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Westminster Hall
Wednesday 12 October 2005
[Frank Cook in the Chair]
Future of the Coal Industry
Motion made, and Question proposed, That the sitting be now adjourned.—[Claire Ward.]
9.30 am
Mr. John Grogan (Selby) (Lab): Today, we have no fewer than four opportunities to discuss energy policy. Following this morning's debate on the coal industry—I am grateful to Mr. Speaker for selecting it—another debate in Westminster Hall this afternoon is about oil and gas. That will be followed in the House by an Opposition day debate on tackling climate change, and energy policy will doubtless feature then. Finally, for those with real stamina, we end the day with an Adjournment debate on clean coal technology.
That plethora of debates reflects the fact that energy policy is once again taking centre stage in national politics. Such is the level and nature of the supply of energy in relation to ever-increasing demand that we are coming to realise that a bad winter could result in power cuts. There is also an increasing realisation among Ministers that people will ultimately hold the Government responsible for keeping the lights on.
The Confederation of UK Coal Producers has pointed out to me that, to date, about 26 billion tonnes of coal has been mined in the United Kingdom. The blood, sweat and tears that went into mining that coal has helped shape communities and generated a culture; indeed, it helped form the political party to which I am proud to belong. Only 1 billion tonnes of economically available reserves are left, but it is worth remembering that domestic coal production last year was marginally in excess of 25 million tonnes. At the current rate of extraction, we could easily look forward to producing coal for nearly half a century more.
The central tenet of my speech, which will be relatively short to allow all hon. Members to contribute, is that although we will never see a return to "King Coal" in our economy, it is in all our interests to ensure a diverse energy supply in which clean coal continues to play a big role, and in which the critical mass of remaining pits in the UK are maintained to maximise that diversity.
I argue for the coal industry not by way of special pleading or out of sentiment but because I believe it has a key role to play in our energy policy. British coal production is inextricably linked to the fortunes of our coal-fired power stations. Indeed, virtually all domestic coal production goes to power stations. In the four years since 2001, coal's share in our electricity generation has been respectively 34 per cent., 32 per cent., 35 per cent. and 35.6 per cent.—all substantial figures.
The first principle that we need to establish in our energy policy is the importance of diversity of supply. Even if we build a new generation of nuclear power stations—I have grave doubts that the issues of waste and cost have been satisfactorily resolved—and even if
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we expand renewables to produce 20 per cent. of our energy requirements, between 60 and 70 per cent. of our electricity-generating capacity will still have to be accounted for, in all but the long term, by gas and coal. Without some sort of public policy intervention, that percentage is likely to be mainly gas.
Jim Sheridan (Paisley and Renfrewshire, North) (Lab): On that point, I wonder whether my hon. Friend agrees with Les King, director of technology at Mitsui Babcock, who said:
"Retrofit or new build of modern coal-fired plant which has been designed to be future-proof would allow plant operators to reduce emissions by up to 60 per cent. now. This could be achieved without increasing dependence on imported gas or on intermittent power sources such as wind and allows for fitting of carbon dioxide capture and storage when this becomes practical. The UK coal fired fleet and its infrastructure is a valuable legacy".
Mr. Grogan : I do indeed. Mitsui Babcock is a leader in that field; I shall suggest later one or two mechanisms by which that sort of technology could be encouraged.
The current increases in gas prices could be the start of a trend. If we diversify the energy mix, including clean coal, we would improve the security of supply and decrease the risks of rapid price rises in a totally dominant energy sector destabilising the economy in the future.
Moreover, coal-fired power stations offer something that no other energy source can match: flexibility to meet demand. Coal can be stockpiled at power stations and used to provide base load, but its supply also has the capability of being turned up and down to meet peaks in demand. Electricity generated from nuclear and gas-fired power stations is not flexible enough to deal with severe fluctuations in demand during winter months. For example, during summer, about 350 GWh of electricity is produced by gas-fired plant and a little more than 250 GWh by coal-fired plant. That position is reversed come the winter, when gas remains at about 350 GWh and coal increases to 390 GWh, with a maximum provision of 420 GWh.
Having established the overriding principle of diversity, we have to make coal fit for purpose environmentally. The Minister is now the seventh holder of the position of Minister for Energy since 1997. Each of his predecessors reaffirmed the Government's commitment to invest in clean coal to produce results. Indeed, the energy White Paper makes it clear that in a low carbon economy, the future for coal must lie in cleaner coal technologies.
However, it is no longer enough just to back research. In a former life, the Minister was a distinguished academic at the university of York in my constituency. In time, I want to be able to recommend him for a honorary degree from York on the basis that he was the one of the magnificent seven Energy Ministers who, in the end, persuaded the Treasury, No. 10, the Secretary of State for Trade and Industry—whoever it was who had to be persuaded—to commit resources to invest in clean coal as opposed to only research. My hon. Friend will be aware that the £40 million funding offered in the recently published carbon abatement technology strategy, which concentrated on carbon capture and storage research—a welcome measure—is somewhat
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dwarfed by the $1 billion that President Bush has assigned to the FutureGen initiative. Among other things, its aim is to develop the world's first coal-based, zero-emissions electricity power plant.
If we in the United Kingdom are really serious about developing workable technologies, that ambition has to be matched at some stage by serious funding. Time does not permit me to talk about the details of clean coal technology; it may be covered by other speakers or in tonight's debate. I want instead to make a couple of suggestions about how the Minister could act to provide regulatory certainty for clean coal producers and give incentives for clean coal production.
In the short term, the quickest way for coal-fired power stations to reduce carbon dioxide emissions is to co-fire with biomass. For example, Drax Power Ltd., the owner of the largest coal-fired power station in the United Kingdom, has ambitions to increase biomass to 20 per cent. of total coal burn. To be able to sell such coal-fired electricity to suppliers under the renewables obligation, stations have first to acquire renewables obligation certificates. The Government currently cap the share of the ROC market that can be accounted for by co-firing to 25 per cent. Next year, the cap will be cut drastically to 10 per cent. The expansion of co-firing that would result from the simple action of maintaining the cap at 25 per cent. would save 2.5 million equivalent tonnes of carbon dioxide a year and maintain much more coal burn.
Will the Minister deal with an anomaly that could threaten the successful operation of phase 2 of the European Union emissions trading scheme, proposals which will have to be submitted to the European Commission by June 2006? At present, a perverse advantage is being offered to those coal-fired power stations that are not equipped with flue gas desulphurisation units. The carbon allocations distributed under phase 1 of the scheme are calculated using historical output on the basis that that provided a reliable prediction of future carbon production.
As for coal-fired power stations, the lifetime of several plants in the United Kingdom will be limited under the terms of the large combustion plant directive. However, the plants without FGD units are in receipt of the same carbon allocations as those afforded to FGD-equipped stations. The FGD stations will be put at a disadvantage even though Drax, West Burton, Cottam, Eggborough and other power stations have invested millions of pounds in the equipment. It could be a start if carbon allocations were increased at those power stations that have made an investment in cleaning up their act, as opposed to, what is in effect, rewarding them for making no such effort.
A number of the mechanisms that could be adopted as incentives for clean coal would provide some financial inducement. For example, we could mirror the renewables obligation with a clean coal technology obligation, encouraging electricity suppliers to source specified percentages of the electricity that they supply from stations fitted with both FDG and carbon abatement technologies. Alternatively, the Government could offer long-term carbon contracts to clean coal producers, perhaps under the auspices of the EU emissions trading scheme. Under that proposal, the
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Government would guarantee prices for the purchase of carbon allocations left unutilised by plant employing specified carbon abatement technology. That would provide a revenue stream to underpin the investment made in the equipment. Every producer would have an incentive to save carbon using clean coal technology in order to cash in on the guaranteed prices for unused carbon allocations. The Government could then sell on those unused allocations to other industrial sectors—according to studies that I have seen, they might even make a profit on the deal.
However, even if we create a future for clean coal generation, what is the future for British coal production? Of the 25.1 million tonnes produced in Britain last year, around 12.5 million tonnes came from deep-mined production with some 12 million tonnes from open-cast. The open-cast sector is still a substantial and important contributor to UK coal production, but the extent to which that continues to be true will depend on planning policy and on the outcome of various planning applications—my hon. Friends want to refer to some of those later.
Only eight deep mines are still operating: Daw Mill, Thoresby, Welbeck, Maltby, Tower, Kellingley in my constituency, Harworth and Rossington—although the last two are due to be placed in care and maintenance from next spring by their owner, UK Coal. For UK coal production to survive beyond this Parliament in a meaningful way, and for reasons of diversity and security, it is imperative that the Government top up the £60 million of investment aid. To ask for bids for the third term of the scheme when £57.53 million of the original allocation has already been allocated makes little sense; the presumption is that more money will be assigned. At Kellingley pit, to which many former Selby miners have moved, a bid for £13 million of investment aid is part of a £48 million plan to provide access to over 17 million tonnes of reserves at the site. Without that investment aid, the future of the remaining pits will be under greater threat.
I understand that the Government are considering not paying investment aid for schemes at Harworth and Rossington because the pits are to be mothballed. That is superficially an attractive idea, but it is worth remembering that no money is handed over to UK Coal until work has been completed. So long as that has been done in those cases, I fear that if the Government go down the route of claiming money back, the extra transfer of risk will mean that no private company will claim investment aid. Unless nationalisation is to be announced—I do not expect my hon. Friend the Minister to advocate that today—such reclamation of aid will only hasten the demise of UK coal production.
There is a strong case for making UK Coal more accountable in return for aid, and I would advocate transferring the administration of the investment aid scheme from the Department of Trade and Industry directly to the Coal Authority, which has a great knowledge of the industry, and which can better insist that if UK Coal claims public money for coal production it must demonstrate that it is interested in more than property development.
Germany's domestic coal industry is similar in size to that of the UK, and it has recently received approval from the European Commission for an aid package totalling €12 billion to assist it until 2010. I do not
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suggest anything on such a scale, but given the sums that are going to renewables and nuclear, I think that we can afford between £30 million and £50 million in investment aid for the next five years. If announcements could be made well in advance, that would help the industry to plan.
In my view, large-scale private investment in future coal production is likely only if the generators of coal power can offer long-term contracts to the producers. That could be a quid pro quo for the Government's offering the generators the sort of long-term carbon contracts that I discussed earlier. I note that the investment aid scheme is up for review in Europe in 2006. I hope that the Government will contribute to that review, and that we can extend the scheme until 2010, as is allowed under EU rules, and consider expanding its scope.
I want to put on record my thanks to the Labour Government for all their work in regenerating former coalfield areas and helping former miners. To give but one example of what they have done, I can tell the Chamber that in Selby, just one year after closure, fewer than 60 of the 2,000 miners who were employed at the Selby mine complex are out of work. That did not happen by accident; it happened because of investment, political will and retraining. The experience in Selby was very different to that in neighbouring coalfield areas in the 1980s and 1990s.
Real partnership is possible in the industry between miners and management. For example, at Kellingley in my constituency, a determined but fair manager, Bill Tinsley, has won the respect of all the unions. Change has been achieved. Kellingley is not unique, but it provides a good template.
I ask the Government to intervene in the market with a five or 10-year plan for clean coal that gives some regulatory and price certainty to coal generators and ensures long-term coal contracts for a clean, modern coal industry. I think that we will win the case for clean coal in the forthcoming energy review, but unless the Government act quickly on investment aid, there may well be little British coal production left by then. I want the Minister to be remembered as the man who, in the interests of energy diversity, gave a kick start to clean coal, and not as the man who finally buried "King Coal".
Frank Cook (in the Chair): I think it advisable to explain the situation: the established protocol in this Chamber is to commence the first of the three Front-Bench winding-up speeches 30 minutes before the termination of the debate—in other words, at 10.30 am. We have 43 minutes left, and nine hon. Members have indicated that they wish to contribute. I appeal to them to bear in mind the time constraint, which leaves them just a little more than four minutes if they are to be fair to their colleagues. Hon. Members should bear that in mind when accepting, and responding to, interventions.
9.47 am
Paddy Tipping (Sherwood) (Lab): I am delighted to follow my hon. Friend the Member for Selby (Mr. Grogan), who said that we would have opportunities to discuss energy today. We will have future opportunities, too, what with the publication of
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the climate change programme review. I hope that the Minister will tell us when he will announce an energy review. The last time I heard him speak, he said that he would do so "soon"; that was a fortnight ago.
My hon. Friend the Member for Selby is quite right to say that coal has a future. During the review, the Minister will have to decide how far the Government are prepared to take a strategic approach, as opposed to the market approach that has served us well over the past 10 years. The thinking, it is clear to me, is that there should be a move towards greater intervention. The reasons are straightforward: we will not meet our target of 20 per cent. renewables by 2020. By then, there will be perhaps three nuclear stations remaining, producing 7 per cent. of our electricity, and we will be heavily dependent on gas. Some 70 per cent. of our electricity needs will be generated from gas, some 90 per cent. of which will be imported. That is a dangerous situation.
Coal will have a place in the future, provided that it is used flexibly to meet the peaks and troughs in the market. The question, as my hon. Friend the Member for Selby said, is probably whether that coal will be British coal. Let me talk about the major coal producer in the country, UK Coal. It made losses of £40 million in the first six months of this year. The Minister knows that Rossington and Harworth are to be put into care and repair. To be blunt, I think that that is closure by another name. Welbeck colliery, in the constituency of my hon. Friend the Member for Bassetlaw (John Mann), is not being managed well by UK Coal. There are real problems at that company; the Minister knows it. He met representatives from the three Nottinghamshire pits on 8 September; he heard them speak about their flexible approach and their attitude towards the coal industry, and I think that he will have been impressed by them. He will also have heard them speak about the change of managers at each of those collieries. He knows of the merger talks and the talk of takeover at UK Coal, and that is all destabilising.
The Minister needs to think carefully about what the role of the Government would be if the major producer UK Coal were to hit real financial difficulties shortly. What would be the role of the Coal Authority? Clearly, resources that are in our national interest are involved.
I should like to pursue the issue of investment aid. We have had £60 million. There are discussions with UK Coal about claims at Rossington, Harworth, Ellington and Welbeck. We should be investing for the future, not the past. I support the Minister's decisions, but he needs to reinforce with UK Coal the need for British coal. He needs to have serious discussions with the company about the way forward and with the Treasury about the bids for investment aid already in. I believe that there are bids of about £100 million, and the resources available in the Department are very small indeed. Investment in British coal will be investment in the future.
My hon. Friend the Member for Selby has spoken movingly about the need for clean coal technology. We need to get the economics and the environment right. All over the world, coal is being used more vigorously. China is opening one new power station a day; in recent years, South Africa has had an electrification rate of 80 per cent., and 90 per cent. of that is driven by coal. If we can produce new clean coal technologies, we can sell them all over the world.
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We have good rhetoric and a good reality on climate change, but we have to have policies to ensure that British coal remains. That means investment in the infrastructure and in clean coal technology. There is a big task ahead of us. There is a chance for discussions, and I know that the Minister will encourage us all to be involved in them.
Frank Cook (in the Chair): For the benefit of everyone in the Chamber, I should say that that contribution took just over five minutes. If everyone who spoke took as long, we would, under normal circumstances, run out of time. However, I have an announcement: in a spirit of bonhomie and co-operation, the two Opposition spokesmen have offered to confine their comments to no more than five minutes each, so there can be a slight leniency now. However, let us not go overboard.
9.53 am
Mr. Denis Murphy (Wansbeck) (Lab): I congratulate my hon. Friend the Member for Selby (Mr. Grogan) on securing this debate.
The questions that we need to address today are: will we continue to need coal for the foreseeable future; can coal be used in an environmentally acceptable way that meets our international commitments; and are the nation's coal reserves in good hands? That last question is perhaps the most important.
There is no doubt that we will continue to use relatively large quantities of coal for electricity generation for at least 20 years. There is also no doubt that under the stewardship of UK Coal not one tonne of coal burned in 20 years' time will be mined in the United Kingdom. Indeed, it is my firm belief that not one deep mine will be left in five years.
Coal can certainly meet our environmental commitments if our Government act now to ensure that a new generation of clean coal power stations is built. It is also right that we have another look, as a matter of urgency, at the nation's energy needs and at how we will guarantee that the lights remain on.
I can understand why nuclear power will be on the agenda as part of an energy review. I must be honest: I have never supported that industry; whichever way the finances are presented, it will always be the most expensive option. However, I accept that we will have to decide how we replace generating capacity.
For less than the cost of decommissioning a nuclear power station, the Government could offer sufficient financial support to encourage clean coal units to be built, which would include gasification and carbon capture. That would help us meet our international environmental commitments. It makes no sense to allow a massive national asset to be under the control of a single private company, no matter how diligent, let alone one with the record of UK Coal. It operates a disastrous one-face policy at its collieries by planning to have long periods at each of its mines where there are huge face gaps and no production. There is nothing to stop any of the remaining mines following the same route as Ellington colliery, which UK Coal closed this year after an inrush of water.
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I spent 30 years working underground at Ellington. I had many disagreements with the National Coal Board and British Coal, but they provided the best equipment available at collieries such as Ellington. When I left there in 1994, it was state of the art. It had high-speed locomotives, the latest computer technology, the best coal-cutting equipment and a brand new multi-million-pound underground ventilating fan system.
When I returned for a visit in 1999, the colliery was then under the ownership of UK Coal's predecessor, RJB Mining, and it was like visiting a scrap yard. Broken and derelict machinery was lying around; much of it had been cannibalised for spare parts. I could not believe the change. Even the fan system had been sold. Access to those reserves had been lost. It will cost a lot of money to attempt to access them again, and it would be impossible to do so from the original site, which has been destroyed by UK Coal with indecent haste.
Based on Government projections, 70 per cent. of our electricity will come from gas by 2020; 90 per cent. of that will be imported. That has not happened by accident, but by a strategy that was considered desirable. We will be dependent on policy decisions made primarily in one country—Russia. We have heard the arguments: "Everything will come together", "The gas will be there" and, "The pipelines have been planned and the liquefied natural gas terminals are being built as we speak". In these distinctly politically unstable times, do we want to rely on gas for 70 per cent. of our electricity and on 90 per cent. of that being imported?
I am not sure that the British public are fully aware of what has been planned. Even if the gas is available, what will be the cost? If we had no alternative, it would be a risk that we would have to take, but we are lucky because we have an alternative. We stand on an island of coal, which has 200 years of known reserves. UK Coal is not a company to be trusted to mine them.
I do not say that lightly. Along with a number of colleagues present, I pressed the Government from 1997 to make public money available to invest in the mining industry. There were 21 pits at privatisation and now there are eight. There will be none in five years. I urge my hon. Friend the Minister to intervene to ensure that UK Coal does not sterilise any more of the nation's reserves. I would not allow it an extra penny of public money until it gives guarantees on the future. It is currently flogging its wares around the City, looking to offload its company, and with it the nation's coal reserves, to any City spiv who has a bit of spare cash.
We cannot let that happen. Only UK Government plc can save what is left of our coal reserves. I urge the Minister to act now. That would be in the public interest. The Minister should remove those reserves from the company, invest them in the Coal Authority and set up a not-for-profit company.
9.59 am
Jon Trickett (Hemsworth) (Lab): I, too, congratulate my hon. Friend the Member for Selby (Mr. Grogan) on securing this important debate. The UK coal industry's situation is perilous, and this energy review is welcome. The background is one of a 10-year decline in fuel prices, which continued until 2003. In the past two years, there has been a rapid change in the direction of gas and oil prices. We have seen what has happened this year to oil
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prices, and an increase in gas prices for domestic consumers has been announced in the past month or two. Furthermore, the price of coal has increased globally. I notice, for example, that between 2002 and 2004 the price of coal increased from $34 a tonne to $78.
The situation elsewhere has been mentioned. In China, India and the United States alone, 800 new coal-fired power stations will be built in the next seven years. That will continue the drive towards an increased cost of coal, both internationally and in this country.
As we have heard, Britain will be a net importer of energy by 2020. We will be 90 per cent. dependent on gas, 70 per cent. of which will come from overseas. It will come from the middle east, the former Soviet Union and north Africa, all of which are politically and geologically unstable. We shall rely on gas pipelines that are 3,000 km long, which will tempt both earthquakes and terrorists. This country will be almost entirely dependent on gas, and I fear that we shall submit to the power of monopoly suppliers, certainly in Russia, where a single company now controls gas supply. In the United Kingdom, there is open talk among civil servants and others about the possibility of power outages because we are so close to our capacity in a severe winter.
That forms a background to the debate. It is clear to anybody who reflects on it that coal must be a key energy source in future. Key questions for the Minister, for the Government and for all of us are whether that coal will be indigenous and whether it will be deep mined or open-cast. Given that we shall be 90 per cent. dependent on fuel imports, it would be foolish to allow our coal deposits to be sterilised. I hope that the Minister will say that he regards the coal beneath the soil in Yorkshire and elsewhere throughout the country to be a precious, strategic energy asset that we shall not allow to be sterilised.
I have already said that there are two ways to take coal—by open-casting and by deep mining. The Government were elected in 1997 on a 10-point pledge to reduce mining companies' capacity to take coal by open-casting; at least to do so without the co-operation of local communities. We have a presumption against open-casting. I hope that the Government will not renege on the promises that we made to the people of the coalfield communities to ensure that there would be proper environmental protection against the ravages of open-casting. That does not mean a blanket ban on open-casting—no one ever advocated that.
Mark Williams (Ceredigion) (LD) rose—
Jon Trickett : I do not want to give way, because I have so little time.
Therefore the argument exists for deep mining to continue. The situation, as we have heard, is absolutely perilous. We must ask serious questions about whether UK Coal's corporate strategy of sitting on so much of what is a precious asset is in the long-term interests of the nation. Frankly, the company's corporate strategy appears to rely more on property development and its property portfolio, which is valued at about £200 million, rather than on coal. The coal production part of UK Coal's balance sheet appears to show a negative influence. That is largely because of the method of engineering and management that UK Coal has used.
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Coal is a precious asset that is being badly developed by the company. There are changes in the stock exchange valuation—UK Coal's share values are changing. We read in the financial press that American-based companies might be moving around UK Coal, perhaps a little like scavengers. I am not sure whether it will be in the interests of the country for UK Coal to be foreign-owned, with even less care shown for the work force and the nation's strategic resources.
All that argues for the closest scrutiny of UK Coal's corporate strategy, and perhaps for the removal of the asset of coal from the company. Certainly, if investment aid is to be given, which it must, I expect the Minister to pay the closest attention to UK Coal's corporate strategy. If he fails to be satisfied by commitments that it makes, alternative forms of ownership must be explored.
10.5 am
Mr. Michael Clapham (Barnsley, West and Penistone) (Lab): I congratulate my hon. Friend the Member for Selby (Mr. Grogan) on securing the debate, which is an important one.
I shall focus today on the current crisis. There has been a crisis in the UK deep coal mining industry since it was privatised, because it was below its critical mass when the Conservative Government privatised it. In the 1992–93 inquiry, the Select Committee on Trade and Industry identified that the industry needed at least 25 collieries to be within critical mass, but it was privatised with 21 collieries. That was well below critical mass, and the industry has been in crisis since then. As a result, the market failed, and the industry relied constantly on the Government to win finance for development. Eventually, we agreed the investment aid package. My hon. Friend referred to that package and to the fact that it is less than sufficient to be able to retain the industry.
The package is currently identified as £60 million, with an allocation of some £57 million, of which less than half has already been paid. That is insufficient to be able to finance long-term development. As a result, two Yorkshire collieries, Rossington and Harworth, which is on the border between Yorkshire and Nottinghamshire, have been put into mothballs. In Yorkshire, two collieries, Kellingley and Maltby, remain, and only six collieries remain in total. Of those six, five are in England and one is in Wales. Unless the Minister is prepared to pick up the challenge, as my hon. Friend the Member for Wansbeck (Mr. Murphy) said, the industry could go in fewer than five years.
We are faced with an enormous challenge, but one with which I believe we can deal. There are, of course, the men who work in the industry to be considered. As my hon. Friend the Member for Selby said, all the miners who were made redundant from Selby had been retrained, and most of them had been allocated to new jobs in different areas of the economy. The fact remains, however, that when Selby closed we were optimistic that many of those men would be transferred to the Hatfield colliery in the constituency of my hon. Friend the Member for Doncaster, North (Edward Miliband).
We believed that Hatfield could take the men from Selby because of its reserves, which make it a jewel in the crown. That has not happened. Indeed, Hatfield has been in mothballs for a considerable time, and I fear for its future unless a package can be put together to rescue it.
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What is to be done? There is a need for a revised scheme. The Minister needs to call in the Coal Authority, and to talk with that authority, the unions and the management of UK Coal—and perhaps with RJB as well, because it owns Hatfield—to see what can be done to provide the necessary incentive to ensure that the industry can survive.
It is crucial that we retain the indigenous coal industry, because changes may well take place in the energy market, providing for coal to be burned cleanly, at a time when we will have no indigenous deep mines. That would be a tragedy. Our deep mines are the safest in the world. Some of them are the most productive. They face enormous challenges because of the depth at which we mine in the UK. Yet we can meet that challenge with technological superiority, and win through.
What I am talking about is important, because it is attractive to the coal mining machinery manufacturers and because of the likelihood, without a deep mine here, of their transferring the whole of their operations—some of which, I accept, have been transferred—to Australia or America.
I hope that the Minister will respond to the call to pull the four agencies together. I understand his reluctance to make large amounts of money available for the private industry, when some of that money could finish up in dividends. The way to deal with that is to bring in the Coal Authority. That could be important to the Minister in ensuring that the money that he makes available for the industry in a revised scheme would be used in a way that would ensure sustainability. I hope that the Minister will take on board the need to call the agencies together, the need for a revised scheme and the need to ensure that indigenous deep mining continues in this country.
10.11 am
John Mann (Bassetlaw) (Lab): The situation is indeed precarious. I shall repeat nothing and take no interventions, but I have a question for the Minister. Alchemy is hovering—and it is rumoured that my constituent Mr. Richard Budge is involved with the Alchemy proposals. Would the Minister regard a takeover of UK Coal by Alchemy as positive, negative or neutral for the future of the industry? The fact that UK Coal and Alchemy are in discussions seems to me a major distraction from the key decisions that are needed on security of supply for UK industry in the longer term.
That is particularly ironic given that the price of coal has increased. The irony is not just connected to the fact that the price has more than doubled in the past couple of years; in addition—and it seems to be a permanent shift—the price of shipping aggregate across the world has more than doubled. With projected demand from China for aggregates, the capacity will not change in the next five years, so the price of coal will remain high regardless of any short-term fluctuations, because of the price of shipping. That will be true particularly of coal from South Africa, China and South America.
Other hon. Members have referred to the flue gas desulphurisation in places like West Burton and Cottam in my constituency. Of course, those arrangements are
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only just on track; they have just started. I reopened the FGD facility West Burton a week ago last Saturday. That is new technology. If nothing else is done, a big problem at those power stations, which will require Government investment, concerns the import of coal. The rail freight infrastructure is not good enough to shift the coal from ports to power stations. That is a major, immediate problem, which will require significant investment.
I am completely in favour of our expanding our investment into freight and rail, but that is long-term investment and will be a cost to the Exchequer. It needs to be included in the calculations. A subsidy to coal would be a cheaper short-term option. The question, of course, arises whether UK Coal can even meet its current commitments with its under-price contracts to power stations. That could become a real problem come February if we have a harsh winter. On current output, never mind increased output, there could be a major problem for the Government in the immediate future.
Another issue needs to be brought into this debate. I met the chief executive officer of Bectel, one of the biggest power companies in the world, to find out why in the United States his company is investing in coal. Clean coal technology is part of the reason, but they see a much bigger gain in the hydrogen car. Surprisingly, that is also happening in China. California and China—the top end and the bottom end of the car production market—both regard the hydrogen car as the car of the immediate future. In California, Republicans and Democrats are saying that they want to see that happen by 2010. That is a political imperative, because they do not want to be reliant on oil from other countries, and an environmental one, because hydrogen is entirely clean technology.
Bectel is investing in coal because that is one of the best ways of producing hydrogen for the car of the immediate future. China is doing the same thing, although with a much cheaper lower-end car, which will soon flood the market. Are we going to miss out on that opportunity? Will Europe miss out? We must ensure that we do not go the same way as other Europeans, who have cut back and have no available coal to use for this new development, which will certainly be the future of the car industry.
Last week I met the new EU coal supremo, Jan Panek, who stated two things of interest. First, he said that 10 years ago the European Commission—the European Union—thought that coal had no future. That has changed in the past 12 months, so that now, because of security of supply and the hydrogen potential, it is regarded as a major part of the future. Secondly, although we know the rules on state aid, there is nothing to stop the Government making a commercial investment in new mines or seams in any way they choose, whether through a commercial loan, a partnership, a takeover, or all three. None of those options are outside EU rules and are, therefore, available to the Government.
To conclude, let me put it in terms of Harworth colliery. We want the state aid to continue, not least because of the energy gap for collieries such as Welbeck, but at Harworth there is a land asset straight off the A1. I want to see a new industrial development there—a spur off the A1, a new mine, housing, and an industrial park with manufacturing. I want EU regional aid, which
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goes into South Yorkshire as objective 1 money that can be accessed, for a new development, incorporating a new mine for the new seam to get 25 years' worth of coal, or more. That model of coherent investment, rather than merely a taxpayer's hand-out, could apply to a number of collieries, including Rossington and Daw Mill, and allow them to expand into the coal of tomorrow.
10.18 am
Mr. David Anderson (Blaydon) (Lab): This debate is long overdue; I thank my hon. Friend the Member for Selby (Mr. Grogan) for securing it.
It is 30 years since we seriously debated energy in the House in anything like a structured way. The past debate resulted in the plan for coal. Sadly, however, that plan was consigned to the dustbin of history within five short years. The deliberate industrial sabotage of the Tory years of the 1980s and 1990s left us with an industry that is a pale shadow of that envisaged in 1975.
Some argued, with amazing short-sightedness, that the loss of our indigenous fuel supply was a price worth paying to defeat organised labour in this country. We are now entering a period when the real cost of destroying our coal industry is becoming evident in the real world.
We have been benighted by short-termism in this country. If we are serious about our energy needs, we cannot go on like this. We need to work out a genuinely sustainable, diverse energy plan for our country. We should be confident in ourselves and in our people's ability to rise to that challenge. While some developed and developing countries are producing more coal as a bulwark against soaring oil prices, we, as was said earlier, are importing twice as much coal as we produce. We are paying through the nose for oil and gas from some of the most unstable parts of the world.
We face the reality of having to reconsider reopening the nuclear option, despite the concerns of people in this country about that proposal. Let us not pretend that the nuclear option, even when it operates safely, does not contribute to global warming. The construction, decommissioning costs and processes of nuclear stations are massive contributors to the factors that produce greenhouse gases.
We also face the continuing advance of open-cast coal mining. I spoke in this House before the recess about the massive opposition to a proposed open-cast site in my constituency. That opposition has hardened over the summer months and if, as I fervently hope, we develop our coal industry again, we must not do it in a way that destroys the local environment for thousands of people, ruins some of the most beautiful country in our land, goes against the development plans in our areas and risks the lives of our families due to increased traffic. That faces us in my constituency and we will fight to stop that devastation.
Later today, Gateshead council's planning committee will discuss the proposals against the backdrop of three petitions, signed by almost 13,000 people, and 800 individual letters and formal objections from national, regional and local bodies. If there is any justice, that debate will end today. If it does not, the people in the area are committed to raising their game, and we will continue to fight those crazy proposals.
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A reinvigorated coal industry must have a place alongside the drive to develop new technologies and exploit the existing ones to the fullest. That could well be the issue facing us in the next decade. I mentioned earlier the plan for coal. Fifty years before that in a report to the House entitled "Coal and Power", based on an inquiry led by David Lloyd George, the following conclusion was made:
"Today we find ourselves in the early stages of a second industrial revolution. Whether we make the right use of this heaven sent opportunity for redeeming the mistakes of the past depends on whether we use wise methods of regulation and control."
"In all of the recommendations we have been thinking not only of the immediate and material advantages, but also of the chance to lay the foundations of a social system that shall satisfy all the aspirations of a great, intelligent and educated people."
Perhaps our ambitions are not as great as those of David Lloyd George; then again, perhaps they should be.
In conclusion, I want to mention Rossington colliery, where I worked. The truth is that unless it has changed since I left, if it is mothballed it can be forgotten about, because it will burn itself out.
10.22 am
Barbara Keeley (Worsley) (Lab): I would like briefly to address the issues raised by the development of open-cast mining which is affecting communities in my constituency, together with concerns about the public health impact of such developments, following the line set by my hon. Friend the Member for Blaydon (Mr. Anderson).
Worsley has a long association with coal mining. It started in the 14th century, but production ceased more than 30 years ago. Many large tips remain, one of which is at the Cutacre site, a substantial tip in the constituency of my right hon. Friend the Member for Bolton, West (Ruth Kelly) which is surrounded by estates in my constituency. My predecessor, Terry Lewis, and my right hon. Friend fought for a number of years to resist an application for open-cast mining at that site. However, UK Coal eventually won planning permission and open-cast operations are due to start early next year to remove the tip and to exploit the seams underneath it.
In my maiden speech I expressed many concerns about the development, particularly after considering the continuing concerns of communities affected by open-cast mining in Yorkshire and Scotland. Clearly, the occupational health effects of coal dust are well documented.
Mark Williams : Will the hon. Lady give way?
Barbara Keeley : No, I do not think that we have time.
Chronic inflammation leading to scarring of the lungs from the inhalation of coal dust is a recognised health hazard for those working in coal mining. Clearly, any jobs created in open-cast mining at the Cutacre site may be hazardous to the health of the people employed. However, I am even more concerned about the risk of respiratory conditions in children and elderly or frail people living near the site. I have read about the hazards of air pollutants caused by open-cast coal mining; early reports in the 1990s were not always conclusive about
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the dangers, but they definitely seemed to show that open-cast mining was associated with a small increase in the mean concentration of airborne particles measured at 10 microns or less.
The major report—which I am sure everyone is aware of—by the committee on the medical effects of air pollutants concluded that children living in open-cast communities were, on average, exposed to a small but significant amount of that particulate matter of less than 10 microns. That 1999 report did not manage to find a correlation between the extra dust in the air near open-cast sites and the overall prevalence of asthma or other respiratory illnesses. However, it did find that there was an increased number of GP consultations for respiratory, skin and eye conditions in open-cast communities. Following that it was recommended that efforts should be made to control the emission of particles from open-cast sites.
As a result of such findings it is unsurprising that communities living near open-cast mines are fearful of the health risks that face them and, in particular, their children. Reports such as the 1999 study fail fully to reassure such communities. Although the messages from research should be reassuring, there is clearly still a need for emissions from open-casts to be controlled.
That leads me on to one of the chief reasons for concern: the fact that the agencies responsible for monitoring the emissions from open-cast operations, and for considering all the potential impacts on public health in my constituency, are new to those activities. As I mentioned earlier, coal production ceased in the Worsley constituency more than 30 years ago. Of the two local authorities in my constituency, Wigan has had experience of open-cast mining quite recently; however, the Cutacre site is in Bolton, so Bolton is the planning and monitoring authority, but it has no recent experience of this type of mining activity.
When the plans of UK Coal to start operations were made clear in mid-2004, I urged the company to establish a community panel to tackle some of the many issues I felt sure would emerge. The company had agreed to a planning appeal. However, it has become clear to me that UK Coal wants to settle all planning matters before it establishes contact with the community, rather than work through the issues alongside the people who are going to be affected. That is short-sighted, and will create more issues in the long run.
It is clear that local primary care trusts need to work together on monitoring emissions of particulate matter in order to safeguard public health. However, PCTs too have little or no experience of that.
I am a sponsor of a private Member's Bill on children's food because I believe that we should do all we can to safeguard children's health by improving their nutrition. If we are concerned about the food children eat, how much more concerned should we be about the quality of the air that they breathe? The area in my constituency that will be most affected by open-cast mining is bordered by the M61 and the A6. Traffic congestion is a major issue; it is already affecting air quality. There are undoubted air quality problems caused by motor vehicle emissions; add to them the
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acknowledged extra emissions from dust and shale and it becomes clear that the public agencies must handle these issues well.
I would welcome suggestions from the Minister as to what assistance can be given to the planning authority and the local PCT to help them establish an appropriate regime to monitor these matters. The agencies have only months to become effective against the potential hazard to public health that will be caused by the renewal of open-cast mining.
10.28 am
Ed Balls (Normanton) (Lab): I, too, congratulate my hon. Friend the Member for Selby (Mr. Grogan) on securing the debate. I wish to contribute partly because I represent a constituency with a strong mining tradition and with miners still working in Selby, Kellingley and elsewhere, and partly because I come from an important coal-producing region: I think that a quarter of UK coal is produced in Yorkshire.
I also want to speak on behalf of all of our children in such debates on the long-term future of energy policy. I have been involved in discussions on this matter both in government before I became an MP and since then with hon. Members—most recently on Friday when my hon. Friend the Member for Barnsley, West and Penistone (Mr. Clapham) chaired a meeting of the Yorkshire coal taskforce. Twenty years ago, coal was seen as the enemy, and, more recently, it has been seen as a difficult problem to manage; but I am increasingly of the view that coal is not part of the problem, but part of the solution. If we are going to have a long-term and balanced approach to energy policy in our country, we have to recognise the important role of coal.
We have some major opportunities at present. As a result of the Budget, there is to be an investigation of economic instruments and how they can encourage carbon capture and storage, and, therefore, clean technology for fossil fuels. Also, the energy review is about to take place, in which it is important that the Minister should ensure that the work on economic instruments is part of the wider energy picture.
We must take on board three important considerations. First, we are increasingly seeing the impact of globalisation and the global community on energy policy and the volatility of oil and gas prices. We can see that from current trends. As my hon. Friend the Member for Hemsworth (Jon Trickett) said, we will move from a reliance on gas of 20 or 30 per cent. to one of 70 or 80 per cent. That is a serious problem for energy security. As a recent briefing from Yorkshire Forward, our regional development agency, said,
"there are growing concerns about security of energy supply with the increasing need to import both gas and LNG from potentially unstable parts of the World and at prices over which ultimately there is little control."
That, it goes on to say, is why it is important that we retain coal in the energy mix.
Independent of the nuclear issue, which is not a solution, and renewables, which I support but which are only a small part of the solution, the first issue to consider in the long-term energy review is the mix between coal and gas. We need such a mix for long-term security.
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The second consideration is the environment. We need global solutions for the environment and climate change, and we must recognise that many countries are producing more energy using coal. Therefore, the clean coal technology debate is not simply about what happens in Britain; it is about what happens around the world. In our review, when we consider economic instruments and incentives and how we can incentivise carbon capture and storage for fossil fuels, we must bear in mind the impact that that will have on wider global energy policy, particularly in relation to coal rather than gas, and the potential benefits of those technologies for the British industry and the global community.
The third point was made extremely well by Dieter Helm of Oxford university in an article in the New Statesman this week about energy policy. We must recognise, as I think the Minister does—this is what the energy review is about—that we cannot expect a long-term solution to climate change or energy security by relying on a liberal energy market alone. It is increasingly clear that such a market will not deliver the necessary co-operation on climate change or the incentives for long-term investment required to develop the clean fossil fuel technology that we need.
I fear that if we approach the issue of economic incentives for carbon capture and storage within the current market structure, the result will be not a balanced energy policy but a second dash for gas, which will neither solve the issue of security of energy supply and diversity nor help with our wider efforts around the world to promote clean coal technologies. I fully welcome the work on economic instruments, which brings great opportunities. Important work is being done both in government and outside, but it needs to be framed within a wider energy policy that takes into account the need for diversity of supply and a role for coal, and the wider spin-offs and benefits of clean coal and gas technologies—we need not one or the other, but a mix of both. We cannot allow the short-termism of this market structure to push us down the route of using gas rather than coal.
I do not have the degree of expertise of some Members present on indigenous coal, but I have listened carefully to other speakers, and, for two reasons, I think that there is a clear relationship between the broader issue of coal and its generation and that of where coal is mined and produced. First, security of supply is not simply about power generation; it is about the sourcing of coal. That should be addressed in the review.
Secondly, we will not have the kind of market incentives we need for long-term production of coal unless we have the kind of incentives we need for the long-term generation of coal. A long-term view of clean coal generation is probably the best way to set up a market incentive for the indigenous production of coal. If we take a sensible approach to the energy review and the balance of generation, we will find that it has a direct effect on the incentives for investment, so that we can break out of short-termism and take a long-term view, not only of a balanced energy policy but of the UK coal industry.
10.34 am
Edward Miliband (Doncaster, North) (Lab): I congratulate my hon. Friend the Member for Selby (Mr. Grogan) on securing the debate. May I say what a
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privilege it is to be the final Back-Bench speaker in what has been a very powerful debate with many eloquent contributions?
I speak in today's debate for a very simple reason: mine is a former mining constituency, which seeks fairness in the treatment of coal in the forthcoming examination of energy policy. I shall make five brief points to explain why. First, it is important to say that no one in this debate believes that we can recreate the past. Some 20 years ago in Doncaster, there were 19 pits and 30,000 jobs in mining and related industries. Today, only one pit, Rossington, remains, and it is due to be mothballed. It is important to make that point, because of people who want to caricature what they would call a pro-coal position.
Secondly, we must acknowledge the changed context since the energy White Paper of 2003. Not only have there been changes in patterns of demand, supply and prices, which others have talked about, but it is increasingly clear that no decision on energy policy is easy. Wind farms face great local opposition, as I know from my constituency, and there are doubts about security of supply. In the case of gas, there is excessive reliance on one source—we are forecast to rely on gas for as much as 80 per cent. of our energy supply within 15 years—and nuclear energy involves great clean-up costs and safety issues. Coal, too, has historically given rise to doubts about its financial viability and to concerns about environmental issues.
The most important point, which my hon. Friend the Member for Normanton (Ed Balls) made, is that it is becoming increasingly clear that we cannot leave energy policy simply to the market. Without a proper Government framework, the market cannot deliver for the simple reason that market failures do not take adequate account of environmental issues, of security of supply or of the dangers of excessive reliance on one source. That is why it is right to re-examine the issue.
Thirdly, we, as a country, must recognise and acknowledge our assets. The Hatfield pit in my constituency, which has been on care and maintenance since January 2004, sits on 80 million to 100 million tonnes of coal. According to the Department of Trade and Industry's own review in 2002, that is about 50 per cent. of the UK's reserves—a fact to which my hon. Friend the Member for Barnsley, West and Penistone (Mr. Clapham) drew our attention earlier.
As many hon. Members know, Richard Budge, who owns the pit, has embarked on a process of trying to raise private sector resources for the reopening of Hatfield. I do not know whether he will succeed, but I must say to the Government and to the Minister that there is a strong feeling in my constituency that if it was seen as right to offer £15 million two years ago as part of investment aid to keep Hatfield open—money that we could not, unfortunately, take up—there will be a real sense of grievance if Hatfield does not reopen because that money is no longer available. The feeling is particularly acute given the subsidies given to other forms of fuel. That is why we need a new phase of investment aid.
Fourthly, coal has always been seen as part of the environmental problem that we face, but I believe that it has a chance to be seen as part of the solution. My interest in this is that Hatfield has planning permission
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for an integrated gasification combined- cycle power plant. I am not in the habit of praising the President of the United States, but it is interesting that in the recent energy Bill, $800 million was made available in tax credits specifically for IGCC power plants. I welcome the Minister's document on a strategy for carbon abatement technologies, but the UK contribution is very modest by comparison.
A point to which the Minister might respond relates to the interaction of the renewables obligation and clean coal technology. Ernst and Young's June 2005 report said that
"the present arrangements, to subsidise heavily a single way of reducing carbon emissions, do no favours to the environment, to security or to the economy".
I support our renewables obligation, but does it matter to us in principle whether renewables produce a reduction in CO 2 emissions or whether clean coal does? I do not have an in-principle view in advance about that, but at the moment it seems as though policy does. Some have argued that the renewables obligation should be supplemented by a sustainability obligation.
Finally, everyone in the coal industry should welcome the fact that the Prime Minister has said that he has an open mind about the future direction of energy policy. As I said at the beginning, however, those who have traditionally relied on coal have said that they do not want to return to the past, so those who have traditionally thought that coal cannot be an answer to our energy needs should approach this question with an open mind. My constituents want coal to be given a chance in the forthcoming examination of energy policy.
Frank Cook (in the Chair): I congratulate Members on complying so readily and effectively with my time prescriptions. I am grateful for that.
10.39 am
Sir Robert Smith (West Aberdeenshire and Kincardine) (LD): As the hon. Member for Doncaster, North (Edward Miliband) said, this has been a good debate. There have been many contributions from Members who have direct personal experience of their constituency's interest in the coal mining industry, its potential future and what it has to offer the economy.
I also congratulate the hon. Member for Selby (Mr. Grogan) on securing the debate and raising the subject. As he said, the Minister will be on his feet a few times today, responding to this debate and to the later ones on gas and oil supply and on clean coal technology, which is a fundamental part of this morning's discussion. It might have been helpful if the subjects had been debated in a different order because the oil and gas situation needs to be tackled in more detail. That cannot be done now because there is not enough time; perhaps we will be able to tackle that this afternoon.
Before I move on, I should draw the Chamber's attention to my entry in the Register of Members' Interests. I am a shareholder in Shell, which is an oil and gas company.
In the context of security, the hon. Member for Selby mentioned that we may be facing power cuts this winter. It might be helpful if the Minister quickly gave the
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Chamber his view on what exactly that may mean. Some large industrial users have interruptible contracts for power supply. There is a risk that those contracts will be called on to be interrupted; that is quite serious. I understand that National Grid Transco's assessment is that even with a one in 50 winter, domestic users and those on secure supplies are not facing power cuts. It would help if the context could be clarified. Nevertheless, when major players in the economy are facing shutdowns because of the price of energy, that is not a long-term stable position. It is right to draw attention to our energy supply situation.
Later this afternoon, we will address how that will progress. Carbon abatement, capture and storage is crucial. I would like to see the Minister get his honorary degree; if he could finally crack this nut and bring everything to fruition, there would be a major benefit, not only, as has been said, in providing a domestic market for our own coal by having a clean way of generating electricity from it, but for our export industry.
There is an urgency relating to the export industry. As has been mentioned, many coal-fired power stations are being built abroad. If they are built now before we get the technology right, retrofitting of the technology will be a much more expensive option. At least if stations are built now with a view to retrofitting, so that they will be ready, that is a cheaper way of bringing the technology on stream. People need to see the technology. The demonstration plant must be up and running so that people can have confidence in how the technology will work.
An exciting development is taking place. The dash for gas has clearly been a major disrupter of the coal industry in the past, but now there is a coming together of the two industries. Carbon abatement technology will possibly make great use of the North sea. Already an experiment is going ahead in Peterhead power station to generate electricity, and to try to use that to take the carbon resulting from that generation and re-inject it into the Miller field to bring out more oil and gas for future production.
Perhaps the Minister will update us on how he sees the debate about incentives progressing. There are forthcoming debates on economic instruments and on the carbon abatement strategy that the Government have proposed. I am slightly concerned about the pace at which those incentives will be made available. They must be available before the infrastructure in the North sea that can take that carbon back under the ground is lost. The situation is urgent and action needs to be taken quickly. An assurance from the Minister that urgent action will be taken would be much appreciated.
In addition, if our long-term strategy is for the carbon to be put back under the sea, we need to sort out the OSPAR and London conventions. That is going to take a long time, so I should like some reassurance about what the Government are doing to get permission to put underground carbon that is not being used for enhanced oil recovery. It is important to get such things right now, because there will be no point in having a carbon abatement strategy in future if we have signed up to an agreement that will not allow us to put carbon back under the North sea.
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We are in a win-win situation, in that we can provide a market for coal in the domestic economy through clean coal technology, so the Government must ensure that that technology is up and running in order to give the market the confidence that it needs.
10.46 am
Mr. Bernard Jenkin (North Essex) (Con): I join others in congratulating the hon. Member for Selby (Mr. Grogan) on having secured the debate. It has been interesting and passionate, and I do not envy the Minister having to reply to it. I suspect that he can say little that is constructive because everything is hanging fire pending an energy review.
An energy policy has to provide three basic outcomes in order to be a success. It has to provide fair pricing to domestic and industrial consumers; it has to comply with our environmental objectives; and it has to provide security of supply. The Minister's difficulty is that the energy policy that the Government have pursued for the past eight years has resulted in the achievement of none of those objectives. Our industrial consumers are paying the highest prices in Europe, and that is going to hit our domestic consumers too; we are failing to achieve our environmental targets; and the security of supply situation is extremely precarious, as Minister knows, given that he has to deal with it daily.
Everything that we have heard today confirms that coal could be an important component in our strategy to tackle the security of supply. How is the Minister going to address that question if he is not allowed to consider it until next year, because the Prime Minister does not want to have a review of energy policy until then? The issue is more urgent than the Prime Minister and the Minister seem to understand. I agree that it is important for our country to develop clean coal technology, not least, as the hon. Member for Normanton (Ed Balls) said, because it will be highly exportable technology and there is little point in our achieving our environmental targets on our own. We need to come up with ideas and technologies that we can export to the rest of the world so that the whole world will be bound into environmental technologies. Coal will outlast oil as a source of global energy by a long way, possibly by hundreds of years. If we are at the forefront of the technology for clean coal, we will put Britain in a strategically strong position, and if we provide a market for our coal, we will also provide improved security of supply.
Will the Minister, simply and briefly, address the issue of intervention in energy markets? The renewables obligation certificate is a massive intervention in our domestic energy market. How can he justify putting up to £1 billion of subsidy into one form of renewable energy without making an assessment as to whether it provides good value for money compared with other possible destinations for such intervention in the market? I agree with those who have suggested that we should consider a non-carbon obligation certificate rather than just a renewables obligation certificate, because the former would target the carbon abatement and carbon sequestration technologies in a way that the existing regime does not.
Finally, what will happen to the emissions trading scheme? There are no plans for it beyond 2012. How is an industry that has to make very long-term investment
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decisions meant to make them when there is now uncertainty on the part of other countries—especially those that are breaching the Kyoto targets by a long way—about whether they want to continue with the emissions trading scheme at all? What is the scheme's future? Is that not yet another issue that needs to be tipped into a proper policy review of energy issues so that we come up with a comprehensive energy policy instead of bolting this and that on to the regime that the Government inherited from the Conservatives eight and a half years ago? Things move on, but I do not think that the Government's policy has.
10.50 am
The Minister for Energy (Malcolm Wicks) : I, too, congratulate my hon. Friend the Member for Selby (Mr. Grogan) on securing this debate and introducing it so well.
The debate has certainly been strong and serious, and it clearly deserves more time. I certainly require more time to respond to all the issues, not only about coal but wider energy policy. I thank my Opposition colleagues for agreeing to speak for just five minutes each. I heard on the radio that there is now a kind of grand German alliance between them on climate issues, and I am pleased that that applies to parliamentary procedure as well.
I recognise the passionate conviction with which Members have argued for the continuing need to maintain an active coal mining industry in the United Kingdom. I also recognise the strong and growing interest in wider energy policy and the need for diversity among our energy sources. I take this opportunity to assure colleagues once again that the Government firmly believe that access to a range of energy sources is essential to ensure security of supply.
I am aware that there are rival camps: some think that the whole future is about efficiency, while others think that it is about renewables, or nuclear energy, or coal or gas. However, I warn against any non-serious dispute about different energy sources. The debate is about the energy mix that we need judged against different criteria, some of which, in the 21st century, are geopolitical. The dispute between rival camps may not be the most appropriate way of approaching that debate, although I am not saying that we have had any such dispute today.
There were some interesting contributions, not least from my hon. Friends the Members for Normanton (Ed Balls) and for Doncaster, North (Edward Miliband), about the relationship between the market and the state. To caricature the issue in an overly simple way, I should say that we went through one era in which the state determined energy policy through the nationalised industries. Under a previous regime, we then went into a period in which the market was king and many people thought that it could determine everything. We are now into a much more serious debate about the state advancing various objectives on behalf of the democracy, albeit with a liberalised market. Such objectives include social policy aims such as tackling fuel poverty, objectives resulting from climate change and so on. We need that kind of intellectual debate if we are to get some of the important details and policies right.
We have to face facts, and colleagues have done so: coal is not a clean form of energy, and coal-fired generation is under increasing pressure from ever more
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stringent environmental regulation, including carbon pricing and emissions controls. Nevertheless, we strongly believe that there will be a continuing role for coal in meeting this country's energy needs for some years to come, provided that its potential environmental impacts can be managed satisfactorily.
I am interested in this issue. When I was in the United States some weeks ago, I visited a clean coal technology plant in Tampa, Florida. Clearly, the technology and good practice are there. The Government have demonstrated their support for the coal industry by making more than £200 million available in coal state aid since 2000. Between 2000 and 2002, we paid more than £160 million of coal operating aid to help mines that could show the long-term viability necessary to survive a period of difficult international market conditions. Despite that support, the industry continued to contract; output was down by 16 per cent. over those three years.
Operating aid was replaced in 2003 by the coal investment aid system, under which up to £60 million was to be made available to support projects to maintain access to economically viable reserves and to preserve mining jobs. Before the CIA was formulated, we commissioned a study to assess our remaining coal reserves and what projects mine operators might enter into with investment support. We concluded that there was likely to be sufficient demand to justify offering that form of aid and went ahead with its launch, but we did not expect the level of demand that it attracted.
The first of the three planned rounds drew applications worth over £130 million, more than double the sum available for all three. However, rather than limit the first period awards to one third of the available budget, we offered more than three quarters of the total, taking the view that such a response would show a level of commitment to the industry's future that deserved early support. In the event, one of the larger offers was not taken up, so the sum available in the second application period was about £19 million. On that occasion, the applications were for over four times the sum available; but again, the decision was taken to award the bulk of the remaining money further to support ongoing investment.
I take this opportunity to announce one late period 2 award. Following the submission of a revised application, Tower colliery is being offered a further £842,000 to cover planned expenditure to the end of March next year. That will bring total CIA support for Tower to just over £3 million. That award brings the
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total awarded to all applicants to almost £58.5 million. Allowing for project monitoring costs, the whole of the aid pot, which we originally expected to award over three years, has been committed within the first two years.
Because the CIA is paid retrospectively in order to reimburse expenditure that has been incurred and defrayed, most mines will continue to receive funding until mid-2006. There are three mines for which that clearly cannot be the case: Ellington, where investment was halted by the flooding which forced its closure earlier this year; and Harworth and Rossington, where development has halted ahead of mothballing once their current panels are worked out. UK Coal has told us that the latter two collieries still have workable reserves, but that even if more CIA funding were available they could not finance the level of investment needed to access them.
The time is therefore right to take a new look at the industry and to reconsider how best to create a climate in which it can attract the long-term investment needed to secure its future. The future of coal will therefore be scrutinised as part of our review of energy policy: that is the right context in which to consider the matter.
Hon. Members may be aware that, although home production has been roughly 55 per cent. deep mined and 45 per cent. surface mined in recent years, problems at the remaining deep mines in the first half of this year meant that surface mine output, mainly in Scotland, has for the first time exceeded deep mine production. The balance is expected to be restored in the second half of the year, but the lesson to be drawn from the first half is that those two sectors are not in competition. Rather, each needs the other to help to maintain the markets that they both need to ensure their futures. I do, however, note the concerns that have been expressed.
We cannot ignore the fact that coal is one of the more polluting fuels because of the CO 2 emissions. As I said, if clean coal technologies can become competitive within the next 10 to 15 years, they could contribute to our target of reducing carbon emissions by 60 per cent. by 2050. I hope that the £40 million package of grants made though the carbon abatement technology system will help to support clean coal technology. Carbon capture is a major challenge, both here and worldwide, not least given the development of coal resources in China.
I thank again my colleague from Heslington—that is how I think of my hon. Friend the Member for Selby—for securing a debate on such a serious matter. However, this is not the end of the debate but the beginning of a long discussion about the future of coal.
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