Examination of Witnesses (Questions 190
- 199)
WEDNESDAY 15 DECEMBER 1999
MR IAN
BLAKEY OBE, MS
LISA WATERS,
MR CHRIS
BLUNT AND
MR MALCOLM
WALKEY
Chairman
190. Good morning and can I welcome you to the
Committee and thank you for coming in what I am sure is a very
busy round of discussions with the Government and other parliamentary
bodies at this particular point in time. I am sure you are very
busy indeed and I am glad that you have been able to spare the
time to come and see us. Is there anything you would like to add
to your written submission before we begin actually to question
you on it and make some more general points?
(Mr Blakey) Chairman, thanks for your
welcome. No, I do not think so. We are happy to answer questions
on it. Perhaps if there is any topic that we feel we have not
covered towards the end, we could say so then.
Chairman: Yes, certainly.
Joan Walley
191. Can I kick off by asking in terms of the
changes in the structure of the Climate Change Levy which have
been proposed, and I am referring now to the increased rebate,
the exemption for renewable energy and combined heat and power,
and capital allowances for energy efficient investment, to what
extent do they address your concerns about competitiveness of
industry and to what extent do you feel that the negotiations
with the Government are actually on course and on target for early
agreement?
(Mr Blakey) Well, clearly those changes help considerably.
It shows that the Government have listened to what we have been
saying. The increase in the rebate obviously addresses the competitiveness
point, but it is worth saying that there are substantial residual
tax liabilities still even in those sectors which make an agreement
to have an 80 per cent rebate. Clearly the CHP and the other changes
address to some extent the basic difficulty which we have been
arguing which is fundamental to the design of the tax and that
is if you are trying to do something about carbon dioxide emissions,
in particular, which is the purpose of it, then the present proposals
still do not really directly address the carbon content question.
We understand there are problems, but this is a bit of a halfway
house, I think, to exempt renewables and CHP and will cause technical
difficulties, I may say. As to the question of negotiations progressing,
perhaps Chris, who is taking the lead for the paper industry in
these negotiations, might like to comment on that.
(Mr Blunt) We are at the point where we have an offer
on the table from the paper industry which, as a matter of fact,
is a 40 per cent reduction on 1990 levels of specific energy consumption
and we hope that the DETR will recommend this to the Secretary
of State, and we will know that, I hope, later this week, and
be able to sign, if you like, an agreement to agree. The detailed
terms of the heads of agreement are still not certain.
192. Would you have expected those to have been
ready and certain by Monday next?
(Mr Blunt) No, I do not think they will be ready by
Monday next.
193. Would you have expected them originally
to have been ready by Monday next?
(Mr Blunt) Yes, I would have expected them to have
been ready a little while before now.
194. So what is the obstacle?
(Mr Blunt) The single biggest obstacle that I perceive
is the problems with IPPC. What we are saying is that if we sign
a negotiated agreement with the Government to reduce energy consumption
by a figure which is agreed, which the Government has said should
be tougher than that which should have been created by IPPC, then
we should effectively be able to say to the regulatory authorities
that run IPPC that we should be deemed to meet their requirements
and we should not have to do any more than say, "Look, we
have a negotiated agreement. Therefore, as far as energy efficiency
is concerned, you should look no further". That is by no
means clear that we can have that, and there are difficulties
in that in Scotland IPPC and environmental issues are a devolved
affair, whereas taxation is not, so we have a problem there as
well.
195. So what mechanism have you got for separate
talks relating to Scotland?
(Mr Blunt) We have not. I assume the DETR are having
separate talks with SEPA and the Environment Agency and the equivalent
regulatory authority in Northern Ireland.
(Ms Waters) For other sectors, it is worth saying,
we have some very significant problems about companies who are
energy intensive and not covered by IPPC, but are members of the
sectors who are in the first wave negotiating agreements. So we
have a situation where the Government, between the various departments,
has been discussing alternative ways to define who would be eligible
for agreements, but appears to be unable to reach any agreement
amongst themselves as to how we work that. Now, the most intensive
industry in the world is thought to be industrial gases and they
are not covered by IPPC because they are taking in the air around
us and putting it back out, so they are not a "dirty"
industry and, therefore, not covered. We also have a situation
where some sites are not covered directly by IPPC because they
are smaller than other sites within the sector, so you may find
a large glass manufacturer will come under IPPC and a smaller
company making exactly the same products in competition will not
come under the IPPC. Then we have other sectors, who are mainly
in the second wave, where parts of their process come under the
IPPC and other parts do not, and English China Clays, on my left,
are a classic example of that. So those definitional issues have
not been addressed and we were expecting by now that we would
have a good steer on who the Government was expecting to be in
and out of these agreements.
196. Can I ask again in terms of the eligibility
criteria how you see this being overcome?
(Ms Waters) Well, in my latest conversations with
the Treasury, the Treasury said that any definition they put forward
to us was likely to be rather arbitrary and, therefore, could
we come up with something ourselves, but I question whether we
would be less arbitrary than they are going to be. I think we
have put forward several proposals about, for example, whether
or not you have the ISO environmental standards, which say that
you have signed up to having an environmental management system
anyway, even though you are not part of IPPC, could we link that
in. I think part of the problem is that business believes that
any sector who wishes to sign an agreement should be eligible
to do so and I think the Treasury is very clear that it only wants
what it perceives as intensive users to be there. So I personally
feel it should be up to the Government to decide where it wishes
to draw the line and then let's see where that line falls. If,
however, they are serious that they are asking us to do it and
we come back with a proposal, we hope they will adopt it.
197. Finally, can I just ask in terms of the
second wave what kind of timescale you think you might be working
to in respect of that?
(Mr Walkey) The second wave, we are still looking
towards signing up in March. That is the target, but until we
get this definition of "energy intensive" laid to rest,
a lot of potential second wave members are doing very little work
about it because any effort they put in, if they are not eligible,
is wasted time and money.
198. So do you think that it is still feasible
for the Government to be considering negotiated agreements in
terms of the second wave, given what you have just said?
(Mr Walkey) If we had a past definition of "energy
intensive", and I am sorry to keep harping on about it, but
"energy intensive" is being quoted in most documentation
on climate change, but it means nothing because it means everything
to everybody. There is no definition of "energy intensive".
199. So how do we go about getting a consensus?
(Mr Walkey) Somebody has to put on the table a definition
for "energy intensive" so that industry knows exactly
where it stands.
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