Examination of Witnesses (Questions 1260
- 1279)
THURSDAY 27 JANUARY 2000
MR MIKE
WALKER, MR
KEITH SEXTON,
MR BEN
GILL, AND
MR JACOB
TOMPKINS
1260.—then perhaps you should be more
likely to support any way in which this can be overturned.
(Mr Gill) That is correct inasmuch as we are already
addressing the effects of climate change. If you take the tomato
industry, they have reduced their use of energy by 25 per cent
I think in the last ten years. There are in larger units now in
the horticultural sector, for example, quite efficient combined
heat and power units which of course, as you are well aware, would
be acceptable. But the problem arises with the smaller units around
the country, and there is the potential then to make totally unviable
the smaller units who cannot take advantage of this technology
which is more suited to large units or to the limited number of
units which have available power sources such as natural gas.
1261. You have mentioned the last ten years,
climate change will probably increase temperatures, therefore
have the savings that will be available to your industry been
taken into the calculation?
(Mr Tompkins) The savings?
1262. Savings in terms of energy.
(Mr Tompkins) No. If you look at the scenarios for
climate change, although there will be increases in heat that
is not necessarily leading to a decrease in energy. If you think
of an intensive pig or poultry unit, that means increased ventilation
during the summer with forced venting. It also means, because
you will get more winter storms, you will need more variable heating
during the winter. Also we have potentially lower rainfall which
means more movement of winter storage reservoirs and water pumping.
The effects of climate change will not mean energy reduction in
all sectors of agriculture.
Mr Cummings
1263. In your evidence you indicate that advances
have been made in terms of energy efficiency and you cite, for
instance, combined heat and power units, thermal screens, heat
exchangers and computerised efficiency monitoring equipment, but
you do not indicate to the Committee how widespread these advances
are. Would you care to do so? What further action do you believe
could be taken by agriculture and horticulture to take advantage
of the incentives to reduce energy use and what barriers are there
to this action?
(Mr Tompkins) The energy reduction measures vary quite
dramatically across agriculture because of the energy usage within
certain sectors. Obviously horticulture, where energy usage is
between 50 and sometimes 65 per cent of variable costs, is extremely
focused to bring down energy costs, thereby reducing emissions,
and the sort of thing we were talking about within tomatoes where
now 25 per cent are using combined heat and power. The others
are using computerised boilers. There are probably now no protected
horticulturalists who are not using all possible forms of energy
reduction which are cost effective. They are looking at computerised
boilers, as I said, and thermal screens. In other areas of agriculture,
dairy has taken up heat plate exchangers to take heat from milk,
and that was under a Government scheme with grants. Farming has
also been looking at other forms of renewables such as wind energy
but there are planning restrictions preventing them taking up
wind energy to the extent they require. There are certain sectors
of agriculture where reductions in energy usage have not been
as focused as within horticulture because their energy use actually
is quite low.
Chairman: I think we have got the message. We
have to be a bit careful with our time.
Mr Cummings
1264. On what grounds do you state that the
proposed Climate Change Levy is a disincentive to cut emissions?
(Mr Tompkins) We have an example where horticulturalists
are taking up combined heat and power but because of the cost
of the units and because horticulture is currently either making
no profit or a loss in certain sectors, and definitely making
a loss once the climate change levy comes in, there will be no
additional capital to invest in energy saving measures. Ironically
almost all of the profits are generally re-invested in energy
saving measures.
1265. But would you not agree that if the price
of energy increases, this is an incentive to encourage farmers
to reduce energy use?
(Mr Gill) There is sufficient incentive from the pricing
system and the pressure the horticulturalist is under to reduce
energy use, as has been demonstrated by the advances we have been
making, but if you introduce a tax which our competitors do not
bear then what you will see is the industry exported to those
areas who do not have this tax, because that is by far the more
efficient way of doing it on a strict financial and accountancy
basis.
1266. Have you any evidence as to how it will
affect industry, if you are working under these imbalances looking
at costs in this country compared with costs in others?
(Mr Gill) If you look at the horticultural sector
it is quite clear that we will see closures of businesses as a
result of this because they are on the border line at the moment
and they will move away from that. I think, Chairman, I should
make the general point at this stage that I find it incredible
that there can be no subject more than climate change which is
a world, if not European in this case, problem and there is no
point in us trying to solve the problem in the UK if the rest
of the Europe, or significant parts of Europe, go on pumping out
heat and carbon dioxide and using energy; we just transfer the
problem elsewhere. We should be moving on the basis of an agreed
European Directive or regulation to give us equality.
Miss McIntosh
1267. Do you think it would be right to wait
for Europe to decide on an Energy Directive, bearing in mind,
as we have seen on a number of occasions, they have failed to
reach agreement and there is no agreement in sight?
(Mr Gill) I would love to think that we could go ahead
in this country and set an example for the rest of Europe, but
what I do believe is very clear is that if we go ahead in this
unilateral way, without any recognition of the problems of horticulture
particularly and the context also of the pig and poultry sector,
the effect will be totally counter-productive. What we need to
do is find a more positive way for the horticulture sector—a
stick and a carrot—so we do apply a stick to those who are
very bad but we give carrots and incentives to change in a far
more positive way. That, I think, has the potential to deliver
on past evidence significant benefits for climate change.
1268. Have you made any costing of what the
cost to the pig industry has been of the Integrated Pollution
Prevention and Control Directive?
(Mr Tompkins) Yes, we are looking at approximately
£12,000 for set-up costs for each business and then around
£5,500 per year, because obviously it depends on the size
of the unit. We are seeing the same thing for poultry.
1269. Is there any particular reason why you
have not publicised this? I represent a lot of pig farmers in
the Vale of York and I do not think the general public realise
the costs involved.
(Mr Gill) I have sought to publicise it. The problem
we have, as your Chairman has alluded to, is that this is a highly
technical subject and when we get into these details it is not
something which is very easily translated into a story which is
easily readable. One of your constituents, whom I visited last
autumn with the Minister of State, commented after the visit,
pointing out the cost of the IPPC, "I would not mind if I
had a track record of polluting, but every inspection I have had
over the years has given me a totally clean bill of health. It
is almost that we are progressing legislation on the presumption
that everybody is presumed guilty until they can prove innocence,
which to me is draconian, over-bureaucratic and putting an onerous
cost on the industry itself making us highly uncompetitive."
Chairman: There are some pretty blatant examples
of farmers polluting as a result of slurry in various forms, are
there not?
Miss McIntosh
1270. Bearing in mind that you have given a
very clear commitment in your written evidence and in your evidence
today that you do feel strongly as farmers that climate change
has to be addressed, and bearing in mind in an ideal world you
would prefer to see a European Directive, could you give us an
indication of how you feel businesses in this country could seek
to reduce carbon dioxide emissions?
(Mr Gill) I think we can go a stage further than the
examples which were given in response to Mr Cummings on how the
individual sectors have done it. There is a project in your constituency,
Miss McIntosh, for renewable energy and I think it is probably
the first power station being put up which will have as its energy
source renewable energy—I myself am growing a small crop
with renewable energy—and that is moving, I believe, in
a very positive general way to giving electricity for the grid
on a renewable basis and much more can be done in that way.
Christine Butler
1271. Instead of Integrated Pollution Prevention
and Control, what alternative criteria would you like to see used
to decide which sectors can negotiate agreements to reduce energy
use in exchange for a levy rebate? That is a question for the
water industry.
(Mr Sexton) We have thought long and hard about this
and we think the only real, fair way is to go back to the original
intention which was energy intensity. We would argue strongly
for effective agreements based upon the genuine intensity of energy
use within the industry sector. It just seems slightly anomalous
now that because we have taken IPPC as the ring-fence we have
ended up with industry sectors within negotiated agreements being
labelled energy intensive with energy intensity under Lord Marshall's
criteria of 1.7 per cent, but others with energy intensity of
13.2 per cent not in. It seems strange that because we have had
to find a proxy for energy intensity, which everybody agrees is
not a very sensible proxy, we cannot go back and have some serious
debate about the proportion of the overall cost of your energy
as a business.
1272. Water is not the only sector which suffers
from this anomaly, would you like to tell me one or two others?
(Mr Sexton) I think the one we have heard of, horticulture,
is another classic example. To some extent we have focused on
our own internal problems and the data we have is on the water
industry, so I do not feel competent to speak about how many other
sectors have been affected by the use of the IPPC regulations.
1273. What do you suggest? Do you suggest they
should come in the IPPC or do you think there should be another
way of dealing with this? There are great difficulties because
of the European legislation on this. Have you any plan you could
give to Government saying, "You could tackle it better this
way, and it would be comprehensive and fairer and easier to collect"?
(Mr Walker) We have spoken to Government since the
announcement of the Climate Change Levy putting forward alternative
eligibility criteria. As Keith has explained, we really think
the basic thing should be based on energy intensity. There are
a number of ways of measuring energy intensity, and I am aware
that is still being discussed within departments as an alternative
way forward. However, I think the main point we need to understand
is that IPPC does not apply to the water industry because at the
European level it was decided there were so many other pollution
prevention directives, such as the Bathing Waters Directive, the
Urban Waste Water Treatment Directive, that it would actually
be duplicating existing legislation which affects pollution discharges
and abstractions in the water industry. So the fact we are not
in IPPC is not because we are unregulated but because it would
be an additional layer of regulation which was unnecessary, so
therefore choosing IPPC over any of the other regulations seems
to be unfair for the industry.
(Mr Sexton) What we have suggested to Government as
a pragmatic solution because of Mike's point, that we are regulated
outwith IPPC, is that it would be possible to set a criterion
where the water industry would accept the duty to use energy efficiently,
to give the same statutory basis as that contained within IPPC,
which would allow the water industry as the only really significant
energy intensive sector to come in without opening the floodgates
to others.
Dr Ladyman
1274. If there was a negotiated agreement for
the water industry, what would it be based on? Would it be based
on absolute energy consumption, energy efficiency, CO2 emissions,
or would it be based on a basket of greenhouse gases? Given that
you are methane producers, could methane be built in?
(Mr Walker) We would prefer it to be built on a basket
of gases because of methane production. Also, there is CO2 from
renewable energy as well as energy efficiency. As an industry
we think there are three main ways we could help reduce greenhouse
gases. There is capturing the methane and actually using it for
renewable energy projects; there are renewable energy projects
including methane, but there are also other things we are doing
including some hydro schemes, wind power on company land and the
short rotation coppice example which was put before. That is actually
Yorkshire Water Services' project, they are the main partners
in that scheme, so we are partners in the renewable energy side
of things. I think what needs to be accepted is that whatever
unit is used in a negotiated agreement, predicted energy use in
the water industry is expected to go up in the next five to ten
years simply because of the Urban Waste Water Treatment Directive
and the increased need for ultra-violet treatment and treatment
works in certain coastal areas. That is one aspect of energy use
increasing. The other aspect of energy use increasing which is
much more difficult to predict is to do with summer rainfall shortages
when companies have to move the water from catchment to catchment
within their distribution networks a lot more than they did before.
So if you have a particularly difficult summer in terms of rainfall
you would be moving water around much larger distances in order
to ensure there were not shortages and that is obviously going
to increase pumping costs. So any agreement would need to have
those criteria built into it, that you need to meet other existing
environmental legislation which will mean increased energy use
and also head room for pumping to prevent water shortages.
1275. How would it be enforced?
(Mr Sexton) In terms of a sectoral agreement, Water
UK is a strong sectoral body where we have a small number of members
and it has been agreed by Water UK's Council and our regulatory
group that we would be able to work as a sector to police an agreement
internally. However, in the letter we sent to Government on this,
there was the suggestion about being ring-fenced as an industry
and we did suggest that Ofwat could have a role in this because
of the monitoring it already does on the industry's costs and
turnover; it monitors a lot of things. There is an implicit regulation
on energy efficiency because of the cost control element. It would
be fairly simple to add that into Ofwat's regulatory function.
Mr O'Brien
1276. Mr Gill, we are wanting to present a report
to Parliament on the best way to apply this Climate Change Levy.
You have made a comment about the number of people you represent
and that you represent small organisations, and then you talked
of negotiated agreements, would that not be too long and cumbersome?
(Mr Gill) That is our big fear in terms of the complexity
of how it is proposed. Added to the fact that, as we understand
it at the moment, the suggestion is that we as the trade association
should try and organise the whole industry. I believe that concept
is more appropriate to a trade association of ten or perhaps 20
members, but when you are trying to collate the information from
such a vast body of people it becomes, I would suggest, impossible.
I do not think it is actually appropriate to ask a trade association
of that size to act as the policeman for the industry as well,
not just for members but to take on the service for non-members
although they may be a minority. So there is a problem here. We
do believe that anybody who wishes to make a reduction, if we
do have to go down this road, should be able to be in the negotiated
agreement. We need to have the ability therefore to make real
advances within the industry and, I repeat, we want to make advances
in energy reduction, it is just a matter of how we can best achieve
this without lumbering ourselves with a system which ends up with
the opposite result.
1277. We are wanting to help the industry but
the situation is the Government has moved from a 50 per cent rebate
to 80 per cent and the fact still remains there needs to be energy
efficiency in the industry. If you can demonstrate, or your members
can demonstrate, energy efficiency, it makes it easier to argue
with the Government. What we need to know from the NFU is the
best way to approach this issue of meeting the Climate Change
Levy. You admit there is a problem there and if you have—and
we have your evidence here and you have given us details—other
facts which would help, I think you should let us have that information.
(Mr Gill) We can submit extra points. I could make
a further point on what you have just said. The problem arises
even with the 80 per cent rebate. Because of the relatively low
labour usage in these sectors, there is still a cost to the horticulturalist
concerned as a result and that has a direct cost to the industry
which may have the effect of putting him out of business. That
is particularly frustrating if you are a producer who has done
all that you can do at this stage in terms of technology and you
are still being taxed.
Miss McIntosh
1278. Is the NFU proposing a negotiated agreement
for the whole of the farming industry? How long will that take?
I hope it is not just a delaying tactic.
(Mr Tompkins) If the Government is minded to go down
this route and is not considering exemptions for agriculture and
horticulture because of the number of members, then we absolutely
need a negotiated agreement for protected horticulture, mushrooms
and certainly the small energy intensive industry in the UK which
will be destroyed otherwise.
Mr Benn
1279. Mr Walker, just picking up Mrs Dunwoody's
earlier point, can you remind us what the total profits of the
water industry are currently? I am trying to get the scale of
the costs.
(Mr Walker) I do not have that information with me
at the moment. I can write to the Committee.
|
