House of Commons - Environmental Audit

Select Committee on Environmental Audit Eighth Report

Introduction

1. In its drive to put sustainable development at its heart, over the last 6 years the Government has put in place various strategies—including, for example, an overarching sustainable development strategy, a climate change strategy, and an air quality strategy. An energy strategy has been conspicuous by its absence—an omission which the Energy White Paper now seeks to address.

2. The Energy White Paper concludes a long process of consultation and reports. One of the earliest of these—the study conducted by the Royal Commission for Environmental Pollution (RCEP) and published in June 2000—was seminal, setting out the need for a dramatic reduction in carbon emissions and presenting hard choices through a series of different future energy scenarios.[1] Subsequently, the Cabinet Office Performance and Innovation Unit (PIU—now the Strategy Unit) produced in February 2002 its own report to help inform the Government response.[2] The PIU conducted a thorough consultation on the basis of a series of excellent briefing notes, and around 400 submissions were received.[3] In turn, this was followed by yet another major consultation conducted this time by the Government itself, and on 24 February 2003 the Government finally published the long-awaited Energy White Paper.[4]

3. Parliament too has been actively exploring this issue. Our July 2002 report, A Sustainable Energy Strategy? Renewables and the PIU Review, examined the requirements of an energy strategy in the light of the PIU report, and focussed in particular on renewables.[5] This followed an earlier report on Energy Efficiency which the EAC published in 1999.[6] The Trade and Industry Committee and the Science and Technology Committee have also reported on energy issues over the last two years.[7]

4. The Government provided its formal responses to the reports of both our report and the RCEP on the day the Energy White Paper was published.[8] At the same time, the Environmental Audit Committee announced that it would hold a follow-up inquiry on the Energy White Paper.[9] The main aim of this inquiry was to investigate the extent to which the Energy White Paper met the recommendations of key previous reports-including those of the Committee itself, the RCEP, and the PIU.

5. We received over 25 memoranda from various organisations, and also took evidence from Brian Wilson, the Minister for Energy, on 2 April. The DTI subsequently provided a supplementary memorandum in response to further written questions.

The strategy

The vision

6. The impact of climate change is in danger of becoming a cliché. Yet for all that it is real and potentially catastrophic. Current projections are based on mathematical models, and yet the parameters underpinning them and the complex interaction between these parameters are inadequately understood. Huge potential changes could result from, for example, the cessation of the Gulf Stream, the melting of the West Antarctic ice sheet, or the release of methane locked in the Arctic seabed, within the lifetime of those already born.[10]

7. There is a broad scientific consensus that man-made emissions of greenhouse gases are a major contributor to global warming. On the basis of the available scientific evidence, the RCEP concluded that carbon dioxide levels should be contained globally to 550 parts per million (ppm)—twice their pre-industrial level and a substantial increase on the existing level of 370 ppm—if the most damaging effects of climate change were to be avoided.[11] Even if this were to be achieved, the global temperature increase could still range from 2C to 5C and regional impacts could be significant. More recent evidence suggests that even this limit could give rise to more serious effects than previously thought.[12]

8. For developed nations, limiting emissions globally to 550 ppm is likely to require a reduction of 70% from current levels (60% for the UK).[13] The Kyoto agreement represented a first step in this direction, but the difficulty of achieving an international agreement limited the scale of the targets adopted-and indeed the Protocol has still not come into legal force. The UK's own target for the first commitment period (2008-12) is only 12.5% against the 1990 baseline, and the UK is in the fortunate position of having met this target already partly as a result of the "dash for gas" in the 1990s. But if more challenging reductions are to be achieved, the UK and other developed nations will need to develop radically new energy strategies based not on fossil fuels but on renewable sources of energy and on using energy more efficiently.

9. In the long process of public discussion and consultation following the RCEP report, a broad consensus has emerged that priority needs to be given to environmental objectives in UK energy policy, and that renewables and energy efficiency—if pursued with sufficient commitment—could make up for the shortfall caused by the decline of our nuclear and coal fired-power stations. This was the major theme of the PIU report (February 2002), endorsed strongly by the EAC in its July 2002 report, A Sustainable Energy Strategy?, and now finally by the Government itself in the Energy White Paper.

10. The Energy White Paper represents a major shift in the approach to UK energy strategy. We welcome the priority which it gives to environmental objectives and the extent to which it endorses the role of renewables and energy efficiency in a future energy strategy. Much of the language of the White Paper, the vision and the aspirations expressed in it, is very positive in this respect. Though we have concerns about the absence of specific details, we accept the point made by the Minister in his evidence to us-that one should not underestimate its significance and that the strategic level at which it was pitched was therefore appropriate.

The 60% target for 2050

11. The Government's commitment to a new direction in energy policy is specifically reflected by its adoption of a long-term carbon reduction target—in direct response to the RCEP recommendation.[14] By including in the White Paper a specific commitment to a 60% reduction in carbon emissions by 2050, the UK Government has set a clear goal for domestic policy. It has also led the way internationally by emphasising to other nations the need to address the challenge of global warming. The Government deserves praise for doing so.

12. The impact of this internationally was reflected in comments made by the Chairman and members of the Environment Committee of the Canadian Federal Parliament, when they came to give evidence to us on another inquiry. In referring to the Government's 60% target for 2050, the Chairman stated:

"We would like, as parliamentarians, to congratulate you for your initiative, which we find far reaching and very enlightened and it sends out a signal also to us in Canada, which we will take seriously. We would like also to congratulate not only you in this room but outside this room those in the Energy Department of the UK who produced the White Paper in which the target of 2050 is elaborated for a reduction of greenhouse gases by 60 per cent. Although the choice of 2050 is a very bold initiative it forces us to think into the future more than we usually do and that 60 per cent reduction is a stunning item".[15]

13. However, the RCEP pointed out that the 60% target was in the context of an international agreement to a "contraction and convergence" (C&C) framework, and it recommended the adoption of such an approach, combined with international trading in emission permits, as offering the best long-term prospect of securing equity, economy and international consensus. The Energy White Paper says nothing about the latter, and the Government response to the RCEP recommendation is non-committal, citing C&C as only one of a number of possible approaches which could be adopted.[16] While we understand the need for some flexibility in international negotiations, we are aware of the difficulties of achieving a consensus. We believe that, just as the UK is setting a precedent in terms of adopting a long-term target, it could also exert greater influence over other nations by setting out and promoting more clearly what approach it favours in terms of an international framework for reducing carbon emissions.

14. The adoption of a 60% target also has considerable implications for domestic policies. The White Paper clearly addresses some aspects of this—such as the proposal to bring forward the review of building regulations. However, there are other major areas, particularly relating to the continuing growth in the transport sector, which present far greater challenges and remain largely unaddressed. A specific example of this is the future expansion in aviation which is the subject of a separate inquiry by the Environmental Audit Committee.[17] While the White Paper includes a proposal for integrating carbon screening within regulatory impact assessments,[18] this is still insufficient. Departments are already required to screen new policy proposals for environmental impacts and conduct appraisals where necessary. We recommend that they should include within this screening process specific consideration of any implications arising from the adoption of the 60% carbon reduction target.

A lack of substance?

15. The strategic vision which the White Paper offers is laudable. However, in our report last year, we expressed strongly the view that the Energy White Paper should not simply be a bland statement of policy, as there had already been a huge level of detailed consultation in this area through the RCEP report and the PIU. Instead, we argued that it should constitute an action plan, setting out clearly and specifically how the Government intended to achieve its objectives.[19]

16. In this context, we expressed concern that the DTI consultation—launched following the publication of the PIU report—would fail to take forward the debate and was in danger of simply revisiting all the issues which the PIU themselves covered.[20] We note that Brian Wilson, in his last speech as Energy Minister, stated in the House that he did not understand why the DTI had embarked on its May 2002 consultation, endorsing our own concerns on this point—which the Government response to our report has done nothing to allay.[21]

17. The need for urgent action is highlighted by the scale of the challenges facing the UK. We forecast last year that the Government would miss its renewable target of 5% by 2003, and was unlikely—on the basis of present trends—to reach more than half the 10% target for 2010. Similarly, a huge step change in energy efficiency improvements is also required if the Government's energy strategy is to be realised. The Government has acknowledged these points, referring to the "extremely challenging" nature of the 2010 targets, and more generally to the "massive challenge" posed by the White Paper.[22]

18. Our fears about implementation have proved largely justified. The Energy White Paper is weak on specific measures and contains little that is new. As the Energy Minister himself acknowledged, the DTI consultation following the PIU report was a waste of time.[23] Resources could have been better used to plan in detail how it was to achieve the hugely challenging objectives it intended to set. It remains largely an act of faith on the Government's part that present policies, with their reliance on market mechanisms, will in fact deliver.

19. The White Paper does in fact include a commitment to publish an implementation plan for energy efficiency, though this may not be for another year.[24] It does not include a similar commitment for renewables—despite the complexity and range of the various activities, initiatives, and processes which need to be coordinated in order to boost their implementation. We are also alarmed at any suggestion that renewables might have perhaps five years to prove themselves.[25] Renewables are likely to assume an ever increasing importance in the context of the UK's growing dependency on imported energy. The Government needs to be fully committed, and we would like to see this commitment reflected in an implementation plan which would provide leadership, direction and confidence that the strategic objectives can be achieved.

20. The Minister, in his evidence to us, downplayed the extent to which the Energy White Paper should contain detailed targets and specific proposals, given the radical strategic change in direction which it heralded.[26] While we have some sympathy for such a view, we find it incomprehensible that the Government was unable to publish an implementation plan as a supporting document to the White Paper. We recommend that the Government does so as soon as possible, and includes within it not only an implementation plan for energy efficiency but a similar plan for renewables.

A lack of resources?

21. The White Paper offers little in the way of new resources. The extra £60 million brings the total capital grant spending on renewable energy to £350 million—but this is over a four year period and therefore amounts to less than £90 million a year on average.[27] This compares poorly with the support extended in the past to, for example, the nuclear industry.[28] It is also far less than the amounts being spent by other countries such as Germany and Japan.[29]

22. Furthermore, these multi-annual figures are somewhat chimerical. Data provided by the DTI shows that the capital expenditure on renewables in 2002-03 was only £1.7 million (out of a budget of £15 million), while the budgets for 2003-04 and 2004-05 are still only £43 million and £98 million respectively.[30] We have commented previously on the difficulties of tracing budgets and expenditure when funding streams are rebranded, amalgamated, and reannounced.[31] We recommend that the Government should publish an annual explanatory statement setting out funding available and spent on renewables and energy efficiency, with reconciliations to previous years.

23. The successful promotion of renewables may involve substantial Government support over many years—as the growth of wind energy in Denmark demonstrates.[32] We are concerned that that the level of resources made available within the UK are inadequate and that the DTI's vision is not reflected in Treasury funding. Additional resources for both renewables and energy efficiency should be made available as part of Spending Review 2004. The Treasury should also ensure that staff resources devoted to energy efficiency within DEFRA are adequate. Indeed, a lack of adequate resources may be one reason for the delay in producing an implementation plan for energy efficiency.

Renewables

The 2010 targets

24. We pointed out last year that the 5% renewables target for 2003 was unachievable, and that the Government would miss it probably by as much as 2%. We also showed that—to meet the long-standing 10% target—there would need to be a step change in the installation of new renewables; and that to meet the 10.4% Renewable Obligation target by 2010 represented an even greater challenge.[33] We have updated the graph we produced last year, and it confirms the absence of any step-change in deployment so far.

Source: Environmental Audit Committee

25. The Government has acknowledged that there is now no chance of meeting the 2003 target.[34] Success on this score depended mainly on increasing the take-up of NFFO schemes, but the most recent data shows that this has not occurred to any significant extent.[35] Indeed, many undeveloped NFFO schemes remain unattractive to contract holders and we note that the White Paper does nothing to address the issue of the sterility of sites which we raised last year.

1 Twenty-second report of the Royal Commission on Environmental Pollution, Energy - the Changing Climate, June 2000, Back

2 The Energy Review, Performance and Innovation Unit (Cabinet Office), February 2002. Back

3 Ibid. Paragraph 1.10. Annex 3, however, lists over 550 organisations which submitted responses or were consulted. Back

4 The Energy White Paper, Our energy future - creating a low carbon economy, February 2003, Cm 5761. Back

5 Fifth Report of Session 2001-02 from the Environmental Audit Committee, A sustainable energy strategy? Renewables and the PIU review, HC 582, July 2002. References to the Committee are abbreviated hereafter to 'EAC'. Back

6 Seventh Report of Session 1998-99 from the EAC, Energy Efficiency, HC 159, July 1999. Back

7 Second Report of Session 2001-02 from the Trade and Industry Committee, Security of Energy Supply, HC 364, February 2002. Fourth Report of Session 2002-03 from the Science and Technology Committee, Towards a non-carbon fuel economy: Research, Development and Demonstration, HC 55-I, April 2003. Back

8 Second Special Report of Session 2002-03 from the EAC, Government Response, HC 471, March 2003. Back

9 EAC press notice, Responses to the Energy White Paper, 24 February 2003. Back

10 The Energy White Paper, p23. See also the speech by Michael Meacher at Newcastle University on 10 February 2003, entitled Earth, Wind, Fire Water, God - A statement of concern. A full text of the speech can be found at: http:www.gci.org.uk/speeches/Meacher.pdf. Back

11 Energy - the Changing Climate, RCEP, June 2000. Back

12 Third Assessment Report of the Intergovernmental Panel on Climate Change, IPPC, 2001. Back