 House of Commons |
Session 2007 - 08 Publications on the internet General Committee Debates Energy |
Energy Bill |
The Committee consisted of the following Members:Chris Shaw, Committee
Clerk
† attended the
Committee
Public Bill CommitteeTuesday 26 February 2008(Morning)[Mr. David Amess in the Chair]Energy BillClause 17Licences
10.30
am
Question
proposed, That the clause stand part of the
Bill.
The
Minister for Energy (Malcolm Wicks):
Good morning
to you, Mr. Amess, and to the Committee on this sunny day.
We discussed much about carbon capture and storage last week, but we
now have the opportunity to consider it in more detail. While clause 16
will prohibit the storage of carbon dioxide without a licence to ensure
that such storage is carried out in a safe and responsible manner,
clause 17 will give the Secretary of State, or an authority to which
the licensing function has been transferred under clause 33, the power
to license the carbon dioxide storage-related
activities.
In
addition to such a licence, a lease or an authorisation in respect of
the relevant offshore space to be licensed by the Secretary of State
must be granted by the Crown Estate, because it has ownership rights
within 12 nautical miles of the territorial sea and relevant
rights—possibly up to 200 nautical miles—will also be
vested in the Crown under clause 1. The Crown Estate will grant leases
or authorisations on commercial terms to operators for the storage of
carbon dioxide within those areas. Such leases or authorisations will
prescribe the geographical space in which the CO2 can be
stored, as well as specifying the period during which the site can be
utilised.
The clause
will ensure that the areas covered by the licence and the Crown lease
can be easily co-ordinated. In the absence of such co-ordination, there
would be a risk, for example, that the licence would continue to apply
when the lease had expired. In such circumstances, the operator would
have to discontinue its activities, as it would be on the Crown
Estate’s land without the necessary authorisation from the Crown
Estate.
Martin
Horwood (Cheltenham) (LD): At an earlier sitting, the hon.
Member for Southampton, Test made some interesting points about the
Crown Estate and how much co-operation was guaranteed in the delivery
of policies such as the licensing regime from the Crown Estate. Has the
Minister had time to reflect on the issues raised by the hon.
Gentleman, as they seem directly relevant to the
clause?
Malcolm
Wicks:
I am still reflecting on such issues and have asked
for advice. I am minded to write to my hon. Friend the Member for
Southampton, Test with some detail, a copy of which I shall give to all
members of the
Committee.
Dr.
Stephen Ladyman (South Thanet) (Lab): Good morning,
Mr. Amess. I want to make a general point about the whole
chapter, and our discussions on the clause is probably the most
appropriate place to do so. I refer my hon. Friend the Minister to our
final evidence session and question 196, which was asked by my hon.
Friend the Member for Copeland. It received an answer from
Mr. Chris Mansfield, who
said:
“In
principle, if you look at the provisions in the Bill and the proposals
put forward by the European Commission in a draft CCS directive in
January, the intent, which is very much supported by industry, is that
that is a liability that should be taken on—at an appropriate
point in time—by the state.”—[Official Report,
Energy Public Bill Committee, 19 February 2008; c. 102,
Q196.]
He goes on to say that he
does not think that it is reasonable for businesses to have to assume
the liability for ever, that businesses do not last for ever, but that
the state goes on, so the liabilities must fall eventually on the
state.
As a
consequence of that intent, the clause and the related clauses in the
chapter have been drafted in benignly. The business is regarded as
benign and one that we wish to encourage. We do not wish to put
barriers in its way, as we do not want to scare people away from it. I
contrast that point with the later chapter that deals with nuclear
energy and the liability that comes from the necessity to store nuclear
waste and to have a decommissioning proposal. That chapter is written
with an entirely different tone, along the lines of, “This is a
very dangerous business. You’re in it to make money, and
we’re going to lock you down and make sure that you pay every
penny.” It includes clause 60, which I call the
“We’re going to hunt you down to the ends of the Earth to
make sure that you pay up” clause. It also includes clause 62,
which I call the “Don’t you think you’re going to
get tricky with us, because we’ll come after your neighbours and
your friends as well” clause. Effectively, it is written in a
completely different tone to this package of clauses, including clause
17, which is written from the point of view that the matter is
benign.
Yes, this is
a benign business, but people will be in it to make money. It involves
the capture of a dangerous material that will have to be stored for a
very long time, for which people will have to be responsible for a long
time. Although I entirely accept the benign tone of the chapter, I
raise the point now because when we consider the chapter on nuclear
energy, the decommissioning of nuclear energy resources and long-term
storage, I will wish to talk to my hon. Friend the Minister about the
difference in tone in that chapter and ask whether we have got it
right, or whether it would be better to make amendments to encourage
investment in nuclear energy, in the same way as this chapter is
phrased to encourage investment in carbon capture and
storage.
Malcolm
Wicks:
That was an interesting speech. When examining
aspects of climate change and energy policy, I often reflect that if
the well-known saying of
Harold Wilson that “a week is a long time in
politics”—we have had one or two of those weeks
recently—is at one end of the continuum, looking at targets for
CO2 reduction, the effects of carbon emissions on our planet
and the longer term issues about CO2 storage and the storage
of nuclear waste is right at the other end. Here we are in 2008, trying
to do our best to make policy for decades and centuries
ahead—perhaps millennia ahead as regards CO2 storage
and a long time ahead for nuclear waste—so my hon. Friend the
Member for South Thanet has raised an interesting point.
Nuclear energy is, or should
be, a profitable business. It is not unreasonable to ensure that the
companies in the business pay the full costs. We will have some debate
about the full costs, and how we calculate them is a perfectly
legitimate discussion to have. However, we have always recognised that
there comes a point, when the geological repository is sealed, when the
state takes over that responsibility for the long term—no one
else can. No one can quite predict what the state will look like in
half a million
years.
The
reason why Governments such as our own have to find taxpayers’
money for demonstration projects is that there is, as yet, no money to
be made out of CO2. It is not yet a profitable business,
although it could well become a commercial business in the future, and
it will need to. Hence, perhaps, the benign tone that my hon. Friend
refers
to.
Dr.
Ladyman:
If my hon. Friend is not in power in half a
million years, I at least expect there to be a large portrait of him on
the Committee wall, staring down at the people who follow us. He is
absolutely right that carbon capture and storage is not yet a
profitable business, but nobody is proposing that the Government
subsidise it for ever. It is intended that it will become a profitable
business. It is a good business, we want people to be in that business,
but nuclear energy has an equally important role in reducing carbon
dioxide and fighting climate change. However, just as people in that
industry need to be responsible for their liability, so do those
responsible for carbon capture and storage. I want to see an even
playing field for the two industries.
Malcolm
Wicks:
I take my hon. Friend’s argument. Last week,
I implied that, in my judgment, the nuclear clauses of the Bill will
not go through on the nod—that is my political
instinct—and I am therefore sure that there will be an
opportunity to discuss those matters. To sum up from that interesting
intervention: there are things in common between CO2 and
nuclear in that the commercial entity must take responsibility for
eventual decommissioning. Similarly, in the very long term, only the
state can take responsibility. However, there are also differences,
which we will no doubt return to.
Question put and agreed
to.
Clause 17
ordered to stand part of the Bill.
Clause 18Requirements
relating to grant of
licences
Question
proposed, That the clause stand part of the
Bill.
The
Chairman:
With this it will be convenient to discuss new
clause 18—Provision for regulations for a carbon dioxide
performance standard on electricity generating
stations
—
‘After
section 36B of the Electricity Act 1989
insert—
“36C
Generating stations: carbon dioxide emissions performance
standard
(1) The Secretary of
State may by regulation prescribe a carbon dioxide emission performance
standard applying to any generating stations requiring consent for
construction or extension under section
36.
(2) Regulations under this
section must prescribe a carbon dioxide emission performance standard
that is in no case greater than 400 kilograms of carbon dioxide per
megawatt hour of electricity generated at any individual generating
station.
(3) Regulations under
this section may
prescribe—
(a) the ways
in which proposed generating stations are able to demonstrate
compliance with the carbon dioxide emission performance standard
including by way of carbon capture and
storage;
(b) the information
that must be submitted with an application under section 36 to
demonstrate compliance with the carbon dioxide emission performance
standard;
(c) how compliance by
generating stations that have demonstrated compliance with the
prescribed performance standard and are granted consent under section
36 shall be monitored and enforced, including appointing and conferring
powers on an appropriate agency to carry out such monitoring and
enforcement;
(d) any sources of
electricity generation that are deemed to be compliant with the carbon
dioxide emission performance standard including electricity generated
from renewable sources.
(4) The
Secretary of State shall not grant a consent under section 36 for any
generating station that does not comply with any prescribed
standard.
(5) Before making
regulations under this section (including setting the level of
performance standard), the Secretary of State shall
consult—
(a) electricity
generators;
(b) the Gas and
Electricity Markets
Authority;
(c) the Gas and
Electricity Consumer
Council;
(d) the Environment
Agency with regard to England and
Wales;
(e) the Scottish
Environmental Protection Agency with regard to
Scotland;
(f) other persons or
bodies representing the interests of the electricity industry, local
government and the environment,
and
(g) any other persons or
bodies as he may consider
appropriate.
(6) The Secretary
of State must make regulations under this section no later than 12
months from the date on which this Act is
passed.
(7) Any regulations
under this section shall not be made unless a draft at the instrument
containing it has been laid before, and approved by a resolution of,
each House of Parliament.
(8)
In this
section—
“carbon
dioxide emission performance standard” means a standard
prescribed by regulation setting the maximum amount of carbon dioxide
that may be emitted from a generating
station.”’.
Malcolm
Wicks:
I am looking forward to hearing about new clause
18, but first, I will speak briefly by way of introduction to our
clause. The clause will enable the Secretary of State to make
regulations by the negative procedure that prescribe the circumstances
in which carbon dioxide storage licences may be granted. The Liberal
Democrats worry about the burdens placed on the hard-working Secretary
of State, but he has some support, so I do not want them to get too
anxious.
The clause
states that the regulations may prescribe who may apply for licences,
what information would have to be supplied by the applicant, the
financial security arrangements and other requirements. Having such
regulations in place will help to ensure that only appropriately
qualified and financially sound operators engage in CO2
storage activities and that certain conditions are satisfied
before a licence to commence operations can be obtained. I now look
forward to hearing the arguments in favour of new clause
18.
Martin
Horwood:
I shall first address the stand part debate,
particularly in respect of clause 18(2)(e). The impact assessment
signed by the Minister raises an interesting question on page 19 about
carbon caption storage falling within the European Union emissions
trading scheme. Future leakages or losses of carbon dioxide from
geological or other storage facilities will attract financial
penalties, because permits are technically required for such carbon
emissions.
As the
Minister has pointed out, we are talking about very long-term
prospects. He almost issued the phrase, “A millennium is a long
time in politics”, and I wish that he had; as it would have been
a good one. I want to ask about the licensing regime and whether the
future obligation not to lose carbon dioxide from storage facilities
will be incorporated within the licensing regime. From the impact
assessment, it seems as though it should be, but it is obviously a
challenge to design that licensing regime to cope with the very long
time scales that might be involved.
The hon. Member for South
Thanet was right to draw a comparison with the nuclear clauses,
although we would make the obvious distinction between one industry
that we would rather discourage and another that, in this case, we
would rather encourage. That legitimises a different approach. After
all, when instantly released, CO2 does not start poisoning
anyone or making their hair fall out.
Dr.
Ladyman:
First, I take issue with that final statement. If
there was ever a massive release of CO2 from one of the
carbon storage places, it would be catastrophic. Secondly, the Liberal
Democrat position might be to discourage nuclear energy. If these two
chapters had been phrased in a distinct way, I could understand it. My
position and that of my hon. Friend the Minister is that we see nuclear
energy as having a positive and benign role in fighting climate change.
So, in those circumstances, the two chapters should be written on a
more even
keel.
10.45
am
Martin
Horwood:
The hon. Gentleman makes a perfectly legitimate
point. We look forward to the Minister’s further
comment.
The new clause addresses another
crucially important issue in terms of carbon capture and storage. For
many organisations and observers of our debates, there is a glaring
omission: for all the commitments to store CO2, once it has
been captured, there is nothing in this Bill that mandates its capture
or puts in place a regime with powers for the Secretary of State to
enforce, strongly encourage or incentivise its capture.
In one of the evidence
sessions, the hon. Member for Copeland asked whether we were betting
the house on carbon capture and storage and whether it would be the
cornerstone of future energy policy in tackling climate change and
without which the whole project might fail. To be honest, the answer
could be yes. We hope that energy efficiency and, in some cases,
nuclear power or at least renewable energy, will do something to close
the energy gap, but they will all struggle to do that within the time
scales we have in front of us. Carbon capture and storage is therefore
a vital component of the campaign to meet our emissions reductions in
the medium term.
If a
new generation of coal-fired power stations such as Kingsnorth is to go
ahead, that cannot be done without a regime in place that would at the
very least enforce carbon capture and storage as soon as it is
available. The sooner that regime is enabled, the better for industry
and for investors to plan for it.
The risk is that we commission
new power stations and then later, once the technology is up and
running, we spring the regulatory regime on the industry. That is the
kind of thing that industry persistently tells us is bad for investment
and future planning. The clear direction of the Stern report is that
action now to incentivise and make clear the strategic direction of the
Government provides certainty for investors and reduces costs in the
long term. We need to lock ourselves into a regime that will make
carbon capture and storage an inevitable part of any new generation of
any fossil fuel powered
stations.
There is a
good precedent. California has introduced a greenhouse gas emissions
standard, including a facility-based element that targets particular
power stations. The standard sets a level of carbon dioxide emissions
per megawatt-hour. In new clause 18 we suggest a level of 400 kg of
carbon dioxide per megawatt-hour. That figure is not plucked out of the
blue; it is based on the current performance standard of the best
modern combined-cycle gas turbine power station. That should be the
baseline against which the Secretary of State will have the power, as
the technology comes on stream, to reduce and enforce lower emissions
of carbon dioxide from fossil fuel powered
stations.
Malcolm
Wicks:
I was struck by the phrase, “as the
technology comes on stream”. I thought that was significant, so
will the hon. Gentleman say more about that? At first sight, I thought
his new clause might be saying that no coal-fired power stations would
be allowed until they could be capture-ready. Is he saying this power
would come in only once CCS had been
proven?
Martin
Horwood:
I am grateful for the Minister’s
intervention. Perhaps I have not made myself sufficiently
clear.
We need to set aside the debate
as to whether Kingsnorth goes ahead without carbon capture storage
technology in place right now. Many of us might be sympathetic to that
but it is outside the remit of the clause in front of us and perhaps
even the Bill. We are seeking to establish a clause that would give
enabling powers to the Secretary of State and would give him the
mechanisms with which to enforce carbon capture and storage, at the
very least as the technology becomes available. In other words, a clear
strategic direction and a clear direction of travel for industry and
investors would be set out. They would be very clear that if and when
the technology became available—and we all hope it will become
available sooner rather than later—the Secretary of State would
already have the powers in place to reduce acceptable amounts of carbon
dioxide per kilowatt-hour and to enforce an increasingly stricter
regime so that it became cripplingly expensive to run a fossil fuel
powered power station without carbon capture and
storage.
Charles
Hendry:
I am listening to the hon. Gentleman with great
interest, may I take him to the actual wording of his new
clause? Subsection (2) says:
“Regulations under this
section must prescribe a carbon dioxide emission performance standard
that is in no case greater than 400 kilograms of carbon dioxide per
megawatt-hour of electricity generated”.
That is a very prescriptive approach and
does not seem to tie in with his talking about “when this
technology becomes available” and “when it comes on
stream”—the two do not seem to tie in
together.
Martin
Horwood:
Again, I must have not quite sufficiently
explained my thinking because I thought I had addressed that issue
already. The number has not been plucked out of the sky and I have some
sympathy with the view that it should not be too
prescriptive—that is something we have argued in other
clauses.
The number
is based on the Californian model of taking the best emissions
performance of the best modern power stations. In this case, modern
combined-cycle gas turbine power stations emit 400 kg per
megawatt-hour, so that is where the standard has come from. The new
clause says we should do no worse than we do at the moment and would
give the Secretary of State the power, in due course, to reduce that
level on a progressive basis, as the technology allows. It sets out the
opportunity for the Minister to emulate Governor Schwarzenegger, to
become “The Terminator” of dirty coal-fired power and to
be the champion of clean coal and gas-fired power stations in the
future.
Charles
Hendry:
I will talk firstly to new clause 18 and then ask
questions about the clause as it currently stands. No doubt the
Minister “will be back” in a Schwarzenegger way to
respond formally to the points that have been put
forward.
I think there
is mixed thinking in what we heard just now from the hon. Member for
Cheltenham. This approach has been taken in California and the
companies there know that they cannot build a power station unless they
are going to adhere to very strict standards of emissions. However,
they are part of a nationwide structure so they can always import
energy
from other parts of the US if coal-fired power stations do not get built
in California. I see the attraction of having an absolute limit; it
gets us away from the target culture, and as the Minister will have
heard me say before, I think the target culture is
fundamentally flawed because it just means that, in 15 years, somebody
else can come along and explain why the target was not met. An absolute
limit does not provide that wriggle room, but there is an inherent
contradiction in what the hon. Member for Cheltenham has been
saying.
Martin
Horwood:
The hon. Gentleman seems to be criticising the
Californian system, but the Californian level is established very
specifically at 1,100 lbs of CO2 per megawatt-hour, which is
about equivalent to 500 kg, and it is on a state-wide basis.
It does not depend on any national scheme, because there is not
actually a national emissions trading scheme in place in the US
yet.
Charles
Hendry:
I am not criticising the Californian
system—it has different sources of energy from those we have
available to us—but I am not sure it is immediately applicable
to us. I am particularly intrigued by some of the language. The hon.
Gentleman said that Kingsnorth would be built, but on the condition
that carbon capture and storage would be implemented “as soon as
it is enabled”. That would mean asking those who are investing
in that power plant, E.ON, to build a power plant without knowing what
the costs would be and probably assuming that the technology would be
available, but certainly not knowing whether Government support would
be available to help them meet the costs. My expectation is that if
Kingsnorth were to have carbon capture and storage technology built in
from the outset, it would add an extra £400 million or
£500 million to its construction costs. The investors would have
to gamble that they might get some of that money back from somewhere.
They would not do that; they are part of a global company, so they
would go and invest in other forms of energy elsewhere in the world. We
would therefore find that the hard-line approach that the new clause
suggests would drive away investment in some areas.
I have great sympathy for the
concept that we want carbon capture storage to be applied to Kingsnorth
but I do not believe that the new clause will achieve that—it is
far too prescriptive. The hon. Gentleman has also got to tell us how we
are going to fill the energy gap.
Steve
Webb (Northavon) (LD): The specific example of Kingsnorth
is very germane to this new clause. Could the hon. Gentleman verify his
own view on the criteria—should it be a cap of the sort
envisaged here? If he were Secretary of State, would such a project go
ahead without any conditions? How would he try to achieve these
goals?
Charles
Hendry:
I find the prospect of Kingsnorth without carbon
capture storage quite horrific. It is clearly a cleaner technology than
the old coal-fired power stations. The idea of building a massive new
fleet of power stations when we could be using other technologies or
when CCS could be involved would be profoundly disturbing. I therefore
wish very much that
CCS is part of the Kingsnorth project and that will no doubt be part of
the bidding in the pilot scheme. We will have to see what the
Government decide in due course but if Kingsnorth does not get
financial support under the pilot scheme, the Government will have to
address the problem. Without such support at the outset, I doubt
whether the investment would go ahead.
We will need at some point to
discuss how we fill the looming energy gap. The Liberal Democrats are
not in favour of nuclear power; they are not in favour of some of the
new-build coal that is being suggested; they are not keen to have
imported gas; and Liberal Democrat councils are stopping wind
applications. Are we going to go backwards? We are going to have a
rather dark, cold future, presumably sitting in a hut, waiting for
somebody to rub some sticks together and invent some heat for
us.
Charles
Hendry:
I will give way because I believe that Kingsnorth
will be built adjacent to the hon. Gentleman’s constituency, or
at least very near it.
Dr.
Ladyman:
I was going immediately to declare that interest:
Kingsnorth is not very far away from my constituency in Kent and many
jobs are going to be dependent on it. Like the hon. Gentleman, I very
much hope that it will include carbon capture and storage. However, if
we did something that would discourage the development of the new
Kingsnorth, would that not mean that the existing plant—which is
dirtier and produces far more CO2—is likely to be
further extended into the future? It is in the interest of the
environment that we give E.ON the support it needs to develop these new
technologies and, in addition to that, press it to include carbon
capture and storage at a later date.
Charles
Hendry:
My understanding is that the current facility has
to close down because of EU requirements in any case and that the new
plant proposed by E.ON would be much cleaner than the old one. However
it still would not be acceptable unless CCS can be involved at some
stage. That is why the way in which the pilot project is going to go
ahead will be fundamental to deciding whether that happens; coal can
have a future, but only if carbon capture storage can be made to work.
My concerns about this new clause is that, by laying down at this stage
such a prescriptive approach, people will be asked to invest without
knowing what the costs are going to be and without knowing what
Government support might be available. In those circumstances they will
simply walk away.
Martin
Horwood:
I cannot let the hon. Gentleman’s
criticism of Liberal Democrat policy remain unanswered. He asserted
that we are against the import of natural gas. I do not remember having
said that and nor do I remember any of my hon. Friends saying such a
thing. The import of natural gas may be not be
desirable, but we certainly would not be in favour of stopping it. In
terms of carbon capture and storage for fossil fuel powered power
stations, he seems to take a view that is supported by comments from
the right hon. Member for Witney (Mr. Cameron). If the hon.
Gentleman rejects the new clause on technical grounds, I would
therefore be interested to know what he suggests in its
place.
11
am
Charles
Hendry:
If I have misunderstood the Liberal Democrat
position of expressing concerns about being heavily reliant on imported
gas—in particular, the proportion that comes in from
Russia—I apologise if I misinterpreted their stance.
We have said that it is clearly
desirable for carbon capture and storage to be part of the pilot
project at Kingsnorth. If it is not part of that project, the
Government have to find another way of supporting it. If the CCS plan
is not involved from the outset, the environmental costs of Kingsnorth
are almost too great to contemplate. However, new clause 18 is not the
right way to deal with that. Setting such a strict target—or
such a prescribed limit—at this stage would drive away
investment, rather than enabling the partnership approach to
develop.
Steve
Webb:
This has been a very worthwhile debate, and I just
want to add a couple of brief comments and questions. I am interested
in an issue that has arisen, which I would call double jeopardy: if
there is leakage from stored carbon, my understanding is that a permit
is needed under the emissions trading scheme—so, effectively, it
must be paid for—but can the Minister clarify whether a separate
penalty regime will apply? I have been looking through the clauses in
this series, and there are all sorts of penalties for not keeping the
books properly, but I am slightly confused about whether there is a
penalty for allowing CO2 to leak. The penalties do not seem
to include one for actually letting the stuff out. Is that because a
permit is needed under the ETS and there is the penalty, or is there a
penalty in the clause in respect of licenses? I am unclear about
that.
More generally,
on giving the go-ahead to new plants, our new clause includes a
specific figure as an upper boundary. If a figure were not put in the
new clause, it would simply say that the Minister could set any
ceiling. If the Minister set a very high ceiling, it would be a
non-binding constraint and have no impact. We did not think it sensible
to table a new clause that would have no impact if the Government just
decided that it would not have one. We are trying to beef up what the
Government do. That is why we have included a specific
figure.
It seems to
me that the right approach to new applications, whether at Kingsnorth
or elsewhere, is that we first need a public inquiry, as it will be the
first of many and this is of strategic national importance. I hope the
Minister will tell us whether or not we will get an inquiry. We should
not give the go-ahead in the hope that the technology is on stream,
although many of us have understandably expressed such hopes. We should
not give the go-ahead for an indeterminate future point at which the
stuff that is going to be
spewed out might be captured. We should not give the go-ahead with that
degree of uncertainty.
Personally, my judgment would
be that the go-ahead should not be given to any new coal-fired power
station until there is a determinate period in which carbon capture can
be applied. Indeed, the requirement should be that, when the go-ahead
is given, the power station is CCS ready in a very specific
sense—ready for a technology that we know will work in a
realistic time scale. That seems to be the right way forward.
In response to the hon. Member
for Wealden, I suggest that the industry would then have certainty; it
would know the time scale over which it had to put CCS in place; it
would know the technology required to implement it; and it would have
some idea of cost, because the technology would be near market. That is
probably the right balance to strike. I hope the Minister can clarify
the Government’s strategic approach, because our new clause is
all about the limits and conditions on a new generation of coal-fired
power stations, and it would be helpful to get a steer at this point
from the Minister on the Government’s strategic
approach.
Malcolm
Wicks:
This has been a useful discussion. May I say from
the outset that it would be inappropriate for me to comment on any live
application for a power station—or indeed on the timing of any
decision by the Secretary of State. The Secretary of State operates in
a semi-judicial world in that respect, and I am afraid that our hands
are tied. Obviously, for any application, the Secretary of State would
want carefully to consider all
representations.
The
licensing regime for CCS will be flexible enough to cover liabilities
for leaks, among other things. The European Union’s ETS
liabilities will therefore also be covered for as long as the licence
is in place. After that—as I think we were teasing out
earlier—the liability in the long, long term will have to pass
to the state.
I was
also asked whether, if there were a leakage—of course, we hope
there will not be any—there is a penalty regime in the Bill. I
am advised that clause 19 explains what can be contained in a licence,
although the list of terms and conditions is not exhaustive. We expect
requirements to remedy and to notify of a leak to be included in every
licence, as standard. Failure to notify of a leak will be a criminal
offence under clause 22. The operator will also be liable for damages
under the environmental liability
directive.
Steve
Webb:
Clause 19(3) contains a list of the things in the
licence, but the Minister appears to be saying that leakage is not yet
included. I am puzzled about why that was not put in the Bill; it seems
to be fundamental to a licence to store
carbon.
Malcolm
Wicks:
I have said that the list is non-exhaustive, and we
expect such things to be included, but perhaps I can say more about
that in the debate on clause 19. Committee sittings may be exhausting,
but the list is non-exhaustive.
I have listened carefully to
the hon. Member for Cheltenham speak on the new clause, but I have also
listened to the hon. Member for Northavon, and I am
not sure whether there was consistency. I think of myself as a
conviction politician, but I have a weakness for searching for
consensus. The consensus is—surely, this is a happy
situation—that we all want carbon capture and storage to work,
because of its importance to contributing to CO2 reductions.
We are all frustrated that CCS is not on the shelf, ready to take off
and apply to fossil fuel power stations. The issues that confront us
are probably about timing, and of course, energy supply and security
are crucial.
I see
myself as more of a spectator in the discussion between the two
Opposition spokesmen, and as the only Minister on the Committee, I
welcome that distraction from time to time. I enjoy it, and it is often
interesting. Nevertheless, supply is important. The climate change and
energy world is full of sometimes well-qualified people who say no to
things—they are the Dr. Nos. They say no to nuclear and no to
fossil fuel power stations, and they say yes to other things in
principle. However, I am afraid that the hon. Member for Northavon is
right. I use the word “afraid” because the Liberal
Benches are often full of Liberal MPs who, in practice, say no to wind
farms in their constituencies. The simple truth is that, unless we are
going to jeopardise our security of supply and unless we become even
more reliant on gas imports than we will need to be anyway, we must
start to say yes to things.
I do not think therefore that
it is unreasonable if, either during debates in Committee or on the
Floor of the House, serious political parties say serious things about
where the stuff is going to come from. That is a perfectly legitimate
point that the hon. Gentleman raised. I was searching for consensus and
I have spoilt it, but there we are. The consensus is that we want
carbon capture and storage to work, but we have to confront a timing
problem. It is not unreasonable that we have different views about that
problem.
I can
understand the motivations behind the new clause. I shall explain why
we have not included provisions in the Bill similar to those
recommended by the hon. Members for Cheltenham and for Northavon and
why we believe that it will not be appropriate to do so. Section 36 of
the Electricity Act 1989 requires a development consent to be obtained
from the Secretary of State in England and Wales and from the Scottish
Executive in Scotland for all new power stations of 50 MW or
more.
The new clause
suggests that no such consent should be granted unless the relevant
power station is capable of meeting a prescribed standard for the
emission of greenhouse gases. Although I am still confused about the
timing of when the new power will come into force, but perhaps that is
a detail. The Government do not believe that prescribing emission
limits in that way is the most effective route to low-carbon power
generation. Such an approach goes against the Government’s
fundamental approach to energy policy, as set out in the 2007 White
Paper. In the UK’s competitive market framework, the choice of
fuel and technology for a new power station is a matter for the energy
company. The Government’s role is to set the right framework to
incentivise private sector investment, consistent with meeting our
energy goals of tackling climate change and providing energy
security.
Malcolm
Wicks:
Yes, although I have a lot more to say, which I am
sure will meet the hon. Gentleman’s requirements, but of course
I give
way.
Martin
Horwood:
I am grateful to the Minister for giving way. He
is doing a good job of answering many of the points that we have
raised. If not under this regime, how does he imagine that existing gas
and coal-fired power stations will be incentivised to adopt carbon
capture and storage? Is that set out in the
Bill?
Malcolm
Wicks:
By some happy coincidence, I am going to touch on
that in the next few pages of my speech. It is the Government’s
view that the EU ETS has an important role to play in reducing
greenhouse gas emissions from new and existing power stations. We
believe that it is the most cost-effective way to make the transition
to a low-carbon
economy.
The EU ETS is
a market-based mechanism that sets an overall EU cap
on carbon dioxide emissions. It operates by setting an absolute cap on
the CO2 emissions that can be emitted by the installations
covered by the scheme—for example, a cement factory or a power
station. The cap on emissions is distributed to installations via
allowances that are either given or auctioned off to individual
installations. The allocations of allowances specify how much carbon
dioxide may be emitted by each installation. Installations that emit
less carbon dioxide than their allowance and therefore have an excess
can sell it on the market, and those that emit above their individual
allocation must purchase the allowances from installations with a
surplus.
We believe
that the EU ETS is the best way to tackle this issue for two
reasons.
Malcolm
Wicks:
Would the hon. Gentleman mind if I make some
progress? First, the in-built scarcity in allowances that results from
the imposition of the cap creates a price for carbon, thus encouraging
investments in generating technologies that emit less carbon dioxide,
which is the same objective as that in the new
clause.
Secondly,
the EU ETS provides flexibility for the market to identify the most
cost-effective way to reduce emissions. The ETS allows companies to use
credits derived from the so-called Kyoto flexible mechanisms—the
clean development mechanism and the joint implementation
mechanism—to offset carbon emissions in the UK. Thus, where this
is cheaper than reducing emissions in the UK, project developers will
take action to set up emissions-reducing projects in the developing or
transition countries and will sell the emission reduction credits
derived from such projects to entities covered by the EU ETS.
Given the flexibility in the EU
ETS, we can therefore reduce emissions at the lowest economic cost,
while facilitating technology transfer to developing countries. The new
clause would be to remove that flexibility. For example, in the short
term, an operator may build a coal power station in the UK and buy
allowances through the clean development mechanism. With the benefit of
a proven technology, such as CCS, the same operator may then choose to
retrofit CCS and benefit
from the emission reductions. Carbon emission reduction is a global
objective and we need to deliver it through the most cost-effective
means. That is a lower cost way of reducing emissions, and I believe
that it is right that developers should have that
option.
Martin
Horwood:
I am grateful to the Minister for indulging me
again by giving way. I want to question him before he sits down and
allows me to speak substantially on the issue. He is describing the
process by which carbon pricing is achieved through the emissions
trading scheme. That was quite specifically addressed by Sir Nicholas,
now Lord Stern in his report. He
said:
“Carbon
pricing alone will not be sufficient to reduce emissions on the scale
and pace required”.
The
reason for that is pretty clear, from the way in which the ETS is
operating in practice. The carbon price that it is generating is not
sufficient to drive investment into clean technologies. This is an
explicit problem with emerging emissions trading schemes and one with
which we are all familiar. Does the Minister now disagree with Sir
Nicholas Stern’s assessment that something more than simply an
emissions trading scheme and carbon pricing is required to drive
forward such
technology?
11.15
am
Malcolm
Wicks:
I agree with Nick Stern’s analysis, although
I want to say a little more about the ETS. It is part of the answer and
becomes a more significant part if the carbon price increases as we
become tougher in phase 3 of the ETS. I certainly concede that, as far
as we can tell at the moment and for the foreseeable future, it is not
the whole answer, just part of
it.
We have outlined
our commitment to consolidating the EU ETS in the
energy White Paper and we are currently working closely with the
Commission to ensure that the revised EU ETS directive continues to
play a key role in ensuring that the EU and the national emissions
reduction targets are reached. I hope that members of the Committee
agree with the Government’s view of the ETS as a cost-effective
means of delivering our goals in achieving emissions reductions. It
does that while, at the same time, allowing progress towards achieving
all our energy policy goals, including maintaining reliable
supplies.
As the
Committee will be well aware, without new electricity capacity, the
United Kingdom potentially faces a growing gap in its generation
capacity. The hon. Member for Cheltenham has made that point. It is
significant that nine fossil fuel power plants, comprising 12 GW of
capacity, which is about 20 per cent. of peak demand this year, are
scheduled to close by the end of 2015. Six nuclear power plants with
the combined capacity of about 6.3 GW are also scheduled to close by
2016, with another 4 GW in later
years.
We are not
therefore in the position to rule out key elements of the UK’s
energy mix, which is what the hon. Gentleman’s new clause would
effectively achieve by setting greenhouse gas emission standards at
approximately half of what is currently emitted by a new
super-critical, coal-powered station. Currently, coal accounts for
about one third of our electricity supply, but that proportion will
reduce during the next
five to 10 years as stations close. Coal-fired electricity generation
plays an important part in reducing and managing the risks of growing
dependence on gas, such as in the winter of 2006 when gas supplies were
tight and prices were extremely high, and the market was able to reduce
gas emissions by generating electricity from coal. Indeed, during that
winter for several months some 50 per cent. of our electricity was
generated by coal in a difficult global gas
market.
We should not
prevent the market from providing such flexibility as we become more
dependent on gas. Although the Government are committed to meeting EU
renewable energy targets and have paved the way for new nuclear,
neither technology is currently well suited to providing large-scale,
flexible generating capacity on the time scale that can respond quickly
to changes in the supply-demand balance. Fossil fuel power stations are
presently the only means that we have of ensuring the flexible and
responsive back-up capacity that we
need.
Therefore,
instead of ruling out one type of energy supply, the approach favoured
by the Government is to maintain a diverse energy mix and to support
the EU ETS that sets absolute caps on carbon dioxide emissions, and
thus sends a clear carbon price signal to the market. That incentivises
the industry to bring forward cost-effective investments to drive
carbon dioxide emissions
reduction.
Charles
Hendry:
I have listened to the Minister with great care.
He will be well aware that the price of carbon as set out under the EU
ETS has fluctuated enormously. It has been up to €30 a tonne; it
has been down to a few cents a tonne. Will he clarify the
Government’s thinking on a floor price of carbon in the event
that they decided that the EU ETS was not doing enough to switch people
away from carbon because the price was too low? Will they consider a
floor
price?
Malcolm
Wicks:
The short answer is yes, as we have said in our
documentation. We are reluctant to have to get to that place. All our
efforts are in developing and making stronger the ETS, so that CCS can
be brought in, as can aviation and so on. We can have some confidence
that, as the phases progress—phase 3, for example—we will
see a stronger price for carbon. That is kept in reserve as a
possibility.
On my
understanding, the new clause tabled by the hon. Member for Cheltenham
asks for regulations on emissions standards and for carbon capture
readiness to be made within 12 months of the Bill’s enactment.
The fact is that the technology will not be ready by then. It will not
have been tested in the UK or anywhere else. Again, that raises the
issue of what timing the Liberal Democrat Members have in mind. This is
not a debating point, it is a serious matter—I am still slightly
hazy about whether they envisage a number of years when no fossil fuel
or coal power stations would ever be allowed because the technology
would not be ready. I am genuinely unclear about that.
The issue of carbon
capture and storage readiness is an important point referred to in new
clause 18(3)(a). I would like hon. Members to note that we are
currently considering whether we should require future fossil fuel
power stations to be built “capture ready”, and if so,
what the options would be for doing that. We will be launching a
consultation on carbon capture readiness later this spring. The
consultation will take into account the recent draft EU directive on
CCS that promotes mandatory carbon capture ready conditions. It will
consider the capture readiness requirements that may need to be
contained in future applications for consents and how practically we
might deal with the UK’s consenting process. It would therefore
be premature to refer to carbon capture readiness in the Bill prior to
the outcome of the consultation.
Paddy
Tipping (Sherwood) (Lab): I accept that
that is a sensible approach, but there is currently one planning
application—Kingsnorth in Kent—and the Minister will have
to be careful how he talks about it. Presumably that application
precedes the consultation and will not be affected by the statement
that he has just made.
Malcolm
Wicks:
My hon. Friend might have been out of the room;
indeed, I know that he was attending another Committee when I said at
the beginning that I would not comment on any one application for
reasons that he will understand. However, I have heard his
comment.
Charles
Hendry:
Can the Minister define what he means by carbon
capture ready? My understanding is that being carbon capture ready
could mean having better scrubbing facilities for sorting out the
SOx and NOx, because if they are not removed from
the system one cannot apply the carbon capture technology at a later
date. Also, it is about having additional space for building a carbon
capture facility adjacent to the power station. Is that also his
understanding or does he have something more fundamental in
mind?
Malcolm
Wicks:
I invariably have more fundamental things in mind.
The answer is yes: we want to consult because this, like many other
questions, is not as simple as it sounds. We want to consider the
capture readiness requirements that may be contained in future
applications. In other words, we want to consider exactly what we mean
by capture readiness. We want to have a consultation so that we can
answer the hon. Gentleman’s question properly and technically.
The issue deserves some technical work, hence our
consultation.
In
summary, I hope that I have reassured the hon. Members for Northavon
and for Cheltenham that the provisions contained in the new clause are
not necessary. The EU emissions trading scheme offers the most
cost-effective means of ensuring that greenhouse gas emissions are
reduced. However, I have always been happy to concede that, in the
foreseeable future the ETS is unlikely to be the whole answer as it
will depend on the price of carbon. Therefore, the consultation is
important, as is the development of the CCS demonstration project as
soon as we can.
Martin
Horwood:
I warmly welcome the Minister’s
announcement of a consultation on readiness of carbon capture and
storage. That is a very positive development that Liberal Democrats
welcome.
It is a moot point whether
locking in carbon capture and storage to the licensing regime in
respect of new power stations is premature, or whether it is premature
of the Bill to go ahead before that consultation has taken place. We
can leave that to one side.
The Minister is also right to
identify the major problem facing energy supply in the UK, which is
that tens of gigawatts of power are to go off stream by the middle of
the next decade. That is why carbon capture and storage is critical and
why it is essential that a regime that locks in carbon capture and
storage—not just in terms of storing the carbon but of mandating
its capture—is so important. With the best will in the world,
energy efficiency, renewables and nuclear—whichever we
prefer—are not going to be ready in time to meet our emissions
targets by the middle of the next decade when this large-scale
generating capacity is
lost.
Malcolm
Wicks:
I seek clarity from the hon. Gentleman. I could
understand an argument that says that as soon as the technology is
ready it should be a requirement. I am not saying that that would be
the Government’s position, but it seems a logical argument. Is
he saying that, or is he saying that until the technology is there a
Liberal Democrat Government would never approve a coal-powered or
fossil fuel powered station? What is the position on
timing?
Martin
Horwood:
I am grateful for the Minister’s question
and the opportunity to clarify. We are seeking to lock in a process
whereby it will be clear to investors that absolute mandatory
conditions, of the kind that he just seemed to open the door to, will
be part of the regime and will be in the Bill to give the Secretary of
State powers to mandate reductions in specific carbon dioxide emissions
from power stations, including fossil fuel powered ones. It will be for
the Secretary of State to judge when the technology has reached the
point at which those powers can be exercised and the restrictions
introduced. The Minister suggested that the exact limit on emissions
set by the clause would stop the development of all new fossil fuel
powered stations, but in practice that could be a matter for debate. If
the level is wrong, we can have the same essential regime with a
different level, if that needs to be
negotiated.
Similarly,
the Minister questioned whether the technology was ready to put this
kind of regime in place. The point is not to prejudge the technological
developments. We are trying to avoid that. This is technology-neutral.
We are trying to send a clear signal to investors and the
industry—as requested by Stern and in so many other
arenas—that this will be the regime, the landscape, the policy
and the clear strategic direction. At the moment, there is nothing
about that area in the Bill. There is nothing in the Bill that reflects
the comments that the Minister has just made about being open to the
idea of setting limits on individual power stations. We are trying to
introduce that.
The
Minister’s broad position at present, as I understand it, is
that measures outside the Bill, in particular the emissions trading
scheme, are a sufficient incentive to industry to bring forward the new
technology. That is a respectable and logical position. It is one that I
hope, under some pressure, he might be persuaded to modify.
I find the
Conservatives’ position less logical. They seem to support in
principle the idea that we need to lock in some process to mandate
carbon capture and storage, but to criticise the only practical and
positive suggestion on the table, which is the new clause. There is no
Conservative alternative. If Conservative Members are not going to
support the proposal in front of us, I have to concede that it is
unlikely to go
forward.
11.30
am
Dr.
Brian Iddon (Bolton, South-East) (Lab): My difficulty is
that if we disincentivise the industry operating in this country, we
may get a greater volume of imported energy, whereas the EU ETS scheme
at least applies to neighbouring countries as well as to Great
Britain.
Martin
Horwood:
I am grateful for the hon. Gentleman’s
intervention, which was well informed as ever. He raises a legitimate
concern, but we could debate the level at which the restrictions are
set and whether the Californian model on which the new clause is based
works well in practice. Such debates could all be had. At the moment,
the new clause is the only practical suggestion for locking in capture,
as opposed to storage, that is being suggested in the
Committee.
As I said,
I find the position of Conservative Members unsatisfactory because they
are not proposing any alternatives despite appearing to support the
broad approach in principle. I hope that consensus will emerge at a
later stage in the Bill, but for the moment I concede that the new
clause is not going to receive support. Therefore, I beg to ask leave
to withdraw the motion standing in my name.
The
Chairman:
Sometimes procedure in Committee can be
confusing. Perhaps I should have made it clear at the start that
although we are debating that clause 18 stand part of the Bill and new
clause 18, the moving of new clause 18 will not happen until the end.
That is when new clauses are moved and when there can be a Division on
them. None the less, I have taken note of what the hon. Member for
Cheltenham has said.
Charles
Hendry:
Thank you, Mr. Amess, for that clarity.
I think that we are all much wiser—well probably no wiser but
certainly better informed.
The debate has gone to the
heart of the energy challenge that we face. We know that, in 20 years,
there are going to be many new sources of energy. Marine and tidal
technology will have proved what they can achieve, and we will know
what other forms of renewable energy, such as photovoltaics, can
deliver. We have a massive energy shortfall coming down the line and we
have to make decisions on how we are going to address that at an
earlier stage. The challenge is that we do not know what technology can
deliver economically.
We probably all believe that
CCS is technically possible, but the challenge will be to ask industry
to invest in new coal technology and coal-fired power stations when it
does not know what the cost will be or
who will pay for it. Industry will be aware that it will cost hundreds
of millions of pounds to add CCS to each power station. If the
Government were going to come forward with the money, by using some of
the credit from the EU ETS for example, that would make a completely
different investment environment from the one there is now. Although I
am sympathetic to and understand what Governor Schwarzenegger has
achieved in California, my concern about the new clause is that it
would introduce too many uncertainties into people’s investment
decisions in this
area.
I want to raise
with the Minister a number of general points about clause 18; there are
areas where greater clarification will be helpful. Is he seeking to
have international agreements and standards on these matters, rather
than the UK going it alone? It would be a matter of concern to us, if
we felt that the UK had different standards to other countries,
particularly if those countries were adjacent to us. I hope that he
will take a generally global view on that. The countries that may be
able to do most in this area are those such as Norway and the United
States, so we should not just be looking at an EU solution but to
genuinely international standards.
Who does the Minister think
will be able to apply for a licence under clause 18(2)(a)? What
restrictions does he have in mind? Are there categories of people who
will be likely to be barred from making applications? He has indicated
in the past that it was unnecessary to bar people from making future
applications, because if they did not adhere to the rules and
regulations, this is the area where they could be ruled out. Are there
other categories, particularly international ownership of
organisations, where that may be the case? Would that give him grounds
for anxiety? What will the fund, as set out in clause 18(2)(e), be used
for? Will it deal with problems during the facility’s operation?
How will financial security be provided? Will it just be from funds
contributed, or will there also be a duty on parents and associated
companies? Does that also take account of any decommissioning
costs?
The store
itself will clearly not be decommissioned—the intention is that
the CO2 will be there for all time—but a small amount
of apparatus will be necessary for injecting the CO2 into
that facility. Who will be responsible for the decommissioning of that
and will it be covered from this fund? Further, who will look after the
fund—will it be ring-fenced? Will that be managed by the
Government, or will it be invested elsewhere? Could it be used, for
example, to offset levels of Government debt? Greater clarity as to how
the fund will be looked after would be helpful.
Finally, I refer the Minister
back to the comments made by my hon. Friend the Member for Northampton,
South, who sadly cannot be here this morning. He talked about the need
for a financial security test. At the time, the Minister said that that
related more specifically to CO2 than to gas storage
elements, so perhaps this would be an appropriate moment for him to
comment on that. My hon. Friend
said:
“I
understand the need for a financial security test with regard to the
financial standing of certain licensees when that test suggests that
their ability to meet their obligation may be at risk. However, we need
to temper that with an understanding that this should not be an
automatic presumption to ensure that
companies do not make unnecessary financial provision over a sizeable
period of time.”——[Official Report, Energy
Public Bill Committee, 21 February 2008; c.
160.]
I hope the Minister will
respond to those details, but in general, it seems to be a benign
clause that we will certainly support.
Malcolm
Wicks:
I thank the hon. Gentleman for that intervention. I
think I indicated last week—certainly there will be an
opportunity later this morning, or later today—to say more about
the international framework that we are developing. However, he is
obviously right that there is no point in us just developing ideas
about CCS or any other proposals on carbon reductions here in the UK.
We have got to play our part. We are responsible for 2 per cent. of the
world’s CO2 reductions but given that that
means—if my arithmetic is right—that 98 per cent. is the
responsibility of other countries, we need to work internationally.
Without going over territory that I can cover later, we are, for
example, working very hard with the Norwegians on carbon capture and
storage, including the reform of international conventions that have
prevented the dumping of waste at sea. They clearly need modernising
and we are making great progress on that. We are, of course, working
within the framework of the European Union but I will say more about
that in due course.
The classes of persons and who
can apply for licences under the clause will be prescribed by
regulations. Those persons will have to be financially sound and
sufficiently expert to undertake the activity of carbon storage. In
essence, all the normal safeguards will apply. We obviously have to be
scrupulous about the criteria; we have to make sure that those
companies coming forward are fit for purpose in all sorts of
ways—in terms of finances and technologies.
The hon. Member for Wealden
asked how the funds will be provided—will parent companies pay?
We will be consulting on the nature of financial security. Our aim is
to provide protection for taxpayers at least cost to the operator; we
do not want to regulate for the sake of it. The operator will
be responsible for decommissioning facilities and we will bear the
cost—as is the case for other offshore facilities. Will the hon.
Gentleman be happy for me to write to him about the precise nature of
the fund? I understand the points that he is making and I can assure
him that this will of course not be used as a pot for our friends at
the Treasury. However, we need to have appropriate safeguards in terms
of setting up the fund to make sure that it is there for its
purpose.
Anne
Main (St. Albans) (Con): I should like some elaboration on
what is required for people decommissioning offshore facilities. Is
there enough clarity over what will be left when this is capped
off—I cannot think of a better way of putting it? What
structures will remain, will there be ongoing observation of the state
of the site and what can people expect? These structures, as we know
with the North sea, often end up in some fjord as a crumbling wreck.
Exactly what do we imagine remaining in perpetuity for shipping,
wildlife and the marine environment as a
whole?
Malcolm
Wicks:
We have much experience to draw on and will do in
the coming few years—from the decommissioning of our oil and gas
rigs in the North sea and the wider UK continental shelf where we have
very clear procedures on what we mean by decommissioning. We discuss
that regularly with the industry. We were saying last week that the
company will have the prime responsibility, not the only
responsibility, for monitoring the operation while it is live and
before it is finally sealed off and capped, but we also said that our
own departmental inspectors, whose experience is in oil and gas, will
have a major responsibility, but with all the extra technical
assistance that will be required. When the carbon dioxide storage is
concluded—when it is finally sealed or capped—the state
will, in one way or another, have the ultimate responsibility for
long-term
monitoring.
The hon.
Lady will appreciate that the details will need to be finalised at the
appropriate time. At the moment the UK has no direct experience of this
kind of storage of CO2, but we are able to draw on the
experience of the Norwegians in the Sleipner gas field, where CO2
storage has now occurred for 10 or so years. I have done my best
to answer all the questions, but I will write to the hon. Gentleman
about the
fund.
Question put
and agreed to.
Clause 18 ordered to stand
part of the Bill.
|
| |
| ©Parliamentary copyright 2008 | Prepared 27 February 2008 |