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Getting the United States of America, Australia, China and India into formal negotiations on a new deal is a huge step forward, but the hard part starts
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now. We have to get every country in the world to play its part. That is why leadership in Europe is so important. As we have just heard from my right hon. Friend the Prime Minister, the European Council has reaffirmed its commitment to cut greenhouse gas emissions in Europe by 20 per cent. by 2020, with legislation next year. Part of the agreement is that Europe will go further, with a 30 per cent. reduction by 2020, if an international agreement is reached.

I am sure that the House will recognise that international leadership by any country is not enough. We can bring to the negotiating table only that which we can contribute at home. That means that the UK must take bold action both to make possible progress in the negotiations and to reduce our carbon footprint.

Our approach to reducing emissions across the economy—in our homes, our businesses, the public sector, transport and energy supply—is based on three principles. The first is pricing carbon, through a trading tax or through regulation, to get the most cost-effective reduction. The second is encouraging innovation in low-carbon technologies, and the third is removing barriers to action, including encouraging long-term behavioural change. The Budget does those things by setting out the steps that we intend to take in each of those areas. Each of us as individuals has a role to play in tackling climate change.

Mr. Nick Hurd (Ruislip-Northwood) (Con): Before the Secretary of State gets to the meat of the three principles, may I point out that both he and the Chancellor in his Budget have been entirely silent about using taxpayers’ money to buy carbon credits in overseas markets to allow us to fulfil our ambitious carbon targets? The National Audit Office estimates that the cost to British taxpayers will be about £5 billion by 2020; what is the Government’s estimate?

Hilary Benn: It will depend on the decision that the Government take about the use of international credits. As the hon. Gentleman will be aware, the Bill provides for the Committee on Climate Change to give us advice on the use of international credits. The Government will have to look at that advice in due course, when we receive it. In another place, there was a lively debate about the use of international credits, and we will no doubt have such a debate in the House when the Bill comes before us. As I am sure the hon. Gentleman accepts, it is entirely legitimate to make progress partly by using international credits because in the end, from the world’s point of view, it does not matter where emissions are saved, as long as they are saved. That is why the Government’s view is that carbon trading and the purchase of credit have an important role to play.

Some 40 per cent. of emissions are the result of choices that we make as individuals, so the Government want to help people to make low-carbon choices, and to ensure that our homes and products are working towards low-carbon living. That is why we launched a big public awareness campaign last year to encourage people to act on CO2. I saw that campaign working for myself in Leeds last Friday. The online carbon calculator has already been visited by about 800,000 people. It is practical and simple; it helps us as individuals to understand what our own carbon emissions are, and gives practical ideas on how to reduce our carbon footprint.

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Through the carbon emissions reduction target we have obliged energy companies to double the amount of energy-saving measures that they install in people’s homes from this April, which means that they will reach up to 8 million households. That will help to save 4 million tonnes of CO2 a year by 2011, and deliver a typical saving of £90 on fuel bills. The green homes service, which is to be launched next month, will provide people with comprehensive advice on how they can reduce their carbon footprint, and will connect people with the offers that are available from energy companies and with other support. We will put £26 million into that service.

We will become the first country in Europe to phase out high-energy light bulbs. That is to be completed by 2011 and will save up to 5 million tonnes of CO2 a year that would otherwise be produced through UK electricity generation. We have introduced regulations to improve the energy efficiency of new homes. Today’s buildings are 40 per cent. more energy efficient than those built before 2002, and 70 per cent. more efficient than those built before 1990. In under a decade, all new homes will be zero-carbon. We will set out the definition of a zero-carbon home for the purposes of the 2016 target by the end of 2008, following a consultation in the summer. The Government are determined to enable business and the public sector to play their part in a low-carbon Britain.

Mr. Henry Bellingham (North-West Norfolk) (Con): Has the Secretary of State looked any further into giving householders an incentive, such as a reduction in council tax, for embarking on microgeneration—for example, for installing a small windmill, a ground source heat pump or solar panels?

Hilary Benn: As the hon. Gentleman will no doubt be aware, we are considering the role that feed-in tariffs could play in ensuring that people do the things that he sets out. It is clear that we need to find more ways to incentivise and encourage that kind of investment. The experience of other European countries that have adopted feed-in tariffs for microgeneration is that it brings forward investment: the renewables obligation certificates work better for large-scale generation.

I wish to mention the climate change levy, as it was opposed by the Opposition. It is forecast to reduce emissions by 12.8 million tonnes a year by 2010, and the climate change agreement is forecast to reduce emissions by 7 million tonnes a year by 2010. The carbon reduction commitment will cover the non-intensive business sector. Up to 5,000 large public sector organisations and businesses, such as banks and supermarkets, will participate in the scheme. It will save at least 4 million tonnes of CO2 per year by 2020 and will save the organisations involved some £755 million through lower energy bills.

I believe in the importance of Government leadership, and because of that all Government Departments will participate in the scheme. However, we need to go further.

Kelvin Hopkins (Luton, North) (Lab) rose—

Mr. John Redwood (Wokingham) (Con) rose—

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Hilary Benn: I give way to my hon. Friend.

Kelvin Hopkins: My right hon. Friend referred to feed-in tariffs, which we welcome—they cover revenue costs and help with day-to-day costs. However, the capital cost of installing solar panels, for example, is very high. There was a Government scheme for 50 per cent. grants; if that were available generally, I am sure that solar panels would rapidly be installed across the whole country.

Hilary Benn: Following the consultation that the Government are going to undertake on them, feed-in tariffs would encourage people to invest and encourage others to lend money for people to invest, by providing the income stream for the years ahead. As I have said before, I think that way of doing things is better than the Government giving out grants to achieve the same effect. The tariffs would incentivise the system; that is why the Secretary of State for Business, Enterprise and Regulatory Reform has announced that we will consider them.

However, we need to go further still. That is why the Chancellor announced in the Budget our aim that all new non-domestic buildings be zero-carbon from 2019, with the public sector leading the way. It is already the Government’s aim for all new schools to be zero-carbon from 2016; we want all new public sector buildings to be zero-carbon from 2018 and we will establish a taskforce to advise on the timetable and on how to reduce carbon emissions in the intervening period. To help public sector bodies in England, including local authorities and hospitals, I have already announced an extra £30 million over three years in interest-free loans for energy-efficiency projects through the Salix scheme.

Cars and lorries are the second largest source of CO2 emissions in the UK. Changing the transport sector to meet the demands of business and personal travel while reducing carbon emissions is clearly important. That is why the Government have provided sustained year-on-year investment in public transport. One consequence has been that passenger numbers on our railways are up—from 735 million passengers in 1994-95 to 1.16 billion in 2006-07. That figure is as high as it has been since the late 1950s to early 1960s.

We are investing in and promoting new clean technologies for transport, including a £20 million fund to help public sector organisations to buy environmentally friendly vehicles. The House will have seen the King review, published at the same time as the Budget. It considers even more radical steps to decarbonise transport, especially cars, in the next 25 years. In response, the Government have made clear their support for an EU-wide target for vehicle manufacturers to reduce average CO2 from new cars to 100 g per kilometre by 2020. That would be on top of the provision for 130 g of CO2 per kilometre currently being discussed in Europe. Furthermore, the Budget outlined a restructuring of vehicle excise duty to encourage motorists to purchase fuel-efficient vehicles.

Mr. Geoffrey Cox (Torridge and West Devon) (Con): Can the Secretary of State suggest how a rural farmer or country dweller will be able to do without his Land Rover or other 4x4 vehicle and escape the penalty that the Government are imposing on him by way of increased vehicle excise duty?

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Hilary Benn: From memory, I think that the best-in-class 4x4 has an emissions figure of 151 g of CO2 per kilometre. If the hon. and learned Gentleman looks at the new table for vehicle excise duty, he will see that that figure is well below some of the others. The aim of the change to vehicle excise duty is to encourage people purchasing new vehicles to choose the most fuel-efficient and least polluting in class. That is why individuals who buy the most polluting, fuel-hungry vehicles will have to pay £950 in the first year, 2010-11, which is more than double the current rate, while those who buy the cleanest—those emitting 130 g of CO2 or less per kilometre—will pay nothing.

Recognising that there is a genuine debate about the sustainability of biofuels, we announced in the Budget a switch in support from the existing biofuels subsidy towards the renewable transport fuels obligation, which contains sustainability criteria. That is why my right hon. Friend the Secretary of State for Transport and I have asked Ed Gallagher, who chairs the Renewable Fuels Agency, to lead a study of the wider economic and environmental impacts of biofuel production, including the impact on fuel prices. Together with the changes to company car taxation, all these steps are sending a clear signal that choosing the cleanest and most fuel-efficient vehicle is, in every sense, the sensible thing to do.

Bill Wiggin (Leominster) (Con): How many family vehicles has the Secretary of State been advised that the car companies are intending to produce that will fit within the low-carbon bands?

Hilary Benn: I will be happy to write to the hon. Gentleman with a list of the best in class for all the different categories showing what vehicle can be purchased and what are the CO2 emissions in grams per kilometre for those vehicles. The change is intended, first, to incentivise the purchase of low-emission vehicles and, secondly, to incentivise the manufacturers to invest more effort in producing more vehicles that have lower emissions. That is one of the changes that must be made if we are to make progress in meeting the aims of the Budget. Although I understand the Opposition’s wish to raise these points, in the end this is about making choices. It is all very well to talk about the need for green taxation, but when measures come along to create an incentive structure for vehicles in order to lead to a change, the House should support that.

Mr. Peter Ainsworth: I am sorry to return to the same point, but if the Secretary of State cannot give us a figure for the overall carbon reduction impacts of the Budget, can he give us just the figure for the changes to car taxation? If we are to be invited to support these measures, it is important to know what the impact is going to be.

Hilary Benn: The reduction relating to the change in car taxation is some 500,000 tonnes of CO2 a year; that is the figure that I have before me. Of course, what it is going to mean in reality will depend very much on the choices that individuals make. Road transport is only part of the picture. In the 2007 pre-Budget report, the Government announced that air passenger duty would
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be replaced with a per-plane rather than a per-passenger tax better to reflect the environmental costs of aviation, and we said that in order to strengthen the environmental signal through taxation we would increase the tax by 10 per cent. from 1 November 2010.

Mr. Ainsworth: I may be able to help the Secretary of State out at this point. I think that he may have inadvertently misled the House. The figure of 500,000 tonnes of carbon reduction arises from the deferred increase in fuel duty, not from the changes to car taxation. I would be grateful if he could give us the figures for the latter.

Hilary Benn: The hon. Gentleman is absolutely right. I apologise for that mistake. The answer on vehicle excise duty will depend on the decisions that individuals take in making their purchases. It is therefore quite difficult to forecast what the changes will be, but the reduction as a result of fuel duty is indeed the figure that I gave the House a moment ago.

Let me turn my attention to the energy sector. The UK has signed up to an EU-wide target for 20 per cent.—

Mr. Hurd rose—

Hilary Benn: If the hon. Gentleman will bear with me, I want to make a little progress, having been generous is giving way.

The UK has signed up to an EU-wide target for 20 per cent. of energy production to come from renewable sources by 2020. In the summer, the Government will launch a full consultation on proposals for meeting the UK’s share of the target. We will look at all options for doing so, from things such as the Severn barrage, which could meet 5 per cent. of the UK’s electricity supply needs, to offshore wind—the UK is now the No. 1 location for such investment in the world and is forecast to overtake Denmark as the country with the most offshore wind generation capacity—to microgeneration, which we have just discussed, along with our commitment to consider feed-in tariffs in that area.

The EU emissions trading scheme is at the heart of the plan of the UK and Europe to deal with climate change. It creates a price incentive for generators to reduce their emissions. To ensure that the EU ETS sends the strongest possible signal to the power sector, in phase 3 the UK will go to a system of 100 per cent. auctioning in the large electricity producers sector.

Stewart Hosie (Dundee, East) (SNP): On the issue of offshore wind generation, will the Government finally address the unfairness and imbalance in connectivity charges to the grid—the subsidy received in the south versus the massive cost to connect in the north-west of Scotland? We cannot gain from offshore wind capacity if the unfairness in the connectivity charge is not removed.

Hilary Benn: The fact that we are now the No. 1 location for investment, and that we will overtake Denmark as the country with the largest installed offshore wind capacity, shows that, despite the issue the hon. Gentleman raises, we are making progress in putting more wind capacity in place to meet our need
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for renewable energy in the years to come. No doubt the debate will continue about the most effective way to allow more capacity to come on stream. When one talks to renewable energy companies, one finds that they are most concerned about planning. That is a special case as far as onshore wind is concerned, but as the hon. Gentleman will be aware, the Government are taking steps to address that.

We are introducing a wide range of low-carbon technologies as part of the £400 million domestic environmental transformation fund. The Carbon Trust technology programme will receive more than £90 million to introduce new energy technology, such as offshore wind, third-generation photovoltaic power, marine energy and biomass heating. During the next three years, the Government will provide about £10 million for a new anaerobic digestion demonstration programme.

Carbon capture and storage will be vital if we are to deal with the problems facing the world, and another example of the UK taking the lead in the demonstration of technology on a commercial scale is the launch of a competition to design and build the world’s first post-combustion CCS power station. We are currently the only European Union country committed to fund a commercial-scale CCS project, and we will shortly launch a consultation on what it would mean for a new coal-fired station to be capture-ready, and on whether all new fossil-fuel power stations should be required to demonstrate that they are capture-ready.

Gregory Barker (Bexhill and Battle) (Con): Is the Secretary of State not aware of the BP Abu Dhabi CCS project, which was announced at the world future energy summit in January? It will be up and running by 2012, when the Government’s competition will barely be over.

Hilary Benn: I am indeed aware of that. I was referring to European Union countries building demonstration projects in the EU, and I said that we are the only EU country doing that in the EU. As the hon. Gentleman knows, we are also funding, alongside other countries, the near zero-emissions coal demonstration project—NZEC—in China. We have to demonstrate that post-combustion CCS works because we have to fit it in all existing coal-fired power stations and in those built during the months and years ahead owing to the thirst for energy in developing countries.

Mr. Hurd: I attach the same importance to clean coal technology as the right hon. Gentleman, but will he clarify whether the Government intend to attach any carbon capture and storage conditions at all to the proposed coal-fired power station at Kingsnorth, and if not, why not?

Hilary Benn: My right hon. Friend the Secretary of State for Business, Enterprise and Regulatory Reform will make that decision, which he will announce in due course.

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