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New clause 10 would add to the Bill specific energy efficiency, energy usage and microgeneration targets. We recognise that we will need to deliver in each of those areas in order to meet the targets and budgets that the Committee on Climate Change will undoubtedly advise us of, but new clause 10 would remove the
flexibility that we consider essential to the overall framework that maximises cost-effectiveness. We recognise the importance of providing increased certainty regarding which sectors of the economy will be required to act to ensure that we meet the targets and budgets, and that is why we amended the Bill on Report in the other place to provide greater sector-specific transparency.
The Bill contains a number of provisions to ensure that sector-specific issues are covered. Clause 33 requires that the Committee on Climate Changes advice on the level of carbon budgets must set out the sectors of the economy in which there are particular opportunities for contributions to be made to meeting that budget. That is supplemented by the requirement in clause 13 for the Governments report on proposals and policies for meeting carbon budgets to explain how the proposals and policies affect different sectors of the economy. Together, those requirements will ensure that a forward-looking process is in place for both the Committee on Climate Change when it provides its advice, and the Government in setting out how the proposals and policies for meeting a budget may affect different sectors.
Mr. Gummer: Will the Minister explain why she has not taken this moment to ensure that the arrangements, particularly for the electricity and gas industries, include the introduction of smart metering, so that every one of us can play a part in making these decisions?
Joan Ruddock: I understand that we all have our enthusiasms and that the right hon. Gentleman has an enthusiasm for smart meters. We are very alive to this issue as well, and we will continue to be soand I understand that it has been a subject of debate in the other places discussions of the Energy Bill today.
Let me briefly turn to microgeneration, which is one of the areas new clause 10 covers. As hon. Members will be aware, in considering the Energy Bill on Report in the other place on 22 October, my noble Friend Lord Hunt of Kings Heath committed us to introduce an amendment to the Energy Bill to support small-scale generation by means of a feed-in tariff. The details of the amendment, including the level of an upper limit for the feed-in tariff, are still being considered, but it will be tabled ahead of Third Reading in the other place on 5 November. It will be an enabling power, and we aim to consult on these issues next summer.
Gregory Barker: This very belated conversion to feed-in tariffswhich the Conservatives have been campaigning on for two years nowis very welcome, but we have yet to see the detail, and as the detail will be of critical importance, can the Minister now tell us who will pay for the feed-in tariff? [Interruption.]
Joan Ruddock: As my right hon. Friend the Secretary of State has just pointed out from a sedentary position, our Department has been in existence for only three weeks, so we think we are acting rather swiftly. I have already said that details are not yet available, so I am not in a position to give the hon. Gentleman any more information.
My hon. Friend says that the new Department is acting swiftly, but I have just heard her say that the consultation will not take place until next
summer. I take on board the point that the proposals need to be drawn together, but since there are established mechanisms in neighbouring EU countries, I should not have thought that it would take until next summer just to start the consultation.
Joan Ruddock: I hear what my hon. Friend says. I was advised on this, and there are procedures, but I am more than willing to look into the matter she raises, because I share her interest in making things happen faster.
In summary, new clause 10 may restrict the Governments ability to introduce policies to ensure the requirements of the Bill are met cost-effectively. For that reason and the others I have mentioned, I cannot agree to the amendment.
New clause 11 would introduce a specific cap for emissions per unit of output from the power sector. We have three main difficulties with this amendment, which, as I understand it, is designed to prevent the construction of new coal-fired power stations without carbon capture technology. First, there is no guarantee that it would reduce UK emissions, and certainly not within the EU. Secondly, it may have the effect of slowing down or halting the development of carbon capture and storage technology, which would make it harder to reduce our carbon dioxide emissions in the long term. Thirdly, it would risk jeopardising the security of the UKs energy supply.
I am sure that I am required to give a little more detail, so I shall oblige. The EU emissions trading scheme caps emissions from all UK power stations over a 20 MW threshold, and is key to achieving emissions reductions while maintaining a secure and diverse supply of energy. Under EU proposals currently being discussed, the EU ETS cap is expected to continue to decrease up to 2020 on a scale calibrated to enable the EU to meet its 2020 climate and energy targets. As the cap tightens, power station operators will need either to reduce their own emissions or to buy carbon allowances, thus financing emission reductions elsewhere in the EU economy. That trading mechanism ensures that abatement occurs at the least-cost location, which is one of the schemes key principles. In this context, the proposed amendment might affect where the EUs emissions come from, but not the overall level, which is determined by the level of the cap. That is an important point. The cap ensures that there can be no more emissions, even if new capacity is produced.
By putting a price on carbon, the EU ETS encourages investment in new, more efficient power stations and technologies with lower emissions. The proposal may, on the other hand, have the perverse incentive of encouraging older, less efficient fossil fuel power stations to keep operating by cutting off the option of building new, more efficient fossil fuel power stations in the UK.
Joan Ruddock: Clearly, we are not prejudging the issue, but I must make the following point to the hon. Gentleman. If, for example, a new coal-fired power station replaces an ageing coal-fired power station and the new station has a 20 per cent. increased efficiency over the old, even without carbon capture and storage there might still be a benefit.
Mr. Graham Stuart: Surely when the energy sector is the one sector through which, using todays technology, we can deliver a roadway to zero emissions, to replace current capacity with a system that has only a 20 per cent. reduction in energy use and that will be in place for decades to come is to put up the white flag of surrender.
Mr. Gummer: May I help the Minister not to prejudge it by saying that if we build a new power station that is 20 per cent. more efficient, it will also have a much longer time in operation? If we are talking about 2050, what we do about carbon capture and storage really is an issue to consider. Conservative Members would like at least the provision for a real step forward to be put in place before we endanger the long-term arrangements.
Joan Ruddock: I share the right hon. Gentlemans aspirations. We are one of the few countries in the world that will allow for a demonstration of carbon capture and storage, and the Government have been very active in pressing on that issue. Of course, there is always the possibility that we can get the technology working and make use of it in future.
Paddy Tipping (Sherwood) (Lab): Will my hon. Friend remind me of the Governments policy on carbon capture and storage? Are we not one of the few countries in the world that are supporting it? Are we not one of the few countries that are in discussions with the EU about it, talking about some of the 12 demonstration plants that are coming to Great Britain? On a more critical point, I know that my hon. Friend will not want to comment on Kingsnorth power station, but it would make sense to make early decisions and announcements, whatever they are.
Joan Ruddock: I am always keen to go further and faster, so I understand my hon. Friends point, but I am not going to speak about that particular installation and its application tonight. I do wish to say, however, how grateful I am to him for reminding the House of the Governments enthusiasm for carbon capture and storage. Not only do we wish to seek a project in this country, but we have been very active in the EU and supported its programme for a number of plants. In addition, critically, we are working with China, which will continue to have coal-fired power stations for decades and decades. If carbon capture and storage matters here, it matters much more in China.
Gregory Barker: If the Minister is right that the Government are leading the world in carbon capture and storage, will she tell the House what resources they are putting behind a CCS programme? Is it just the miserable tens of millions of pounds over a period of years to which a ministerial colleague of hers has referred? With how much is she prepared to back her words?
Martin Horwood: Given the Ministers claim that we are in some kind of leadership position on carbon capture and storage, will she congratulate China on having a working demonstration project well ahead of us? Does she therefore regret her predecessor Departments decision to have a carbon capture competition so narrowly drawn and poorly funded that it led to the cancellation of carbon capture projects in this country?
Joan Ruddock: I would take issue with the hon. Gentlemans last remark. I do not think that it has ever been claimed that the decision not to go ahead at Peterhead, to which he refers, was the result of Government action. It was a private decision by a private company. I reiterate that we are enthusiastic about carbon capture and storage. Believe me, we raise it in every international forum, we are doing the work on the ground and we will have a project. I congratulate China on that and on many other aspects of its move to low-carbon technologies.
Joan Ruddock: I am sorry that my hon. Friend has posed that question, because I am not in a position to give him an answer. The process is being gone through, and I cannot give him that information today. I am sorry.
Lynne Jones: I have supported new clause 11. Given the reservations of my hon. Friend the Member for Wolverhampton, South-West (Rob Marris) about the feasibility of achieving the 80 per cent. target by 2050, including in aviation, I am horrified that we should be supporting new power stations that are only 20 per cent. more efficient in carbon dioxide emissions. Surely if the new clause were accepted, it would be an incentive to people wanting to build new power stations to have to invest in carbon capture and storage technology. How can we contemplate giving permission for a coal-fired power station without carbon capture and storage?
Joan Ruddock: Perhaps my hon. Friend will listen to the rest of my remarks and then make up her mind about what she has just said and how she wants to react. Because I have taken interventions, I have not been able to get to some of the remarks that I want to make, which I think will cover some of her points.
Ruling out new, more efficient coal stations now would be likely to hamper the development of carbon capture technology, as I have indicated. The efficiency penalty associated with the capture of carbon dioxide
makes retrofitting the technology to older, less efficient power stations a much less attractive option than installing new build. The right hon. Member for Suffolk, Coastal (Mr. Gummer) said that such stations would be in use for a much longer time, but it remains the case that it would be more attractive to link carbon capture and storage to a new station than to retrofit an old one.
Dr. Strang: This point is hugely important. As far as Peterhead is concerned, that was gas, and sadly we can now leave that matter parked. The fact is that we need both systems so that we can retrofit and build power stations with new CCS. That is the problem. There is real concern that we need to be putting in a lot more resources.
Joan Ruddock: I thank my right hon. Friend for his contribution. I am trying to say to the House that it will be easier to build a new power station, and the incentive will be there. New clause 11 would rule out a new power station. I am not speaking generally, I am speaking to the new clause and the fact that it would rule that out. As I understand it, the new clause specifies that no new coal station should be built unless it had carbon capture fitted, but at the moment it is not possible to fit that technology because it is not available on a commercial scale.
Joan Ruddock: As I have already said, that prejudges the issue. As I wish to come on to say, there are other issues involved, not least security of supply. My right hon. Friend the Member for Edinburgh, East (Dr. Strang) said that we need to have both, and we not only want to have retrofitting if it is possible, but we certainly want linkage to new facilities. The technology applies to gas as well as coal, of course. CCS is not simply a coal technology.
Gregory Barker: The hon. Lady is speaking good sense. Unfortunately, she is not articulating Government policy, which is to have just one form of technology. She should therefore support the Conservatives much more ambitious CCS proposal, which is for post-combustion, pre-combustion and oxycombustion capture. If she would like to join us in our costed, ambitious programme, that would be great. Unfortunately, all that she has to defend is a rather piddling, unambitious, sometime never CCS programme.
Barry Gardiner: Will my hon. Friend be kind enough to confirm that if we were to accept new clause 11, as proposed by the Opposition, it could leave the country vulnerable? Old power stations would come to an end, so if CCS was not commercially viable, there would be no replacement facilities and, therefore, new clause 11 could put us in a position where the lights went out.
Mr. David Heath (Somerton and Frome) (LD): I am puzzled, because the Minister has said on a large number of occasions that she does not want to prejudge these matters, yet is not the entire Bill based on prejudging the issues and on the fact that we do not want highly polluting technologies that will prevent us from reaching our climate change targets?
We need new, efficient coal power stations if we are to encourage and support the crucial development of CCS technology. New clause 11 would adversely affect our energy security objectives. We are facing particular energy security challenges at the moment. Coal and oil-fired power stations producing 12 GWequivalent to 20 per cent. of peak demandare due to close by 2015, and that is in addition to the closure by the end of 2023 of nuclear power stations that produce about 5 GW. That will make us increasingly reliant on imports of gas, with all that that means.
Mr. Graham Stuart: I am trying to follow the hon. Ladys argument about how brand new coal-fired power stations, which pump pollution into the atmosphere, will be easier to retrofit with yet-to-be-developed technology than old ones. Is it not possible that we will discover that brand new supercritical power stations turn out to be harder to retrofit when we eventually obtain the relevant technology? Does she have any evidence to back up her claim that new power stations will be easier to retrofit than old ones?
Joan Ruddock: What I know is that new clause 11 says that we should not have any new coal-fired power stations unless a particular technologyCCSis available, but the fact is that it is not available at the moment. An issue is being prejudged, and I am making a case against new clause 11.
Although we hope for a major expansion of renewables and nuclear power, those technologies alone will not meet all our electricity needs, especially given that we will need flexible power stations that are able to provide back-up support because of the intermittency of renewable generation. Without coal, the only option is gas, and that has all the implications for energy security that I have mentioned.
We take seriously the need to reduce emissions from fossil fuel power stations. Significant improvements in design specifications already mean that new coal-fired plants would, as I have said, emit approximately 20 per cent. less carbon dioxide than older coal-fired power stations. Moreover, CCS offers the possibility of still further reductions; there is potential for a reduction of up to 90 per cent. in carbon dioxide emissions from fossil fuel-burning power generation.
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