Examination of Witnesses (Questions 35-39
MR NICK
EYRE AND
MR BRIAN
SAMUEL
1 FEBRUARY 2006
Chairman: Welcome and thank you for waiting
so patiently in the background. No doubt some of what has been
taking place was of interest to you as well. Again, you will be
very familiar with this Committee. I am particularly glad to see
you on this first time since I have been in the Chair, but also
because of my personal interest in the EST from its inception.
We are going to be interrupted by a vote in about five minutes'
time, but I hope we can get going while we can and then we will
have to have a short break.
Q35 Mark Pritchard: Welcome, gentlemen.
On the same day the Pre-Budget Report came out, the conclusions
of the Energy Efficiency Innovation Review were published. Could
you give the Committee your overall assessment of those?
Mr Samuel: We were very much actively
involved in the process and we think that the general conclusions
are actually helpful. Obviously, they then have to be carried
through. They feed into the Climate Change Programme Review and
ultimately will feed into the energy review as well. We certainly
think that some of the key measures in there, such as raising
the level of awareness within consumers and the means to do that,
are actually vital. Perhaps we would have liked to have seen more
reference to fiscal incentives to actually help raise that level
of awareness. Other conclusions such as accreditation and helping
the energy suppliers to deliver their Energy Efficiency Commitments,
we believe will actually increase the opportunity to raise the
level of those commitments as well. We know there has been quite
a large amount of carry-over from the first Energy Efficiency
Commitment period. As a consequence, the activity in the cavity
wall insulation market is not as great as people had actually
expected and some of the suppliers have actually reduced activity.
This clearly shows that more can be done. In relation to the actual
level of savings in the household sector which are achievable,
the Energy Efficiency Innovation Review identified some seven
million tonnes of carbon cost-effective savings by 2010 which
can actually be delivered with the right policy framework. We
believe that there is actually further scope to increase those
savings to some 16 million tonnes carbon potential from the household
sector. That is some 36% of energy demand. So clearly the potential
is actually there. It is a question of actually taking those recommendations
and putting them in place. I note today that there has been an
Ofgem consultation launched on smart metering. We believe that
is one way to increase the levels of awareness and engagement
with consumers in the household sector. There is still some work
to be done on that, but it is those measures which need to be
taken forward.
Q36 Mark Pritchard: Thank you for that.
Do you think the Treasury can make a difference? You mentioned
policy frameworks. Do you think what it has done thus far is taking
us in the right direction or the wrong direction, or is it neutral?
Mr Samuel: I think it has been
helpful in the sense that we have had the recent Energy Services
summit, which was helpful in the sense that it did engage with
the suppliers and clearly a couple of good messages came out of
that. One of those again was the general feeling that fiscal incentives
were required. I would say that insufficient focus and attention
has been given to that, both in the household sector and in the
transport sector so far with Vehicle Excise Duty, for example.
Chairman: We will come to that point
a bit later on, but we will suspend for 15 minutes. We will start
at a quarter past four, regardless of who is here.
The Committee suspended from 16.00 pm to
16.15 pm for a division in the House
Q37 Ms Barlow: I noticed there is no
mention of energy efficiency in chapter 3 of the Pre-Budget Report,
"Meeting the productivity challenge". To what extent
do you feel the Treasury is building energy efficiency into its
wider targets of encouraging economic growth and competitiveness?
Mr Eyre: I think we are reasonably
positive about that now for two reasons. One is the involvement
of the Treasury in the Energy Efficiency Innovation Review and
Brian has talked about the household side of that, but of course
the Innovation Review also covered business and energy efficiency
and the Treasury was actively involved within that process. Then,
of course, there is also the Stern Review where the signs are
that this means the Treasury is looking at the issue of climate
change, of course from its perspective but actually factoring
climate change into long-term economic thinking, and we believe
that is absolutely right. So I think at that sort of high level
we are increasingly seeing the Treasury engaging on climate and
energy issues. It does not mean that we are always necessarily
happy that things are moving forward in terms of policy change
at the pace we would like to see, but I think that is to some
extent inevitable. We are there to be discontented to some extent.
Q38 Ms Barlow: Do you think that energy
efficiency is a great economic challenge for Britain, or do you
think that it will be a cost?
Mr Eyre: We know it is a huge
opportunity and we know historically it has been a huge winner.
Just to take one statistic, in the household sector alone we have
seen something like a 50% improvement in energy efficiency over
the last 30 years or so. In other words, we are using half the
amount of energy in the household sector that we would have been
if we had not improved energy efficiency over the last 30 years.
Just to put that in perspective, the carbon saving which results
from that improvement is three times the carbon saving which is
produced by the whole of the nuclear programme. So this is a serious
part of energy policy, it cannot be treated at the margin. As
Brian mentioned earlier, the opportunities going forward are significant
and we know that these are in the main cost-effective opportunities.
Just to take one example, because it is a big and important one
in the household sector, cavity wall insulation probably costs
£200 to £300. The lifetime savings, the lifetime reductions
in energy bills, is £2,000 to £3,000 per household.
So it is saving carbon, £150 per tonne of carbon. You are
making £150 economic profit for the UK every time you save
a tonne of carbon. The same is true of many of the technologies
across all sectors. So it is a crucial part of the equation which
the earlier witnesses from Friends of the Earth mentioned about
how to get to a low carbon economy with minimal economic pain
or indeed some economic advantage.
Q39 Ms Barlow: That being so, you said
that the Treasury is taking that on board in its wider economic
strategies now, but do you think it is doing enough or is it missing
a trick? Do you think it should be doing far more than it is to
tie in the general economic picture with the energy efficiency
agenda?
Mr Eyre: There are certainly some
areas where we would like to see further action, which is not
to say that fiscal policy is the only thing which is going to
deliver energy efficiency. Of course other policies, regulation,
general Government leadership, awareness campaigns, these are
all important, but in some ways we know that tax reaches parts
which other mechanisms cannot. It really does engage people and
we would point to two particular areas where we think changes
in tax could play a bigger role. One would be in getting discretionary
household energy efficiency measures, such as insulation, much
higher up the agenda and we have published research which I think
we have sent the Committee in the past on the impact which differentiating
council tax could have on that. I think the second area where
we think there is increasingly a problem is in car energy efficiency.
It is very clear that we are not on track to get close to the
European Union target of 140 grammes per kilometre average for
new vehicles in 2008. We are over 170 at the moment, and indeed
the situation is getting worse. The efficiency of new cars bought
last year was worse than in the previous year where they were
bought by private individuals. Where companies were buying them
the situation was still getting better because of the very good
measures which the Treasury has put in place on company car taxation.
But we think that the equivalent measures on Vehicle Excise Duty
are not sufficient. The differentiation is not big enough to have
a meaningful effect and we think consideration should really be
given to increasing those. That would be a very, very clear message
from Government, a sign of leadership as well as an economic signal
that actually people can do something. Our own campaign at the
Energy Saving Trust this year is trying to engage people to save
their 20%, to get a real sense that people need to work with Government
and that the Government's targets can only be delivered if people
play their part as well, but the tax system has a key part to
play in helping to get that message through.
Chairman: We would like to come back
to both household savings and cars specifically, and how the tax
system could be used.
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