Select Committee on Environmental Audit Minutes of Evidence

Examination of Witnesses (Questions 190 - 199)




  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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