Select Committee on Environmental Audit Minutes of Evidence

Examination of Witnesses (Questions 660 - 679)



  Q660  Dr Turner: What you are saying effectively is that you are not actually going to address transport emissions because it is easier for other people to reduce emissions in their area. If you take that to its logical conclusion, and given the predictions for aviation growth, et cetera, transport emissions could take up our whole global target emissions leaving absolutely no room for any emissions by any other sector of the economy by 2050 unless transport bears its share of the burden.

  Mr Alexander: My understanding is that transport emissions more closely tracks GDP growth than other sectors of the economy.

  Q661  Dr Turner: I am coming to that.

  Mr Alexander: In terms of the point that you make in terms of aviation, that is why, even prior to my arrival at the Department for Transport, during the British Presidency of the European Union I worked for, and was indeed pleased to see the outcomes of the Environment Council which secured a greater degree of consensus on the need to move this forward than previously. Even a cursory reading of the newspapers in the last couple of days reflects the fact that there are major players in the airline industry, for example Lufthansa, who are on record yesterday as saying that they oppose the inclusion of the aviation sector within the Emissions Trading Scheme any time soon, and to recognise what a significant prize we achieved with the Department for Transport, working extremely closely I understand with the Department for the Environment, to secure those conclusions in the Environment Council in December. I do not say that all the issues have been resolved. There is much further work that we do still need to undertake, but I believe that it is the right policy given the inherently international nature of air travel. I believe we have made significant progress in terms of the conclusions of the Environment Council. There will be, I understand, a further vote in the European Parliament next month on exactly this question of aviation coming within ETS. Indeed, we now look forward by the turn of the year to the European Commission producing its legislative proposals as a consequence of what under the British Presidency we achieved. So I can assure you that we take very seriously the challenge of emissions from the aviation sector in particular, but we are convinced that the right response to that, given its inherently international nature, is to include aviation within the Emissions Trading Scheme.

  Chairman: We will come back to aviation in a moment.

  Q662  Dr Turner: You are saying that the Government accepts that the growth in carbon emissions mirrors economic growth, but that is precisely one of the most important arguments because if you take our global emissions and our total economic growth, then the growth in emissions has been decoupled from economic growth. Indeed, one of the biggest questions in tackling climate change is that if we fail to decouple growth from growth in emissions then we have no chance. So I cannot understand the logic of accepting, in this important sector, the growth and continued growth—

  Mr Alexander: Historically, it has been the case that there has been, in terms of trend, a correlation broadly between GDP growth and transport emissions, but of course you are right to recognise that we want to work actively to decouple them. That is why, for example, in terms of the RTFO that I mentioned you can see progress there; it is why, in terms of aviation and that sector we want to see it brought within the Emissions Trading Scheme at a European level; it is why we continue to believe that there is a significant contribution that can be made by sustained investment in public transport, in terms of giving people effective choices to make. So does that set challenges for us? Of course it does, but, equally, I do not, and would not, wish to advocate a scenario which says that the cost of meeting our environmental obligation is that we should not, as a country, pursue economic growth. I think, in many ways, there are technological solutions to this and there will, of course, be a behavioural dimension to this, and, as I sought to reflect at the outset of my remarks, our challenge is to work effectively with industry and, indeed, with the public to set a policy framework which incentivises the outcomes that we would like to see.

  Mr Campbell: May I put some numerical description on that? I think what is going on here is there is a consequence of economic growth, and then there are policy measures to reduce carbon emissions, whether by decoupling or other policy measures, such as the Renewable Transport Fuels Obligation. In 1995 carbon dioxide emissions were 150 million tonnes of carbon. If you look in the Climate Change Programme review document you get a number, for 2010, that says before the policy measures were announced it was 144, but actually if you take away the policy measures in the first Climate Change Programme you would have had 161 million tonnes of carbon. So the economy proceding and, also, demographic factors would have changed from 150 to a rise to 161. A series of policies in the first Climate Change Programme brought it to 144. A series of policies in the Climate Change Programme review of the document that you have seen takes it to 132 to 137. So as well as some decoupling, what has gone on is an increase and that has been pushed down by new policy measures.

  Q663  Dr Turner: Yes, but not in the transport sector.

  Mr Campbell: And in the transport sector. So that 6.8 million tonnes of the saving, getting us down from 161 to in the 130s, is in transport. So what you are seeing is the transport—

  Chairman: It is a lower rate of growth of emissions rather than an actual cut in emissions. I think we have had quite a lot of time on this.

  Q664  Colin Challen: The 2004 White Paper used projections about the future cost of oil per barrel: in 2010 the price was going to be $23 and by 2020 it was going to be $28. In the light of recent experience, have you now obtained new projections for those years 2010 and 2002 for the price of oil?

  Mr Alexander: The first thing is you would anticipate, again, I have taken a fairly close interest in this, not least given the terms of the evidence you have received from the editor of Petroleum Review, both in terms of the issue of peak oil and, also, in terms of the issue of oil price forecasts. The first point, just in terms of the machinery of government, is to recognise that it is not the Department for Transport which itself sets what is the Government's view as to the oil price but is indeed compiled by the Department of Trade and Industry. The oil price scenarios (I have sought to look into this in light of the evidence you have received) are based on what the Government judges to be realistic assumptions about possible alternative paths for GDP growth, global oil demand and supply and investment in the oil industry. They take into account assumptions used by organisations such as the United States' Department of Energy and the International Energy Agency, an intergovernmental body independent of the industry formed to advise consuming nations on energy issues. The oil price scenarios were last updated in February 2006, and these will be reviewed and published as part of the Energy Review, so it will be a DTI lead on this, but this will be something that I understand will be covered in the Energy Review, which will be published in the months to come.

  Q665  Colin Challen: Of course, these projections are just that: they are projections and not statements of fact. Clearly, they must have influence on how you plan things Previously, until 2000, we were planning things on the basis of a fuel duty escalator; we now have an escalator, thanks to market forces, which has probably taken us well beyond where that previous one would have taken us. How has that affected your planning within the Department? It must have had some impacts, and what impacts have been evident as a result?

  Mr Alexander: As I say, we work closely with the DTI in terms of the published figures that are produced, but you are right to recognise that not simply is it the case that fiscal measures are set on a year-by-year basis but, also, there is volatility within the oil sector.

  Q666  Colin Challen: What has changed in the Department's thinking, as opposed to its discussions with other departments about the figures? What has actually changed in the Department's thinking? Could we ask, for example, whether the Department welcomes the current price because it might suppress demand and, thereby, eventually reduce carbon emissions, or does it see it as more of a threat because it damages economic growth, or brings the prospect of inflation, which I understand is a clear concern around the world at the moment? What is the Department's position, if you like? It must have a view on where prices are going.

  Mr Alexander: I think the Chancellor of the Exchequer might have a view if the Secretary of State for Transport suddenly held forth on our view on international oil prices and how it will affect global inflation. It reflects the fact, of course, that all of the departments I have mentioned—whether it is the DTI in terms of the economy, whether it is the Treasury, both in terms of its international responsibilities for global markets or, indeed, its stewardship of the economy, and ourselves in terms of transport—follow these issues closely. The updated energy projections, that I reflected in my remarks, in February 2006 do quote prices on 2005, 2010, 2015 and 2020. The point I would make is that it tends to be that, given many of the projects we are working on are longer-term measures and making longer-term judgments, those figures towards the end of that spectrum do matter to us and we will follow them closely. We are working closely with the DTI in terms of the Energy Review at the moment, and that will be the next opportunity at which these figures are updated. If you are suggesting that we take an interest in this matter, of course we do, but so, too, do the other departments. The international oil price is a fact rather than a policy or an aspiration on the part of government and our job is to recognise those realities in terms of the global oil market while, at the same time, recognising that there is considerable divergence even within the global oil market as to where oil prices will be. I saw that in an interview in Der Spiegel on Monday Lord Browne, the Chief Executive of BP was giving his indication as to where he judged the oil price to be in years to come, and suggesting that there would be some softening in the global price of crude. Clearly, he is entitled to his opinion, but that is the job of the DTI, as I say, on the basis of the sources—

  Q667  Colin Challen: I can understand your reticence in not wishing to trample over other Departmental responsibilities, least of all that of the Chancellor, but does your reticence conceal a neutrality on your behalf, for your department, on this issue? The Government elsewhere does use the price mechanism as a signal and as a means of suppressing demand. So is the Department neutral on the question of the price of oil?

  Mr Alexander: Firstly, you are well aware that the issue in terms of, for example, petrol tax is a matter for the Treasury. Of course, we have discussions ahead of the Budget, as do all departments, with the Treasury but it is not for me to set independent policy in relation to our fiscal regime rather than the Chancellor of the Exchequer. Beyond that there can be matters which are within your sphere of concern but not necessarily your sphere of influence, and I think, probably, the global oil markets would fall within something that we are concerned about but I would not claim, as the Secretary of State for Transport in the United Kingdom, that accounts for about 2% of global emissions, we are able to direct, more than within our own domestic market, prices as they have emerged through the global oil markets.

  Q668  Colin Challen: This issue does have a bearing arising from concerns about peak oil. I am wondering, in the light of your appointment letter and the Prime Minister's request that you contribute to the Energy Review, whether the Department has made representations to the Review on the issue of peak oil, and what impacts that may have. A supplementary question, if you like, is: does the Department take a view on when we will reach peak oil?

  Mr Alexander: Our view is that global oil production will not peak before 2030, but again that is a cross-governmental view rather than simply the view of the Department for Transport. That is contingent on sufficient investments being made. This is consistent, as I sought to describe in my earlier answer, with the view of the IEA, most other governments round the world and, indeed, the oil industry itself, and reflects what we have judged to be several flaws in the argument that was put to this Committee by one individual who clearly takes a very different view in terms of the timing at which peak oil will be reached. Simon, you might want to say a word in terms of how, in practice, we are working closely with the Department of Trade of Industry in terms of the Energy Review.

  Mr Webb: We have had a member of the Department for Transport working on the Energy Review. We think with these kinds of issues it is better for us to be on the joint team approach with them, so we have had somebody working there all the time, making sure, first of all, that we are contributing transport expertise and, secondly, obviously, we are very interested that long-term oil price projections are being thoroughly addressed and that transport measures, which are relevant in the context of energy, are being explored and we have a modest menu of things that we are exploring within the Energy Review. So I think we are thoroughly engaged on all that, and that allows us also, as a department, to sort of calibrate what we are doing in the light of the unfolding knowledge, so that in our long-term strategic thinking we can take account of both what the projections are and uncertainties about them.

  Q669  Colin Challen: We are very different countries, but do you think we have anything, in this country, to learn from the Swedish example, where they are now proclaiming a public policy commitment to reduce their dependence on oil by 2020?

  Mr Alexander: Actually, I should probably declare an interest, in that prior to my appointment as Secretary of State for Transport, holding my previous position as the Minister for Europe, I travelled to Stockholm and met with Stefan Edman on 13 March, who is leading the Commission on Oil Independence. That (it is curious how these events happen) reflected the fact that I read in The International Herald an article with the Swedish Prime Minister, a person who himself talked at great length about Sweden's commitment to oil independence. I was sufficiently intrigued that in the course of what was otherwise a straightforward Foreign Office visit to one of our European partners, I requested personally that I could meet with the Head of the Oil Commission back in March. I did find it a fascinating, albeit fairly brief, meeting with him, and I will be interested to see the conclusions of the oil independence commission study. My recollection of the time—and I appreciate the Committee may have been in Stockholm since I was there—was that he was bringing forward his recommendations in the summer, around August. Of course, there is an anticipated general election in Sweden in September, so we will all be following with great interest, not least, as a Labour Government, the fortunes of the Social Democratic Government in Sweden. In terms of the discussions that I had with them at that point, and that was prior to my appointment as Secretary of State for Transport (I can see my officials looking worried at this point because they did not have the opportunity to give me a brief before I went there), they emphasised a few points to me: firstly, that they faced a particular challenge in Sweden in that if you take an average Swedish car park it is thirstier than an otherwise average European car park—the predominance of Saab and Volvo mean that you tend to have more energy-demanding vehicles. However, another strong emphasis that was placed to me, which is quite distinctive to Sweden, is what they describe as Swedish gold in terms of biofuels. They are convinced that there are big opportunities within Sweden to see oil becoming predominantly a feature of the transport sector of the economy whereas, at the moment, oil, for example, in terms of housing, accounts for a significant portion of oil consumption within Sweden. So I would be very interested in the outcomes of the Oil Independence Commission. I do not foresee circumstances in which we would be arguing for oil independence, as a government; it reflects the fact both that we are ourselves still a significant net exporter of oil—I think, in terms of oil production, we are around 13th or 16th in the world, at the moment—but, at the same time, I will be very interested in the conclusions of the report to see whether there are lessons that can be learned in terms of the kind of efficiencies in technology and public policy which can assist us in the pursuit of our environmental goals consistent with our economic and social goals as a government.

  Q670  Colin Challen: Can I ask one final question: I am just wondering if we are falling behind a bit. The Swedes are going down that route; George Bush told the Americans that they were addicted to oil and they had to do something about it (I know there are layers of complication with that simple statement), but last year at the Labour Party Conference the Chancellor told us that we needed to increase production of oil and develop more oil refineries and so on. Are we really in step with the international community on this issue?

  Mr Alexander: Having managed, hopefully, to avoid conflict with the Treasury ahead of the Spending Review on the fiscal regime in relation to petrol, I feel I now tread rather close to Margaret Beckett as Foreign Secretary if I comment too much on the line in the State of the Union speech. There are a few points I would make, though: firstly, the issue in terms of refining is somewhat different, where my understanding (and I would not claim to be an expert who has worked in this field for many years and many others have) is that one of the reasons why we have a high oil price at the moment is actually a constraint in terms of refining capacity rather than an ability to access either new fields or fields which can increase their levels of production. In that sense, it does seem to me to be common sense, if there are considerable constraints on refining capacity at the moment, to look at how that bottleneck can be addressed in order to see the oil price reflect capacity rather than simply a specific bottleneck in terms of refining. Secondly, in terms of your point on President Bush's comment, I know that that has been a source of great interest and great commentary in the United States itself. I recently had the opportunity to read a speech by Barack Obama, the newly-elected Senator for Illinois in the United States, who took great issue with the assertion that President Bush had made because he said: "It is easy to state that as a fact but the policy consequences are somewhat different". In that speech he argued from a different political point of view that there needed to be far more work undertaken in terms of policy measures. I sit here today on behalf of the British Government, not the American government, but I think we need to assess these matters not simply in terms of our public statements but, also, our public policies. In terms of the British Government position, as I say, I do not think even our harshest critics could dispute the fact that on the international stage—whether through the action that we took at the Montreal Conference towards the end of the year, whether in terms of the fact we prioritise climate change along with African global development as one of the two key challenges that we set for the Gleneagles Summit last July—we have been amongst the global leaders in prioritising the issue of climate change. The final point I would make would simply be to say that while they may be related I think there are distinctive policy dimensions to the question of energy independence and energy conservation. Of course, we, again, through the Prime Minister's speech at the European Parliament last autumn, have prioritised the work of the European Union in terms of taking forward a common energy policy and within that common energy policy one strand of work is around that issue of energy security; another strand of work is around energy diversity and a third strand of work is around generally liberalised energy markets within the United States. I would not, in all circumstances, see the issue around oil independence and oil security as being one and the same.

  Q671  Mr Hurd: The market has effectively replaced the fuel duty escalator—certainly that is the argument the Chancellor uses for not restoring it. Given that the impact of higher oil prices has been felt at the petrol pump for a while, what evidence are you seeing at the Department in terms of the impact of higher oil prices on demand? If you are not seeing anything yet when would you expect to see it bite?

  Mr Alexander: The first point I would make would be to say that often in the context of discussions such as this the fuel duty escalator is seen simply as an environmental measure, and my recollection of the circumstances in which actually the fuel duty escalator was introduced by a previous government was a need to find some extra money as much as (and I hope I am not being uncharitable in that description; to secure revenue is a reasonable aspiration of a chancellor in those circumstances) to address specifically environmental concerns. Of course, it is for the Chancellor to reach a judgment at each Budget in terms of the volatility of the oil markets and the price of the oil markets, and that has been reflected in the statements that the Chancellor has made in recent years. My understanding and my recollection of the statement that was made at the last Budget was that there would be a further consideration of this, I think, in the autumn of this year, in September. So, in that sense, it is a matter which the Treasury keeps under review but it would probably be better directed towards the Treasury, given their direct responsibility for the fiscal measures related to transport.

  Q672  Mr Hurd: My question was not a political one but quite a straight one: what impact, in terms of the data that you process, are you seeing in terms of the impact of higher oil prices, on demand. Forget the politics, what actually do you see?

  Mr Webb: Over last winter there was some reduction in the expected level of vehicle use, but we need a rather longer run of numbers before you can tell whether it was some other factor and the statisticians, I think, are able to record the data, which is all out there. We are nervous about making a firm conclusion, but I suspect there is something of last summer-to-autumn's oil price rises in there. Traditionally, there is quite a strong inverse correlation between price and road use, though you have to recognise that you are already at a high level because of the fuel duty and, therefore, the incremental effect of an oil price change is actually much less than it might appear at first sight because you have got such an amount of tax already in there.

  Chairman: We are about halfway through our time, so can I urge my colleagues to be as brief as they can with the questions, and I am sure the Secretary of State has got lots of good points to make, so perhaps you could also respond in the same vein.

  Q673  Emily Thornberry: I want to take you back to your expected return from the initiatives within the Transport Department being around 25% of cuts in carbon emissions in the UK, which I understand was your earlier evidence. Which of the initiatives are likely to have the biggest impact, and do they include the one which is the choice made by people as to what type of car to buy, so perhaps buying more efficient cars, and the impact of the Vehicle Excise Duty on that? We have seen a change in the way in which people have bought company cars, but that impact does not seem to be anything like as great on the private market. Really, my question is a bit of a cheeky one: I would be very interested to hear about your 25% and what it is your top five might be, and does that include the choices that people might make on the type of car they might buy?

  Mr Alexander: This is actually set out in terms of the Climate Change Programme in terms of the actual numbers, and I will ask Nigel to say a word in a moment in terms of numbers. In terms of the categories by which we account for the transport portion of the projected savings: in 2010, in terms of millions of tonnes of carbon, the Voluntary Agreements package, including reform of company car taxation and graduated VED, which was the specific point that you asked, in terms of influence on purchase, 2.3 (that is in million tonnes of carbon); wider transport measures, 0.8; sustainable distribution in Scotland and Wales 0.1; the fuel duty escalator 1.9 and the RTFO 1.6.

  Q674  Emily Thornberry: What is the RTFO?

  Mr Alexander: The Renewable Transport Fuel Obligation, which is basically the sale of biofuels of 5% within the mix by 2010. That was the point I made in the introductory remarks. It may not be visible—indeed it will not be visible—to car users but the effect of simply changing the biofuels or increasing the portion of the petrol at people's pumps in the station by up to 5% of biofuels has the effect of more than 1 million tonnes of carbon, which is equivalent to a million cars off the road. So it is a very significant measure and makes a significant contribution. Nigel, is there anything you would add to that in terms of the numbers?

  Mr Campbell: Not much, except to say that the Voluntary Agreements package actually makes an improvement in fuel efficiency, whether that comes from people driving in a more fuel-efficient and, often, safer manner (not accelerating and braking so fast) or choosing a less environmentally damaging vehicle through the company car tax reform or the graduated VED system, or the technological fixes. All those three combined add to the 2.3 million tonnes of carbon and 2.3 million cars off the road, in effect.

  Q675  Chairman: Is not the evidence that it is a substantial incentive that really makes an impact on people's choice of vehicle? That is why the company car tax provisions have worked quite well. As yet, the very small incremental changes in VED for ordinary private vehicles have not had much impact. Is there not now overwhelming evidence that bigger VED differentials are needed if there is to be any significant change in car-buying behaviour by private motorists?

  Mr Alexander: On the basis of the numbers that I have just offered to the Committee, I do not think there is a single response, in the sense that if you look across the range from 1.6 million tonnes of carbon from the RTFO (simply changing the fuel mix) through to and including the Voluntary Agreements package, and those two elements that you have mentioned, graduated VED and company car taxation, it is right to recognise that the company car taxation system has, we believe, accounted for significant savings. This is a matter which the Chancellor will keep under review in terms of the judgments that he makes both in terms of the company car scheme and, also, in terms of VED, but there has been a significant decision taken in terms of the last Budget in terms of the graduated or graded system of Vehicle Excise Duty. Ultimately, that is a decision that is made following discussions with the Department for Transport and the Treasury at the time of the Budget.

  Q676  Chairman: I appreciate it is a Treasury decision. Whether, however, raising the VED for the most high emitting vehicles by an amount which equates to about half the cost of filling their tank could be described as "significant", I think, is open to question. I hope that your Department will make very strong representations before the next Budget about this. Can I just move on to another issue, which is about the fuel duty escalator? When that was frozen or abolished six years ago greenhouse gas emissions from domestic transport did rise quite sharply. We have touched on the question about the effect of the oil price rise, but is it not now clear, because of that rise in emissions, that the abolition of the escalator in response to those fuel duty protests of September 2000 was a rather premature response?

  Mr Alexander: You will appreciate that the period that you describe was somewhat before my time as Secretary of State for Transport, so maybe I will turn to my officials at this point, in terms of the large table of numbers that Nigel has before him.

  Mr Campbell: I was going to make two points. One is that you saw quite a big increase between 2001 and 2002 in road transport emissions—they increased by something like 2.5%. The following year it fell by nearly 2.5%, so if you compare 2003 with 2001 it has increased a bit. I think, also, to relate back to Mr Hurd's question, Simon rightly said why the statisticians were not comfortable saying: "This year's prices have done this to this much". If you look over a longer run of data, broadly, 10% more on the fuel price reduces travel by about 3%, and by encouraging cleaner fuels it reduces carbon emissions and fuel use by about 7%. So the fuel efficiency thing is slightly bigger—

  Q677  Chairman: What puzzles me about the Government's approach generally on cars is this: we now have technology which will allow people to go on driving their cars—in fact increase the amount they drive—and, at the same time, achieve big reductions in carbon emissions if we could persuade everyone to move to low-emission vehicles and to drive in a more prudent and environmentally friendly way. Now, given that is the case, that is a relatively easy policy for the public to accept. No one is saying: "You can't go and see your granny on Saturday by car"; they are simply saying: "Choose the environmentally friendly car to do so", and yet the incentives to do that are ludicrously feeble: there is a tiny differential on VED, we are dithering about road-pricing, and it is going to be years before it comes in except in a very small number of urban areas, and we are doing relatively little about raising the duty on fuel, yet all these are measures which could be introduced on a revenue-neutral basis; no one says the overall tax burden should increase but a very strong signal could be given to car users that: "Yes, you can go on driving your cars as much as you want, as long as you drive a greener car".

  Mr Alexander: There are a number of points I would make. Firstly, there is no one, single response to this. For example, the RTFO will effectively have no impact on individual drivers in the sense they will probably be blissfully unaware in terms of the fuel mix at the pump but, nonetheless, in terms of the actual impact on numbers it is itself very considerable. Secondly, there is a challenge in terms of engine technology, and we have seen significant progress being made in terms of engine technology in recent years. We have had discussions at a European level in terms of the Voluntary Agreements that we have secured at a European level with a range of different manufacturers, including Japanese and European manufacturers, and we want to see that go further. Indeed, we are in discussions at the moment as to what is the most appropriate way to take forward that agreement with the manufacturers in terms of new car fuel efficiency, but there is also work which can be undertaken in terms of, as you say, cleaner cars themselves. One of the measures that took place under my predecessor, I understand, was fuel-efficiency labelling to equip people with the proper information at point of purchase where they are deciding what vehicle to acquire. In addition to that, as I say, there are fiscal measures; for example, both the graduated Vehicle Excise Duty that I have spoken of and, also, the company car scheme. However, I recognise that there is a contribution that can be made and that is why I welcome the step the Chancellor took in terms of the graduated Vehicle Excise Duty as a step in the right direction.

  Q678  Mr Hurd: You appear to have dumped one of the policy levers, which is the Powershift grant, which appears to leave you with a problem in relation to the target for sales of low carbon cars, which I understand is to reach 10% of all new cars by 2012. That would require sales of around a quarter of a million low-carbon cars per year but in 2004 sales of these cars reached a total of 481. In the absence of the Powershift grant and without a desire to move the VED differentials much further, what policy levers are you going to use to get even closer to that target?

  Mr Alexander: Even with a Powershift grant we were not convinced, on reflection, it was the right response. Just, perhaps, to give you some of the history, in terms of Powershift grants (because, again, you would anticipate it was a question I asked my officials on arriving in the Department), Powershift was suspended back in March 2005 following concerns about the technology-specific nature of the programmes and the degree of compliance with European state aid rules. We did notify the European Commission for clearance in early 2005. However, a review of the grants, as I understand it, by the Department concluded that the benefits of four of the six programmes would be limited to the purchase of emission reductions. In the absence of wider benefits, such as market transformation effects, which, as I understand it, was the original idea—that if we had these grants it would actually have a transforming effect on the market—it represented poor value for money. As in all of these schemes, I think it reasonable that Ministers are charged with asking what can have an impact in terms of market shift. On the other hand, having a reasonable concern for prudence in terms of the public finances, frankly, we are not convinced that giving individual grants of such a small nature to individual car purchasers will deliver the significant emissions reductions or a change in the way that people, at the moment, approach issues of green transportation to believe that it is the right way to go. That explains the decision that we have taken. In terms of what will take its place, there are a couple of things which I would highlight—as Nigel turns the page for me. One is the low carbon R&D programme, which specifically involves grants for industry for R&D into low carbon. One of the features that has already been pointed out by the Chair is the capacity of fleet purchasers to actually have a differential impact. That is also the case, for example, in terms of the work we have been doing with the transportation sector in terms of logistics, where there are actually very considerable gains to be secured in terms of carbon emissions from ensuring that people are driving in a way that is also environmentally friendly. The other approach is an infrastructure programme which is, essentially, grants towards the cost of alternative fuel refuelling points, for example gas, electric, hydrogen and bioethanol. I understand from my reading of the evidence before this Committee that there has been some interest expressed in terms of whether we could in the future look to the kind of approach that has been taken in Stockholm, where you have a limited number of these points within a constrained city area. It would be by such an infrastructure programme that we could issue grants if there was a city, like London, which was willing to countenance that in the future.

  Q679  Mr Hurd: Is the target still there or is it just so out of sight that it is embarrassing?

  Mr Alexander: We are not giving up on the target but, on the other hand, the specific grants in terms of the Powershift proposals we were not convinced would assist us in reaching it.

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