Examination of Witnesses (Questions 80-99)
MR TOM
BURKE CBE
19 OCTOBER 2005
Q80 Mr Hurd: Tom, my question is about
clean coal. You have been passionate about the urgency of the
timetable and you have put what we look at in a global perspective
by pointing to the elephant in the room that is China, and your
central thesis seems to be that nuclear cannot help because it
cannot deliver on the timetable and you have asked us to put clean
coal as the key element in the mix because, with global challenge,
look where all the coal reserves are, so it is going to be part
of the story whatever happens, and in the UK that looks an option
as a hedge against over-dependence on gas. My question to you
is: why do you feel confident that clean coal can deliver to this
urgent timetable whereas nuclear cannot?
Mr Burke: I am not confident.
I did not say so in my memorandum that it could; I said nuclear
cannot. What I actually said in my memorandum is we have to do
something else, and if you are asking me to focus entirely on
the urgent timetable I am rather in the Catherine Mitchell camp
that our biggest priority is actually energy efficiency. But in
some sense that was not the immediate focus of this inquiry. I
actually think we could do it, but it is not with the level of
confidence I would have on the efficiency. I actually think we
could do it for two reasons. One, we are very familiar with coal
technologies across the board, both in the deployment, construction,
the public acceptability, the siting—I think we are much
more familiar with coal technologies, and we are talking about
technologies which we have. Pulverised coal is being built all
over the world at a vast rate; the Chinese are building a new
pulverised power station, one every five days. So we know we could
build them. In a sense we can get very much from this huge learning
from what others are doing because there is so much other coal
going on. We know we can do coal gasification which would be,
in a sense, my instinctive desire for a coal option, to go for
gasification. We have lots of gasification plants around the world
already and we can do a lot more and we can learn as others do
them as well. There are real issues about carbon sequestration
but I do not think they are issues which cause me to doubt the
principle about doing it because we have been managing reservoirs
for 150 years or more. That is why John Browne has interestingly
focused on this so quickly, in a sense; we know how to manage
geological reservoirs. It does not mean it is problem-free. I
think the real barriers there are not technological or even economic,
they are institutional. If you wanted to go for gasification you
are asking combustion engineers to do chemical engineering; that
is an institutional problem. If you want your utilities to connect
up to your reservoir managers you are asking the electricity utility
industry to cooperate with the oil industry; that is an institutional
problem. All I would say is that it is easier for political will
to address institutional problems of that kind than it is to address
the other problems. So I think it is easier to solve them. But
it is not a guarantee at all for it and then you are back into
what is your trade-off between gas-dependence energy efficiency.
That is why I keep coming back to the point and saying that if
your problem, which is a real problem and actually worse than
some people say because they have left out the coal coming off
stream, is an electricity supply problem you need to identify
the pathways that take you through that problem, and all I was
trying to say in my memorandum is that I cannot see a way in which
nuclear helps you with that problem, which is what is causing
the current debate.
Q81 Mr Hurd: Just keeping on clean coal,
what would you like to see the UK government do to give you greater
confidence that the UK government was accelerating the development
of clean coal technology?
Mr Burke: I know exactly what
I would like to see it do but I cannot tell you how I would persuade
it to do it. I would like to see the UK government use as one
of its primary tools a very low level of carbon tax to substitute
for the regulatory certainty it is not going to be able to deliver
otherwise, and to use that to create a fund to finance the rather
rapid deployment of advance coal technologies, carbon sequestration.
I would not do that by trying to pick winners; I would do that
by saying that we can pick the losers. I know which carbon intensive
technologies we ought to get out first and then let the market
decide and make bids into that fund for the additional cost of
purchase in the public good, of replacing that generation coming
out. That is my ideal world. I am not sure I see an easy path
to it.
Q82 Mr Hurd: You gave us some very startling
data about China. Where would you point this Committee to in terms
of getting more data about what is actually going on in China
in terms of coal power build?
Mr Burke: The IEA is the source
of the data I presented to you. I am sure that both Shell and
BP can give you a lot more data on that. Rio Tinto can give you
a lot more data on that. John Ashton and I in one of our guises
have produced a report which is a confidential report on coal
in China and we would be very happy to share that with the Committee,
but on that basis—in other words not for publication.
Q83 Chairman: That would be very helpful
indeed and obviously we will respect the confidentiality.
Mr Burke: We have done a report
on advanced coal technologies in China and what the state of play
is, which we would be very happy to share with you.
Q84 Mr Hurd: A parallel Committee, the
Science and Technology Committee, is currently looking at carbon
capture and storage. If you could give that to the Science and
Technology Committee as well it would be very helpful.
Mr Burke: On the same terms, we
would be very happy to. What I am really saying is that I do not
want to see it on the website or in Hansard.
Q85 Dr Turner: We have a lot of fiscal
instruments which aim to some degree or another to address climate
change, including the Renewables Obligation. But at the same time
we have a competitive electricity market so there is a bit of
conflict and confusion there. We have the Climate Change Levy;
we have the EU Emissions Trading System. But you clearly think
that these are not entirely adequate and you argue for greater
intervention. Can you say why you think they are inadequate and
what measures you would like to see put in?
Mr Burke: I have already partly
answered in relation to Mr Hurd's question that the Emissions
Trading Scheme will essentially, as things currently stand—and
I suspect for some time to come—make a difference at the
margin, but it is not going to make a difference to investment.
The signal is not strong enough to persuade major investors to
change their investment pattern, but it will make a difference
whether you go for gas or coal, for instance, at the margin. I
do not foresee the degree of agreement even at the EU—even
actually at a national level let alone at EU level—let alone
globally, to drive a price signal through strong enough to create
the investment in the time. So I think the ETS is very important
and as we go through the century, as we deal with the transport-driven
and more dispersed sources, then it is extremely important because
at the margin the choices will add up to making a difference.
But if we do not do something in the very near future about the
technology trajectory for coal burn then in effect it will not
really matter from a climate point of view what else we do. That
is the real logic. Therefore we need to be clear—and I think
government needs to be clear—that a stable climate is a
public good; it is not going to be arrived at without public investment.
What is it worth to this country to maintain a stable climate
or to play its part in the global effort to maintaining a stable
climate? That seems to me the question, and I will be interested
to see how the Stern Review is going to look at this. A question
of climate stability is the same as the question of national security.
Nobody says, "Let us do a cross-benefit analysis on whether
or not we should go to war in Iraq." Whatever your view on
that you would have thought somebody suggesting that you do a
cost-benefit analysis before you did it was completely silly,
and it is the same on climate security. The issue is: what are
the cost effective pathways? So if there is public investment
you then have two questions: how do you finance that investment
and how do you spend it in a way that is focused and sensible
and delivers results rather than simply waste results? When I
was replying to Mr Hurd there, my sense is that a relatively low
level of carbon tax will generate, because of the inelasticity
of demand for energy, rather large amounts of money. If you can
keep the Revenue's hands off them then you have a pool of money
that you can use to effect investment rather quickly, and that
is the opportunity you are missing because nobody seems able in
this debate to use the words "public investment".
Q86 Dr Turner: You have obviously read
the Science and Technology Committee's report towards a lower
carbon economy which proposes exactly that: a carbon tax, and
carbon tax credit system penalising carbon and carbon emission
and rewarding the investment technologies which do not.
Mr Burke: One of the most successful
examples of an economic instrument achieving its environmental
objectives was the Swedish NOX tax, and the Swedish NOX tax basically—vehicle
emissions predominantly but also electricity—said, "We
are taxing your NOX emissions and we are investing the proceeds
of that tax in financing the technology to reduce the emissions."
So it became a self-sunsetting tax, which has considerable attractions
to it because as the policy succeeded so the yield of the tax
fell, the burden fell and the air improved. I thought that was
a very elegant instrument.
Q87 Dr Turner: So would you agree that
we need more immediately effective mechanisms like the carbon
tax and Carbon Tax Credit System, which deliver very clear signals
that are transparent, whereas our current system is just too complex?
Mr Burke: It is opaque and does
not deliver signals that are strong enough—and I refer you
back to the points I made in reply to the Chairman's question
about the confidence and certainty needed to get the sustained
investment that is necessary to address this problem. Furthermore,
I think that in commanding the public confidence, being straightforward
with people about the fact that at the end of the day the public
good is going to be secured by public investment and not otherwise,
is a very important part of sustaining the kind of strategy over
several parliaments that is going to be required.
Q88 Colin Challen: In addressing this
public good over a number of parliaments, do you have any specific
thoughts about how the regime within government, dealing with
climate change and energy issues, should be changed? A couple
of ideas have emerged, one quite recently in a debate last week,
but other people have suggested it, that there should be something
like an independent carbon policy committee, like the NPC. Other
suggestions might be that energy and climate change should be
taken out of DTI and given its own Cabinet ranking. Do those sorts
of ideas have any resonance, do you think?
Mr Burke: What not everybody has
got their minds around yet is that whenever we stabilise carbon
dioxide concentrations we have to keep them there; it is not that,
"We will do this and then we can go back to our old ways."
So the idea of something like a monetary policy committee in the
longer run is quite important. I would like to see government
set itself targets on the carbon intensity of its public expenditure,
because that is something it controls, and it can do something
about the intensity of its public expenditure. I do not just mean
procurement; I mean the whole public expenditure frame. You take
out the transfer payments but the basic public expenditure frame
incidentally will help shift the balance in the Treasury rules
on capital expenditure against our current expenditure in a way
which will allow you to invest in energy efficiency as part of
the solution for dealing with fuel poverty. So I would certainly
like to see that. I have far less enthusiasm for the idea of playing
musical chairs with government departments. If you were asking
me what would I do in an ideal world I would restore something
like the capacity of the Cabinet Office to actually coordinate
across government, which we used to have, but which, without many
people noticing, we seem to have lost. That machinery for coordinating,
properly used, is an extremely powerful way, particularly on a
technical issue like this, of bringing together the necessary
alignment between the actions of departments. That is more the
kind of machinery government solution I would be thinking of,
especially after the last machinery of government change in relation
to my interests in the environment, which has been reasonably
catastrophic.
Chairman: Let us not go there! You may
find we share your view on that, and have said so in the past.
Joan Walley.
Q89 Joan Walley: I just wanted to press
you on what you said about the idea of changing the Treasury rules
in terms of public expenditure, capital expenditure and revenue.
Have you written anything on that?
Mr Burke: I have not written anything
on that, but I have talked to a few people about it and I would
be very happy to give you a short note. It is just the obvious
thing that if you have to drive down the carbon intensive public
expenditure then you would look for ways in which you could get
the best pound for your buck in doing it. Clearly one of the best
ways is in the health service, the education service and in the
social security service. If you can find ways to capitalise that
spend then it is better than year on year on year raising your
spend on current account. I have not done much more thinking than
that. Of course, again, it would make wars a little more difficult
because wars are very carbon intensive.
Q90 Chairman: That is an inquiry which
we have considered but felt to be a step too far!
Mr Burke: I thought it might almost
be a step too far to raise the point.
Q91 Chairman: We did not want the field
trip either!
Mr Burke: In the very real sense,
why I was raising that in that way was simply to demonstrate the
potential power of a mechanism that focused on public expenditure,
where the government is one of the biggest capital spenders, and
it is all very well telling business that it must invest and it
is all very well doing other things to try to constrain with this
hand that amount of carbon in the economy if with this
hand you are pumping it up. There is clearly incoherence in that.
Q92 Joan Walley: So you would advocate
that as being part of the mixture?
Mr Burke: I think that is again
part of the different fiscal instruments, part of the policy measures
that we need to be thinking about as we address what is, I think,
a very urgent problem, yes.
Q93 Mr Chaytor: Can I take you back to
the start of your remarks, where you referred to the influence
of the "sofa denizens"? These are the characters that
used to be in Harold Wilson's day the "Kitchen Cabinet"?
Mr Burke: Yes.
Q94 Mr Chaytor: I would link that with
what was said earlier by Dr Dixon about the position of the industry
and the attempt by the industry to seek this window of opportunity.
In fact I think Catherine Mitchell also said it. Dr Dixon also
said that one of the generators, British Energy, is not actually
lobbying for new build. The suppliers are not lobbying for new
build; one of the two generators is not lobbying for new build.
The City financiers do not seem to be coming in very quickly unless
they get cast iron guarantees. What parts of the industry are
leading the lobbying?
Mr Burke: The first thing is that
there is no such place as the business community; there are lots
of different communities with different interests and different
dynamics. I have no objection to the nuclear industry lobbying
for what it thinks is the solution; I do not for one minute think
there is any bad faith, I think there are people who have made
the best analysis they can and they want to do it. So I cannot
see any reason why they should not lobby and lobby very aggressively
for what they want to do, and they are entitled to make as much
of a public debate about lobbying as they see fit. What I think
is more important, and it goes back to the question and my reply
to Mr Challen, is that you have to have confidence that the processes
of government will not be bounced by lobbying with differential
access. In other words, that there is somewhere where all of that
is put together in a process in which everybody can have confidence.
There is a voice from the CBI that government tends to take, I
think at least politically, quite seriously, which is a very different
voice from the voice of the major investors. The CBI is saying,
"Please take this away, let us do something later about it."
I do not think very much actual basis that this is going to hurt
our competitiveness. The major investors, the BPs, the Shells,
the BGs, the Rios are saying privately—not so much because
they want it to be private but because they do not take the public
stage in the way the CBI does—"Get on with it."
And there are a lot of other voices in the industry saying, "Give
us, if not regulatory certainty because that is quite difficult
to do on your own, at least give us a consistent and constant
political signal." So I have some sympathy for the pressures
on government because of the way the business voice is being articulated
and expressed, and that is a problem for business. But government's
hand in dealing with that is not to have a sense that somehow
what the government is going to do is going to be decided by a
small group of advisers around the Prime Minister and not by a
whole government with an elaborate and rather good, in my observation,
advisory process for sorting out the wheat from the chaff and
presenting Ministers with clear options that have actually looked
at things in three-dimension. The uncertainty people have is that
somehow the government is being bounced by privileged access.
Q95 Mr Chaytor: I just want to pursue
this privileged access. Your definition of the industry, therefore,
is one of the generators against CBI—
Mr Burke: Of course there are
a lot of people, actually all over the place not just in the nuclear
industry, who honestly think that the nuclear future is the way
to go. There are a lot of people who believe that. There are a
lot of people in the City—not the investors but the fee
makers, the accountancy consultants and so on—who can see
massive fees, and they are very keen and they are going to join
in on that as they would on any other opportunity. I find it very
hard to criticise people for doing that; I think they are entitled
to do that; that is what in a sense drives the dynamism of the
economy. What the public is entitled to require is that the machinery
of government for dealing with those pressures is such that the
outcome is in the public interest not in a private interest.
Q96 Mr Chaytor: What about the Department
of Trade and Industry?
Mr Burke: The Department of Trade
and Industry has always, I think, found itself in a difficult
position of wanting to promote but not having the tools to promote.
Q97 Mr Chaytor: Is it part of this lobbying
campaign?
Mr Burke: No, there are differences
of opinion inside the Department of Industry. You can talk to
different people in the Department of Industry and get different
views. This goes back to saying, "What is your confidence,
with all of these different channels of information and different
voices, different ideas and information, that government puts
it all together and really sorts it out?" I am not saying
that government has ever been absolutely brilliant at it, I am
saying that it used to be better than it seems to be now, and
that this is an area where it really needs to be good because
it requires the cooperation of so many people who are going to
make big bets on the policy in order to deliver the outcome. So
the worst thing would be if we are sitting around here in five
years' time and we are still talking about what is the way to
address this problem. That would be the worst of all worlds because
then events will determine the outcome.
Q98 Mr Chaytor: Finally, can I ask about
the Ministry of Defence?
Mr Burke: I do not know anything
about the Ministry of Defence's involvement in this issue. I think
it is an important voice, however, and I will be very interested
to know more about the Ministry of Defence's view on how an unstable
climate would affect their priorities.
Q99 Mr Chaytor: Are they sitting on the
sofa?
Mr Burke: I have no idea.
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