Examination of Witnesses (Questions 160-179)
ANGELA EAGLE
MP, MS REBECCA
LAWRENCE AND
MS LINDSEY
WHYTE
12 DECEMBER 2007
Q160 Joan Walley: I turn to the environmental
transformation fund. There are two aspects to that: how it will
work domestically and internationally. In respect of the domestic
ETF, do you believe that the funds are sufficient? We understand
that £170 million of new money over a three-year period is
coming from budgetary increases in the Comprehensive Spending
Review. Is that adequate? I spoke to a colleague who is doing
a lot of work with local community groups. It seems that there
are some restrictions on who can claim this funding in order to
get demonstration projects off the ground at local level.
Angela Eagle: The fund domestically
is shared between BERR and DEFRA and it is up to them to decide
in detail how they wish to ensure that the money does the job
it has to do. It is really about developing low-carbon technologies
and it can involve any suggestion in the entire area from initial
research to commercial deployment.
Q161 Joan Walley: Is it only businesses
that can apply for it, or can residents apply if they want to
demonstrate some heating arrangement within their own community?
Angela Eagle: Are you referring
to a combined heat and power project or something like that?
Q162 Joan Walley: Yes.
Ms Lawrence: The criteria for
allocating the funds have not yet been set, so DEFRA and BERR
are in discussion. They will be open to new ideas and suggestions
and there is a process in place for getting agreed criteria so
that the funds across the two departments can be truly transformational.
Q163 Joan Walley: It may be interesting
to have a note on that.[1]
I know that a colleague in Nottingham is looking at how this funding
can be used for a demonstration project there. There are serious
issues. We would like to know whether or not there are barriers
in terms of who can claim and get access to funds for that purpose.
Angela Eagle: DEFRA and BERR are
consulting with each other at the moment ahead of consulting more
widely before they make announcements about how the funds will
be made available. We will send a note.[2]
It may be worth asking your contacts in turn to contact the department
directly and make suggestions about how community involvement
in those kinds of things can be encouraged.
Q164 Joan Walley: Earlier you mentioned
Stern. In the light of what Stern says is needed—massive
increases in research and development—are you content that
the £170 million will be enough?
Angela Eagle: It is a significant
start. You must remember that there are other areas being pulled
in as well. There is science and technology funding for development
and research which can be coupled with it. A public/private partnership
is also being put together to bring research moneys to bear on
technological change which I believe has already attracted £300
million of private sector money alongside some of the matched
funding from the research councils. It is not simply this fund
that will be applied to the technological changes we need in order
to switch to a much lower carbon-using economy.
Q165 Joan Walley: Are you looking
to fund some of that out of phase 2 of the European ETS?
Angela Eagle: Are you asking whether
European ETS will be hypothecated?
Q166 Joan Walley: But not from the
auctioning of phase 2 of the European ETS?
Angela Eagle: I do not believe
that so far we have made decisions about what to do with the money
we will raise from auctioning phase 2 of the EU ETS. We certainly
would not hypothecate it in that way. It may be that once we have
raised the funds we may decide to do something like that with
them, but it will not be an automatic hypothecation.
Q167 Joan Walley: Do you have any
idea how much you would expect to get globally from the auctioning
of phase 2, irrespective of whether or not it is hypothecated?
Angela Eagle: Phase 2 allows for
auctioning of up to 10%. We would certainly want that to go up
over time and, certainly in phase 3, to auction a much higher
percentage, but it is too early to say. That anticipates the futures
of a futures market. As a minister I do not have a crystal ball.
Q168 Joan Walley: I turn briefly
to the international element of the environmental transformation
fund. There is a big welcome for the way this has been taken forward.
When we were in touch with WWF it had particular concerns about
the detail of how the international element of it would be implemented.
I would like some clarification on the details of the fund, how
it is spent and whether it will count towards the Government's
commitment to devote 0.7% of gross national income to official
development assistance or it will be additional to it. There were
also concerns expressed by WWF both during its evidence to us
and subsequently relating to the World Bank and how the whole
thing fits together, for example when the loan is repaid to whom
it is repaid and out of whose budget that repayment is made.
Angela Eagle: At the moment the
fund is divided 50-50 between DfID and DEFRA. It is mainly capital
and it can be classified as official development assistance. One
of the ways we are thinking of dealing with this is to set up
a multi-donor fund. That is why we have asked the World Bank to
help us design a trust fund that will deliver in a timely fashion
to developing countries the chance to have these transforming
technologies available as they develop. The bank circulated for
consultation at the annual meeting a prospectus outlining how
the fund could work with others. We are keen to talk to other
countries to see if they will put money into the fund that we
wish to create. I know colleagues in Bali are having discussions
around the fringes about what is happening there and how the fund
might be bolstered by other countries. But at the moment that
is how we plan to do it, and it will be part of ODA.
Q169 Joan Walley: Are you aware of
the concerns of WWF about the relationship between the loan and
the ODA and whose money it becomes when it is paid back? Is there
any possibility of the Treasury perhaps having more detailed discussions
with WWF in terms of how this can be incorporated into a transparent
accounting system?
Angela Eagle: It is important
there is transparency and that people realise the funds are being
used for the purposes for which they were created and not for
any other. We are quite happy to talk to the WWF about any concerns
they have and about transparency of accounting which is absolutely
vital to the work we do.
Q170 Joan Walley: As a follow up,
one of the issues we have been looking at in detail is biofuels.
There is anxiety in some quarters that if the World Bank oversaw
this loan it would be much more attracted to projects which gave
the highest returns which could well be biofuels. I am just wondering
whether that would be in line with government policy or the Treasury
would seek some accountability over the way its loan, which would
then be managed by the World Bank, would be handled. We would
not simply want to see a huge depletion of rainforests and so
on.
Angela Eagle: It would be patently
absurd if in order to deal with transport emissions, which globally
account for about 14% of emissions, we got rid of all the forests
which are the carbon sinks that help to keep the climate balanced
and also host much of the biodiversity. It would be a law of unintended
consequences in the extreme if we flattened the rainforest to
grow a load of things to make biofuels, whether it be detropha
or wheat. There is increasing understanding of the double-edged
sword that biofuels can be, although they are certainly useful
in reducing emissions in the short term or this hybrid period
if they are of the right sort and have not been shipped half-way
round the world. I rather agree with Julia King's view that we
need to start to develop a carbon whole life cost analysis of
these things. If we could do that we would be able to see which
biofuels were worth having and which were not. The more we understand
whole life emissions and the balance from growing all the way
through to final use the more we realise that these things must
be analysed carefully. We can produce unintended consequences
if we simply subsidise all biofuels without analysing whether
they are good or bad.
Q171 Joan Walley: Therefore, we can
expect the Government to have some control over how the £800
million is spent through the World Bank?
Angela Eagle: We do not intend
to give control away in that sense, although we are anxious to
create funds that could attract other funds and therefore work
harder to have the technology transfer which gives to developing
countries opportunities to develop in a way that is not as damaging
to the climate as the way we developed.
Q172 Joan Walley: In respect of the
Congo forest conservation initiative, do we know yet how it will
operate and how soon it will commence?
Angela Eagle: The Congo forest
initiative of £50 million was announced last year. I am not
sure how well defined it is.
Ms Lawrence: The two co-chairs,
Wangari Maathai and Paul Martin, are together developing a proposed
governance structure and agreeing its terms of reference together
with a detailed development plan for the fund. As we all know,
avoided deforestation is potentially really significant and a
pretty cost-effective way of reducing global emissions, but it
is crucial to get the governance right and work collaboratively
and constructively with the countries in which the trees stand.
That is what the co-chairs are doing right now.
Q173 Joan Walley: Some claims have
been made that the management of this scheme was excessive. Has
that been looked at so we can draw lessons from it?
Angela Eagle: I have not heard
that, but if there are criticisms you want to pass our way we
will certainly investigate them. You always have to strike a balance
between ensuring that the funds are used for the purpose for which
they are created and provide the best opportunity and ensuring
you are not overly-bureaucratic about it.
Q174 Dr Turner: One matter that featured
in the Pre-Budget Report was the CCS demonstration plant competition.
That the Government is doing something to promote this technology
is welcomed by the CCS community, as it were, but there is some
concern about whether this is the right way to go about it. There
could be 11 projects, including BP's pre-combustion project at
Peterhead which is at an advanced stage of preparation, going
forward to produce infinitely greater savings than we will get
from this one post-combustion demonstrator; and we would also
have had a wider choice of technologies available for exploitation
had the Government done it slightly differently. Why is the Treasury
so committed to this single plant and this sole technology?
Angela Eagle: We decided that
we wanted to focus on post-combustion because we thought that
was the most relevant in terms of capturing carbon with the potential
to retrofit existing plants and looking at the kind of plants
being built even as we speak. It is important that post-combustion
technology is developed but that does not prevent work being done
on pre-combustion technology; it is simply that the Government's
demonstration project is about post-combustion technology. There
is no commitment to fund more than one project. What we wish to
do is get ourselves into a situation where at the end of the competition
we have a scaled-up, working post-combustion carbon capture and
storage facility which has the potential to be retrofitted to
a lot of existing generating plant. Coal reserves will probably
continue to be burned for the next 50 years and it is therefore
vital that we try to develop abatement technology to deal with
the consequences of it. We felt that if we could develop a solution
post-combustion this was the best and most useful one to have.
Q175 Dr Turner: That is clearly essential
in the context of China, India and indeed some of our own future
stations, but pre-combustion plant could make an equal contribution.
Angela Eagle: Pre-combustion is
important, but since we already have plant that is putting a great
deal of carbon into the air and that developing countries, particularly
China, have a great deal of dirty coal and are building power
stations at a rapid rate to supply their own energy needs, retrofit
post-combustion seems to us to offer the best chance, if it can
be delivered, of maximum abatement capacity which is beneficial
in the battle against climate change. That was the nature of our
decision. I emphasise it does not mean we believe that pre-combustion
technology should somehow be abandoned but simply that the Government's
demonstration project wishes to concentrate on this particular
area.
Q176 Dr Turner: I completely understand
the logic of it. The question is: is this the Treasury's last
word or will it bring forward other support mechanisms for a broader
range of CCS technologies in future?
Angela Eagle: It may well do so
if it is demonstrated they work, but in the context of having
a demonstration project which is being run by BERR in a competitive
environment we have decided to provide government support for
post-combustion abatement of 300MW. That does not preclude the
possibility at some future time, if such pre-combustion technologies
appear, of the Treasury looking at how it can reward carbon capture
and storage achieved by other methods, but the context of our
discussion here is that where there might be a market failure
because the technology is available but practically it cannot
be created and brought to market for cost reasons we try to support
the work being done so we can fast-track the development of the
technology which is badly needed in order to fight climate change.
Q177 Dr Turner: The only difficulty
is that the other technologies are unlikely to develop in this
country to demonstration stage without some Treasury support.
All roads lead back to the Treasury.
Angela Eagle: In consultation
with other government departments the Treasury has announced its
decisions on what sort of demonstration project it wishes to support.
BERR has already held an industry day to which it has invited
developers who wish potentially to become involved in the forthcoming
competition. There is good interest around. If you ask me whether
half-way through the competition process we will agree to do pre-combustion
as well the answer is no; we are concentrating on a post-combustion
project of the sort we have announced.
Q178 Dr Turner: Obviously, the Government
has decided that its capital grant support, presumably, will go
to this project, but it is quite possible that industry will invest
in other projects if the fiscal conditions are right. It does
not necessarily mean capital money up front from the Government.
Angela Eagle: At the moment we
are concentrating on trying to create and demonstrate the technology
in this particular way. We have no plans to give other capital
support to other projects being developed. It is silly to rule
things in or out at this stage, but I have given you quite a strong
indication of where the Government's priorities lie in terms of
trying to bring to market a carbon capture and storage plant that
will be useful. Other experiments are going on in other countries
with different technologies. For example, Italy and Poland are
doing post-combustion and Germany is doing pre-combustion. There
are other potential international developments around and obviously
we shall be keeping a close eye on them. It is important for the
world as a whole that we crack this technological problem and
we are able to capture and store carbon emissions. In the next
50 years that may well be one of the most vital things we can
do to prevent run-away climate change, but that does not mean
the UK has to do all of it.
Q179 Dr Turner: The Pre-Budget Report
quotes savings of about .7 million tonnes of CO2 a year from the
demonstration project, whereas the Energy White Paper refers to
savings of between 1.1 million and 3.7 million tonnes of CO2 a
year. Can you account for the huge difference in the figures?
Ms Lawrence: There is a simple
technical reason in the sense that the Energy White Paper gave
an illustrative estimate for the purposes of assumptions of the
policy matrix and the full range of policies. Now that we are
in a competitive phase we do not firm up the illustrative numbers
because this is one of the elements of the competition where bidders
will be able to say what savings they propose and at what cost.
Therefore, the technical answer is that we are in a different
phase at the moment.
Angela Eagle: We would be delighted
if they could save even more.
1 See Ev 68 Back
2
See Ev 68 Back
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