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I hope that the combination of these arguments—the duplication of the effect of the EU ETS cap; the possible undesired impact on the development of CCS, and the energy security concerns it raises; and the actions we are taking to promote CCS technology—are sufficient to persuade the hon. Member for Bexhill and Battle (Gregory Barker) not to press new clause 11 to a Division.
Gregory Barker: Anyone who has heard me speak about climate change will know that my party has long recognised that the benefits of moving to a more efficient, low-carbon economy extend far beyond just stabilising our global climate. Shifting to a low-carbon economy will also mean saving ordinary people money by making their homes, and even their businesses, more energy-efficient.
That is why I wish to speak in support of the Government’s amendments to the Electricity Act 1989 in order to enhance the role of the carbon emissions reduction target. New schedule 1, new clause 16 and amendments Nos. 45 and 51 will all receive the support of Conservative Members because we consider them the right thing to do. We wonder why these actions are so long overdue, but we welcome them nevertheless. As we debate this issue in late October, one wonders why serious action to stave off fuel poverty this winter was not taken earlier by this Government.
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I am also highly sympathetic to new clause 10, which was tabled by the hon. Member for Morley and Rothwell (Colin Challen), who is one of the House’s experts in this area. His proposal to improve energy efficiency in the residential sector and in the commercial and public sectors touches on a vital issue.
Mr. Gummer: Would it not be easier to do all this if home owners could see, at a glance, how much money they were spending on the energy that they were using? Why are we still waiting for smart metering to be rolled out, given that the relevant legislation is in place—if only the Government would activate it?
Gregory Barker: Sadly, I cannot give my right hon. Friend a good answer to that. Conservative Members have been champions of proper, real, intelligent smart meters, and of an ambitious programme to roll out that modern technology. I do not know why the Government have dragged their feet and will not heed the opinion not only of Conservative Members, but of Members from across the House that there should be a far more ambitious roll-out of real smart meters. It is regrettable that the Government have not taken advantage of the Energy Bill to introduce a more ambitious programme.
Paddy Tipping: I support the hon. Gentleman on the introduction of smart metering. He will know that discussions are taking place on that subject in the other place today. He talked about an ambitious roll-out, so will he tell us how he proposes it should be done? What will the cost be? What will the cost to the consumer be? If he has answers to all those questions, the House would be keen to hear from him.
Gregory Barker:
I am not going to be drawn any further, because I am mindful of the time. If the hon. Gentleman would like to listen to the energy debate in
the other place or read the Hansard account of it, he will discover an extensive extrapolation of our policy, in which all his questions will be answered.
New clause 11 is the provision on which I most wish to focus. It proposes the introduction of an emissions performance standard, which I consider vital if we are to meet the ambitious targets inherent in the Bill. Those ambitions are shared across the House, and support for new clause 11 extends well beyond the Conservative Benches. The Conservative policy enshrined in new clause 11 is modelled on the Californian example, which was introduced in January 2007. It requires all new base load generation serving the Californian market to have emissions no greater than those of a modern gas power plant: 500 kg of CO2 per megawatt-hour. By contrast, even advanced technologies, to which the Minister alluded, such as the new supercritical units proposed for use at Kingsnorth in Kent, will, in the absence of CCS technology, operate at the much higher level of approximately 700 kg of CO2 per megawatt-hour. Governor Schwarzenegger described the emissions performance standard as being similar to the standards set for appliances such as fridges,
“where there are minimum performance standards and beyond that it is up to the market to compete, as long as they meet or exceed the minimum standard”.
Colin Challen: On new clause 11, what level of kilograms of CO2 per megawatt-hour does the hon. Gentleman have in mind? If I recall, Lord Turner said last week that the UK’s current performance level is about 450 kg of CO2 per megawatt-hour and by 2030 that should have reduced to 50 kg of CO2 per megawatt-hour.
Gregory Barker: Initially, 500g kg of CO2—
Colin Challen: That is an increase.
Gregory Barker: Clearly, we would look to push that down in the future, with the advent of technology. However, until we have the CCS technology on-stream, we would not wish to push it lower. That figure is a sensible middle course between the most ambitious target and the Government’s target, which is—unfortunately—the least ambitious.
Our EPS policy is clearly defined, transparent, non-discriminatory and verifiable. It would guarantee equality of access for EU electricity companies to national consumers. In his 2006 review, Lord Stern said:
“Carbon pricing alone will not be sufficient to reduce emissions on the scale and pace needed...Effective action on the scale required to tackle climate change requires a widespread shift to new or improved technology in key sectors such as power generation, transport and energy use”.
It is the opinion of pro bono legal advocate Client Earth, in its submission to the Department for Business, Enterprise and Regulatory Reform carbon capture and storage consultation in 2008 that the Government’s description of CCS readiness is a
“a vague and meaningless definition that does not create effective incentives or requirements for private sector energy companies to make the necessary investments that are required”.
Mr. Gummer:
Could not a deal be done between the Opposition and the Government on this issue? Could we agree if the Government gave real sense to what they mean by “readiness for carbon capture” so that it was clear that any new power station would have that technology
when it became available and the money was in place? The fundamental problem is that the vagueness of the Government’s position means that we have to stick to the argument that there should be no new generation without CCS. Can we press the Government to be more precise?
Gregory Barker: Regardless of what the Government say, the great benefit of our position is that it is clear: there will be no new generation of dirty coal without carbon capture and storage. The clarity of that position sends a clear signal to the market so that it can plan for investment. It is unfortunate that the Government competition has such a long timeline, is so vague and has no clear funding commitments. We are told that the funds available might be tens of millions of pounds, which is even less than would have been needed to ensure that the Peterhead CCS project stayed in the UK, instead of going to Abu Dhabi.
Barry Gardiner: The hon. Gentleman has been clear, and it is right that we have clarity on this issue. Will he be equally clear about the consequences of adopting such a position? If new generation capacity without CCS were ruled out, it is possible that, as old stations ceased generating, we would not have enough supply to meet domestic and industrial need. Does he accept that that is a clear possible consequence of his amendments?
Gregory Barker: No, I do not, and certainly that would not happen under a Conservative Government. The Government may have a one golf club policy on the energy economy, but we would look at a range of instruments to ensure a balanced and secure energy economy. We see CCS not as a way of ruling out coal in the future, but as driving forward an agenda that will ensure that we can use the UK’s coal reserves and reach our 2020 CO2 emission targets. We are more ambitious and more clear-sighted than the Government, and if we ruled out a new generation of dirty coal, we would have to have a range of policies across the energy economy. If the hon. Gentleman waits until the new year, we will unveil our climate change strategy papers and he will see the stark contrast between the Government’s one-club golfing and doom and gloom-mongering, and our wide-ranging energy horizon.
Mr. David Heathcoat-Amory (Wells) (Con): Does my hon. Friend intend to accompany his proposals with a cost-benefit analysis to ensure that these mandated low-emission power stations are the best way of achieving a lower carbon emitting economy? Otherwise, we could be loading more expensive plant and higher electricity prices on British industry during a very deep recession. How confident is he that his proposals, which could be written into statute, would be the best way to achieve a lower emission economy?
Gregory Barker:
I have to be frank with my right hon. Friend—without carbon capture and storage, we will not meet our targets. If we cannot decarbonise the electricity sector in the UK and elsewhere in the world, the chances of being able to meet our CO2 targets in the next couple of decades are very slim. It is by no means the only policy tool at our disposal, but it is one that we cannot afford to throw away. He is right to say that the
costs will be considerable—hundreds of millions of pounds, and perhaps even billions of pounds—but this policy would be a good use of the auctioned ETS credits that will accrue in 2012, recycling them back into the energy sector to fund research and development and innovation for UK plc. Unfortunately, the Government are sitting on their hands and have no credible policy not only on implementing CCS, but for funding or developing it.
I contrast the vagueness of the Government’s unambitious policy—we can hope that that might change with the new Department and there will be an announcement in due course—with the clear policies articulated in June by the Leader of the Opposition, when he announced that the Conservative party in government would introduce an EPS standard for all electricity generated in the UK.
Steve Webb: We support the hon. Gentleman’s proposal, but the Minister’s response was that if emissions are capped within a cap and trade scheme, the only effect would be to produce slack somewhere else. My answer is that we should also lower the cap at the same time: is that the hon. Gentleman’s position?
Gregory Barker: I cannot give the hon. Gentleman a definitive answer on what the cap should be in 2012, but his general point is correct. We see CCS not as an alternative to the ETS, but as a complementary policy. The whole point of an emissions trading scheme is that it drives technological change. I am sorry that Ministers do not accept the verdict of Lord Stern—in a report commissioned by the Government—that
“Carbon pricing alone will not be sufficient to reduce emissions on the scale and pace needed”.
Perhaps the Minister can say now whether she refutes those words. If not, I hope that she will join us in supporting an emissions performance standard that is the most market friendly approach to driving CCS.
Mr. Chaytor: Regardless of the hon. Gentleman’s comments about having no new coal-fired power stations without CCS, will he accept that new clause 11 would not, in itself, bring that about? It would set emission standards, but it would not say what those standards would be.
Gregory Barker: The hon. Gentleman is right. We have tried not to be overwhelmingly prescriptive, which is consistent with our approach to the Bill. We do not want to put specific figures into the Bill if possible, because technology moves on.
Mr. Chaytor: Does the hon. Gentleman accept that that admission blows a hole in his policy on CCS?
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Gregory Barker: Not at all. I have told the hon. Gentleman what a Conservative Government would do. We would follow the Californian model. When he sees the climate change strategy that the Opposition will publish in the early new year, he will get a full flavour of the range of policy tools that we will be deploying.
Mr. Gummer:
Will my hon. Friend come back to the point about carbon capture? Would it not be helpful if we could say to the Government that there ought to be a mechanism whereby, if they could be stronger in explaining
how they were going to extend carbon capture and storage, it would be possible to have a phased introduction rather than this sharp distinction between the two sides? It seems to me that if the Government were prepared to be tougher about what such a measure would mean, the Opposition could, perhaps, come closer to the Government on the issue.
Gregory Barker: This is a very rare parliamentary occasion when I find myself in the slightest disagreement with my right hon. Friend. The beauty of our policy is that it is absolutely crystal clear. It sends certainty to the market and allows investors and the energy sector to understand that we will not countenance a new generation of dirty CO2-polluting coal-fired power stations. We want to engage constructively with the energy sector, which is up for this if long-term leadership is provided. Earlier in the year, in that leaked exchange of letters between DBERR and the energy companies, we saw just how the whip hand is with the energy companies. The absolute failure of Ministers and senior civil servants to provide any leadership means that we have to take back the initiative and show vision and leadership. That is what the EPS standard will do. A clear statement of our intent in this policy is vital in providing market certainty.
Mr. Graham Stuart: Does my hon. Friend agree that under this Labour Government we have had posturing on climate change while there has been an absolute and consistent failure to deliver the targets that have been set? To pick up on the comments made by the hon. Member for Brent, North (Barry Gardiner), who has just left his seat, there might already be a shortfall in generating capacity in about 2017. We have potential shortfalls in energy generation and a failure to commit to cleaning up new coal when it comes on stream.
Gregory Barker: My hon. Friend is spot on.
Let me conclude on this element of the group of amendments. The ETS is a vital part of the drive to a low-carbon economy. However, unlike the Government, we do not believe that the ETS on its own will deliver enough. That is why we are on the same side as Lord Stern. As my hon. Friend the Member for Ruislip-Northwood (Mr. Hurd) said so clearly earlier, the signals being sent to the market from the ETS alone are too vague, too fickle and too weak just to rely on emissions trading. That is why we need to introduce an emissions performance standard to give real teeth to the Bill.
I am grateful for the support that the EPS has had from those on other Benches. We must give the long-term clarity that the market needs to invest appropriately in order to deliver a decarbonised electricity supply to this country within the next 30 years, through which many of the policies for meeting our 80 per cent. reduction target by 2050 can be achieved. Although we cannot vote on new clause 11 now, we will wish to put it to a vote later on.
We are broadly in favour of the measure to expand the carbon emissions reduction target, but are concerned that the Government have made fuel poverty a problem for the industry to solve rather than taking initiatives to tackle it effectively themselves. If they had done something about fuel poverty when there was still plenty of time ahead of this winter, such as when we were pointing to the sharp rise in forward gas prices earlier in the spring,
they would not be expanding CERT out of necessity at a time when it is unlikely to help anybody this winter. A fairly small amount of money per household is likely to be passed on to the bill payer anyway. Do the Government now see CERT principally as a fuel poverty mechanism or as a carbon reduction mechanism?
The Secretary of State for Energy and Climate Change (Edward Miliband): Both.
Gregory Barker: When the Government first introduced the CERT order in January, we were critical of it on several counts. The order failed to explore how, in targeting vulnerable customers, the energy distributors might readily identify that group without contravening the Data Protection Act 1998. It was an unambitious response to the scale of the climate challenges that we face and, in trying to drive microgeneration, tackle fuel poverty and lower carbon emissions, it might easily have been driven at cross-purposes. However, we supported the measure then and we will support it now, as it takes much-needed action to help the fuel poor, a group that has suffered particular hardship under the Government.
According to National Energy Action, the Government slashed the budget of the Warm Front scheme this year by more than 25 per cent. for the next three years, leading to 50,000 fewer vulnerable households receiving assistance next year. The value of cold weather payments, which were introduced by a Conservative Government, declined in real terms over the last four years, failing to keep pace even with the rate of inflation, let alone with soaring fuel costs. [Hon. Members: “We’ve just increased them.”] But over four years, they have failed to keep pace.
Simple energy efficiency measures, such as cavity wall insulation and lagging boilers, will make the difference between life and death this coming winter. It is a sad testament to the Government’s record on fuel poverty that today’s measures, coming as they do at the end of October, will do little to tip the balance this winter.
Paddy Tipping: Will the hon. Gentleman at least acknowledge that the Government have significantly increased winter fuel payments, as has just been announced? More particularly, he recognised that the CERT scheme was paid for in the main by energy companies, and seemed to imply that that was not enough. What is his commitment? What is he saying? What money would he make available, were he in government, to retrofit existing households? How many millions of pounds is he prepared to commit now?
Gregory Barker: I shall come on to that question in just a moment, because I want to keep some structure. The hon. Gentleman is right that we welcome the expansion and improvement of the CERT scheme. We are pleased that the Government have chosen to take on board our concerns over the targeting of vulnerable customers and have provided for that support to be targeted at areas and groups as well as individuals. All fuel poverty charities tell of the difficulties in finding the fuel-poor and the further struggle in getting them to accept help. Street-by-street, postcode-by-postcode improvements mean that the most vulnerable will be lifted by the tide of change and lasting improvements to our housing stock that can be strategically mapped out to encompass those most in need.
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