us as an early mover, but not necessarily a first mover, in CCS. Such people often reap the benefits in technology and cost without taking a lot of the additional risks. That is a perfectly honourable position for this country to be in.

Hon. Members spoke about the Oxburgh report. I point out to Callum McCaig that even that report contemplates very substantial capital expenditure of potentially more than £1 billion and perhaps even £2 billion, as well as the CfD. Sammy Wilson asked who pays for these things. Well, that would be the cost, and the payment would be borne respectively by taxpayers and bill payers. The incentive structures would have to be determined in future discussion, but there would be a CfD, and the framework regulation is something that Lord Oxburgh properly discussed.

Photo of Jesse Norman Jesse Norman Parliamentary Under-Secretary (Department for Business, Energy and Industrial Strategy)

I am sorry, I cannot take interventions because I am really short of time, but I hope I have at least addressed the core point the hon. Gentleman made.

Let us be clear: the Committee on Climate Change seems to be contemplating a contribution on CCS from this country until 2030. No one can predict the future, so it is not clear that we are behind schedule from its point of view. However, it is very important to recognise that even the Oxburgh report is not just about a CfD, but about a potentially substantial capital cost, which would fall on taxpayers.

My colleague Jim Shannon raised an issue about cost and effectiveness and was absolutely right. The hon. Member for Middlesbrough South and East Cleveland asked about the NAO report. I absolutely assure him that it has been given—and is being given—a lot of scrutiny within my Department.

Let me quickly wind up my remarks in the time that remains. The Government are actively interested in and engaged with the question of CCS. I very much thank hon. Friends and hon. Members for their wide-ranging contributions to a fascinating debate. This is not an easy issue to crack, but we are focused. The Government will set out our approach in due course and use the opportunity offered by the debate to further inform our thinking.

Photo of Philip Hollobone Philip Hollobone Conservative, Kettering

The debate will finish at 10 minutes past 4. It is my loss that I have missed most of it, but I need not worry, because Philip Boswell is going to sum the whole thing up in the few minutes remaining.

Photo of Phil Boswell Phil Boswell Scottish National Party, Coatbridge, Chryston and Bellshill 4:06 pm, 24th January 2017

I am delighted to see such excellent and almost comprehensive cross-party support for the inclusion of CCS in the Government’s commendable industrial strategy doctrine. Clearly, we are mostly on the same page, and I am sure the application from Sammy Wilson to work for the Trump Administration will be successful.

Although the Minister understands that the cost of developing CCS is an existing issue, I am sure he recognises that the cost of not developing and including it will be greater—that is well articulated in the report. None the less, he has undertaken to keep to climate change commitments, to publish the Government plan in quarter one of 2017, to publish details about decarbonisation across all sectors including CCS, and to consider the Toshiba option, which is to be highly commended. I very much look forward to developments in the near future.

I am delighted to see Lord Oxburgh in attendance and thank all hon. Members for their contributions. Finally, I thank you, Mr Hollobone, and all the staff who enabled the debate to take place.

Question put and agreed to.

Resolved,

That this House
has considered UK decarbonisation and carbon capture and storage.