Examination of Witnesses (Questions 460-479)
MALCOLM WICKS
AND MR
PAUL MCINTYRE
10 OCTOBER 2006
Q460 Rob Marris: I cannot find it
there. It may be on there, but it is not findable, nor is it in
the Library, nor is it in the Vote Office.
Malcolm Wicks: Let me ask Mr McIntyre
to say a little bit more about the consultation process. It might
be helpful if, after this meeting, we quickly send you a note
of the different consultative exercises that there will be.
Q461 Chairman: Yes, I should like
that very much. Thank you.
Mr McIntyre: On the question of
consultations, the purpose of the main document is to set out
a sense of direction, but also to set out within a number of the
areas that there is a need for Government to consult on how that
sense of direction should be translated into detailed policy.
The reform of the Renewables Obligation is an important example
of that and also the case that the Minister has already mentioned,
the proposal for an energy performance commitment. Some of these
consultations have already been rolled out, they are going to
be rolled out over the autumn and the plan is that as much as
possible in terms of conclusions from that further work and consultation
will be wrapped up in the White Paper.
Chairman: Perhaps you could ensure that
we are included in that roll-out process so we are aware of the
consultations as and when they begin please.
Q462 Mark Hunter: The Energy Challenge
document suggests that one of the ways of reducing energy demand
would be to shift energy suppliers from a focus on selling as
much energy as possible to providing energy services such as energy
efficiency measures. It also says that the energy companies are
in fact willing to do this. Could you explain to us a little how
it would work and also whether or not you think there would have
to be public subsidy to help poorer consumers take advantage of
this?
Malcolm Wicks: There is no need
for subsidy as such. The problem here is that demand from the
housing sector is increasing. This is despite probably more insulation,
more thermal efficiency, despite some of the newer appliances
we are buying being more efficient. With the whole range of electrical
appliances which we and our children have in our houses now energy
demand is going up. We think it is possible and certainly desirable
that energy demand starts to decline and that is why your question
is important. How would this work? Again, forgive me, it is something
we need to consult the industry about, but we do want to move
towards a situation where in future the supply companies, the
people who supply us with gas and electricity, will be financially
incentivised, they will make more money if they help the housing
sector and each of us as individuals to become more efficient
and reduce our demand. In other words, instead of company X coming
to us and basically saying they will sell us gas, they will sell
us electricity, it would be lovely if we bought both from them
and they would occasionally read the meter and we pay them and
that is it, that is more or less the end of the relationship.
What this would involve would be the company coming to us and
asking to look at our house, looking at the thermal efficiency,
the need for cavity wall insulation if that is appropriate, loft
insulation, asking to talk to us about the whole range of appliances
we use, asking to talk to us about microgeneration, whether we
would be interested in thinking about microgeneration. That is
the kind of revolution we need to bring about.
Q463 Mark Hunter: Do you think price
incentive is key to that?
Malcolm Wicks: Yes. At the moment
the incentives from a climate change point of view, conservation
point of view, are all in the wrong direction, are they not? If
they sell more gas to you and me, they make more money, more electricity.
We have to reverse that; it is a cultural revolution that we are
bringing about here.
Q464 Miss Kirkbride: Minister, I
quite agree with you that we need a cultural revolution, but given
that this Government is quite keen in interfering in all sorts
of walks of life I am surprised that you are not willing to be
more proactive when it comes to changing the way we use our energy
supply. I think one of the principal barriers to many people actually
investing in mini wind turbines—my leader apart—and
solar power and all of these things is that the returns are just
not great enough. They are still too expensive to cut your bills
in any timescale that most people looking at spending thousands
of pounds in reducing their energy consumption are really prepared
to consider. Unless the Government are prepared to be more involved
in forcing our hand to do this and therefore hopefully making
these things cheaper by more people wanting them I do not think
you are going to get this cultural revolution and you are not
going to see demand going down by so much. It is too easy to do
nothing.
Malcolm Wicks: We have a programme
of government grants to householders. We have a low carbon building
programme which is worth some £80 million and not all but
some of that money will go to householders to kit themselves out
with microgeneration so we do have a grant aid programme. The
real secret here, and it is a very familiar story, is that at
the beginning of new technologies they are very expensive. The
first television was a very expensive item.
Q465 Miss Kirkbride: It has taken
30 years on televisions, has it not?
Malcolm Wicks: What we need to
do is start to benefit from scale and with our £80 million,
which will enable us to bring on a lot of microgeneration technologies,
you will start to see the benefits of scale, in other words prices
will tumble. That has to be it. The other important thing is that
I hope a lot of active citizens who might have reasonable salaries
will not always be looking for grants. People spend a lot of money
on electrical appliances, plasma TV screens and that. I hope some
of those individuals will say that even if the payback period
looks a bit long this will be their contribution, they want to
do that. Just talking to people I know of more and more people
who would like to be doing something of this kind. I do not think
this is about too much government intervention. I do think we
have to resist this a bit.
Q466 Mark Hunter: You will be aware
that some of the individuals who have pursued microgeneration
schemes are having difficulty selling the energy they have generated
back into the system because the supply companies are not always
as interested as they might be in cooperating with them.
Malcolm Wicks: Two things. One
is that the new Act of Parliament on Climate Change, introduced
by our colleague Mark Lazarowicz, which has Royal Assent, talks
about the requirement for supply companies to offer a price to
people. I said in that committee that we would keep a careful
eye on it to make sure the price was right. Yesterday Ofgem, the
regulator, also said useful things about the need for microgenerators
to be able to sell their electricity if they are lucky enough
to generate so much that they can sell it.
Q467 Mr Wright: We are talking about
the energy saving equipment and one of the problems the manufacturers
have is to look in that crystal ball about what the Government's
view is going to be of the demand there is going to be for their
particular products. Have the Government announced their energy
efficiency target for the energy efficiency commitment after April
2008? If not, when is it going to do so?
Malcolm Wicks: There are consultations
now led by Defra, on the energy efficiency commitment, but Defra
ministers have made clear their ambition about increasing the
scale of that commitment.
Q468 Mr Wright: When can we expect
the target to be put forward?
Malcolm Wicks: Next year, I am
advised.
Q469 Mr Wright: Do you consult with the
manufacturers of the energy saving equipment over this particular
issue?
Malcolm Wicks: Yes, we do have
a lot of consultations with manufacturers.
Q470 Chairman: We can still buy B-rated
energy efficient condensing boilers. Would it not be good just
to wipe them away and only have A-rated condensing boilers?
Malcolm Wicks: That is where we
have to move to and we have to move in that direction at a European
level. There is a good deal of interest in the European Commission
and the European Parliament about that. It is not my subject as
such, but ditto the kinds of cars we are allowed to buy in Europe.
Q471 Chairman: In climate change
terms that is quite a quick gain.
Malcolm Wicks: It is, yes.
Q472 Mr Hoyle: Colleagues touched
on the problems for industry not knowing what the future holds,
but industry is taking the easy option, is it not? What is happening
is that we are setting targets and expecting industry to meet
those targets but industry is turning round and saying "Hang
on a minute. We might as well do more damage to the climate by
moving abroad". So they move to China where nobody cares
about the climate. We are having a negative effect and that is
the danger. What are we going to do to keep industry in the UK,
not allow it to move to China, Brazil or wherever it does not
matter about the climate because energy is cheaper and labour
costs cheap and this is going to be at the expense of the UK.
The problem is that they are all fine words, they are all fine
actions, but the reality is that we could end up doing more damage
to the climate.
Malcolm Wicks: I understand the
concern, but, with respect, I think you exaggerate the argument.
We are seeing now a range of industries across Europe, certainly
across the United Kingdom, taking this agenda very seriously and
being incentivised to do so by the European ETS. Clearly in terms
of the crucial details around the Emissions Trading Scheme, we
do have to be aware of that danger that we do not just want to
let some dirty industry, heavy emitters, to up sticks and relocate
where there is no regime. That is a question of getting the balance
right in the roll-out of the Emissions Trading Scheme, but also
of course it points to the need to reach international agreements
about carbon. The meeting last week in Monterrey, which I attended
together with the Secretary of State for the Environment, indeed
the Foreign Secretary gave a keynote speech, was very much about
the process of discussion internationally, so that many of the
emerging economies like Mexico itself, South Africa, obviously
India and China, are part of this challenge and are meeting the
challenge.
Mr Hoyle: In fairness may I say I accept
what you are telling me, but the proof of the pudding is in the
evidence we have taken. We have had manufacturers from the car
industry saying that energy is one of the issues and one of the
reasons why they are not going to produce in the UK. The truth
of the matter is that we have lost two major companies and both
reported to this Committee that it is red tape and energy costs
which are making them consider moving elsewhere. I rest my case.
Chairman: Costs rather than carbon costs.
Mr Hoyle: Absolutely, but it is all built
in.
Q473 Mr Weir: Everybody who generates
electricity has told us that what they really need is a robust
system to provide a long-term price for carbon across a wide variety
of sectors and they are talking 10 to 15 years. You talked a lot
about the EU Emissions Trading Scheme but one of the difficulties
with that was a sudden drop in the price of carbon which went
a long way to undermine the scheme. Can we really expect the scheme
to deliver this long-term cost price for carbon?
Malcolm Wicks: I likened it earlier
to a toddler; the Emissions Trading Scheme is quite a young creature.
We are very committed to seeing it grow. We all understand that
while the UK has been rigorous about its approach to our own allowances
here in the United Kingdom, some other countries, some other parts
of Europe frankly are just not playing the game on climate change.
There is a big test for the European Union and the Commission
in terms of the current round, really to make sure that all nation
states, all 25 states in the European Union, are serious about
it when they are looking at their national allowances. This is
a very big test for the Commission.
Q474 Mr Weir: How long are you going
to allow the toddler to grow? If the scientists are correct, we
do not have decades to get this right. It has to be done soon.
Has the German Government not taken steps to give long-term commitments
on carbon costs? Is the UK Government thinking of doing something
similar?
Malcolm Wicks: The UK Government's
record is a good one on this. If you look at the allowances we
offer compared with some other nation states then we are very
serious about playing the game because we are committed to the
Emissions Trading Scheme. I quite agree that time is not on our
side. Global warming is not theory, it is leading to rising infant
mortality rates from diarrhoea and malaria in Africa even as we
speak. Time is not on our side and we need to act urgently, but
it is vital that we put faith in a European-wide scheme. While
we are responsible for two% of CO2 emissions in the UK, the European
Union is the international arena where we need to engage. We are
focusing on this very hard.
Q475 Mr Weir: I accept that, but
you also talked earlier about bringing transport into this scheme
at some point. You were consulting about that. You have been consulting
also about bringing air transport into this scheme. We are told
that airlines are going to be one of the biggest emitters, but
there does not seem to be much progress in bringing airlines into
the trading scheme.
Malcolm Wicks: It is the position
of the UK Government that at the appropriate time aviation should
be part of the scheme. It is fragile at the moment. This next
round is a key test for the Commission. We need to show that it
is serious. That will help the price of carbon, the market for
carbon. When it grows we can start to think about transport, aviation
and so on. I am very hopeful about this. It is easy to be critical
at the moment of various nation states, but we need to grow this.
Logically I do not see why, in time, this should not emerge as
an international ETS. Why logically, at the appropriate time,
should California and Norway and other states of different kinds
not join in this scheme? There is a lot of interest in the United
States at state level in this kind of emissions scheme.
Mr Weir: You again talk about time and
one of the things is that the generators need something now to
give them a long-term price for carbon. How long will the UK Government
continue to discuss this or will you look at taking unilateral
action if the EU Emissions Trading Scheme does not come up with
a suitable system shortly?
Q476 Chairman: You do say in your
document that you will keep open the option of further measures
to reinforce the operation of the scheme. When will that keeping
the option open be terminated and action taken?
Malcolm Wicks: This next round
and how it progresses is absolutely crucial. You are right to
remind us that we do say that; we keep that option open because
we are committed to this. Obviously you could take action at UK
level far, far better if we can build a robust creature at European
Union level. I share your frustration actually, but the DTI, despite
its immense powers does not run the European Union; not yet. Therefore
we have to negotiate very hard with some of the countries.
Chairman: We did have the presidency
quite recently.
Q477 Rob Marris: In terms of building
new nuclear power stations, which at the moment certainly is controversial,
do the Government have in mind any numbers which might be built
in what the industry is pleased to call a fleet.
Malcolm Wicks: Yes, I often puzzle
over the word "fleet".
Q478 Rob Marris: Nuclear power stations
sailing around the estuaries of Britain polluting there.
Malcolm Wicks: We should not want
them to float off. No, we do not. What the review document says
is that the Government feels that nuclear could be an important
part of the energy mix in the future. We think that there are
implications for the Government around planning and the carbon
framework is also important. Given the relationship between the
state and the market, given that we are talking about a liberalised
market, given that we are talking about private companies, it
is not for Government.
Q479 Rob Marris: So you have no numbers
in mind.
Malcolm Wicks: It is not for Government
to say that we shall have X nuclear reactors and so on. My colleague
Mr McIntyre might say something about our assumptions when we
do some analysis on this.
Chairman: I should just say that you
have sent us your response to our report on nuclear but the Committee
has not seen it yet. We know it has been sent and we shall make
arrangements to publish it as soon as convenient but we have not
actually physically received it yet.
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