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Mr. Swayne: Part of that rise may be consequent on the strangling to death of British horticulture and the importation of the products that it previously produced by air, with a great use of aviation fuel, which is one of the most serious carbon dioxide pollutants.

Mr. Thomas: I accept the hon. Gentleman's latter point, but his former point was somewhat peripheral to the argument, although I support the point made by the right hon. Member for Fylde (Mr. Jack) about the horticulture industry. There is an obvious carbon-negative factor that should be taken into account in the workings of the tax.

The tax is complicated, and it is right to call it a tax, not a levy. However, none of the complicated difficulties with it persuade me to oppose it in principle. In fact, having heard the comments of the Opposition Front-Bench Treasury spokesman, I feel even more strongly that we should put the tax through as a marker of the changes that we need to see in this country. The amendment tabled by the Opposition is poorly drafted from a party that purports to want to form a Government at some stage in the countries of the United Kingdom. It shows a lack of understanding of what the Kyoto targets mean and of how we can move to achieve that international obligation.

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The time scale for the changes that we want to see in the environment and in carbon dioxide emissions is between 15 and 25 years. The magic year 2010 has been mentioned and 2020 is increasingly coming on the horizon in working out the targets. Legislation that pivots around some environmental blip from year to year would send out a tremendously bad signal to business, the public at large and our international partners.

The poor understanding within the Conservative party is reflected in the way in which it has approached the issue. It has not come up with an alternative scheme for meeting the Kyoto targets. Many of us who have serious doubts about the complexity of the climate change levy and what it leaves in and leaves out would have liked to hear alternative methods of achieving the Kyoto targets, but I regret to say that that has not come forward from the Opposition party.

Mr. Letwin: Is the hon. Gentleman seriously advancing the proposition that lifting the gas moratorium would not do more to achieve the targets than this tax?

Mr. Thomas: It would in the very short term, but we are talking about a 25-year period. As the hon. Gentleman knows, there would not be the natural gas to pump into stations in 25 years' time. We have to start planning now for the changes that we want to see in 20 or 25 years. That is why the right hon. Member for Fylde was correct in referring to biomass and short coppice rotation. Elephant grass, willow or whatever might be grown, but that is not an answer to the situation that we are in now. I spent three hours with a biomass group in my constituency on Monday morning discussing how we could get a biomass plant established in the area. The members of the group were arguing strongly that they need a lead-in of four to seven years for the coppice rotation to take effect before the plant can be efficient.

10.30 pm

I say to those on the Government Front Bench that I hope that Energy Ministers will be informed that there are still pieces missing in the Government's picture on renewables, especially in terms of renewable energy and the price that may be involved. I understand that the Department of Trade and Industry will be discussing next week how it might address the issue. It is part of meeting our climate change obligations that the left hand knows what the right hand is doing. The Government are pressing on with the levy without necessarily bringing in all the other benefits that need to come on stream. For that reason, they are giving the impression that they are introducing a tax without the benefits that should accompany it. It is incumbent upon them to work hard over the summer to produce for industry ideas about the use of renewable energy that will fit the jigsaw and produce a much more complete picture.

The Government's view is at least robust, if nothing else, and linked to environmental aims. I welcome the later amendments on combined heat and power. I hope that they will improve a deficiency in that area.

I hope that everyone in the House accepts that there is climate change and that it brings problems. Certainly the occupants of the Conservative Front Bench are starting to

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accept that, although they do not accept the levy. However, climate change demands vision and political bravery. It is regrettable that, on the whole, we politicians are short-termist. We do not like to plan ahead for 10 or 15 years, because on the whole we shall not then be around to reap the benefits. However, the Government have shown a little bravery in this context and I hope that they will resist the amendment, stick to their guns and review the workings of the climate change levy to ensure that some of the other points that have been raised are taken into account, particularly the future of renewable energy.

Mr. Timms: The hon. Member for West Dorset (Mr. Letwin) asked me to withdraw the tax. I wish I could withdraw the huge problem of climate change which faces the world and requires an effective response throughout the world. The hon. Gentleman said in an intervention on the hon. Member for Hazel Grove (Mr. Stunell) that it might be a problem. Well, it is a problem. That is the reality that we face, and we are taking effective action to respond to it.

The hon. Member for West Dorset seems to be labouring under some straightforward misapprehensions, and in a brief contribution I shall attempt to correct them. He said that the problem could be solved alternatively by lifting the restrictive consents policy. We have announced that that policy will be lifted, and that is reflected in chart 6.2 of section 6 of the Red Book about the projections for carbon dioxide emissions. The levy is needed in addition to that to meet our objectives.

Annual emissions are expected to be about 15 per cent. below 1990 levels this year, but it is forecast that they will start rising again as a result of continuing economic growth and because of factors such as the decommissioning of nuclear power stations. The projected increase in emissions takes into account the expected impact of the levy. That is why it is vital that the levy and all the other measures within the climate change programme are implemented in full to prevent any slippage.

The hon. Member for Ceredigion (Mr. Thomas) rightly said in an effective contribution that a wide range of measures is required, of which the levy is one.

Mr. Letwin: If the Minister believes--I am sure that he is right--that the decommissioning on a substantial scale of nuclear power stations will have a significant effect on emissions, why is it that the so-called climate change levy does not exempt power produced from nuclear stations?

Mr. Timms: I do not know whether it is the policy of the Conservative party to promote new nuclear development. We know what is happening to nuclear power over the next 10 or 15 years, and that is one of the factors that we should take into account in projecting the future of carbon dioxide emissions. It is not a matter, as the amendment suggests, of watching some statistics to check whether we might need to take action to deal with climate change. That is wilfully to ignore the seriousness of the problem of climate change when, in reality, urgent action is imperative.

The hon. Member for Galloway and Upper Nithsdale (Mr. Morgan) asked about hydro-electric plants with a capacity of more than 10 MW. He is right to say that

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the exemption for renewables in the climate change levy applies to hydro schemes with a capacity of less than 10 MW. That is because we want to promote new renewable energy sources. There is a great deal of scope for new forms of renewable energy generation, and that is what the exemption is designed to promote. We want to incentivise new activities rather than subsidising existing activities that have competed successfully with other forms of generation for a long time.

I have had a number of discussions on the issue with the organisation that the hon. Gentleman mentioned and others, and no one has suggested to me, as the hon. Member for Hazel Grove did, that big hydro-electric operators will shut down when the levy comes into effect. It would be wrong to suggest that. I recognise that there is a concern about a band of hydro-electric schemes, perhaps in the 10 to 25 MW capacity range, that, at some point in the future, they may want to carry out refurbishment, and that may well be a point that needs to be considered at that stage. But we are right to focus the exemption for renewable generation on new forms of renewable energy so that we can substantially increase the extent of that.

Mr. Stunell: Will the Minister give way?

Mr. Timms: I shall not give way again as I need to make some progress.

My hon. Friend the Member for Rotherham (Mr. MacShane) raised some questions about electric arc furnaces for steel. I do not anticipate the problems that he fears because the 80 per cent reduction will be available. There will also be significant reductions in the price of electricity because of the new electricity trading arrangements. There is not an amendment on the subject before the House tonight, so the Bill represents the position that will prevail when the levy takes effect next April, but I shall be glad to meet my hon. Friend and others to discuss the concerns of the steel industry.

To the right hon. Member for Fylde (Mr. Jack), I would say that we have fully recognised the special case of horticulture. The 50 per cent. concession that we have announced is unique. No other industry will enjoy the benefit of that, and that is being extended through a later group of amendments tonight to include lighting and heating. Belgium is working up an energy tax, and I anticipate that most, if not all, of the EU states will, in due course, need to introduce such a measure to meet their Kyoto objective. That trend is clear.

As I have said, I welcome the support of the hon. Member for Ceredigion. He is right to recognise the importance of taking the step that is contained in the climate change levy. We are permanently improving energy efficiency across the business and private sectors, providing a continuing incentive to innovation aimed at improving energy use.

The burdens on business will be kept to a minimum. I repeat what I am sure I have already said many times to the hon. Member for West Dorset, that we are recycling all the revenues from the levy in full to business through equivalent cuts in employer national insurance contributions and schemes to promote energy efficiency, including additional support for renewable sources of energy. There is no net gain to the Exchequer from the levy package.

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If the projection of an increase in carbon dioxide emissions after 2000 is correct, the amendment could delay the onset of a levy only until 2002, but we need the levy in our fight to reduce greenhouse gas emissions. Any delay in implementation of whatever duration would prove deeply damaging to our aims. The problem of climate change remains a great challenge and a challenge that the Government are prepared to face up to. I am pleased that, on this occasion at least, the hon. Member for Hazel Grove can support us in taking the levy forward.

I have one last point. The hon. Member for West Dorset talked about emissions trading as an alternative to the levy. It is not an alternative; it is a complement. We are taking forward an emissions trading scheme.

The amendment is inconsistent with our key long-term goal of reducing greenhouse gas emissions and improving energy efficiency in business. I urge the House to reject it.

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