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UNCORRECTED TRANSCRIPT OF ORAL EVIDENCE To be published as HC 130-iii House of COMMONS MINUTES OF EVIDENCE TAKEN BEFORE Environment, Food and Rural Affairs Committee
Climate Change: Looking Forward
Wednesday 19 January 2005 SIR JOHN HOUGHTON, DR DLUGOLECKI and MS CHRISTINA HUTCHINS MR ANDREW LEE and MS CATERINA CARDOSO Evidence heard in Public Questions 208 - 295
USE OF THE TRANSCRIPT
Oral Evidence Taken before the Environment, Food and Rural Affairs Committee on Wednesday 19 January 2005 Members present Mr Michael Jack, in the Chair Mr Colin Breed Mr David Drew Patrick Hall Mr Mark Lazarowicz Mr David Lepper Mr Austin Mitchell Joan Ruddock Alan Simpson David Taylor Paddy Tipping Mr Bill Wiggin ________________ Memoranda submitted by Our World Foundation
Examination of Witnesses
Witnesses: Sir John Houghton, former Co-Chairman of Working Group 1 of the UN Intergovernmental Panel on Climate Change (IPCC) and former Chief Executive of the UK Met Office, Dr Andrew Dlugolecki, Review Editor of the Insurance and Financial Services Chapter of the IPCC Third Assessment Report, Board member of The Carbon Disclosure Project and The Tyndall Centre for Climate Change Research and advisor on climate change to UNEP Finance Initiative and Ms Christina Hutchins, Director, Our World Foundation, examined. Q208 Chairman: May I apologise to everybody in the room for the delay in the start. I am afraid our Committee domestic business overran, for which I apologise. We welcome as our first witnesses this afternoon Our World Foundation and may I thank you for sending in your written evidence. We welcome Sir John Houghton, the former co-chairman of the Working Group 1 for the United Nations Intergovernmental Panel on Climate Change and the former chief executive of the UK Met Office. I now know who to blame for my weather forecast, or I used to anyway. Mr Andrew Dlugolecki, the review editor of the Insurance and Financial Services Chapter of the IPCC Third Assessment Report and a board member of the Carbon Disclosure Project, the Tyndall Centre for Climate Change Research and advisor on climate change to the UNEP Finance Initiative. It is almost a pocket c.v., your responsibilities. Anyway, you are very welcome, and Christina Hutchins, the director or Our World Foundation, who has a wonderfully brief title! As you know, the inquiry which the Committee has before it is to take stock of where we are with reference to Kyoto and the targets that we set. Can I ask you a very straightforward couple of questions. Why is it, in your view, that the policies which the Government have put forward effectively are not delivering what they hoped for in terms of the UK target for CO2 reductions and what principally do you think the Government should do to recover the position? Sir John Houghton: Thank you. That is a good question. We are very disappointed. I think everybody is very disappointed at the way the renewables energy targets, for instance, are not going to be met until 2010. Now, the reasons for that may be many but we notice that other countries, in particular Germany, have done very much better on renewables than the UK. Their building of wind sources of energy have been very much greater than ours by a factor of five or six already. The growth of solar p.v. energy in Germany is enormously greater than anything in this country and they have incentive schemes and mechanisms which seem to be working very much better than ours, and we would like to say a little more about that in a minute, I think. We need to begin to put our house in order and to become more determined, I think, that what we do is going to actually be delivered rather than allow forces which would tend to operate against more renewables taking their place. I think I will ask Andrew to add to that. Dr Dlugolecki: One practical example of that is in the electricity industry, which I am sure you must be familiar with, but just very briefly we have conflicting policies. One is saying the Renewables Obligation to generate more renewable electricity and the other one is saying produce electricity as cheaply as possible. My background is from the finance industry and now the finance industry is very unwilling to touch renewable energy because what has happened is that those conflicting policies have driven some of the green suppliers bankrupt, which means that now the banks own the power stations, which they never wanted to do, and nobody is going to build new power stations when the guiding rule is that you must have electricity as possible. That is unfair when renewable technology is still evolving and therefore cannot compete at this point in time only on price. The time will come when it will be able to, but it cannot do it yet. Ms Hutchins: The House of Lords Select Committee on Science and Technology recently said that the Renewables Obligation tended to act as a cap rather than stimulating the market and they suggested rolling targets and capital grants. Also, we are suggesting that perhaps the UK could consider the German refit scheme with a renewable energy feed in tariff, which basically guarantees renewable energy producers access to the grid for a fixed price for a fixed term, which is a great stimulus, and it actually costs less than the Renewables Obligation. Also, we would suggest that perhaps refit could be adopted for community scale projects and this need not be marginal. For example, in Denmark 80 per cent of the wind projects are supported through refit. Other suggestions that we would like to make to stimulate the UK market would be the creation of a significant climate change renewable energy budget to supply significant capital grant cost for the building of large-scale renewable plant, such as tidal lagoons, should be reconsidered. Also, as Sir John said, we need to learn from countries which expand renewables, produce clear policies to bring renewables more in line. We also need to stimulate the consumer market through a high profile climate change communications programme. Just like any other project would be marketed, so too we need to stimulate support for renewable energy as well as energy efficiency technologies. In turn, obviously consumer support will build confidence in the investment sector. Finally, we would also like to suggest that perhaps in the UK what we could do, which would also help our targets, is to provide support and grants to help consumers adopt domestic scale micro CHP. Basically, at the moment 1.3 million people buy boilers every year and therefore if they could be encouraged to buy micro CHP within less than ten years that would generate sufficient capacity to take over from the existing nuclear power stations if you take into account the emission losses through transmission. Chairman: Right. Thank you for that helpful start. Q209 Paddy Tipping: It is interesting that you have started by discussing the UK policies and the real engines for economic growth at the moment are China and India. If you look at the population growth, it is going to come from the developing world. Global warming requires a global solution. In the developing world how big an issue is it? What priority does climate change get? Sir John Houghton: Can I comment on that? I think it is a global issue and it demands global solutions, you are absolutely right. But those global solutions are made up of individual countries doing what they need to do and what is absolutely clear is that we cannot expect China, India and countries of that kind to take very big steps. Q210 Paddy Tipping: I take that as a given. That is a given, we all agree on that. Let us just talk about what we are going to do elsewhere. What political policy priority has global warming got, let us say, in China? That is where some real growth is taking place. Sir John Houghton: Well, if we are talking about China, I know China reasonably well. They are in fact very concerned about climate change. They know about floods, they know about droughts, they know about storms, they know the sorts of things that will happen and they are trying to become very efficient in their energy. During the 1990s they actually cut their CO2 emissions. They are going up now quite considerably, but they actually cut them in the 1990s though efficiency means. They want to do that. They are a big country, they want to industrialise and they are going to do that whatever. We have got to help them do it, of course, in ways which are sustainable. We have got to help them with renewable energy schemes, with efficiency schemes, all sorts of things. China are well on board as far as the ideas are concerned, but China in the political arena will not move until the US moves and that is the major issue as far as China is concerned. If I can return to the UK scene and what we are not doing - Q211 Paddy Tipping: No, I do not want to talk about the UK. We will have plenty of time to talk about the UK. Ms Hutchins: I would say that obviously it is true that in China perhaps they are more conscious than in other parts of the developing world. In many parts of the developing world people are just trying often to survive. At the moment there is a great push, which is fantastic, for the alleviation of poverty. We have Gordon Brown trying to raise £100 billion per annum. We have the new report by the United Nations trying to increase their budgets from 130 billion up to 135 billion per year and up to 195 billion by 2015. The point is that a lot of people in the developing world are not conscious of global warming and yet they are going to be directly affected and they are already in the front line. There are 183 million extra people being affected by disasters already. Some of that is climate change. What we need to do is to obviously increase awareness in those countries amongst the people, the companies and the governments that climate change will radically undermine those countries unless they take on board mitigation policies. Also, what we need to do is to link the alleviation of poverty to what we were suggesting linking it to, debt for climate change/renewable energy plans. Basically, at the moment we are talking about writing off 100 per cent of the debt, but that money will be applied to health, education and welfare. What we should be looking to do with the Treasury, the EU and the G8 and UNFCC is also suggesting that that previous debt funding is also applied to the expansion of renewables in those countries because that will help not only those countries and also the global community but also it would help their economic prosperity. As we know, too many people do not even have power. So we are suggesting that. Dr Dlugolecki: During a little bit in my career I was responsible for developing countries in my old company so I have visited them on business rather than just climate change. You are right when you infer that they do not see climate change as the big issue, it is development. I have been to almost all the COPs(?) as well, so again I meet people there. The key thing is how to give them some incentive to want to see climate change as an issue which will reward them as well. At the moment under the Kyoto Protocol we have gone along a rather legalistic bureaucratic route with the CDM, for example, almost on the basis that nobody should make money out of climate change and we are going to make the mechanisms as hard as possible to do it. If you take an alternative model like contraction and convergence, which you might have heard of, I think one of the great benefits or bonuses in that is that it creates emissions rights for developing countries which are greater than their current consumption of fossil fuels, much like Russia has signed up to, and that is the reason why Russia has signed up to Kyoto. By doing similar things for developing countries you then give them an incentive to participate in the whole process of fighting climate change. At the moment the developing countries are very suspicious that there is a plot to stop them developing and we need to get around that by letting them see that there is a way for them to make money and develop sustainably. Ms Hutchins: Could I just make two final points. At the moment there is this big push to alleviate poverty. Climate change will ultimately completely counter the efforts which are being made to alleviate poverty. They will be pouring money into a bottomless pit unless we mitigate climate change. The second point is that if we are talking about raising $135 billion per annum, rising to $195 billion per annum by 2015, what we need to be doing is approaching climate change with that kind of financial clout, i.e. as we are suggesting, a global climate change renewable energy plan which is significantly deploying renewables internationally with that kind of money. Paddy Tipping: That is helpful, thank you. Q212 Chairman: Just a point on that. We seem to load into what we expect people to do to relieve their debt lots of things and you have now loaded another requirement on to the less developed world to achieve. In other words, they have got a shopping list and they have got to tick the boxes before debt is cancelled. Given, for example, removal of corruption might be an absolute key to getting any improvement in a less developed country, how are you going to rank all of these extra things you are asking countries to do to get themselves relieved of debt? Ms Hutchins: We were suggesting at first instance, before the recent push has come, for the alleviation of debt being tied in to those monies being completely applied to health, education and welfare. Initially we were not suggesting that the alleviation of debt finance would go into renewables but that one would look at each country on a specific basis, one would assess their renewable sources, see what funding (if any) they could apply to the expansion of renewables and that that money should be levered with developed countries either on a one to one, five to one, ten to one basis and if the country was so impoverished they did not have to apply any monies but they made a commitment to work with developed countries to expand renewables. It is only since the global push to alleviate poverty is tying in all that money to health, education and welfare that it would seem futile if one did not include climate change mitigation, the expansion of renewables, into that mix because, as I have just said, if they do not mitigate climate change they will become increasingly undermined through human suffering as well as economic disbenefit. Q213 Patrick Hall: If I could ask Ms Hutchins, with regard to the evidence submitted to this Committee, the paper on a global climate change renewable energy plan, one of the elements of that is the proposal that Government should instigate debt for climate change/renewable energy plan swaps. How would that work? Ms Hutchins: What we were suggesting is that at the moment, as I say, Gordon Brown is leading on the alleviation of debt, so basically number one is that climate change and the expansion of renewables need to be introduced significantly to the Treasury so he can take it forward, also through the EU and the G8 presidencies and through the Kyoto, UNFCC process. Basically, how that could work on a practical level. Number one, the key principle, will be the alleviation of debt, as I have just said, and that each country should be considered individually. Secondly, that the country commits to working with developed nations to progress a realistic schedule of deployment and that realistic targets are set for each country. Then we move on to the funding and obviously, as I said a moment ago, if the debt at the moment is being earmarked for health, education and welfare then climate change and the expansion of renewables need to be put into that. That then could receive leverage from developed countries through the GEF and otherwise either on a one to one, five to one or ten to one basis. Also, we need to increase awareness in these countries of how climate change will radically undermine the peoples and the nations because that can create a ripple effect for future policy. As I mentioned a moment ago, economically it can only help to benefit the countries and they need to be made aware of that because not only do these countries need energy in order to grow economically but also countries such as North Africa have great resources in the Sahara for wind and solar thermal which they could, given support, help to export and that would help them financially as well. The final point is to not impose a debt for climate change/renewable energy plan swap gives such countries complete unfettered licence to further expand using fossil fuels which, as we all know, means we will never mitigate climate change. On that final point I would like to say, as everybody knows here, the IPCC at present are projecting a 5.8º centigrade increase this century at worst. I imagine many of you are aware of the Hadley Centre and the global dimming problem, which is now projecting possibly a 10º centigrade increase this century, 2º centigrade possibly by 2030, 4º centigrade possibly by 2040. So it is critical that we encourage and support developing countries to expand their renewables as well as ourselves. Q214 Patrick Hall: On the point the Chairman raised about how much can we realistically expect to attach to debt relief, I do not think you have said you wish to replace the other programmes with issues to address global warming and sustainable energy but to add that to the list. Okay, but do you see that as being realistic given the pressing poverty in certain parts of the world? I think if you are going to develop that argument you need to show the links between these things, if indeed there are links between global warming and poverty and environmental degradation and the economy. Those are the sorts of arguments which might work, but is that something that you have developed so far? Ms Hutchins: I would say that if we study, as many experts have internationally, the increase in natural disasters since the 1960s we will see how already climate change may be radically affecting countries both in the number of people affected and also economically, as Andrew will be able to tell you. Therefore, if the present debt payments are being applied to health, education and welfare, on a health level under climate change many counties will become increasingly stricken with diseases such as malaria and other diseases. As per Peter Cox and the programme, many of these countries will become uninhabitable. When we are talking about a 5.8º or a 10º centigrade increase that is the global average. That means other regions may rise far higher. How is that going to affect peoples' health and welfare? So therefore to not have it in the mix - it is the number one priority, surely, because it affects everything else. Q215 Patrick Hall: Okay. What can Britain do, not only when it has got the presidency of the G8 but in the long-term, perhaps taking up your partnering scheme suggestion? Sir John Houghton: I think one has to be realistic, of course, about what is possible in the shorter term and then in the longer term and I think in the short term of course there is going to be a great deal of emphasis on poverty, education, welfare, and so on, but nevertheless there has to be some education not only of people in the UK but also people in the developing countries about what is likely to happen with climate change, particularly in floods and droughts, extreme events and extreme heatwaves and the whole problem that is going to cause for their agriculture and to some extent for their survival in certain parts, particularly the Sahara and African countries. We are certainly not proposing that there should be some bureaucratic arrangements which are made as part of the debt removal scheme because what we need is more bottom-up procedures which will help those countries to grow for themselves the necessary contributions to their growth in energy, renewable energies rather than fossil fuel energies. I happen to be a trustee of the Shell Foundation and the Shell company has put $250 million - and they are going to put another $250 million - into a capital fund, a charity for supporting renewable energy growth in the Third World, in the poorest of countries - Q216 Patrick Hall: I was asking what Britain could do and I think your answer is a more general one, also about what corporations can do. If I have misunderstood, I apologise for interrupting you, but could you look at what Britain specifically can do so that people here can relate to that and maybe keep Government to account on what has actually been achieved, or is it just some general vague international activity which it is not always easy to relate to? Sir John Houghton: I am sorry, this is not vague international activity, it is activity undertaken by a British company which is actually very effective and I was using it as an illustration of something which is very effective in developing countries because of the way in which they do it. It is done from the bottom-up and it is done making sure that poor people actually run the schemes and develop their own processes rather than just some top-down approach. If Government and industry in the UK can get together in ways which would enable this to occur, not in the bureaucratic sense but in an actual real sense then progress would be made. Q217 Chairman: Ms Hutchins is bursting to say something. Ms Hutchins: Basically, Sir John's point is that we need to avoid bureaucracy and it does not have to be complex. The partnership should be seen as positive development, not unwieldy impositions. Basically, how do you do it simply? Well, simply you bring together in the UK parties such as the Shell Foundation, the investment sector from the City. You have small groups, not unwieldy groups. So you have a finance group and you also have a technological innovation group to give advice and technology transfer. You have a country which they are paired with, for example someone in Sudan recently said to me that they were trying to find funding for a renewables project but they did not know where to begin really. So simply a country could have a list of renewable projects which sought funding and they would come to that partner, say it was the UK, to the finance group, who would be able to see whether there was anything here that the UK could assist with. If not, that could go to a finance group in another country, which would be a pivotal centre for investment in renewables basically and have key people involved, as would the technical group. Q218 Mr Drew: In terms of negotiations with those countries that are trying to develop, is there any case whatsoever for conditionality, to say to them that there would be additional aid if they were to look at means of producing energy and forms of transport which were environmentally acceptable. I know this is provocative, but one way in which you could argue that you could at least stop the world from getting worse is to actually take those countries that are in the early stages of economic development and give them incentives so that they were able to do that through sustainable means of energy and transport. Sir John Houghton: If I might try and answer that. In the first instance you have to help them do it. You cannot say that a condition of giving them this is that they should actually do things which are perhaps technically quite difficult for them or even administratively quite difficult for them in developing new forms of energy and putting those forms of energy out and financing these schemes, and so on. There is no point in us putting conditions in unless we are prepared to actually help them do that. I think the way to help them do that is not just via Government, it is via Government/industry cooperation because a lot of industries are involved in those countries too, in order to say, "Well, here there will have to be some sort of backing with some finance," but this comes from what you are basically trying to do, by that sort of cooperation and making sure that it works from, as I say, the bottom-up rather than something just imposed upon them and saying, "Take it or leave it." We cannot do that. We have to help them a great deal. Technological transfer is one part of it, but it is even helping them rather more than that with developing business techniques, developing the way in which they can grow waste-to-energy schemes - and the Shell Foundation has done a lot of those, which are very effective, much more efficient than the world bank because they are doing it on the ground floor level rather than from the top. Q219 Chairman: Just a quick brief comment, Ms Hutchins. Ms Hutchins: Well, obviously aid would be great but, as we know already, a lot of it does not get to where it is meant to be going and there is corruption, so another thing that we could consider would be to send out micro generation CHP technology - give it instead of finance to such countries. Q220 Chairman: In your evidence, in fact the first point you make in paragraph 1 of what you sent to us, you suggested that we should move towards a target of 80 per cent of the nation's energy to be derived from renewable sources. If we look specifically at the United Kingdom, what is your route towards that objective given our somewhat slow progress to the targets that have already been set? Ms Hutchins: Basically, you assess obviously what a country's energy (not electricity but energy) requirement is and you can work out how much you would need to transfer every year to renewable sources over that kind of timescale. Given the existing slow growth, it really means that we have to, number one, come up with the will to do it. If there is the will, everything is possible. Secondly, the funding to support it and the removal of barriers. At the moment we are in an emergency situation and really we should be moving forward - Q221 Chairman: That is a great general statement, but let us deal with practicalities. How do we get from where we are to where you suggest we want to be? What sort of money are we talking about, what methodology and how are we going to do this? Ms Hutchins: On a funding level, if you take the UK's energy consumption now and not allow any additional increase and then discount the amount of existing energy investment it works out (based on 2000 figures) at around £5 billion a year of capital funding required to support the expansion of renewable energy projects. What we were suggesting was that that money could be going into supporting renewable energy projects but in joint ventures with existing energy companies and that after so many years the energy companies would have the option to buy out the public share, i.e. retain 100 per cent of long-term profits, and thereby the climate change/renewable energy budget would be a rolling fund. You would not necessarily have to put up £5 billion between here and 2050. Q222 Chairman: Just to be clear, you are inviting the government of the day to make a long-term commitment of £25 billion worth of capital? Ms Hutchins: £5 billion per annum. Q223 Chairman: Yes, but over what period, because we have got, what, forty-five years to your target? Ms Hutchins: Sure. Basically, what I said is that it could become a rolling fund. You would create joint ventures with the energy sector and they would have the option to buy out the government's investment. Q224 Chairman: But why should the energy sector not do it itself? At the moment what we have got is a system where there are some financial encouragements through the Renewables Obligation to move forward, and private companies are making those investments. Some major energy suppliers are busy telling us that they can supply green energy. Why should they not do it? Ms Hutchins: Because the energy companies, according even to BP, seek Government leadership and also we have a critical global issue. The action is not happening as yet sufficiently in the energy sector, so Government needs to take leadership on it. Sir John Houghton: Could I just raise one renewable energy source, which I believe is important and lots of other people believe it is important too, and that is tidal energy. We have the highest tides in the world in the UK and the potential for tidal energy - and this is being looked at by companies like Tidal Electric and the like - is perhaps 50 per cent of the UK's total electricity needs. The problem with something like a tidal energy project is that the money is all needed up front and the pay-back period is rather long, twenty or thirty years, because there is no fuel involved and it is a sizeable scheme. Companies on their own will not invest in that way. What we need is Government/industrial partnerships producing demonstration projects in things like tidal energy. The technology is known. There is no problem about any part of the technology. There are no particular environmental problems with tidal energy. We know exactly when it occurs. It is not like wind energy, intermittent and you are not sure when it is coming, you know precisely when the tidal energy is there. So there are areas of that kind which the Government has hardly looked at and it is hardly supporting and hardly encouraging. Unless there is real encouragement, real incentives and a willingness from Government to put a capital share, along with industry, into demonstration projects those things will not get off the ground. Q225 Chairman: I just want to ask Dr Dlugolecki, does that make financial sense to you? Dr Dlugolecki: Yes, it does. There was a big renewables conference sponsored by the German government in Bonn last year, in June, which considered these issues and precisely the point that Sir John has raised was a key issue for everyone, including the finance sector, that the main trouble with renewables is that the cost is up front. The energy is free but all of the cost is up front and finding that money when you are competing with fuels which are unrealistically cheap (that is the fossil fuels) is almost impossible from a financial point of view. Why are the fossil fuels unrealistically cheap? Because at the moment consumers are paying nothing for the damage which will happen in thirty, forty, fifty years' time. In fact it is already beginning to happen from using these fuels. So these fuels are unrealistically cheap. So on your main premise about why do we not just use renewables, quite simply the fossil fuels are unrealistically too cheap and therefore nobody is going to start renewables unless there is help, first of all to recognise that the structure of renewables projects is different because they are all up front and so the banks, etc., need a different kind of comfort on the risks side, and secondly governments have to set a clear pathway. I think this is going back to the question you asked earlier. There has to be a clear pathway with milestones along about where we intend to be at different points in time. Interestingly, there was a report by one of the biggest American power companies which burns coal, called Sinergy, and what they said was - and bear in mind this is in the USA - "What we need from Government is a clear view of where we are going in terms of how quickly emission limits are going to come in." So they accept that even in the USA it is going to come in, but there is not the incentive for them to develop clean coal technology, for example, until they know how fast it is going to come along. Ms Hutchins: I have three additional quick points. When we are talking about a £5 billion per annum renewables budget for the UK, first of all let us put that in context. That is only about a fifth of the environment budget and only about a fifth of the fuel tax. The second point is, what is our world worth? If Peter Cox and the Hadley Centre are correct and the UK is going to have a habitat like Africa in eighty years' time, what money would put that right? Thirdly, we should consider the German Ecotax model because that has been their most successful climate policy and that has generated vast sums of money. It would easily cover such a budget. Q226 Chairman: But that Ecotax was to raise money for the German pension situation, was it not? Ms Hutchins: But its objective was to make energy consumption expensive. That was the primary objective. Q227 Alan Simpson: I am a great fan of tidal power and have been for decades. It is a bit difficult to harness in Nottingham! Dr Dlugolecki: It could be arranged! Q228 Alan Simpson: It may well be if we do not get our act sorted out. You know that the Renewables Obligation is currently set at 10.4 per cent that energy suppliers have to contribute from renewable sources by 2010 right up to 15.4 per cent by 2015. You have nudged this along a soupçon and suggest that it should be set at 80 per cent by 2050. It would be interesting to know if you think that is realistic. I am just in the process of doing a place that will generate a surplus of energy from a combination of micro CHP and photovoltaics, but I cannot see anyone else on our street who is going in that direction and to get that sort of 80 per cent figure we have to have a seismic shift in our thinking and our policy focus. Can we do that? Ms Hutchins: Well, I would ask you the same question, can we do it? I think it is about the will, the funding and the removal of barriers and mobilising the population. Dr Dlugolecki: I would answer that very simply from the business point of view that if you actually look at the rate at which technologies have spread in the last one hundred years then the answer must be yes, it can happen, but if we do not remove some of the barriers it may not happen. If you look at the spread of the car, at one stage people were concerned that London was going to grind to a halt with horse manure and yet within twenty years the horses had gone. Look at the spread of the mobile phone. You just have to look around. It is perfectly feasible that that could happen, but we can also stop it happening. Ms Hutchins: If we do not and if it is not achievable in the developed nations before the developing countries further expand using fossil fuels then we will never put the lid on climate change if certain feedbacks are triggered. So we have to make it possible. Sir John Houghton: People say actually that of course technology will do it anyway, industry will do it anyway, so why do we worry? Because it has happened in the past, it will happen in the future. But it is not quite so simply because the reason why it has to be done on the timescale we are talking about is that... Chairman: Well, as you have stopped speaking, I am going to adjourn the Committee for ten minutes to enable colleagues to go and vote and Mr Simpson will continue our line of questioning. So you can think a little more about the answer. The Committee stands adjourned for ten minutes. The Committee suspended from 4.00 pm to 4.20 pm for a division in the House. Q229 Alan Simpson: If I can pick up from where I think we left off, I think the point I was heading towards is that I do not think the Committee needs to be convinced of the moral, ethical, environmental case for the changes which you are describing. I think what we are looking for is an identification of the mechanisms of getting there and I think those mechanisms really need to be focused for us on what Government has to do. I was just trying to bring us back to the question of how we change the economics of what is viable. I know from my own place that if I wanted to do something cheaply I would not be doing this combination of micro CHP and photovoltaics, but in the long term or in the medium term it makes sense to try and have power systems which generate more energy than they consume. In part of your evidence you gave us an example of the German Ecotax system raising 6 billion a year? Ms Hutchins: It has raised vast amounts, yes. Q230 Alan Simpson: It would just be helpful first of all to know what is the rate of tax which applies in Germany because you suggested ten per cent? Ms Hutchins: It was incremental. It was a tax on electricity, mineral heating, oil and gas. It started off on electricity at 2 pfennig per kilowatt hour. I think it was 6 pfennig on mineral, 4 pfennig on heating oil and 0.2 pfennig - I can give you the exact figures - as a first round, and then they increased it in 2000 and 2001. The mineral went up to 6 pfennig twice, I think it was. Q231 Alan Simpson: Just let me cut to the chase here. I think the figure for us that are relevant is what the rate is now because that would be helpful. Ms Hutchins: I will have to get back to you on that one. Q232 Alan Simpson: Sure. If you have not got it, we do not need to go through the history but if you could just let us know at some point. But in a sense that is a very narrow approach to the tax process and I think the cleverness of the German approach is that in some ways they have not related it to climate change at all, they have tied it to pensions, so that it engaged a different sort of coalition. I really would like you just to say would you first of all want this just on energy generation and not on things like the current windfall profits the oil and gas industries are sitting on, something in the region of £5 billion this year for doing nothing really. The second is, is the wider issue that you raise a question of whether we tax not fossil fuel consumption but energy consumption. Is there a need to change the whole nature of the energy market so that energy suppliers can actually sell thermal efficiency rather than energy consumption? Sir John Houghton: I think the most important tax to have or the most important weighting to provide is on the fossil fuel part of the energy system because that is what you are really trying to cut down, and that in itself of course will help to produce energy efficiency also, particularly for people who are of course having to pay that tax because they get their energy from that means. So that is important to develop it in the first place. It is a question which I think Andrew might like to answer. Dr Dlugolecki: I think opportunism has its place. So if the opportunity arises to get some more money from an environmentally friendly direction, as you say, where the fossil fuel industry is making a lot of money then I think there is something to be said for that. But I would only see that as something which if the opportunity arises you take advantage of it, but you do not have that in your plan and you do not rely upon that kind of thing happening. You are asking what specifically can we do. There is a number of other things that one can do. You are looking at tax there, but in terms of efficiency one big thing which is coming in quite soon, which is interestingly in the finance industry, is that there is an EU directive on the energy performance of buildings and that is going to really waken up the entire property-owning sector in the UK because to them until recently climate change has not been an issue and there is a big difficulty in running buildings, commercial buildings anyway, in a climate-friendly way because the tenants and the owners have different objectives. The tenants want buildings which are as cheap as possible to run, whereas the owners maybe want buildings which are capitally very efficient and over the long-term will be better to run. So you have a conflict of interest there. So that EU directive is creating a new platform where we can see climate change coming in as a big issue in terms of the running of buildings. Another very specific one is where there was a big fanfare when Tony Blair announced in Johannesburg that the Export Credit Guarantee Department (ECGD) had ringfenced £50 million for the export of renewable energy from the UK, and not a penny of that has been claimed. No one has come forward to use that money to export. That again was one of the things which were analysed in the Bonn renewables conference. It is not just a British problem, it is a generic problem for the renewables industry. The renewables industry tends to be small companies and they just cannot be bothered. They do not have the resources, let us say, to deal with the problems of exporting. It is enough trouble for them manufacturing in their own country, let alone exporting to a country where there may be corruption and all sorts of other problems, plus the procedures for getting the credits from ECGD or their foreign equivalent are very cumbersome. So one thing Government could do is to look to see how to get small renewable companies to be able to export, and they need a lot of assistance to get started. I am not just saying, "Well, let's just give them money and it's a subsidy." It would be good for Britain ultimately because you are creating new industries and it is very necessary, and we can see it is not just a British problem, it is all over the world and that £50 million is just sitting there unused. In terms of my own industry, the finance industry, there is increasing interest in what we can do about climate change. The big finance industry is not interested in investing directly in renewables. You are talking there about venture capital finance. This is new stuff and it is highly risky. You have got the risk of the entrepreneur, the risk of the technology and the risk of the market. The big investment companies do not have the skills to do that. They invest in big companies. What you have seen recently is the formation of something called the Carbon Disclosure Project, which now has over a hundred backers which collectively control something like $11 trillion of assets. So it is very, very big. It is partly UK but it is also international and what they are finding is great difficulty as investors in finding out which companies are treating climate change seriously. So one thing that Government could do is to bring more focus in terms of the requirement on companies to report their performance on climate-related activities. For example, just publishing their emissions would be a good start. Similarly, for investors I think it would be very worthwhile to sponsor some research - and I think it would be tiny in terms of the amount of money - so that one could judge which investors are actually paying attention to climate change in the way they invest their money. So you could say, "How many emissions did this £100 million of investment create?" At the moment there is no recognised metric for doing that. It would need very little money to actually sponsor some research and come up with a method that people would accept as being reasonable to do that kind of thing. Another reason why investors do not go into renewables is because there is tremendous pressure on them to invest securely. So they do not tend to look at the long-term, they only look at very short-term returns. The Treasury tried to change that with a Pensions Bill in 2000 and it is looking again at trying to change it, but there seems to be a tremendous need to bring the trustees of pension funds up in terms of their ability to look at these issues. There was a report published on 17 December, the Morris interim report on the actuarial profession. The actuaries are extremely influential in the way they influence investors' decisions, the fund managers they appoint, the strategies they adopt, and that report concluded that actuaries are very, very narrow and introverted in their thinking. They tend not to think about the wider world, environmental issues, and so forth. So that again is another opportunity. There are certain key decision-makers that the Government could do things with. You may think this is a litany of criticism, but I can give you a positive example as well. Chairman: We are up against time restraints for some of our colleagues. I think we have got the message. I am sorry, Ms Hutchins, I know you are bursting to get in but two of my colleagues have short, sharp questions to bring your session to a conclusion. Q233 Mr Lazarowicz: The point I want to make relates very much to the issue of what Government can be doing as well. In your paper you have made the point about if we are going to get the kind of change in renewable policy that is required in the renewables market we actually need to make sure the public are brought on board in a much bigger way and are actually aware of the issues and some of the solutions. You have been doing some work in relation to how the view of the UK climate change programme should include a strategy communications plan. Can you tell us a little bit about what you have in mind there, what is the extent of the programme that you have in mind, what it will consist of, and also give the timescale? Can you also in that answer roll up also the issue of what response you have had so far in your discussions with Government as to the likelihood of that type of communications programme coming forward. Sir John Houghton: Well, just very quickly to say I chaired a meeting last May which was hosted by BP. The object of the exercise was to say how can we get together with Government or Government, industry and NGOs together to have a concerted, cooperative public awareness programme on climate change with a wide range of stakeholders. We had a lot of good people at that meeting, a lot of senior people from right across the board, including Government, and as a result of that I wrote a letter to the Prime Minister and he supported that sort of approach on the basis that - Q234 Mr Lazarowicz: What kind of scale are we talking about, can you give us some idea? Everyone has communication programmes. What is going to be special about this one given the challenge that we are facing? Sir John Houghton: Well, what it has to present is to give people information about climate change in a way that they can be informed about it. Government needs an informed public if they are going to have the confidence to move ahead with the sort of programme we have been talking about earlier on and put the sort of money in that we were talking about earlier on. So it has to be a large scale programme. It also has to try and not only change people's attitudes but also give them information about what they need to do, why the renewable energy business is important so that it is coupled in with renewable energy information and all that sort of thing too. I think Christina could actually say a little more about that. Ms Hutchins: We are talking about a major programme and one which is sustained for many years of the scale of the kind of HIV, the drink driving campaigns, that kind of impact. We also feel that it should have the same kind of tone as the famine appeals. I think the tsunami disaster has shown you how people are willing to help given the right buttons to push, and therefore the tone is very important. Where we have got with it so far is basically, as Sir John was saying, we have been having meetings with Defra, who are keen to implement a communications campaign, and we are proposing that that be implemented in coalition with Government, the private sector and the NGO community. At the moment it seems that there is some certainty as to whether the Defra campaign may move forward as a less than high profile, certainly in the first year. They are talking about local and regional awareness-raising and, as Sir John said, they are talking perhaps only in the first year about changing attitudes, whereas we think we should be getting people to take action. Mr Lazarowicz: Perhaps in view of the time I could just simply ask you, if possible, to give a note of a bit more detail about what you actually have in mind in practical terms in that kind of programme. Q235 Joan Ruddock: Well, I agreed with the Chairman that I might ask you about global dimming and I do so because I watched the amazing Horizon programme last week. Before that I was totally ignorant on this subject. I imagine most people still are. As I understand it, what we have is essentially a global cooling because of air pollution and as we begin to reduce air pollution that effect goes away so that actually global warming, which we have all been so obsessed about, might be on an even faster track than we had envisaged to date. I just ask you what you think the implications of that are and how much more seriously, perhaps, this Committee, the Government and everyone else has got to address global warming because it is possibly a greater order of magnitude. I think Miss Hutchins referred to the Hadley Centre, which of course is on to this already. Sir John Houghton: Yes. I was responsible for the scientific part of the 2001 IPCC report. We did know about the particles situation then. We took the sulphate particles into account in so far as our projections for 2100 were concerned, expecting of course that sulphates were not dropping in all countries of the world because of the problems of acid rain, and that of course is occurring and that is what part of what the programme was about. Just a general point about the science. There were various scientific points made on that programme, one about aircraft and about cloudiness, and so on. Having been involved in this process for the last fifteen years or so, the science has become stronger. Our projections in 1990 have become tougher because positive feedbacks tend to be stronger than we believe they might be. We have always tried to be very conservative in our projections and not put forward things which were too uncertain, but those uncertainties tend to be moving in the direction of making things harder and making global warming greater than we expect it might be otherwise, and that is a very serious matter actually. It demonstrates, and that programme demonstrated very well that almost all the evidence we have is pointing in the direction that it will be substantially worse than we expect. Of course, at the moment a lot of the global warming we have actually committed to to date has not occurred because the oceans are preventing us from warming up. They take time, twenty or thirty years, to warm up. So we are committed already. Even if we stop burning all our fossil fuels tomorrow we are already committed to a substantial degree of climate change and climate change by 2050 will become larger than we expected whatever we do, in a way, and then it becomes worse still. We have got to mitigate so that the damage will not become absolutely impossible by the middle of the century, and that is what we are talking about today. Having realised that, we are in an urgent situation to do something about it and Government really needs to say, "This is very high priority." We have got to get all parts of government together, the DTI, Defra, the Treasury, and so on. We have got to get together with the major players in industry, the BPs and Shells, and so on, of this world and for the Government to approach them and say, "Look here, we really do want to move along in the mitigation programme of renewable energy and renewables in particular. Please, how do we do that in a joint partnership with you?" We can then help other countries in the world also because we could become big in the business of renewable energy. We are not big at the moment, we are small compared with many other European countries. So why do we not just pick up this particular subject? Ms Hutchins: My response very quickly is, yes, the implications are that we are talking about global catastrophe and in twenty-five years from now there will be irreversible melting of the ice cap. Basically, Kyoto cannot deliver what is needed at the moment because governments will not commit to sizeable emissions reductions until alternative energy sources are on board because it will undermine their economic development. Therefore, that is why it is critical that we implement a global climate change renewable energy plan to rapidly expand renewables. We would suggest, because you were talking about a mechanism to do that, that we would much like to bring together with Government a small steering group comprising government parties, no more than twelve, environmentalists and the private sector to take this plan forward. There are some excellent minds including parties involved in an international task force and other parties contributing who could help to expand and develop this. Chairman: Thank you very much indeed for your stimulating contribution and for your paper. I am sorry it has been a little bit disjointed because of the voting, but nonetheless thank you for coming. Memorandum submitted by Friends of the Earth Examination of Witness
Witness: Ms Bryony Worthington, Energy and Climate Campaigner, Friends of the Earth, examined. Q236 Chairman: We welcome now Bryony Worthington from Friends of the Earth. May I first apologise to you for the delay in your being able to give your evidence and thank you for your patience in remaining with us. Sometimes votes come and business overruns. I want to start our questioning by just looking at two fundamental questions which I put to our previous witnesses. The Government set themselves a target in advance of the requirements of Kyoto. They have now had to row back on it and I am interested to know why that is the situation. How did they decide on 20 per cent? Why did they think that was the right number, from which they have now resiled? What practically should we be doing to recover the ground? Ms Worthington: Okay. Well, it is interesting. The history of the 20 per cent target is somewhat shrouded in mystery, but what we do know is that in 1997 when the Labour Government was preparing a manifesto at that stage emissions were steadily decreasing year on year. From 1990 to about that time we have seen a steady reduction in emissions thanks to the dash for gas. I think generally commentators believed that we would be able to maintain that throughout the remainder of the decade and into the next decade and that the 20 per cent target was simply a continuation of the linear path and therefore was a sensible target. So I think that is the reason why they set it. However, they then went on to produce their climate change programme, which they believed would deliver that target, but it was fundamentally flawed on many counts and actually what we are seeing is that that linear pathway has not been adhered to and emissions have yo-yoed really up and down since the late 1990s with no discernible pattern. So really they are not on track and the latest results and projections show that we might only make a 14 per cent reduction, not 20 per cent, and even that is very ambitious given that we are currently at around 7.5 per cent below 1990 levels. So there is a huge hill to climb. I think you also went on to ask what should they do about it. Well, they have a climate change programme review, which of course this inquiry is very kindly for, and they can, I think, introduce new measures and a new approach which would get them back onto a linear pathway and that is essentially what we would like to see them do. Q237 Chairman: Given that the dash for gas gave them, if you like, a head start but also a rather nice comfort zone they did not have to do very much because other people were doing it. The electricity generators were replacing coal with gas. Did that not take the pressure off the rest of the economy to contribute in terms of CO2 and other greenhouse gas reductions? Ms Worthington: Certainly in relation to meeting Kyoto, the Kyoto target was pretty much met when it was signed so there was not really very much pressure to do very much and I think there was a certain amount of complacency that industry would just keep on becoming more efficient and fuel switching would continue. The failing stems from a number of different failings because nobody really is taking an overarching look at the economy as a whole and starting from the point of view of where are emissions rising - Q238 Chairman: Let me just stop you because that is a very interesting point. You say nobody is doing it. Do you know why, and who would you nominate to do it? Ms Worthington: Well, we would like an independent body which is not the Department for Transport or the Department for Trade and Industry, and indeed perhaps is not even Defra, to take on the role of setting carbon budgets for the UK plc, all sectors that contribute climate change gases. We do not really have strong feelings about who should do it, but there is a strong case, perhaps, for the Treasury taking on this role. We are now living in a new world where carbon has a price and in fact will have an effect on the public purse in the years going forward. So it may make sense to integrate it into a Treasury function so that it becomes looked at in terms of a carbon budget economically as well as them having an oversight over policies and measures. Q239 Mr Mitchell: Why is the EU not reaching its targets as well? Ms Worthington: Well, the EU are also not on a linear path, this is true. If you look at which sectors have failed to reduce, it is overwhelmingly transport which has failed to be tackled at a European level. The same is true in the UK, of course. So yes, you have seen some countries going beyond and still managing to produce some reductions and other countries where their economic cycle is growing and their emissions are rising. So it is a combination of sectoral failure. There perhaps are not enough policies to tackle transport emissions. But also with the individual countries the net total is that we are not making enough of a reduction. Q240 Mr Mitchell: The new accession states usually come from a mucky industrial tradition. It is going to get worse, is it not? Ms Worthington: Well, it is interesting. Their part of the burden-sharing agreement is to obtain an eight per cent reduction on 1990 levels, which is the same as the EU's target, and they are well below that because they have had quite a significant economic downturn since 1990. So there is not much incentive on them at all to clean up, but with them coming into the EU you would hope that financial flows from the reconstruction bank or EIB would help them to clean up their industry and they would continue to go on and make savings. So I do not think the picture is clear yet as to what they will b doing and the jury is still out really in terms of looking at their allocation plans to industry through the Emissions Trading Scheme, which would give you a good signal as to which countries are continuing to want to improve their resource efficiency and which are not, but I would have to submit some supplementary on that. Q241 Mr Mitchell: Do you want a further reduction of 30 per cent up to 2020? How likely is that given the fact that we are failing already? Ms Worthington: Essentially what we are beginning to look at is rather than talk about scary large numbers that are at a long distance from here which politicians actually feel able to sign up to because it is nothing to do with their particular term in office, we should probably start to look at incremental targets which are expressed annually. There are studies which show that from 2010 if OECD countries are to make substantial reductions you could set targets of maybe just a two to three per cent reduction per annum. That is much more manageable as a figure than setting a very long distant target and Friends of the Earth is still looking into those options as a new way of looking at targets. It is very well supported by the science of climate change. Climate change is dictated by emissions over time, not simply by how low our emissions are at a certain point in the future, so the linear pathway is a really crucial thing in trying to control those concentration levels. Q242 Mr Mitchell: You also want a reduction in the cap for Emissions Trading Schemes in the second phase. How likely is that given the fact that the revision of our own National Allocation Plan has already made it more difficult in the first place to achieve that? Ms Worthington: I think I would agree with Christina, who said that anything is possible if you have enough political will and on this issue hopefully we will see slightly more willingness to make the market work. This has been a trial period, this first phase of trading, and I think everybody is pretty unanimous that there is not going to be much scarcity and it will not deliver many of the savings. But we are testing how it works and by the time the second phase comes in there will be more willingness to take action. The problem will be, of course, competitiveness concerns and whether the EU can continue to push ahead while other countries are not involved. We would argue that the EU can and should push ahead, but it ought to be mindful of how it can protect some of those industries that it might want to, and particularly they could use border tax adjustments or traditional trade routes to try to protect themselves as they go forward from making themselves uncompetitive relative to other countries. Q243 Mr Mitchell: How happy are you with Emissions Trading Schemes? Is it not really just going to be a way for individual industries to buy a failure to comply and overall of obfuscating the issue so much that people think something is happening when it really is not? Ms Worthington: We are not very happy at all with how it has been implemented to date. Q244 Mr Mitchell: You would prefer another method? Ms Worthington: No, the scheme itself theoretically can work and can be very economically efficient. The problem is that it is a political instrument and it has been implemented in a political way. We hope that it can be improved. Q245 Mr Mitchell: Is it going to be an effective discipline, do you think? Ms Worthington: It will fundamentally change companies' attitudes to their emissions. Company accounts being produced from this year onwards will carry a new asset line in the budget which says whether you have a carbon liability or a carbon asset. So suddenly it is no longer just the concern of the environmental manager within a company as to what their emissions are, it is going to be a matter for the financial directors and the chief executive; it will appear in the accounts. So it fundamentally changes the attitude of emissions by its introduction, so it is groundbreaking. It is not yet implemented in the right way, but that does not mean to say that the theory behind it is not strong. Q246 Mr Mitchell: Just one last question from a layman's point of view. How is it all measured? How can you be so precise, a reduction of 2.9 per cent? How on earth do you know? Ms Worthington: A good question. Q247 Mr Mitchell: It is comparing old plant, new plant, all kinds of systems, the efficiency of which you do not know. It is not as if it is an overall measure of somebody going out with a sniffer and saying, "2.9 per cent worse this week." How precise is the measurement as to what it is? Ms Worthington: Well, we had a very stark illustration of how you can get it wrong with the DTI's energy projection, where they were forced to admit that they had actually got the figures wrong and they were using the wrong conversion values. But in layman's terms what happens is that an installation is required to calculate its CO2 emissions derived from its fuel consumption and then use formulae for that. They are quite detailed formulae and they take into account the different fuel types, even to the degree that different coal stocks have different values for carbon dioxide. But it is a derived calculated figure. Q248 Mr Mitchell: Is it cheatable? Ms Worthington: Yes, but it is regulated by the Environment Agency and their officers are responsible for checking and verifying that those figures are correct, and they are independently verified. Mr Mitchell: Thank you. Q249 Joan Ruddock: You have heard my question previously on global dimming and the fact that I, as one person, having seen one television programme am much exercised about this. I just wondered in the light of what you know of global dimming just how likely you feel we are to meet any of the targets, in particular the very ambitious 60 per cent by 2050? Is it doable? Ms Worthington: Well, as Sir John Houghton pointed out, they have known about the effect of aerosols and whether it has an enhancing or a dimming effect on the effect of concentration, but the degree of uncertainty about that part of the science is probably the largest degree of uncertainty of all of it, so it is still highly unknown and uncertain. Q250 Joan Ruddock: Can I just interrupt you there? Is it not that more recently it has been measurable because of the reduction in air pollution in western countries? Ms Worthington: The programme, which was very compelling, seemed to imply that. I think we will have to wait to see what the IPCC make of it in terms of integrating it into their next assessment report. What we believe, to use a poor analogy, is that we are essentially in a car hurtling at a speed at which we do not really know how fast we are travelling towards a wall and we are not quite sure how far away that wall is. Essentially, what is important is that somebody sits down and works out how to invent the brakes. That is what the UK can do and that is what the UK and Europe can do. We must work out how to control our levels of emissions and that will involve Government intervention. That is the challenge for our generation. I feel very passionately that we can show it can be done, we can do it without huge amounts of pain and economic recession. That should be then an exportable set of knowledge that we can then send out to other countries and encourage them to take the same path that we have. But we have to prove it can be done and the exerting of control and the inventing of the brakes is important because, as science firms, once we have the levers in place we can simply ratchet down according to the levels of the later science. Without any degree of control we are simply out of control and very possibly will reach a point where we have no return. Q251 Joan Ruddock: Your analogy suggests that we do not know how to invent the brakes, whereas I think Sir John and his group were perhaps suggesting it was the political will that was lacking. Do you really think there is a knowledge gap still? Ms Worthington: There is a combination of a partial knowledge, because nobody is looking at it in its entirety. Governments tend to take a very bottom-up approach, "We will tweak this tax here," or, "We'll introduce this policy measure here," but no one is looking at it in its entirety and that is what is needed now, to gain control over all sources. Joan Ruddock: Thank you. Q252 Mr Lepper: If I could just follow on that line of thought, because in your evidence you say that the current climate change programme has a mixture of measures which seek to achieve emissions reductions but there appears to be no consistency of approach. I think that is exactly the point that you have been making to us just now. Is there any sign that the review of the climate change programme is addressing that lack of consistency? I am not going to get mixed up in your analogy of the car, but where do you see the driving force ought to come from in knocking heads together and bringing about that consistency? Is it the department we shadow, is it the DTI, the Department for Transport, the Treasury, or does it much matter which of them it is as long as somebody takes the lead? Ms Worthington: Sadly, I think it does matter who does it. Obviously some departments have more clout than others and this is why I think possibly we would be interested to see if the Treasury felt it was a role they should perform. The Cabinet Office, similarly, who have cost-cutting responsibility could also be encouraged to do more. As to whether the current review of the climate change programme has taken a different tack, we would like to see the failings of the last programme more clearly acknowledge, that the bottom-up approach to policy making has not delivered the kind of control which is necessary. That said, there are some interesting measures which have been discussed within the programme which take us some way towards addressing some of the obvious gaps, but I do not think there is a sign yet that they are recommending a new holistic kind of carbon budgeting approach, which is what we would like to see adopted. Q253 Mr Lepper: Is there any sign of the emphasis that the Prime Minister has been placing on the pace of climate change during the presidency of the EU and the G8, etc? Is there any sign that the urgency which he in his public statements gives to that whole issue is affecting the thinking generally within government departments? Ms Worthington: Sadly, not enough really. I think Mr Blair seems to be more interested in the kind of global politics of the current impasse and seems to be quite relaxed about the fact that perhaps we are not doing as well as we should be at home. That is regrettable because it is not something which goes unnoticed in these discussions and I think he should pay far more attention to domestic policies on this issue if he is intent on taking a leadership role internationally. There are lots of examples. The recent emissions trading debate over the allocation of more allowances at the last hour indicates that Number 10 did not step in on the side of the angels but actually chose to put competitiveness concerns, or so-called competitiveness concerns ahead of the environmental integrity. So yes, it is an important issue which we would hope they would place more attention on. Q254 Mr Lepper: So it is talking about the global problem and the need to deal with it rather than looking at what we can be doing? Ms Worthington: There is a mythology that does the rounds, which is, "We're only responsible for two per cent of the emissions. We've already done a lot since 1990. We're doing our bit." But we all know that the bit that we have done was almost entirely an accident because of the dash for gas and that two per cent of remissions, although it is small, we are one of the leading developed countries and if we, as a stable, well-developed county cannot show that we can get our emissions onto a downward trajectory how on earth can we persuade anyone else to do the same? Mr Lepper: Thank you. Q255 Joan Ruddock: I know Friends of the Earth is always going on about road transport and transport in general as being the key to making some real change. Can you tell me, in relation to the price rises for fuel which have occurred over say the last year is there any evidence that those rises have been sufficient to reduce car usage? Ms Worthington: No. The policy at the moment seems to be frozen and the fuel duty escalator has - Q256 Joan Ruddock: No, I was talking about the market rises rather than in terms of global oil prices. Ms Worthington: Well, the problem, as always, is that it is not simply about price because elasticity kicks in and people will simply be prepared to pay more for a service that they require or need. What you need is a mechanism that triggers innovation. There is a lot of people making a lot of money out of the status quo and, as we have seen with the renewable electricity industry, what you needed was some kind of carrot and stick that said, "We're not just simply interested in relative prices, we are actually going to oblige a certain portion of your business to change towards renewables. That thinking, which has resulted in a good mechanism, has not been applied to any other sector. So we see the Treasury simply reducing duty on biofuels in the hope that that will introduce a whole new industry producing renewable transport fuel. It simply will not because unless the big companies who control that market who are asked or obliged to do that there is no reason on earth why they will. It is a highly capitalised industry and new players find it very difficult to enter. So obligation is the obvious route. So I do not think it is as simple as what the effect of prices are; there is also this question of how do you force innovation. Q257 Joan Ruddock: I asked you that because you believe that there should be a greater escalation of the fuel tax, but if there is no evidence that raising the price reduces the amount of mileage that we all do in our cars then how is that going to have a major effect? How high would you have to go to actually make people reduce their mileage? Ms Worthington: We do not have an answer for how high because we see it as part of the package. As I was saying, we need to try to use mechanisms which cause innovation. So if you were to do it through a tax route the important part would be the recycling of that revenue to Government into alternatives to the car. So it would not simply be the price alone but the fact that you would recycle into public transport or alternative transportation which would perhaps cause a reduction in emissions. So it is not simply a price issue on its own. Q258 Joan Ruddock: But is there enough public transport to get people out of their cars? Ms Worthington: I think there is a shift towards more investment in public transport. Certainly, as we have seen in London, with the Congestion Charge there has been quite a shift and various cities around the world are looking at very innovative solutions. There are talks of very lightweight tram systems being looked at in Wales at the moment. There is more interest in it, but yes, we need to have dedicated funding mechanisms for that. Obviously the fuel duty goes into general taxation. Some of that should be ringfenced for public transport. Q259 Joan Ruddock: What about the liaison between departments, DTI and Defra? Do you think that is good enough? Does that have an impact on whether these solutions are taken forward? Ms Worthington: I have to say we have witnessed probably one of the most unhelpful interactions between two departments through the Emissions Trading Scheme with the DTI representing what they believed to be the competitiveness of industry and Defra representing our need to meet our targets and it has been, I think, quite acrimonious at times. So I do not think the relationships are as strong as they should be. I think we have to accept that we simply cannot protect existing high emitting companies to the detriment of the whole society. There is going to have to be a shift and actually it will be for the benefit of society as a whole if we encourage those players to move and innovate. It is regrettable that often a very conservative approach is taken to simply helping those who are currently powerful to remain powerful and we need to see more innovation. Chairman: I would like to bring Alan in on the domestics and the time constraints. Q260 Alan Simpson: I am just finishing the fine drafting of an Energy Services Bill so my eyes lit up when I came to the part of the FoE submissions which said that you were recommending a top-down market-based mechanism that incentivised energy companies to sell energy services, so I would be quite keen for you to just trace out the direction your thoughts are taking, but also if you would just confirm two things. One is, whichever way we look at that it is not compatible with a unit price-based competition policy. It is the nature of the current competition policy which makes that plea unobtainable. The second is that whatever we come up with really ought to be industry-neutral so that we do not inadvertently find ourselves saying, "Well, it's okay to lob £85 billion at burying nuclear waste because it is not carbon, but anything that is carbon can't be touched so we need to look at how we service general efficiency but not energy consumption." Ms Worthington: Okay. I might ask you to clarify the last bit, but in terms of what we see as being wrong at the moment in terms of the demand for energy, the current Government mechanism operates on a bottom-up approach so it adds together savings attributed from different activities that companies undertake to arrive at a set amount of energy saved. Meanwhile, everybody is installing more and more electrical goods into their homes and spending more time or whatever living a more luxurious lifestyle. The demand for energy is actually continuing to rise even though these small incremental projects may be taking some of the edge off that growth. When you get into carbon constraint where you have absolute targets against a baseline year, simply constraining growth is not enough, you have to start to reduce. What we would suggest is again more of a top-down approach where we look at the overall trend in and demand for energy from any sector. In fact we would suggest starting in the commercial sector, where there are very few policies at the moment to incentivise this kind of activity, and you create a budget for energy demand which is implemented through a system of tradable certificates between those companies who service those customers and essentially providing people with a target level of demand that they will fulfil. If they need to go above that target they pay the penalty or purchase credits from somebody else who has managed to reduce demand from their customer base. That is taking the principles of the Renewables Obligation, some of the elements of the Emissions Trading Scheme and applying it to energy demand so that you fundamentally change people's views from one of, "We will make more money if we sell more units," to, "Well, we have to try to meet our customers' needs with this amount of energy." That will change the relationship between the units sold and the service provided and should incentivise companies to look for those low-hanging fruits, the least cost solutions which they could probably much more easily uncover than Government might be able to. Q261 Mr Lazarowicz: Can you tell us something about how you think the Energy Efficiency Commitment should be improved? As there is meant to be a Defra/Treasury view of policy in this area, can you briefly give us some idea as to what is the nature of the changes you would like to see in the commitment? Ms Worthington: We would first of all want the target for the commitment to be expressed as a percentage of overall demand so that the target rises as energy demand rises, in the same way that the Renewables Obligation keeps pace with the growing demand for electricity. Otherwise, you are simply providing a static amount of savings against a rising baseline. That is one of the fundamental problems with the scheme at the moment. As I have just outlined, we would prefer a far more top-down approach to encouraging people to make savings so that you would start with looking at the totality of your customers' demands and giving people targets to reduce that demand, or if we feel it is politically unacceptable to ask for reductions yet from this sector that you simply say no net growth. That would equally be a way of tackling growth in demand. Those are some of the fundamental things which need to change to make the Energy Efficiency Commitment a useful tool in reducing demand rather than simply encouraging various small projects that take place. Q262 Mr Lazarowicz: Again, it might be helpful to have a bit more information sent to us to give us some idea what you mean in more specific terms about the domestic centre. Ms Worthington: Certainly, yes. Q263 Mr Lazarowicz: Again, you are also critical of the way that the Climate Change Levy has actually impacted upon emissions and again I would be interested in knowing first of all why you think the levy has not been working well and what should be done to it to make it work better? Ms Worthington: Well, essentially it has not been set at a high enough rate to really fundamentally incentivise changes in behaviour. That is one of the most fundamental problems. The recycling of the revenue which has come in also has gone towards National Insurance reductions, which whilst that is a good thing it is not very well targeted in terms of how you might use the revenue to encourage more reductions in emissions, which would then automatically affect the scheme. Some money is obviously being recycled through the Carbon Trust, which is welcome, and we hear encouraging news that they are making progress in terms of helping industries and businesses to realise savings. There is also quite a number of exemptions from the levy, which has resulted in climate change agreements being negotiated between Government and industry. These agreements are fairly opaque, well, entirely opaque actually and very hard for us to scrutinise in terms of understanding whether they are actually being asked to do anything. We hear great things about how much has been saved, but it is very difficult to verify whether that is just as a result of business - Q264 Chairman: You can write us a letter with the questions that you would like to have answered on the grounds that it is opaque and we cannot find out and we will put them to the relevant Secretary of State. Ms Worthington: That would be welcome. Thank you. Chairman: All right. Well, you do that. Q265 Mr Lazarowicz: What you are saying, to be clear, is that it is a relatively simple technical issue and quite a big political issue, this Climate Change Levy. It is not a particularly complex scheme to work out. That is the message I get partly from what you say. Could I just ask you, in terms of an increase to the Climate Change Levy what kind of a level of increase are we talking about? Ms Worthington: I have not properly considered that, so I would have to give you a supplementary on that. Mr Lazarowicz: Okay. That would be helpful. Q266 Chairman: I, too, would welcome some further thoughts about the Energy Efficiency Commitment because it seemed to me that companies are doing it but there did not seem to be much of a connect with the customer and I would be grateful for your thoughts as far as that is concerned. Just one final postscript question. Sheffield Hallam University did some work on evaluating where you got your best value for money in terms of the public pound being spent for carbon dioxide reduction and glass fibre loft insulation came out as the leading light. The use of biodiesel oil see rape, sadly from my point of view because I think it is a good idea, came at the bottom. We do not hear much about what I might call simple, straightforward things like that. We hear lots of very sophisticated, complicated schemes. We are we not concentrating a bit more on the easy things to do? Ms Worthington: Well, it is interesting because whilst it may be true that fitting loft insulation is the most economically sensible thing to do, human beings are not really very sensible economic actors very often and actually we would like Government to concentrate on the simple things but actually the really simple thing you could do is to shut down inefficient coal-fired electricity-producing power stations because they are operating at 30 or 35 per cent efficiency when a modern CHP could reach over 60 or 70 per cent efficiency. So there are some simple things. There are twelve or fourteen coal-fired power stations which represent maybe up to 20 per cent of the UK emissions. Now, tackling them is a lot simpler for Government than trying to encourage 21 million householders to fit insulation. So economic efficiency perhaps does not always translate into simplicity or ease of result really. Chairman: I think my observation would be that you discussed and our previous witnesses discussed great publicity campaigns involving the public. If we cannot crack the loft insulation one we are going to be struggling. Thank you for your very clear answers. Thank you for your evidence. There are lots of questions which came up and I am only sorry that time prevented us from quizzing you more and we very much look forward to the supplementary information which you very kindly volunteered. Thank you. Memorandum submitted by World Wildlife Fund Examination of Witnesses
Witnesses: Mr Andrew Lee, Director of Campaigns, and Ms Caterina Cardoso, Climate Change Programme Leader, World Wildlife Fund, examined. Chairman: I am sorry you are tail-end Charlie on a rather late running day. For that I apologise. We will do our best to get through as many of the points that you kindly raised in your written evidence as we can and to that extent on behalf of the World Wildlife Fund may I welcome Mr Andrew Lee, the director of campaigns, and Caterina Cardoso, the climate change programme leader. Mr Hall is going to commence our questioning. Q267 Patrick Hall: I see that your brief emphasises that one of your tasks was to try and maintain biodiversity, etc. in the world and protect habitats. Clearly climate change is a threat to the world biodiversity, especially the long-term effects of climate change, but surely we have already got climate change locked into the system which is happening right now so there are immediate and short-term effects. Looking through your evidence, I think it is fair to say that the emphasis is on dealing with the long-term effects of climate change. I have not seen anything in there which suggests that we should be doing things immediately. What I would like to know from you is how much your organisation thinks we should be doing now to adapt to existing climate change and would that effort divert resources from dealing with the long-term effects, which is where clearly your emphasis seems to lie? Ms Cardoso: Both these need to be tackled because unfortunately climate change in parts has already occurred and there is nothing we can do about that. It has already occurred and low-lying nations, biodiverse regions such as the Arctic, for example, really need that we develop adaptation strategies and that is the way our organisation goes and the way we think the Government should go as well. However, any efforts towards adaptation should not distract attention from long-term mitigation. We do not gain much by adapting if we do not do something to mitigate as well because, for example, if we go above 2 degrees adaptation would not be useful any more. So we actually have to deal with the climate change which has already occurred. That is just a fact of life. But we have to avoid the worst dramatic impact that would occur with more than 2 degrees. Q268 Patrick Hall: Yes, but you can see that from the political point of view and maybe the public's point of view the evidence of changes already occurring can have a tremendous impact, such as flooding, a greater incidence and intensity of flooding, as we have had in this country recently. So if there was political pressure to invest heavily in trying to prevent flooding, adapting to existing climate change, does that not risk preventing us from looking at the long-term threats? How would you seek to overcome that if you accept that premise? Mr Lee: I think there is a difference between fiddling while Rome burns and actually raising the very real issues of what kinds of impacts are going to occur. A recent report we were looking at in WWF suggests that two billion people who rely on water from the Himalayan glaciers could be at risk in terms of their water supply in the future with this 2 degree scenario. That work does need to be done. There needs to be work done both on mitigation of the impacts that will happen anyway, but perhaps more importantly to mobilise those issues through the heads of those governments to apply pressure back on the emitting countries, whether those are the developed countries, Europe and the US, or China, for example, and actually bring home the real impacts as well as looking at some of the short-term measures which will have to be done anyway if some of those people are not going to suffer. It is a slightly different issue to, "Do we put more money into Boscastle?" Q269 Patrick Hall: I think we have got to get to a position where people see the relevance of both and I do not think people in Carlisle would see a flood protection scheme now as fiddling whilst Rome was burning. What we have to do, surely, is to try and ensure that such investment is capable of dealing with more incidents and greater incidents in the future. My concern was that perhaps your emphasis being only on the long-term, certainly in this evidence, you are not assisting in getting the measures that are needed now linked in if this construction, for example, is capable of dealing with the effects of longer term climate change rather than just the short-term. Mr Lee: Just to be clear, WWF is doing both and we are looking in the UK at how rivers and the coast could be managed by working with natural processes to adapt to climate change rather than just use a concrete solution, which still protects the residents of Carlisle, incidentally. But also globally we are looking at our entire programme of investment now to see whether we are investing money in places which are going in any case to be irrevocably changed by climate change. So we are conscious of trying to keep our balance, if you like. Q270 Mr Mitchell: Why do you think Government is not even reaching our domestic targets? Mr Lee: Well, I would sum it up really by saying three things, some of which has been mentioned here today. One is about political will. We think it is not so much knowing what to do as actually the political will to do it. That is compounded by departmental muddle. It is about the interface between different Government departments that has come up today, but also I think sitting behind all of it are what I would describe as the bogus fears about competitiveness which are being put against really very solid climate science. I think this myth needs to be exposed. Q271 Mr Mitchell: It is a cost and a burden, is it not? Mr Lee: Well, there is no evidence in the long-term. If you look at the work of people like Adair Turner now and other very well respected people, I would have to say where is the economic case that has been put anywhere effectively that taking the sorts of actions we need to take to tackle climate change will damage the economy? Q272 Mr Mitchell: But that assumes that everybody else is doing it. The economic case for not doing it is that there is a burden now. Mr Lee: Yes, and that is where you get into the importance of the EU leadership and the global leadership so that countries are moving together exactly so you do not get that competitiveness. Q273 Mr Mitchell: The countries will not move together, will they? Ms Cardoso: I would like to add something to that in relation to competitiveness. As far as the power sector is concerned, for example, the competitiveness issue is not applicable. The power sector in the UK does not suffer. It does not have to compete with the power sector in the rest of Europe, so that is not an issue. The fact is that in the National Allocation Plan and the Emissions Trading Scheme the power sector could have delivered considerably more than what it did. The targets were very much weakened due to pressure from the power sector and they do not have a problem of competitiveness. So that is something which we are still trying to figure out why it happened. Q274 Mr Mitchell: You said it was political will. Political will derives from the electorate, otherwise governments are scared of doing things either because it imposes costs on people or duties, or because it does not feel the public is sufficiently concerned. That is a chicken and egg situation, of course, but it could be that the public has heard so much about it, then doubts have been cast by others on the need and then people are not convinced. A delay until the public can be either convinced or the situation becomes irrelevant might be advisable. Can you convince the public to accept a burden which a middle-class consumer, a middle-class household, a middle-class market might well feel is entirely appropriate? This is extending it far wider than that. Mr Lee: I think this is where I would bring the issue back. You were mentioning earlier, Chairman, loft insulation. If you say to people, "Are you prepared to make big sacrifices and potentially lose jobs to tackle climate change?" that is a very different question to saying, "Would you like to have somebody come into your house and work out how we can fix it so that it uses less energy, you save money and it's better for the planet?" Very few people are going to say no to that. That is what we are talking about. When we talk about energy services, which is the jargon word, that is what we are practically talking about for me living in a terraced house in Hampshire and I think there is a great danger - you talked about over-complicating - of actually over-dramatising the level of change. This point about step-wise change year on year, a lot of these things are common sense and a lot of them save money. We are convinced in WWF that a lot of them provide opportunities for innovation and for new business. What they do not do is ensure that everybody who is currently a player will necessarily be a player in the future, that is the difference, because we are talking about transforming a market, maybe new companies coming in, maybe existing companies changing their portfolio of what they do away from energy supply to services. I think a lot more needs to be done to present what a low carbon lifestyle would look like, what it would feel like, so people can understand what we are really talking about. Q275 Alan Simpson: Can I just pursue that, Chairman? Back to your terrace. Does it not mean that the nature of the energy market, the nature of the changes that they face is that the people who knock on your door have to come from companies that are not saying, "Look, sign up with us and we'll give you ten per cent less, or 12 per cent less, whatever it is," but instead are saying to you, "Sign up with us on a five year service contract and we will supply you with the energy, insulation and conservation measures and energy saving equipment, fridges, whatever, such that we will make money out of your non-consumption of energy"? Is that not the trick that we have to find? Mr Lee: This is what we looked at with this ILEX report, which Caterina could talk more about, which looks at exactly what the power sector could do. Q276 Chairman: Would you like to develop that point, because I want to ask you about the power sector. But if there is more that you think they could do, please tell us. Ms Cardoso: Yes, there is quite more that they could do. The whole thing, for example, about energy services is, as you say, there would be an argument. Another thing they would do, for example, is convince the Government to set the policies which make the gains from energy efficiency more visible. For example, at the moment if somebody actually invests in energy efficiency in their house such as insulation they reap the benefits but when they try to sell the house they gain nothing with that. But, for example, if actually that was something that was incorporated in the value of the house - and Government policies can do that - it would be completely different. Again, for example, in terms of rental accommodation if the landlord does something to improve the efficiency of the house the house is more comfortable but he cannot really charge a higher rental because of that. So there is a huge problem in terms of information. People do not know what they are gaining and they are not policies that actually make those gains more visible and more up front. You gain after five years. How do we actually make those gains appear straight away at the first capital investment? Q277 Chairman: Let me just follow that up because some people in the street I live in installed some solar panels. They were then told by the local authority to take them down because they did not fit in with the fact that it was in a conservation zone. But the real question which occurred to me was, why on earth did they invest in them when their timescale of payback might take ten years and that at the domestic level is a real problem because a lot of the investment you might make in low energy equipment you will never get your money back in terms of lower energy usage before you move house. How should we tackle that issue? Ms Cardoso: It depends. One way will be, for example, capital grants, the same thing they are doing for the commercial sector, to actually have it for the domestic centre as well. That would be a possibility, that it could be discounted through other means. That would be one way of tackling that issue. I guess still the main thing is about the information because there are certain areas in which people will live, for example, for longer than five years. I would say it takes at most two years to actually reap the benefit of insulation and other boiler insulation, etc. Chairman: Insulation, yes, but the more expensive investment, no. Mr Mitchell wants to come in. Mr Mitchell: Well, no, I want to put a question to the Chairman. Did they take it down? Chairman: Yes. Unfortunately, they had to take it down. Q278 Mr Mitchell: I have got another question. What Alan says is, I think, very interesting because we talk about changing markets and I think that is the aim. Rather than changing individual aims and objects, psychology or whatever, persuading people, you change markets by subsidy, by finance, by intervention. What Alan is suggesting, I think, is a five year deal with the customer that they will invest in measures in that house which will reduce his consumption and that will be an arrangement. You also need some degree of subsidy or support for things like solar panels so that what you say does not happen, that people installing them actually take a loss. There is no incentive to a long-term investment because the market will not support it. We have to change the whole financing really rather than the psychology. Ms Cardoso: I would say that we have to change both. We need to change the finance. For example, at the moment packages in terms of financing these kinds of things are extremely difficult to get. There is also a matter of psychology. But at the end of the day I think the easiest way of going through this is really through the Emissions Trading Scheme because this gives the incentive to companies to begin to change the way they look at energy. This is what Friends of the Earth were saying before. At the moment they are very much trying to sell as much energy units as they possibly can. The moment that there are incentives that will change the market. The incentives actually say, "Well, for each energy unit that you sell you are actually going to incur a cost unless you produce it through renewable energy." They are going to change the whole way they look at the market and that is going to be the trigger. I think, going through the households is quite complicated in a way, whereas we have five or six major power companies in the UK. If we can change them by giving them the right incentives by putting a price to carbon, I think that is perfectly possible. Q279 Chairman: Let us just pick up on this because I am a bit confused about this power company argument. On the one hand you said earlier as far as the Climate Change Levy was concerned it had been mitigated by representations from power companies. On the other hand, not all that long ago London Underground was plastered by notices about "London Electricity if you want to buy green energy." They were making a virtue out of selling you the electricity more expensively, although it is a homogenous commodity. So on the one hand they are trying very hard to sort of wave the green banner and wrap themselves in an environmental wrapper, saying, "We're responsible," and yet you are telling us they are being irresponsible by the lobbying they are doing. From the nuclear point of view, they have nothing to lose. They would love the whole country to increase the investment in nuclear power because it is CO2-free and we could take a trick straight away. The gas people must have felt relatively virtuous because they are part of the dash for gas and reduction in CO2. So that leaves us with the real problem, which is the coal-fired power stations. You say in your evidence that there could be very significant contributions to CO2 reductions from the energy sector, so would you like to develop the argument, wrapping in the question of green credentials? Which bit could make the biggest reductions and how should they do it? Ms Cardoso: Which power sector companies could do the biggest reduction? Q280 Chairman: If you want to do it company by company, fine, or if you want to do it sector by sector, fine, but tell me who has got to do what and how. Ms Cardoso: Well, the first step again I think would be for the Government to set the right framework because there are many companies who actually would like to become greener but they do not have the right framework from the Government. So both in terms of allocations of remissions - Q281 Chairman: Hang on, I am talking about the power generating sector. Ms Cardoso: Yes, I am talking about the power generating sector as well, and that is what the power companies have been telling us as well, that they do not have the certainty that the Government is going to pursue a system of incentives for green energy. So I think that would be the starting point. Then basically once that system of incentives is in place the power companies have a number of options on how to reduce their emissions. One of them is to close coal. There is no reason to continue having coal. They can switch to gas. I think the medium-term solution is to switch to gas. A second one is actually to increase renewables and for that again we do need a good framework from the Government. The Government should extend the Renewables Obligation to 20 per cent by 2020. That would give a much more secure investment framework for companies. The final thing is actually to start addressing all the various energy services, which we have discussed before. Q282 Chairman: Why do you say no to nuclear? Mr Lee: Well, for a number of reasons. Firstly, because we think there is absolutely no evidence whatsoever that it is economically viable, and those words come from the Secretary of State for the DTI, not from WWF. Q283 Chairman: Do you believe everything the Secretary of State for DTI says? Mr Lee: No, but I think on this, if she is taking the competitiveness argument - Q284 Chairman: You are selective in your belief, are you? After having slated Government for poor coordination and knowledge in the area, you are now according the Secretary of State probity on nuclear, are you? Mr Lee: Well, even the DTI is saying there is no economic case for nuclear, let us put it that way. The second point is we have not solved the waste problem. The third point is that it is not needed. The point of the work we did with this report is to say, "Actually, it is not too late to get on with this, with sufficient will and with a sufficiently clear framework for businesses. The trouble is, I think at the moment the power companies and the Government are looking at each other to see who will blink first and each, to some extent, is saying to the other, "You act." "No, you do it. It's your fault. You need to give us a clear signal," and the Government is saying, "No, you need to do more." So I think in the climate change review the Government needs to break that deadlock by saying, "No, this is what needs to happen. This is the regulatory framework, these are the incentives. It is now going to be profitable for you to invest in the sorts of things that Caterina mentioned. We do not think nuclear needs to be part of the solution. Ms Cardoso: I would like to add something to that. It is not just DTI but most studies which actually look at energy see that nuclear energy is not economically very viable. They usually do need quite a few subsidies to go ahead. In terms of alternatives, where to invest the money, one can invest, for example, in energy efficiency measures and that would be much, much cheaper. Q285 Chairman: Have the French got it wrong? Ms Cardoso: It seems so. Q286 Chairman: But they have got 70 per cent invested in nuclear power in terms of their generation - Ms Cardoso: And they are heavily subsidised. It is the French taxpayers who pay. Q287 Chairman: But they are not producing any CO2 from it, are they? Ms Cardoso: They are producing other kinds of dangers and economically you can - by increasing energy efficiency measures, by reducing energy demand, I think, for example, if there was a target to reduce energy demand, if there was, for example, 0.2 per cent reduction in energy demand per year, which corresponds with what the Energy White Paper has been saying on energy efficiency, that would be much more cost-effective in reducing CO2 emissions than giving subsidies to the nuclear industry and incurring all the other problems that occur with that. Q288 Chairman: My final point. If it is so straightforwardly expressed as you have said, just 0.2 per cent reduction - Ms Cardoso: That is our interpretation or their target - not ours exactly, ILEX's interpretation. Q289 Chairman: Okay. So it is well supported and well documented. Why do you think the Government are not leaping towards that achievement of that straightforward objective given the problems they are facing in having to row back on their own target? Ms Cardoso: It is a very good question. I personally would think that one of the reasons is that there is not a strong lobby behind it. When it comes, for example, to the power sector there is a very precise group of industry who actually want to lobby for something. When it comes to energy efficiency, the benefit of energy efficiency, they are spread all across society. So you will not have basically all the UK population lobbying for that. They are not concentrated, the benefits, they are spread out. So that is why I think it is so important. All right, we commissioned the report to ILEX, which was reviewed by most major players in the power sector. It actually says if we can actually meet the 20 per cent target with no nuclear energy and at a much lower cost, then business as usual. But what happens? Those costs are spread out, so who is going to be lobbying for that? That is one of the problems. Mr Lazarowicz: You mentioned earlier on the UK's position in the leadership of both the G8 and the EU later this year and the Prime Minister has said that climate change is a major priority in both those two presidencies. What would you put as a kind of headline of things that the Government should be doing to make use of its presidency period in both these organisations? Obviously engaging the US is undoubtedly one of the priorities, but could you tell us what would be the best things the Government could do to make use of that opportunity? Q290 Chairman: Can I just presume on Mr Lazarowicz's question by just raising a point which came at the last sentence of paragraph 1.5 of your evidence, where you say, "The UK must ensure that re-entry of the US into the international climate change regime is based on US commitments to tough emissions reductions domestically." Does that dilute Kyoto, and if we achieve that objective, to follow Mr Lazarowicz's point, how is the United States going to engage in this when they have rejected Kyoto? Ms Cardoso: I think there is an important difference between what the federal government says and what is happening at the levels of the different states. The state of California, New York and New England, they are all seriously considering to actually have caps on their emissions. They are also considering a cap and trade system. So we would think that an important way, and a very useful way, of engaging with the US would be through the states, for example exploring ways of how we can link potential cap and trade systems in these states together with the European system. That would be a way. Much of the policy in the States, from what I understand, much of it actually comes from the states. It is very bottom-up on many issues. So foreign policy would be top-down but issues, for example like this one, which actually comes down to what the local people do, is very much bottom-up and it is much stronger. I think there is much more potential for achieving a cut-down in emissions in the US if one goes via the different states. So that would be my first suggestion as far as the US is concerned. As far as the most important achievement of the G8, I think it comes out of commitment from different countries that we do not go above the 2º centigrade increase in temperature. That is absolutely key. There are many countries which support this view, so it is a matter of bringing it together and making it public. Q291 Mr Lazarowicz: What the people have said to us today and all the other evidence we have received is very convincing and we as a Committee are most likely to be convinced and we will, no doubt, be doing our best to convince our colleagues and we will have a very strong report and very strong recommendations at the end of our process, but the issue which I suppose always concentrates the mind is that to achieve real change does not just require the governments of the world to act, it requires above all a worldwide public movement effectively and you do what you can as NGOs to bring it about and obviously governments try to do what they can as governments. What can Parliament do to actually help encourage the kind of worldwide pressure for change, which is really the only way you are going to bring on board governments? Mr Lee: I will have a crack at it. This is a huge issue, of course. In the UK there is a fledgling organisation called the Climate Movement being set up by all the major environmental NGOs in response to the issue that this is such a massive thing we have to deal with that no one organisation can do it. The model there is to build a coalition more like perhaps the Jubilee 2000, the drop the debt sort of model, which involves church groups, trades unions, business, a very disparate network. Part of the thinking behind setting up the climate movement is that it could become a trigger for similar movements in other countries. There was a discussion about whether it should be set up as a global organisation and the feeling was that that is too much to bite off in one go. Let us see if we can get more of a movement here. But the other part of my answer to your question would be, going back to this thing about what does it look like, what does a low carbon lifestyle look like and why would people be interested in it, there are some very symbolic and very important decisions about to be taken by the Government. The Sustainable Community summit, which is going to happen before the end of January, is a critical opportunity for the Government to say in advance of the publication of the climate change review that every new home built in these new communities in the south-east will come up to the higher standards in terms of actually not just energy efficiency but a whole range of other things. That does a lot of things. It does not just impact upon the people who go into those homes, it also sends a very powerful signal to the market, it also creates volume just in terms of the number of houses built to those standards with the kind of kit that you were talking about earlier, so it brings the production cost down, and the idea of a sustainable building code (which is what is being vigorously debated right now to go into that summit) is that that would then set a benchmark across the construction industry. Okay, that only deals with new houses and you have then all the issues of refurbishment, but those sorts of things could be used much more actively, I think, as a way of promoting "This is what it means to you as a citizen. These are the sorts of choices." Then I think you would find more people supporting it and saying, "That's a good idea," and there is clear evidence from the construction sector that there is a market demand for this sort of property and that people are actually prepared to pay more for it. We think that the very small extra build cost, which would be very tiny if there was the volume, could easily be covered by things like a green mortgage at a preferential rate, looking at council tax levels, and so on; in other words to take out the front-loaded cost and give customers the benefits over the years. I think there is the public movement, climate movement end and there is what the Government could be doing now with issues like housing. Q292 Mr Lazarowicz: That is helpful. If I could turn very briefly to a separate aspect of the issue and just ask you to say a little bit more about why, with regard to the EU Emissions Trading Scheme, you are unhappy at the idea of sourcing emissions from outside the EU. Should international emissions trading be encouraged? You have heard the evidence from Our World that it is actually needed to bring developing countries on board the worldwide Emissions Trading Scheme? Ms Cardoso: We are definitely extremely supportive of an international trading regime, very supportive of that. We are lobbying for that and the Kyoto Protocol actually sets already the basis for that. With regard to this particular issue about sourcing emissions reductions from outside the EU, the reason why we oppose that is because for an emissions reduction to actually have some value as a reduction it has to be a reduction in addition to business as usual or less than business as usual. For example, if we are sourcing it in countries where they do not have targets it is extremely difficult to actually make sure that that reduction is a real reduction or whether it is just a reduction that would have happened anyway by accident, in which case it has no value. So that is the main reason why we oppose that. The second reason is that our objective is very much to reduce emissions at home, to set the example for the rest of the world of how one can reduce emissions without that having a negative impact on the economy, in fact it can even have the contrary. So we are very supportive of an international trading regime. There are countries outside the EU which are interested as well, such as Japan and China, and we think those options should be pursued. Q293 Mr Mitchell: What sort of cost are you talking about? Is it a small extra cost? The Government wants to build these houses in the south-east for £60,000, which the Institute of Chartered Surveyors says would not build a cigar box! Can you put a figure on the amount of extra cost involved in being energy efficiency for new buildings? Mr Lee: The best figure we have is that if you take the highest quality housing in terms of the environment like the BedZed development in London you are talking about two per cent on the build cost and that is without the volume. That is partly because quite a lot of the technology is expensive because it is still not in the big market and we think that is not a big percentage. Q294 Chairman: Can I just conclude by turning now to the role of agriculture and particularly the use of biofuels. There seems to me to be a paradox in this country. That is that Defra on the one hand are very enthusiastic. They tell us about the benefits. The Chancellor, on the other hand, makes a reduction in duty for biodiesel and bioethanol, but as far as the use of indigenous raw materials from UK agriculture is concerned, to the best of my knowledge nobody has built a plant. The Secretary of State, upon being probed about this problem, says: "If we are more generous this will encourage imports of biofuels, but on the other hand if we meet our obligations under the EU directive for blended fuels, if we do not have a biofuels plant it will be imported." This paradox appears to be irresolvable. What is your practical advice about what should happen? Should we first of all have a UK biofuels industry? Secondly, what do you think we need to do to get one actually underway? Ms Cardoso: WWF is supportive of biomass but it is also supportive of the way the market works. So I think, for example in the context of the CAP reform there should be more support for biomass. Whether, on giving those supports, the UK farmers decide to go ahead with it I would say is a different question. I think what is very important is that the options are explored, the pros and cons are explored and that there is a diversion of subsidies from excess of food to biomass. That would be our view on that point. Mr Lee: In terms of the dilemma you have just described, it is curious that that point of view is being put for biofuels, that imports are the problem, we should have our own industry. That argument is happening. Whereas for wind energy, for example, the argument put by the DTI - I am sorry to mention them again - is exactly the opposite, "Oh, well, it doesn't matter if we just import all the technology." What we and I think actually all the NGOs have said is, "Look, there is a huge market opportunity here for the UK to be a leader in the world on some of these things." So personally, yes, I think biofuels, biomass is a part, probably a small part in the UK, of the solution but certainly part of the mix. It has other benefits, rural development benefits, benefits for land managers, and we should be trying to get a slice of the action, if you like, in that case. It would probably have much bigger benefits in other countries, of course. Q295 Chairman: Do you think as a principle it is important to tackle these issues on as many fronts as possible? I come back to the point I made to our previous witnesses that if you look at what gives the best value for money for the expenditure of the public pound in CO2 savings it is loft insulation and biofuels suddenly comes right at the bottom of the spectrum, which is where I personally suspect the Treasury are camped by saying, "We have a limited amount of money to spend in this area so let's put it where we get the biggest bang for the buck," which is a rational economic judgment. But what it means is that you close down not just biofuels but many other options if you are looking to put public money into trying to stimulate the types of development that we have been talking about. So do you consider it important that you fight on as many fronts as you can or should you just concentrate all your resources, coming back to your observations about the power sector, for example, on where you are going to get potentially the biggest hit? Mr Lee: Well, I think we have outlined where we think some of the big hits are now. I think this does relate back to the climate programme review and the lack of a clear long-term vision. What scale of climate change are we trying to avoid? What degree of real reduction in emissions do we want and what does that look like in terms of the energy future, because going back to your point about nuclear earlier, is our vision in the future of highly centralised energy production and lots of imports or is it of more decentralised production in combined heat and power, using biofuels, and actually there needs to be some thought about what that looks like, how it all fits together, because then there is some kind of direction. Then in the shorter term I think it is possible to make some really quite clear economic decisions about if we put the investment here it will bring this technology nearer to market. But as part of an overall view - and this is part of the problem, I think, with the debate about wind at the moment in the UK - it has been hugely polarised because it is sort of, "Wind farms will do nothing." Well, wind is an important part of the mix, but it is only part of it and by not talking to people about what the whole thing looks like all the attention is focused on the wind debate. So a clearer plan, I think. Chairman: Thank you very much indeed. Your answers have been very clear, and thank you for your very interesting written evidence. If there is anything else you feel you wanted to respond to in writing following these exchanges, please do not hesitate to let us know and thank you very much for coming. |