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30 Jan 2008 : Column 335

Peter Luff rose—

Mr. Hutton: I give way to the hon. Gentleman, because I suspect that he would be one of those who support what Mrs. Thatcher said.

Peter Luff: Lady Thatcher achieved the changes necessary to secure a competitive market in Europe using the existing powers. The Commission already has the powers to secure a proper price for carbon to underpin new nuclear and renewable energy. Those powers already exist. The things that we need to do can be done with existing powers. I cannot understand—although as a reasonable man, I am open to persuasion—why we need new powers to achieve objectives that we can already achieve.

Mr. Hutton: I wish we had achieved all those objectives. It is not true to say that we have achieved them all. I made the point—it seems a long time ago—that I regard the provisions relating to energy in the Lisbon treaty as essentially consolidating. On that basis they should be supported, because they provide a simpler and clearer legal basis on which we can act.

The difficulty for the hon. Gentleman, for whom I have a great deal of respect, is that if he supports the provisions, and if he supports QMV applying intelligently in this context, he has a job of work to do to explain to people why he thinks it would benefit the European Union, even if the treaty had been ratified by the House, to go back and reopen it at some point in the future. I suspect that he does not believe that that would be in the UK’s long-term national interest, so he needs to do a job of work on his hon. Friends on the Front Bench.

As I said earlier, the UK strongly supports a liberalised European energy market, one built on strong ownership unbundling, strong and effective independent regulation and greater transparency. The decline of our own gas resources and growing supply interconnection with continental Europe means that UK prices are increasingly linked to those in the rest of Europe. EU gas markets are not as transparent as ours, and that is putting upward pressure on prices as well. Our experience shows liberalisation to be the best and most effective way to deliver secure, affordable energy supplies, increased choice and improved services, better efficiency and greater investment.

As my right hon. Friend the Member for Leicester, West (Ms Hewitt) observed, independent research published today by Oxford Economic Research Associates again shows that the UK has the most competitive energy markets in the EU and the G7. That means that we ensure that no company can dominate energy production, generation or supply, that consumers can switch suppliers easily and quickly to get a better deal, and that third-party suppliers have equal and fair access to the market to help drive competition.

That should all help to keep our energy costs as low and as competitive as possible. As wholesale energy prices rise, having the most competitive market in the European Union is the best sort of protection for UK consumers against those pressures. That is evidenced by our lower prices over the past five years, despite the recent rises, compared with the EU 15.

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Mr. Weir: I am interested in what the Secretary of State is saying, and in theory he is correct. How, then, can he explain the fact that when one energy company puts up its prices, most of the rest follow at a respectful distance thereafter? Is that not grounds for at least investigating how energy companies are acting in our so-called liberalised market?

Mr. Hutton: The energy companies are subjected to the full rigour of existing legislation against unfair and anti-competitive practices. If there is evidence of any breach of our competition laws, we have the right mechanism to police it and to enforce those laws. The sad truth is that energy prices have been rising across the world, and it is inevitable that some of that will be reflected in prices here in the UK. As I say, if there is evidence of anti-competitive practices, we have the tools to address them.

The Commission has consistently credited the UK for the competitiveness of its energy market. The third package of energy liberalisation recently proposed is very much in line with the UK model, and could address many of the issues now inherent in EU markets. More transparent markets with clear, stable regulatory regimes would give market players the confidence that they need to invest, and would help reduce the costs of serving EU energy needs. Within the UK, liberalisation has led to sustained and substantial investment in new gas facilities: pipelines, LNG—liquefied natural gas—terminals and storage.

Independent research has indicated that full market opening in Europe could increase cross-border trade in electricity by 31 per cent. and reduce prices in the EU 15 by up to 13 per cent. Total savings in the EU could be of the order of tens of billions of euros. The lack of competition in EU energy markets is costing UK and EU consumers, and it is crucial that all member states press on until we have reached our goal of a true internal market in energy. Rejecting the Lisbon treaty would set back progress in this area.

Mr. Philip Hollobone (Kettering) (Con): The whole House would agree that liberalising Europe’s energy market is a good thing, but it can be done under existing powers. Will the Secretary of State tell the House why signing up to the Lisbon treaty will bring that about, if it is not coming about at present?

Mr. Hutton: The treaty provides a clearer legal basis for taking forward such work in the future. That is important, and we have important guarantees about our national reserves and strategic supplies, which I should have thought the hon. Gentleman supported. The sad truth is that we have not completed the job of energy liberalisation in the European Union, but the treaty of Lisbon will provide a clearer platform on which to take that work forward.

We all have choices in this debate. The hon. Gentleman is expressing his support for energy liberalisation, which I am glad to hear, but the position of those on the Conservative Front Bench—which, as I understand it, is not to ratify the Lisbon treaty but to renegotiate the treaty basis of the UK’s membership of the European Union—would set back progress on energy liberalisation, not speed it up. That is the choice that he and others have to address.

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As the House knows, last week the EU published its draft renewable energy directive, as part of a wider climate and energy package. The draft directive provides the framework for achieving the EU’s agreed target of securing 20 per cent. of EU energy from renewable sources by 2020. It also proposes specific contributions from member states towards this goal. The Commission has proposed that 15 per cent. of all the UK’s energy should come from renewable sources by 2020.

The directive also contains a target for 10 per cent. of all transport fuels to come from renewable sources by 2020. It is crucial that this biofuels target does not undermine global sustainability in any way. That is why we will continue to argue strongly for strict sustainability criteria to be applied to the biofuels that can be used to meet that target.

We see the proposals as a good starting point for discussion in the Council, and we believe that an EU working more effectively together can deliver the necessary action to match this ambition. We want all member states to be able to deliver their agreed targets in the most cost-effective way. We are committed to achieving whatever UK target is agreed following negotiations in the coming months, and we have made a strong start, with the announcement of a potential massive expansion of offshore wind, approval already given for the world’s largest offshore wind farm, which will be located in the Thames estuary, consent granted for one of the world’s largest biomass plants, which is to be built in Wales, and the launch of a feasibility study on harnessing the tidal estuary of the River Severn, the second largest project of its kind in the world.

There are many more important renewables projects in the planning system. The successful passage of the Planning Bill currently before the House will be vital to reduce delays in making the best projects happen. However, it is obvious that we will need to redouble our efforts to reach the 2020 target. This summer, we will launch a consultation on what more we should do to boost renewable energy to meet our share of the EU 2020 target. We look forward to a serious national debate about how we can best do that, to help feed into and shape the UK’s renewable energy strategy, which I hope will be published in the spring next year.

Through the Energy Bill, we will put in place measures to strengthen the renewables obligation to triple renewable electricity from renewables obligation eligible sources by 2015, and in April the renewable transport fuel obligation will be introduced. As many hon. Members know, that will require suppliers to include 5 per cent. of renewables in their fuel mix by 2011.

By drawing a line under institutional reform in the EU for the foreseeable future—whereas it is the position of the Opposition parties to bring it back into the full glare of publicity—ratification of the Lisbon treaty will give us the time and energy to focus on issues such as those that I have outlined, which really matter to EU members and citizens. That is why the position being taken by those on the Opposition Front Bench is so damaging to the UK’s long-term national interests.

Mr. James Clappison (Hertsmere) (Con): Is the Secretary of State making the case that the long list of renewables projects he has just told us about are dependent upon
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the provisions of the treaty? Presumably, planning for them began before 23 June, when the intergovernmental conference mandate was agreed.

Mr. Hutton: No. I know that my speech has been a long one, and perhaps the thread of it may not be as clear to the hon. Gentleman as I would like. That is not my argument. It is not a rational argument, because the proposals have been produced now and the treaty of Lisbon has yet to be ratified. However, my wider argument is twofold. The treaty provisions will be an improvement on how we currently deal with energy matters in the European Union, but my fundamental argument is that if we took the advice of the Conservative Front Bench, we would set back any realistic prospect of making progress on those areas and others. That is the fundamental choice for the House, and it is why those on the Conservative Benches with common sense are not supporting the views held on their Front Bench.

Strengthening the EU emissions trading scheme is another issue on which an outward-focused Europe can make a real and lasting difference. There is much for the UK to support—in particular, the Commission’s move towards EU-wide central caps with a clear and long downward trajectory. That is a fantastic boost to our work to meet our emissions reduction targets in 2020 and beyond. The energy industry has made it clear to me and others that to invest with confidence in low-carbon energy production, they need the long-term certainty that a strengthened EU ETS can bring to the carbon market. That is one of the many reasons why the Commission’s proposals on the ETS are so important.

The International Energy Agency estimates that carbon capture and storage has the potential to contribute up to 28 per cent. of global carbon dioxide mitigation by 2050, and will be crucial in moving towards a low-carbon economy. The EU’s proposed framework for the regulation of carbon dioxide storage is a necessary step towards the commercial demonstration and future deployment of CCS across Europe. The framework will provide valuable support for our work on a domestic regime, on which the House had a useful debate on Tuesday night.

As many hon. Members will know, global demand for coal is due to increase by 73 per cent. by 2030, driven mostly by the energy requirements of China and India. The support of the European Union and members states’ commitments to demonstrate CCS would add weight to the work of tackling emissions from developing countries. The Commission’s plans for a network of EU demonstrations would include measures to share knowledge about those demonstrations with countries outside the EU, which will be of critical importance. I hope that the UK’s project, for which we launched a competition in November last year, will form a full part of those activities.

Mr. Ian Taylor: I know that that competition is for post-combustion carbon capture, but I remind the Secretary of State that the merits of pre-combustion, pre-emission carbon capture are equally worth while. If this country is not going to have a project involving that, will he at least stimulate the European Union to spend some research funds on such a project?

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Mr. Hutton: I do not dismiss the importance of considering a variety of different carbon capture and storage technologies. In this country, we have to make a decision about the resources that we have available—that is, basically, to do one project here in the UK. Our clear legal advice was that to run an effective competition—and to have one, and one only—it was best to have a competition involving similar technologies that could properly be compared with one another.

I hope that there is scope for pre-combustion CCS demonstration projects to emerge from the European Union’s commitment to organise 12 demonstration projects in the next few years. We have chosen post-combustion, for good and strong reasons. It is probably the technology that will have the greatest impact in China and India, and it is where we have to focus our support.

Finally, engagement with producer and transit countries, old and new, at European level, is crucial to UK and European energy security. Although pipelines that flow into central Europe from the east may currently have little impact on existing UK energy supplies, as our energy markets become more integrated, the work done to develop diversity of supply in one part of the EU will increasingly boost energy security across the whole European Union. An EU dedicated to addressing global challenges rather than debating internal reform can speak with a stronger voice and establish a more powerful collective position on energy issues at international level—for example, in the permanent partnership council with Russia.

Rob Marris: To draw those two threads together, is not the Opposition suggestion that we could do this anyway, without the treaty, an example of looking through the wrong end of the telescope? My understanding is—my right hon. Friend will correct me if I am wrong—that nothing in the Lisbon treaty would prevent the kind of initiatives mentioned by my right hon. Friend that the Government are already taking. Furthermore, there are elements to the treaty that, if the treaty is ratified across the EU, would enable this country and other member states to do even more—the sort of international co-operation to which my right hon. Friend has just referred.

Mr. Hutton: I agree. This debate is about energy; the wider benefits to the UK of ratifying the Lisbon treaty are clear and compelling, and have been identified by the Prime Minister, the Foreign Secretary, the Minister for Europe and many other members of the Government. However, today we are considering energy. If there is cross-party support for the concept of energy liberalisation, the last thing we should do is to punt the Lisbon treaty into the long grass. That would simply make it harder for the United Kingdom and the European Union to make the progress that sensible and intelligent people want them to make.

Mrs. Curtis-Thomas: My right hon. Friend referred to projects being made available to China and India, as they are significant energy-consuming markets. Is there also an intention to share knowledge about new technologies for energy conservation and production with developing nations that currently have no energy
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profile at all, but which need energy to realise a decent standard of living for their citizens?

Mr. Hutton: Yes, there is. My right hon. Friend the Secretary of State for International Development is taking that work forward. The EU is taking forward a climate change partnership project with China. We have to make sure that all of us in the European Union make the maximum contribution to all the challenges, which essentially involve technology, but also include finance, the exchange of intellectual property rights, and technology transfer.

Steve Webb (Northavon) (LD): In response to an earlier intervention, the Secretary of State promised to come back to an earlier point, but in taking so many interventions, he may have omitted to do so. Will he address the point in the Conservative amendment about the Government, having allegedly fought a separate energy article, now supporting it? Will he clarify his response on that specific point?

Mr. Hutton: I did deal with that point— [Interruption.] The hon. Member for Rutland and Melton (Alan Duncan) may not have liked my answer, but I definitely dealt with the point. To recap, I should say that we did have concerns about an energy article; there is no question about that. However, the concerns have been addressed. The importance of the Lisbon treaty in relation to energy is that there are important new energy red lines. First, we are able to protect and secure our rights over our national oil and gas reserves. Secondly, we can ensure that we can always act to ensure security of supply in emergencies. Furthermore, any new article will not impede progress in opening up EU energy markets and liberalisation. The concerns have been addressed; that is why I say to my hon. Friends, and to Members across the House, that they should support the ratification of the treaty.

To make real progress on all these issues, the UK has to play an active role in the European Union. The EU itself must be effective and efficient, focused on discussion and action beyond its own institutions on the issues that matter. Working together for the EU and each member state’s national interest in relation to energy, the treaty of Lisbon will help us achieve that. It will enable the enlarged EU to work more efficiently, and the UK to negotiate more effectively about the future role and focus of a modern global Europe.

As I have set out, the Lisbon treaty meets the UK’s red lines, protecting the UK in areas of vital national importance and helping us to focus on the big issues, including energy. It is what we said we wanted: an amending treaty, not a constitution. It is a good deal for Britain and for the whole of Europe, and I commend it to the House.

1.47 pm

Alan Duncan (Rutland and Melton) (Con): I beg to move, to leave out from “House” to end and to add instead thereof:

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