CORRECTED TRANSCRIPT OF ORAL EVIDENCE To be published as HC 648-i

House of COMMONS

MINUTES OF EVIDENCE

TAKEN BEFORE

ENERGY AND CLIMATE CHANGE COMMITTEE

 

 

LOW CARBON TECHNOLOGIES IN A GREEN ECONOMY

 

 

Wednesday 10 June 2009

MR ANDREW SIMMS

DR DOUGLAS PARR

Evidence heard in Public Questions 1 - 63

 

 

USE OF THE TRANSCRIPT

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Oral Evidence

Taken before the Energy and Climate Change Committee

on Wednesday 10 June 2009

Members present

Mr David Anderson

Colin Challen

Anne Main

Judy Mallaber

Paddy Tipping

Sir Robert Smith

Mr Mike Weir

Dr Alan Whitehead

 

In the absence of the Chairman, Paddy Tipping was called to the Chair

________________

Memorandum submitted by New Economics Foundation

 

Examination of Witness

Witness: Mr Andrew Simms, Policy Director and Head of the Climate Change Programme, New Economics Foundation, gave evidence

Q1 Paddy Tipping: Thank you for joining us as our first witness on our Low Carbon Technologies in a Green Economy Inquiry. Obviously you have already done a great deal of work on this. I was particularly interested in the paper A Green New Deal. It would be helpful if you set out what you think are the headline issues in that.

Mr Simms: Thank you. We see it as being a necessary and effective response to what we described as the triple crunch, one of those crunches being the credit crisis or the debt crisis, if you prefer that way of describing it; the second being what we have to do in the face of tackling imminent climate change; and the third being the resource crunch, which even some of the most conservative voices in the field, such as the International Energy Agency, are finally conceding is almost upon us, either in terms of problems within the industry around production capacity, in which they envisage there being a squeeze regardless of the global recession around 2013, or, more importantly perhaps, the fact that they have now conceded that we are on the cusp of the global peak, plateau and long-term decline of oil production. So we see it as those resources underpinning almost everything we do from the way we produce our food, the way we run our business, the way we get around, almost everything from the moment we get up in the morning to when we go to bed at night, that there is a need for a massive environmental transformation of the economy and that in delivering that massive environmental transformation of the economy, we have the opportunity to provide a parachute to the broader economy in the context of the current recession. As we still do not know exactly how long the recession is going to last and how deep it is going to be, we also see that there are multiple wins in doing this in that we think by investing for the medium to long term in the vital environmental industries - energy generation, new forms of transport, new ways of doing agriculture - we will find new investment opportunities which are less volatile, more secure and safer homes for our savings and for our investments; we also see that it is an opportunity to tackle some long-term, engrained social problems, such as energy poverty. We refer to the fact that in the original new deal brought in by President Roosevelt, in the aftermath of introducing his 100-day programme of measures, one saw, over a number of years, the most rapid compression of income inequality in the United States that that country has ever seen. So we see it being driven by unavoidable environmental and resource dynamics; the current context of the economic recession giving us problems that we have to solve in any case; and we see it as being a massive opportunity for things that are unavoidable but will bring that most rare of opportunities in politics of a win, win, win situation.

Q2 Paddy Tipping: I hope you do not mind my saying this but I saw the economic context, the difficult economic international climate, as in a sense one of the drivers behind the report, and you have acknowledged that. I just wondered whether in tactical terms it might have been better just to look at a narrower green focus, rather than having so much emphasis on the banking crisis. Clearly that is not your view.

Mr Simms: I would tick two things to that. First, a mistake the broader environmental movement, we believe, has made for a very long period of time has been to underestimate the importance and the role of the City of London. An example of how that plays out in practice would be that up in until the crash, and in fact it is still the case, one of our largest banks, the Royal Bank of Scotland, is also Europe's largest investor in the old-fashioned fossil fuel industries and the fact that that bank has now fallen into public ownership means that the Government has the ability, the capacity, the strings, to pull on its investment priorities. One might see there being some kind of poetic justice if one of the largest of the failed banks that is still one of the heaviest investors in old-fashioned fossil fuel technologies were turned, for example, into a green investment bank. I am aware that there have been a few proposals of that nature around. The second thing to say is about the volatility and the instability induced by the banking crisis and the need for the kinds of reforms that will capture for the public purse the legitimate income that it deserves. Many of these problems and solutions are linked because when we are looking for sources of funding to invest in environmental transformation, some of the banking reform around tax havens and transparently are not the whole part of the picture but certainly part of the picture. The fact is that there is a perversity in the way in which, as awareness of climate change as a problem has risen, so too has the amount of money going into the old-fashioned fossil fuels industries through the City also pointed to the need for some fundamental banking reform. We have covered quite a broad church and we have looked at the role and the need to regulate exotic financial instruments, for example. One might think that that is tangential to this but we also saw it as being symptomatic of a banking system that had started to exist for its own ends and rather as a service to the wider productive economy.

Q3 Paddy Tipping: The Government already has a fiscal package to stimulate the economy. How green is that?

Mr Simms: We have been particularly critical of the so-called green stimulus package, and we think for good reason. First of all, at the first time that it was described in the Pre-Budget Report, when we stripped away all the current existing spending commitments and looked at what was actually new and additional as an actual green stimulus package, we ended up with a figure equivalent to about 0.0083 per cent of GDP, which struck us as being small compared to the International Monetary Fund's estimate of the amount of money that had been put into bailing out the banks, which they estimated at about 20 per cent of GDP. I would want to give credit for the fact that that amount of money that was new and additional as a green stimulus package rose when we got to the budget, and it rose to 0.09 per cent of GDP. We were also disappointed because of some of the additional measures that were announced in the budget such as the commitment to extract a further two billion barrels of oil from underneath the North Sea, which we calculated would roughly generate the amount of greenhouse gas emissions equivalent to the UK's entire emissions, including aviation and shipping, for one year. I think I said at the time that it struck me as a balanced budget in that anything good that it did for the environment, it also equally undermined in other ways. We also pointed out, and it has been separately pointed out by the likes of the bank HSBC, that the overall scale of investment in what we might term environmental transformation in the UK was very small compared to a wide range of other countries, including France, Germany, China, South Korea and the US, and that we seemed to be way down the league, and it seemed to be an open goal that was being missed.

Q4 Mr Weir: That was the point I was going to raise about international comparison. Can you tell us then in your view what you think the Government needs to do to address that problem and bring us up more to the international comparisons of what is being done?

Mr Simms: I think we need a widespread programme of investment, starting with the low-hanging fruit of the building stock where most jobs are to be found, where it is likely because of the way that resources and labour are procured that the maximum value will be retained within the UK economy. There are various estimates of the sorts of amounts of money that we would need to spend. I noticed the economist, Paul Ekins, part of the Green Fiscal Commission, has estimated a ball-park figure of about £10,000 per home. I believe the Conservative Party has estimated something in the region of £6,000 to £6,500 per home and that this level of investment, drawn from a wide range of sources would generate vast amounts of potential employment. I am also interested, given the decisions which are currently being made about increasing our generating capacity in the UK, that Deutsche Bank have pointed out that for every pound or euro worth of investment in the new green decentralised renewable technologies, you generate between two and fours times as many jobs as you do investing in the old-fashioned, centralised, energy technologies. I think it is with the building stock and energy efficiency where we begin and then we move rapidly on to the transport system. I would like to see a fundamental shift of investment out of the infrastructure which supports the wasteful private motor car and into more mass transit and public transport systems because this clearly seems to be the future, and the energy generating system itself, so incentives of the kind which have been pioneered and delivered successfully in Denmark and Germany and across the Continent for getting the mainstream renewable technologies up and running at a range of scales; and low cost credit being made available to the various parts of the renewable sectors, which seems like a difficult thing to do in the context of a recession which some people would blame on the availability of low-cost credit. If you want to get a newish industry up and running, there is no short-cut to making available substantial amount of credits. Walking there this morning, it struck me as a historical example that what it took to get what was then the new kid on the block as an energy source, oil, up and running in the face of what was dominant at the time, coal, took about 50 years to get the capital to shift over from one source to the next. I am mindful of the fact that we have less than a decade to effect the same kind of shift today. The idea that it will happen as a natural process of market changes I think is fantasy. I think it is going to talk large, bold statements from the Government. It does not just mean public money. That means making an environment in which it is easier, for example, for our savings and our pension funds to see the renewable sectors as a natural home, and a fairly secure home as well. I think it means innovations with financial mechanisms like green bonds, which could be done at a local, regional and national level. It also means making some big decisions about priorities; for example the ball-park figure of there being £20 billion hanging over a reinvestment programme for Trident would seem to be another major decision of public priorities that the Government has to grapple with

Chairman: Let us keep narrowly focused.

Q5 Judy Mallaber: You have referred to this obviously already but in your report you say that you think the UK so far has largely missed out on the boom in green collar jobs. You particularly refer to Germany; you have already mentioned what is happening in America and we have heard about China again in the last couple of days. To what extent do you think we are missing out? Is it a competition between countries? Will we lose out if we are not jumping in on the technology now or are there plenty of jobs to round everywhere and what do you think is the potential for us in terms of job creation?

Mr Simms: I think one of the important things as part of the global picture is that in all countries there is enormous potential for generating jobs at the local level. There is one thing which I find particularly humbling and I sit as a judge on something called the Ashden Awards for Renewable Sustainable Energy. I am mindful of the fact that from China to India and a range of other developing countries, including some in Africa, the innovation at the local level of renewable technologies is astonishing and the capacity for job creation enormous and for human development profound. I do think that we have been missing the boat in the UK. I do not see it as primarily an international competition; I do see it as absolutely vital in creating a range of jobs from the low, medium to high skilled in an economic circumstance in which unemployment is on a dramatic upward curve. So I certainly see it as being the absence of a larger and more comprehensive skills and training programme in the UK to get people who have the skills, which range from implementation and maintenance of the range of renewable technologies right through to the scientific R&D side at the other end of the employment scale, and that we are missing an opportunity because it is an employment-rich process. I think we should be seeing the visible evidence of the rehabilitation of the UK's building stock right now; we should be seeing the signs; we should be seeing it all around us, and we are not.

Q6 Judy Mallaber: Have you done any estimates of the potential job creation?

Mr Simms: We are actually working on that right now. We will have a piece of work finished by the end of July, which will put some numbers on the employment return on investment in different energy forms. I am very happy to make those figures available as soon as we have them.

Q7 Judy Mallaber: Will that also include an analysis of what skills or a lack of them you need to develop and also whether there are any areas where many have missed the boat?

Mr Simms: It will to some extent; it will not be an absolutely comprehensive regional analysis of what is where because we do not have the resources to do that at the moment. It is going to look at what the relative employment creation potential for relative investment in the different technologies will deliver.

Q8 Colin Challen: We have some league tables of the value of the green stimulus as part of the overall financial stimulus that countries around the world have sought to deliver or have announced. I think the UK green element came quite low down in that international context. I think "career" was at the top.

Mr Simms: It was, that is right, at 80 per cent of its green stimulus.

Q9 Colin Challen: But we are not always comparing like with like, are we? I am just wondering if you have a more advanced or sophisticated league table so that we can really say where the UK is. It talks in the paper this morning about Chinese investment in Seoul for example. Is there a more sophisticated analysis?

Mr Simms: The most sophisticated analysis that I have seen is the one done by HSBC, which is a huge global bank with vast resources which unfortunately, from our perspective, dwarf the resources that we have. It is quite 'caveated' and there are quite a few footnotes in the HSBC league table, which attempt to deal with the issues of non-comparability but that is the most sophisticated analysis that I have seen to date. It is extremely difficult to get more detailed breakdowns. It is a substantial exercise and the information is not always in the public domain. Unfortunately, that is the best that I have seen so far.

Paddy Tipping: Let us move on and look at some of the specifics in the report.

Q10 Dr Whitehead: In your report you have put in what, I think it is fair to say, are some eye-catching slogans such as, "every building a power station" and "a carbon army of workers". What analysis have you done and how would you convert those slogans into practical policies? Taking, for example, the "every building a power station" slogan, presumably you would envisage that involving many, if not most, domestic properties and presumably commercial properties generating their own heat and power over a short period of time. How would you envisage that would be effected?

Mr Simms: I think the context for this - and obviously I am not the first person to say this - is that we are dealing with a situation in which, in the space of a few short decades, we are going to have to go entirely renewable. We can argue exactly over what "renewable" means but we are going to have to get there. The building stock is one of the largest energy users and one of the largest sources of greenhouse gas emissions. It is the place where we can not only make some immediate gains but we can also, importantly I think, help to educate people about their wider energy use. We see it as having a multi-function, if you like. The simplest and most obvious thing is the low-hanging fruit of energy efficiency. It is still the case that vast swathes of our building stock are energy-inefficient in that they waste a lot of the energy that they use. That is step one. Step two, and this is extremely site-specific, is to be able to audit buildings to see which are going to be the most appropriate for renewable technologies; it will be different in different places. We do not envisage that every house will have its own ground source heat pump and solar panel and windmill and all the rest of it. The task is to audit the building stock to see what is going to work where. We know that solar works differently, depending upon the angle of the roof and the direction of the roof, so that is the challenge, I think. It is also not the case that we see each individual building as having entirely to generate its own electricity, because that would not be an efficient application of renewable technologies. Some of the work done by one of my colleagues who is sitting behind me at the moment from Greenpeace points to the fact that one of the most important and efficient scales is a community sized grid structure. We do see the need for diversifying away. We are not advising that we get rid of the National Grid; we actually see that there is some potential in having large scale grids, but we do see that there are huge gains to be made through decentralising energy, ultimately down to the household level but not to the point where every house has to generate all its own energy. In many circumstances, houses will be able to become net suppliers of energy to the grid, depending upon their site and the implementation of the appropriate renewable technology where they are. In the answer to your question, there is a level of detail which I do not think it is going to be practical to go into today but I am very happy to follow up after the meeting. There are detailed strategies for CHP; there are detailed strategies for solar; and there are detailed strategies for energy efficiency.

Q11 Dr Whitehead: I understand that. The slogan "every building a power station", in a sense you have already slightly retreated from that in terms of indicating that that is not really the case. Secondly, I suggest you rather gloss over the social and legislative elements of that inasmuch as your suggestion sounds as if people will be required, or buildings will be required, either communally or individually to produce their own energy. Would that be done by direction or by stimulus or by incentive or by encouragement?

Mr Simms: Can I say that I absolutely do not mean to retreat from that. I find it hard to think of an example where a building would not be able to generate some of its own heat or power. Through intelligent re-design, through retro-fit and certainly when starting from scratch with new build, I think in almost every circumstance you are either effectively generating power by using less and freeing up more to be used in other places or actually being able to do it directly. In terms of how we do it, I think there is going to be a mixture. We are certainly going to improve things through standards - through technical standards and building standards. The speed with which available sources of part subsidy for installing existing technologies is used up tells us that there is a suppressed demand for people to do this. I think there is a huge need to clarify and make simple information around the planning procedures that you do have to go through available to people. In investigating the potential for doing things on the house in which I live in south London, I have found it extremely difficult to get simple and clear guidelines about what you can do straightforwardly and what you need to get permission for. I know there are some initiatives around to make that easier. This is a simple answer but I think it is going to be a combination of all of those things. I think we do need to tighten up on our building standards. I think we do need to have subsidies and incentives available for installation. I think ultimately, as Britain seeks to meet its own emissions targets, that these are thing that are going to have to happen anyway.

Q12 Dr Whitehead: For example, currently there is I think a total of 80,000 solar thermal collectors on people's houses over the entire life that commercially available solar thermal collectors have been placed on people's houses. That number is being increased about 6,000 or 7,000 a year.

Mr Simms: You need government action on this. Germany, Denmark and various other countries in Europe stand testimony to the fact that if you want to go to scale, you have to have government support for it and that has to be substantial.

Q13 Sir Robert Smith: I had better declare my interests. On the Register of Members' Interests, the most relevant one to this inquiry is my shareholding in Shell and my role as Vice Chair of the All Party Group on the Offshore Oil and Gas Industry because my constituency in the north-east of Scotland is heavily dependent on it. In the funding of your scheme, you have talked about a windfall tax on the profits from oil and gas companies. I just wondered which profits you saw the windfall tax going on.

Mr Simms: The profits registered and posted in the UK where we are concerned.

Q14 Sir Robert Smith: They are global profits and not from the North Sea?

Mr Simms: Personally, I would see any sorts of profits that could legitimately be taxed in the UK as being ripe for a windfall tax. When one talks about a windfall tax, it tends to imply that it is a one-off and I suppose I am thinking of a recurrent model. I am thinking of Norway's example as being an interesting way in which you can take something which is a double windfall in one sense in that it is a sort of geological windfall and also the way that the exception of the sudden and relatively short-term dip in the price has been generating significant profits. That is an intelligent way to make the best use of a declining resource to pay for the transition away from dependence upon that source, which has been nurtured over a long period of time.

Q15 Sir Robert Smith: You are obviously very keen to see the outcome of the green deal and achieving the new housing stock and the retrofitting and funding. I am just wary of simple solutions that say there is a pot of money lurking that could be capped painlessly. Obviously the Norwegian model is about hoarding their own resource from the North Sea and you are talking about a tax on any company that happens to register its profits here. I wonder how long that company would continue to register its profits here if the tax regime became unattractive.

Mr Simms: There are two points on that. One is that the argument that one would not do the right thing simply because you would have capital flight to a weaker regulatory environment can be applied in all circumstances.

Q16 Sir Robert Smith: It is not the right thing; if we have capital flight, we do not get the money in.

Mr Simms: The fact is that where the fossil fuel industries are concerned, they register in London and New York, for very good reasons, and, depending upon how it was done, I do not envisage the market centre for the fossil fuel industry shifting overnight to somewhere in sub-Saharan Africa or Asia. I just do not think that is a realistic possibility. I also do not see the windfall tax as being the only source of income, but I do see it as being a legitimate one and a trick that we have missed. I think in fact Norway has been able to build up on a per capita basis an astonishing national security safety net for whatever slings and arrows the global economy or the global environment throws at it. I think in the dying days of North Sea oil, particularly in North Sea oil, when we seem not to have experienced lasting benefit from the golden days in the Seventies and Eighties, we have one last chance to put it to some good, and do that in a way that matches the focus of the spending with the nature of the source of the funding, if you like, but we certainly do not see that as being the only source of money.

Q17 Sir Robert Smith: Have you looked at when the Chancellor last hit the North Sea with tax changes, the loss of investment that came to the North Sea as a result?

Mr Simms: We have looked at a number of international examples and we were interested to find that China, for example, had used a windfall tax on its own sources, that the US had done it in the 1980s, and that windfall taxes have been used successfully on a number of occasions.

Q18 Mr Anderson: Can you put a figure on how much you would expect to raise in windfall tax?

Mr Simms: I can, but I would like to come back to that with you because we last looked at it in detail a few years ago. We do have a report called Hooked on Oil, which has some figures in it. I could not give you the figures off the top of my head but I would be very happy to forward that.

Q19 Paddy Tipping: Let us move on and pick up a point that you were making earlier on, which is about the local networks and decentralisation of generation. How would you get that into place and how would we fund it?

Mr Simms: Fortunately, and I am sure the Committee is aware of this, there is a number of quite successful examples, such as Woking, that have already been there, and there is a level of detail, knowledge and understanding of how to work through local authorities. That is not my specialisation but that has been looked at in great detail. Again, the report I referred to earlier that Greenpeace produced on decentralised energy has wrestled with some of the difficulties of planning. I have referred the Committee to that report, and also to the work of some of the renewables trade associations that have been looking in great detail at the planning obstacles and the planning hurdles to doing that. What was the second part of your question?

Q20 Mr Anderson: Let me just take that on a bit. In your report you say that this is going to cost £50 billion. Where is that money coming from?

Mr Simms: Where is the money coming from? There is a range of estimates on what we should be spending at the moment. I noticed that Lord Stern, with the percentage of GDP he thinks we should be spending on effecting this transition, has come up with a figure that translates to about £11 billion a year. I noticed the Sustainable Development Commission have quoted £30 billion for the next few number of years. We have quoted the figure of £50 billion, which is also the figure that IPPR came up with in one of their reports. Where is this money to come from? I think it is to come from a range of sources. I think it is to come from public, private and individual sources. We have alluded to the Government now being in a position, through public ownership or substantial public involvement in some of the major banks, to be able to influence their investment portfolios. We see there being an important role of leveraging private resources into this process of transition. We have alluded to the windfall tax. We have also alluded to the role of green taxation. Here there is a problem and I do not understate it because it is something that is always an issue with the Treasury. We think to win the public case for increased green taxation, that taxation would have to be hypothecated; it will have to be linked to the desired outcomes, otherwise it is very hard to win the argument in public; people might think it is just another form of backdoor taxation. We see as being perhaps the biggest win encouraging some of the major institutional investors, like the pension funds, to start looking to the renewable technologies maybe not as being opportunities for spectacular returns but as being opportunities for safe, secure and long-term returns. I think one of the greatest challenges we have in the investment community is lengthening their time horizons and the investment in environmental transformation and energy transition is certainly one of those. We also see there being great potential for innovative new financial mechanisms, such as green bonds. We have written to the Secretary of State, Mr Miliband, advising that the Government might like to consider a green investment task force that would bring together a range of institutional investors and individuals ranging from banks that have specialised in this area, like HSBC, Rathbone Greenbank in the UK, a sustainable investment forum, to look at the scope for innovative new bond and gilt-like mechanisms to raise funds, some of which may appear on the public borrowing books and some of which would not. I have alluded earlier to Trident, perhaps slightly flippantly; I did not mean it to be that way because I think there are some very real political decisions that do need to be taken where major capital items are concerned, like Trident, which have huge opportunity costs, should we continue to go ahead with something like that when we know we have the challenges of environmental and energy transition in front of us. I would see there being a mixture of public, private and individual sources. If I found available a pension product that was specifically dedicated towards investing in renewable energy technologies, I would choose it. I cannot actually find one at the moment. Someone will now turn round to me probably after this meeting and give me a list of seven but I have not found one yet. I think there is an appetite for it and I think there is actually quite a diverse range of sources that we can go to.

Q21 Anne Main: Briefly, going back to your potentially hypothecated green taxes, can you give me an example of such taxes that you think would be reasonable and how would they be explained to people, given that in the billing of gas bills and electricity bills people are not terribly aware of how the break-up currently is worked out on the green part of the tariff? Can you be a little more specific on that because "hypothecated green taxes" is a very overarching statement.

Mr Simms: I would start with what we have already discussed. I would start with the windfall tax. The basic rule of taxation, as we see it ---

Q22 Anne Main: I was thinking more of on the individuals rather than on big companies.

Mr Simms: The principle I would begin with is that we should tax more of what we want less of and less of what we want more of. On that basis, I think we should be looking at effecting and encouraging a shift away from the private motor vehicle towards mass transit, for example. I see at the moment the current scrappage scheme as being a perverse incentive to keep us locked into an energy-intensive form of transport. I think one of the biggest mistakes that the Labour Government made was to abandon the fuel duty escalator, when this government came into power, in effect. I would like to see that healthily restored because the very poor do not have cars anyway very often and rely upon under-funded and over-crowded public transport.

Q23 Anne Main: That is so: unless you have public transport in place, people are not going to opt out of their cars, in which case then who is going to put the up-front funding for all this big investment in additional transport? Where is that coming from?

Mr Simms: I think I have alluded to a number of different sources.

Q24 Mr Weir: I will just make the point before I ask my question. The comment about cars is wrong in rural areas. There is a huge difference between rural and urban areas.

Mr Simms: I would agree with that.

Q25 Mr Weir: The point I would like to ask you about is decentralised energy. Starting on decentralised energy, fine - no great problems with that - but you talk about ensuring grid connections. The National Grid raised concerns about small, decentralised schemes, feeding tariffs and such like, relating to the way they balance the grid and the difficulty of knowing when energy is going to come in from these small as opposed to the large stations. I wonder if you have done any technical research on how you deal with the inflow of small amounts of energy from decentralised projects or from individual homes on to the National Gird, which as you said earlier would still have to exist?

Mr Simms: That is a very specific and technical question. I would like to point you afterwards towards a number of pieces of work which have dealt with it in detail. I would say, though, that the flip side of that is that one of the good things which a more decentralised system has to offer and a system in which we are evening out household demand by having a higher take-up of household level technologies is that you actually even out the peaks and troughs of demand on the grid. One of the things that a more diverse system has to offer is probably a more stable grid because you do not get the shocks to the system in quite the same way.

Q26 Mr Weir: The grid at the moment has to turn on and off positions depending on the amount of energy that is coming into the grid and they have balancing and tripping charges. Their point is that if they do not know when this energy is coming on, they cannot control it; they cannot turn it on or off to allow the grid to function properly, which could lead to power outages.

Mr Simms: I think there are two levels at which you can ensure against that. One level which is being looked at a lot at the moment is the potential for, at the other end of the scale, a more interconnected European grid, which is fed into by a range of the more renewable technologies that operate on a high degree of reliability at a macro scale, whether it is tidal or wind, which can even out supply at a large level down to evening out the peaks and troughs at the local level. Again, I would say it is a particularly technical area, not one in which I am expert, and so, rather than giving a half-baked answer, I will come back to you later and refer to the work that some of my colleagues who deal with those questions work on.

Q27 Sir Robert Smith: Mr Simms, you made the point that there should be more investment products aimed at green investment, green jobs, and at pension products. Do you think what is missing perhaps still from getting those products really up and running is the confidence that governments and international organisations, such as the European Union, have a longer term commitment to delivering on this agenda so that those investments will make a return, in a sense, getting the carbon price and the forward carbon price high enough actually to make it attractive and send a signal that energy efficiency really will pay in the long run?

Mr Simms: It is a huge issue and a huge problem. The carbon price and the rollercoaster ride that it has been on has led I think to despair and utter confusion in the renewables sector. There is a number of different ways in which you can perhaps underwrite a carbon price and taxation is one of them. Another way you could do it is by having a more serious and tighter cap, which will force the price. If we are to align our efforts with the science of climate change at the moment, as well as the impending nature of the peak oil debate, that is something we should do anyway. Leaving it to the way that the market has been operating at the moment clearly has not worked for a lot of people and it absolutely has to be addressed.

Q28 Colin Challen: You have spoken of many interventionist measures which appeals to old lefties like me, but we have only just touched now upon the ETS. Do you think that the ETS can actually play a valuable role in a green stimulus package?

Mr Simms: There are three things about the ETS. It is all about the cap, as far as I am concerned. A tight carbon cap is needed to drive a price signal which will make any difference. I think the ETS was badly designed at the outset; it had too much hot air in it and clearly malfunctioned on that basis. I think some of the ways in which the ETS and the carbon market play out in practice in terms of how one accounts for emissions reductions also has the potential for a lot of leakage in the system. Purely relying upon a price that, depending upon what the external circumstances are, can ping around like a pinball is not enough to build the replacement energy infrastructure that we need. I am neutral about at what level the price would generate the necessary change. I do not think anybody really knows. Lord Stern has talked about £40 per tonne but I do not think we actually know because it is very hard to take a guess on how markets operate. I think the ETS, probably, if it functions well, if it has got a decent cap, if you drive the leakage out of the system, is probably part of the solution but it is certainly not going to work even of itself

Q29 Dr Whitehead: Just briefly, in order to make a number of the issues that you have raised work, you have suggested very briefly that the low-intensity grid needs to be completely reconfigured and that, by the way, there should be an effective European supergrid in order to even out the electricity supply from renewables, which is obviously substantially greater than the interconnectors, and implies a grid system. My calculations are that, roughly speaking, those measures alone would be about £60/70 billion to introduce and would take about 15 years to do. How does that square with your timescale and your other proposals as far as upgrading is concerned?

Mr Simms: I think one of the other things we say in the report is that we do not believe that we can achieve what we need to achieve purely through substitution of new energy sources and through the implementation of the best available energy efficiency; that we see that demand management has an important role to play in this as well. I cannot remember whether we actually mention it in detail in the report, but we have suggested, for example, a demand reduction obligation being placed upon the utilities to drive some of those changes.

Q30 Dr Whitehead: What percentage? What does that mean?

Mr Simms: That means that where the UK is concerned, based on the work, for example, of people like Kevin Anderson of the Tyndall Centre on climate change research at Manchester University, for the UK to play its part in meeting a reduction in global emissions, which is in line with the science, to prevent us flipping past the temperature band of 2 degrees, the UK needs to hit year-on-year emission reductions of between 6 and 9 per cent. So the culmination of all the different initiatives that we have been advocating are designed to get us to that. I have to say, when I came into this meeting, I was slightly nervous about getting a range of detailed questions on things like this because the report (I should have said at the outset) was the product of eight different people writing it, and I think it is fine to mention that the particular proposals relating to the grid structure were from my colleague Jeremy Leggett, in whose area of expertise it is. So, again, on that particular question, I would like to make a note of it and come back to you after I have consulted with my colleague, whose work area it is.

Paddy Tipping: Many of us know Jeremy. We are going to talk a bit about carbon capture and storage and other technologies.

Q31 Mr Anderson: You do not mention carbon capture in your reports, as far as I am aware. Do you think it has a role to play in developing a low-carbon economy?

Mr Simms: The issues to do with carbon capture and storage are in the way that we have touched on mutual priorities around the table, so far. I do not rule out carbon capture and storage and I believe that we have to look for the most sure, guaranteed and effective ways to both reduce emissions, generate the electricity and get the power that we need to run the country. There are many question marks that hang over carbon capture and storage. I think it is right that people have argued that, should we consider any new coal-generating capacity, those plants should come ready. I note that the ones that have been discussed at the moment (I think the figures show) are geared up to capture somewhere between one-seventh and one-quarter of emissions from new plant. I think the signal it sends from the UK, for us to be considering a new generation of coal-fired power stations which are not completely ready to capture and store their own carbon, is a bad one for a developing world and countries like India and China, which sit on vast reserves of very dirty brown coal. I would prefer strongly that the UK did not go down the route of new coal-fired capacity because I think we have got to bite the bullet and jump. That said, it is also still very early days for the technology. I have spoken to people who work in the industry who refer to the fact that the geological safety and soundness of structures after you have taken out X per cent and are thinking to use them for sequestration is still not a thoroughly understood process. So I think we should be cautious before we trust to it too much.

Q32 Mr Anderson: What about the demonstration projects to test this?

Mr Simms: I have no problem with the demonstration project. What I would have a problem with is the use of demonstration projects as a slight-of-hand with which to introduce a wave of new coal-fired generating capacity which cannot be guaranteed will be effectively incorporated with comprehensive carbon capture and storage. It is difficult, and the politics of it, I think, have been somewhat opaque to date. I think the effort that it took to get to the point of insisting that any new plant should be ready even with the trial element is demonstrative of some of the power struggles that have been going on behind the scenes, which makes me nervous.

Q33 Sir Robert Smith: I can see where you are coming from, obviously, if we build a whole generation of power stations on the assumption of technology that is not there, but the handling of carbon, the use of carbon and its storage underground has been used a lot in the States in terms of oil recovery. So there is quite a lot of understanding of carbon. Are we going to stop China and India using coal? Do we have to succeed with carbon capture and storage if we are going to, as a global world, tackle climate change?

Mr Simms: I think the UK has to be a beacon. We have to set absolutely the highest standards in everything. We have to use the greatest creativity and imagination to set an example of how much is achievable. Actually, it comes down to that most politically unpalatable issue, that however you look at it - and I know we are talking just about energy and climate change here - energy underpins a whole range of other ways in which our ecological footprint, not just talking about carbon, vastly outweighs that which the planet can legitimately take. So it is not just about redesigning an energy system so that we can keep going on as usual; there are fundamental issues about how we need to reduce our ecological footprint in order to be able to equitably share the planet and hold up models of development for India, China and Latin America to plausibly emulate. I think behind that I suggest that there is a kind of deeper re-engineering required than merely how we wire the grid and how we pour energy into it. We often forget that linked to our energy use is a range of other forms of unsustainable consumption that affect everything from our fisheries to our forestries to how we mine things from the earth. The analogy I would draw is this: that there seems to be a perception still, I think, surprisingly prevalent in the debate around energy at the moment, which reminds me of the transport debate in the 1970s, when the mantra was "predict and provide". We thought that all you had to do was to guess how many cars the market and the population were going to kind of wish on to the roads and then build the roads to meet them. In a finite planet we cannot do that, and I think where energy is concerned it is not a game of "predict and provide"; it is a game of working out how we can align our energy use to what our ecosystems can provide and what they can safely absorb without triggering catastrophic environmental breakdowns. I think it was James Hansen, the world's leading climate scientist, who said that we need to be aware of exactly what the stakes are here: that we are on the cusp of consigning to history the climatic conditions under which civilisation emerged. It is not a game of just keeping our energy supplies flowing to power a "business as usual" economy; it is about a deepening profound and fundamental re-engineering of how we use energy and other resources too. I sometimes feel that the way that we approach is we are looking for the latest magic, sort of, silver bullet or technological fix, forgetting that magic is exactly that - it is an illusion; it is a stage game. I fear that whilst I certainly do not rule out that carbon capture and storage have got a role to play I suspect that it is part of a deeper narrative in which people really want to keep "business as usual" ticking over.

Q34 Mr Weir: I understand what you are saying about the energy use, but obviously the debate about energy has split, in many ways, the green camp, if you like, between those who are purely renewables and carbon capture and now, it seems, some in favour of new nuclear build. How do you feel about nuclear power stations?

Mr Simms: To be fair, there is a very small minority of people who have environmental credentials who have said that. Some people who have been reported as being nu-converts have merely got to the point of saying that they think everything is so dire that they really just do not care any more. When you look at the science of it and the degree to which even an ambitious programme of new nuclear could substitute/provide for, its contribution really is not that great, however you look at it. I think Colin Campbell from the Association for the Study of Peak Oil points out that we already passed the peak of economically viable, high-grade ores for the nuclear industry anyway. We tend to think that nuclear is an infinite supply, and it is not; it is bound by geology in the same way that other conventional sources of power are bound. I would take a simple, pragmatic and economic argument and say that what we need to do is a bangs for buck argument. What are we going to get in terms of maximum carbon reductions? What are we going to get in terms of maximum output for what we invest? What are we going to get in terms of security of supply? When you apply those arguments (and we last looked at this in detail in 2003 in a report that we did comparing the potential contribution of micro-renewable sources with nuclear) we came to the conclusion that when you factored in many of the, often, hidden costs of nuclear power the unit price was extremely uncompetitive, and it came at the bottom of a long list of alternatives. There is another piece of very interesting work - tantalising work because there is very little to compare it to - done by an analyst in the field called David Fleming, who has worked out that when you do a full life-cycle energy analysis of potential new nuclear and you look at the energy involved in its long-term safe storage, construction, mining, etc, etc, nuclear can provide no more energy than you will need in its full life-cycle to manage its mining, building, decommissioning and long-term safe storage. In other words, it does not make a net contribution in the long term, notwithstanding the fact that per unit of output it is, I believe, uncompetitive in the long run. That is without touching on the various security arguments, which I think are profound and important as well and tend to be rather glossed over.

Q35 Colin Challen: One of the great technologies of the future, on which the EU spends more money on research and development than it does on renewable sources of energy, is fusion. Would you support that kind of approach?

Mr Simms: Would I support the investment?

Q36 Colin Challen: The investment that the EU spends directly on R&D in fusion outweighs what it spends on renewable R&D. Is that the correct approach? Is it the right priority?

Mr Simms: It is the old joke, is it not, that we are 20 years away from getting economically viable fusion, and we have always been 20 years away from getting it. We are at the stage now where we have got to do things now. I grew up as a child under a Conservative government that was always telling us that we had to make tough choices in how we allocate our resources. We need to be making these changes now. I think that means that the priorities for our investments and our spending need to be geared towards implementing what we know works and implementing what we know, pound-for-pound, investment generates jobs. Jobs are very important at the moment. One of the problems with those sorts of technologies - and nuclear in particular - is that it is extremely capital-intensive. Yes, of course, it creates some jobs but in comparison to more decentralised renewable energy forms it creates very few jobs. So I think if we are looking for multiple wins in terms of carbon savings, in terms of security of energy supply, in terms of creating jobs, renewables are going to win hands down again and again and again. So I think if we are increasingly in an era in which we see a squeeze on public finances across the industrialised world, those tough choices get even tougher. I would say we need to focus our resources on the renewable sector.

Q37 Colin Challen: That logic would apply to R&D in a whole range of potential new products and services, would it not? It does not just have to be fusion; we do not have to stay within the energy sector. If the immediate challenge is climate change and renewables have to be developed and so on, you could say: "Let's, at least temporarily, stop R&D in a whole range of areas to focus our attention on the task-in-hand." Is that something that you would advocate?

Mr Simms: It is terribly hard to make this argument without it sounding somewhat alarmist, but I think you cannot under-estimate the nature and the scale of the problem that we face. Since, when you are talking about profound environmental change, it happens at a different timescale to us sitting and having meetings and even conducting inquiries of this nature, it is quite hard to connect with the reality of that, but I would go back to Jim Hansen's words and say that we have a period of time, a desperately short period of time (and we calculated on the basis of emissions trends and the latest work of the IPCC that we have, roughly, assuming that emissions do not rise any further, until the end of about 2016) before we flip over into a new, more profound phase of risk, where it is no longer, to use the IPCC's criteria, likely to stay below that critical 2 degrees above pre-industrial times temperature rise. So I would say we have got a period of less than a decade in which all our efforts need to be geared towards effecting this great transition, this great environmental transformation, of our economy. I do, yes, think we should put other things aside and focus not entirely exclusively but largely on that effort. I am reminded of the challenge that Britain faced during the Second World War when we had, as an island nation, a huge challenge to radically reduce our consumption of resources and preserve our energy supplies. At that time you saw the lead being taken by public buildings at a national level and at a local level; you saw highly visible demonstrations of people in public office opting to save energy and use transport systems that were low on energy consumption; you saw public buildings being turned over and publicly demonstrating how they were radically cutting their energy supplies. I think we need to make and perhaps need to see some evidence in the public domain, in circumstances which I know elected officials are interested in, of leaving behind the difficulties of the last few weeks and leading by example. I think there is a great chance to do that. That has taken us into a slightly different point.

Q38 Paddy Tipping: Before we go into the current political problems we are going to stop at that point, Andrew. Thank you very much for coming. I noted that you walked here, but that might be due to other problems. Thank you very much for coming. That has got us off to a good start. You promised that you will supply a number of pieces of further information and, in particular, the study that you will publish at the end of July. Thank you very much indeed.

Mr Simms: Yes, and thank you very much. I apologise for not being an expert in every single competence the Green New Deal covers, but part of the purpose of writing it was to bring together a range of expertises covering finance, energy and climate change, precisely because we thought they needed to be brought together. If the Committee would like to follow up on those points we would be delighted to provide follow-up information.

Paddy Tipping: Thank you very much.

Memorandum submitted by Greenpeace

Examination of Witness

Witness: Dr Douglas Parr, Chief Scientific Adviser and Policy Director, Greenpeace, gave evidence.

Q39 Paddy Tipping: Douglas, thank you for joining us. I know you have heard all of the discussion this morning; inevitably, we are going to cover some of the same ground so, I guess, you have had an opportunity to think through some of the potential responses. Let me start where we started with Andrew about the Government's green stimulus. Has it gone far enough?

Dr Parr: No, it has not, and the scale of the challenge that was referred to previously is clearly one where it is going to require considerable amounts of money in order to make that transition, not obviously just in direct expenditure but in creating the frameworks and facilitating investment by the private sector and by individuals as well. As I understand it, we have got about £1.5 billion from the collected stimulus packages and Pre-Budget Report and Budget. We would say that the annual investment would need to be, certainly, over £10 billion.

Q40 Paddy Tipping: What more needs to be done? You have talked about extra money, going to £10 billion, but give us some specifics about what you would like to see as part of the package.

Dr Parr: Let me split that into a number of different sectors in terms of energy. Firstly, as has been referred to, the building stock. The level that has been invested by the Federation of Master Builders on the back of the Oxford University research is that we need about £5 billion a year every year up to 2050 to bring the building stock up to standards that would be compatible with an 80 per cent cut. (I would say, actually, we probably need to go to about a 100 per cent cut in the energy system in the UK but, okay, for 80 per cent, £5 billion a year.) That does not have to be public investment, it should bring in private investment, but for a number of sectors, including public sector, social housing and so on, and some of the hard-to-treat homes, then public sector money is going to be very important. Secondly, the power system. Clearly, we are going to need a lot more wind and we are going to need a lot of offshore wind. Now, we welcomed what the Government did in the Budget which was to give extra support to offshore wind and, hopefully, get the first mega-offshore wind farms moving. We very much welcomed the announcement on the London Array. However, to get a lot more of it then we are going to need considerable extensions of the grid out to the strategic areas offshore that have been identified in round 3 and beyond. That is investment up front and that is a regulated investment but, nonetheless, it is investment of some size. We would also support, as was alluded to, strategic connections with other countries which allow management of intermittency; for example, say, connections with Norway allowing the use of dispatchable renewables in their hydro system. The cost of renewables through the renewables obligation - we actually prefer a feed-in tariff but can understand why the industry at this point in time prefers the renewables obligation, at least for the major projects - will continue to have a cost and it will have a cost as we get more and more renewable energy on to the grid. Thirdly, I would say, in the built environment, we see that it is important to move to district heating because of both the opportunities for energy saving through CHP which that offers and, also, through the strategic opportunities that that offers in the long term as we switch to lower-carbon forms of heating, because it is much more straight forward to convert, for the sake of argument, 25,000 installations serving 1,000 homes each than it is to engage with 25 million individual houses with some owner-occupied, buy-to-let, etc. So those are three examples; there would be others in the transport sector, like electric vehicles, and so on.

Q41 Judy Mallaber: We have been talking about international comparisons. How do we compare? Are there any other countries that have gone beyond the hype that we should really look at? We are visiting Berlin and Copenhagen shortly; are they going to give us good examples of what can be achieved?

Dr Parr: One of the things I would say is that international comparisons should not just stick to governments but examples of what is going on below the country level. I am sure that Copenhagen has recently announced that it is going to aim for zero carbon by 2030 and it accepts that it will not be able to do that all within its borders and it will go to offsetting, but those offsets have to appear, I think, within 50 km of the Copenhagen borders. So it is not some obscure offset project in a developing country far away where we are not quite sure what is going on; it is happening on the spot - an excellent example.

Q42 Judy Mallaber: Is that just talk or are they actually doing it?

Dr Parr: I think they are doing it. Another example from Copenhagen is the introduction of cycling policies over a number of decades which they have calculated have saved about 90,000 tonnes of carbon, and where they now have between 30 and 40 per cent of trips inside Copenhagen done by bicycle. That is the kind of modal shift that would be welcome in a number of cities around the UK. London is a bit of an exception, but many cities around the UK could benefit from that kind of thing.

Q43 Judy Mallaber: Are we way behind other countries?

Dr Parr: I think in terms of a cultural shift on transport we are really behind. We have really got to get to grips with the poor quality of our building stock. I think it is EST, observing that we have some of the worst building stock in Europe and that we need to do quite a lot just to get to the sort of standards that we see in other countries. On renewables, the EU does its charts of renewable energy, and I think until the last one I saw we were only alongside Malta and Luxembourg in the low level of renewable energy that we have, which given the renewable resources that we have, particularly offshore, is a crying shame. So I think, on a number of measures, you can say yes, we are behind. I have to say that - and we are not usually people who like to give credit to governments - credit to Government; they are starting to take the bull by the horns on, particularly, offshore wind. So that is good, but there is plenty more that could be done.

Q44 Judy Mallaber: On the creation of green collar jobs (a favourite theme of this development), IPPR have done a report for you relating to jobs from offshore wind. Have you done any work in other sectors and have you done any estimates of what is the potential for the creation of jobs?

Dr Parr: The only work outside of that is the work which, I hope, you have also seen on energy efficiency in the building stock, and how cost-effective it is in terms of generating green jobs, where, I think, for every €1 million of investment we get about 8 to 14 directly created jobs and between 9 and 40 indirectly created jobs. The comparison I like to give is that by energy efficiency you do not just create a one-off fiscal stimulus, like you get through VAT, but you get a fiscal stimulus every year, for every year, because of the savings in fuel that you get. So I think, particularly in energy efficiency, those indirect jobs are really quite important. They are much bigger features than they are in comparison with other jobs. In direct answer to your question, those are the only two sectors where we have direct jobs.

Q45 Colin Challen: I think we can all accept that there are a lot of new jobs to be created in the green and environmental sectors. Does your analysis extend to looking at the net balance in job creation or job losses for the UK economy? If we save energy and have demand management, and we use things longer, then you could have a green recession. To take one example, if we all decided that we would hang on to our old cathode ray tube TV sets and not buy the new flat-screen TVs, and everybody ends up throwing away perfectly operational functional CRT TVs, that puts people out of jobs in one sector. Why do we not just hang on to things for longer? But then what impact does that have on jobs?

Dr Parr: Yes, I understand the point you are making and it is a complex macroeconomic analysis which, I am afraid, we have not stretched to. We did discuss it with the consultant in the course of the report on energy efficiency and recognised that, broadly, the job effectiveness (if I can put it like that) of energy efficiency work is generally recognised to be better than other forms of public expenditure in creating jobs. However, it is very difficult to put figures on those.

Q46 Colin Challen: In your analysis, obviously, there is a lot of focus on renewables and so on, and energy efficiency. Have you given sufficient weight, do you think, to how you cope with job losses in the impacted sectors which are, shall we say, redundant in the new economy?

Dr Parr: I am aware of work that has recently been published by the UK about the effect of an accelerated uptake scenario for the EU-wide 20 per cent renewable energy target, which of course translates to 50 per cent of energy in the UK. Their assessment is that an accelerated uptake scenario compared to what is currently the collection of renewables policies in place would generate, I think (I am sorry, the number has slipped my mind), millions of jobs across the EU when taking into account the macroeconomic effect that you talk about of losing jobs elsewhere. I am sorry that number has slipped my mind; I would be quite happy to forward the report to you.

Paddy Tipping: That would be helpful.

Q47 Anne Main: You have mentioned on several occasions some of our older housing stock being totally inefficient in terms of energy. Do you think more could be done, perhaps, in creative ways such as having a green tariff within Council Tax bands should properties be brought up to a particular green standard, which might encourage those who are entitled, potentially, to grants to invest, because they would then see an ongoing reduction in Council Tax bands? Do those sorts of schemes exist anywhere that you know of?

Dr Parr: I have to say I am not an expert on this but I do know that there have been some experiments with that - I think Braintree is one of the district councils that have attempted to do this. It is, in fact, one of the recommendations in the report that was done for us by Impetus Consulting, because it may not appear to be economically rational and cost-effective but, actually, in the psychology of it people wanting to get a reduction in their Council Tax is worth a lot more than any number of grant schemes. They just see that as something that is an important thing to do and, you know, somehow getting one up on everybody else. So, actually, operating through taxes that are not particularly well-liked, shall we say, is a very cost-effective way of looking at it.

Q48 Anne Main: We hear about increasing taxes or making green taxes, but this would be a tax reduction, in effect.

Dr Parr: This would be a tax reduction and, therefore, sits in people's brain space in a different place to a grant-making arrangement.

Q49 Anne Main: Do you think that could be extended to even within industry and businesses whereby this green incentive was given to employees to operate in a greener fashion - be it travel and so on? I am looking more for carrots than sticks. I am hoping you might suggest a few carrots.

Dr Parr: In the business sector it is clear that the barriers that SMEs face on energy efficiency and building stock is very similar to those that are faced by individual householders. I guess an equivalent reduction in business rates would be an effective way of generating interest in energy efficiency, because the key thing is to get it taken seriously at senior management level. So that would be one way of doing it. As for businesses trying to stimulate "greenery" amongst their employees, I would have to think about that a little harder, because I think there are some complexities there about double counting, and so on.

Paddy Tipping: Let us move on to talk about another area: offshore wind and marine renewables.

Q50 Mr Weir: Your report suggested that between 23,000 and 70,000 jobs could be created in offshore wind, and the Government in their Investing in a Low Carbon Britain introduced, in a new low-carbon investment fund, a targeted investment of £405 million and, also, proposals for the increase in ROCs. How do you think that will impact on offshore wind and marine renewables?

Dr Parr: I think there are a number of issues around us getting hold of those jobs for the UK. Some of them sit with financing, but quite a number of them sit elsewhere. Let me talk about the financing ones, first. First of all, you have got to get the support mechanism right, and it would appear that the people who are going to do large developments of offshore are comfortable with the renewable obligation. So the banding of the renewable obligation may well be adequate. I think we will have to see going forward whether that actually does do the job, but, at the moment, that seems to be there. The other two barriers are the straightforwardness of the planning system and being sure about grid connections. I have referred to that as one of the areas that does need some form of financing, the grid connections, and probably from the public purse, or at least spread over bills, as it currently is for the onshore grid, and the existing mechanisms will probably be adequate.

Q51 Mr Weir: There is an ongoing problem already with grid connections with onshore wind and transmission charges. Do you think that that needs to be really looked at for offshore wind as well, or is that going to be a barrier to developing offshore wind and, particularly, marine renewables, which will often be in fairly inaccessible areas?

Dr Parr: My understanding is that the barriers to connection which have been experienced onshore are now being tackled; if not to the total satisfaction of wind farm developers at least it is ameliorating the situation. Offshore there is due to be a different regime, and the precise configuration of that regime is still to be established whether it will effectively be a national grid or the Scottish operators extending their networks or whether it will be some kind of private offshore transmission operator. It is an uncertainty that does not help, it has to be said. I think for wind farm developers themselves the other uncertainty is about whether if they construct their wind farms there are actually going to be cables to connect them, and that is why there is a significant importance in strategic upgrade as identified by, at least, the National Grid south of the border, because if you know that a certain area of sea is going to be important for offshore wind development then every individual scheme having to connect its wind farm to the shore is not a very cost-effective way of doing it, and is a slower way of doing it. If a number of small cables going on a point-to-point basis from the farm to the shore was, instead, replaced by a very large cable going through to one place, then you save the taxpayer, effectively (or, in this case, the bill-payer) quite a lot of money and you increase the certainty that those developers have got that they will have a market for their product. It seems to me that that is something that should be taken up very speedily by Ofgem. There are no real barriers to that happening; there is no legislative barrier; it is a question of getting the mindset and the process right.

Q52 Mr Weir: I think your point about connection is the difference between connection charges and transmission charges; connection charges have already been dealt with but there is still a serious problem over transmission charges. If you are suggesting, rather than a point-to-point position, you are going to have one cable does that not suggest there is going to have to be intervention to decide on the location of wind farms by central government or Ofgem rather than by allowing the individual companies to decide where they can best site the wind farm? Is that going to lead to less development around the coast?

Dr Parr: I think if government has got the scale of ambition then not necessarily, no. We already see that there is, to some extent, intervention by saying: "Here are the potential sites for round 3", so in the licensing arrangements for offshore wind some level of intervention is already there. Does that mean that those sites which are not within round 3 that developers want to develop are disadvantaged? I suppose the answer is yes, but at the moment the worry seems to be that we are not going to get around to getting the stuff that we have identified built rather than that there are lots of other developers gagging for sites that are not within the rounds.

Q53 Mr Weir: What about other marine renewables - tidal and wave power and such like? Is there anything else government needs to do to ensure that they are developed?

Dr Parr: I think you touch on a very important point because if I look at the UK and its position globally then marine renewables - wave and tidal stream, in particular - are those where we have a strategic advantage that no other country in the world has got, and we could be the crucible of creating, of course, an industry for ourselves but, also, contributing globally a technology that will otherwise not be made as cost-effective as we could make it. In terms of what government needs to do, first of all, again, you have the same kind of considerations that we have with offshore wind. We need the support system. I know that the banded ROCs are quite helpful. The Scottish Government has gone further, which is, of course, always welcome, but again the same kind of barriers as apply to offshore wind apply to marine renewables, which are surety over grid connection, some opportunities for testing components where some of those connection charges are, perhaps, not levied (a demonstration place like in Orkney), and ensuring that the planning regime is reasonably predictable. Beyond that, again, the same set of issues apply as to offshore wind, but in the sense that if we want to get hold of those jobs then it is about getting hold of the supply chain and making sure that the kit is manufactured here through the development of ports, through the development of the infrastructure which supports the industrial sites, to making sure that the manufacturing capacity that is in the UK and the skills that are already available for conversion to marine renewables are made available. The different thing about the other marine renewables, other than offshore wind, is that because it is at an earlier stage of development then we need to ensure that there is money available for the demonstration phase. One of the saddest things that I have heard is about the marine renewables development fund which was allocated 50 million for this territory, and I understand only a few million of it has actually been spent. It seems to me that if we are a little bit more creative and, perhaps, a little bit more flexible about how we choose to spend that money then, yes, we will be able to spend it. However, that is not the object of the exercise; it is actually doing two things: one is, hopefully, you will get some return on that, but you would also give a lot more confidence to the marine renewables industry that this is a Government that means business and is not going to be hamstrung by bureaucracy in trying to make it happen.

Q54 Dr Whitehead: You have suggested in your report that a £5 billion investment per year in energy efficiency, mainly in households, would lead to very substantial emission reductions and substantial long-term job creation. The Government has proposed a £1 billion energy saving programme. I assume you would consider that to be somewhat inadequate in view of your own proposals?

Dr Parr: Yes, I do. I stress that not all of this money has to be public sector money; it does not all have to come from the public purse, but in terms of kick-starting it, particularly in the current economic climate, it seems to us that public sector, social housing are going to be best places to start, for two reasons. One is that the market is not particularly tight at the moment. When we launched that report we had support from the Federation of Master Builders who told us that in the first quarter of this year they estimated about 90,000 people have been laid off from the building trade, which is a horrendous number. Those people who are semi-skilled or, at least, used to the building trade could be redeployed with minimal training (the Director General's estimate was about 3-5 days, typically, of training) to allow them to become part of the workforce that would deliver this energy efficiency "revolution" that we do need to see in our building stock. The other area where I think we have a strategic shortfall is that about 30 per cent of our homes are hard to treat - principally solid-walled. It seems to me that because they are hard to treat they need almost a special strategy all of their own. There is a real opportunity, and I would do it in a two-pronged way: one would be to target particular areas and see if the existing technologies can be reduced cost of installation by doing whole areas at a time, getting contractors to move in, if you like, and do those areas (social housing would be an excellent place to go), and the other places that we do need R&D, or RD&D in this case, are to see if we can improve the existing technologies, not merely whether we can find a better foam because that is not where a lot of the cost is - a lot of the cost is actually in the installation - and whether there are more effective ways of installation than, frankly, what I experienced on my house, which seemed to be extremely slow and time-consuming; just in the way that the Germans have found more effective and cost-effective ways of installing solar thermal and solar PV than we seem to be able to manage over here, because, again, the cost of solar PV and solar thermal is not just the panels, it is about the cost of installation. They can do it much more cheaply than we can.

Q55 Dr Whitehead: But a £5 billion per year programme, as you have suggested, whilst you also underline that this would be a question of starting by concentrating on social housing, hard-to-treat housing is also only a minority in social ownership.

Dr Parr: Right.

Q56 Dr Whitehead: Therefore, that would imply a large entry, possibly district by district, into private sector housing.

Dr Parr: Yes.

Q57 Dr Whitehead: How would that be achieved? Would it be by incentives? Would households be directed to raise their efficiency? Would there be other methods of persuading people that this was a way to go forward?

Dr Parr: Again, I see there being a number of strands. First of all, the agent for much of this has to be the local authority because, potentially, quite invasive building work is not going to be liked by people on the back of utilities, who are generally under-trusted, and I think there needs to be a local agent, which in this case would be local authorities. Match that with mapping of the quality of the building stock, which the Energy Performance Certificates around Home Information Packs give a platform for. I think the example from Kirklees shows that they are able to do a street-by-street, house-by-house approach. I would like to see one of the schemes that was included in London's package, which was the Green Concierge Service, improved, enhanced and rolled out proactively as an offer. Just to elaborate for those who do not know that scheme: essentially, this is for people who have money that they want to spend on their property but do not have the time, energy and information to sort it all out for themselves. The Green Concierge is someone who comes in, gives the advice, says what needs to be done, and actually manages the project. So that unpicks some of the potential barriers. Ultimately, because quite a lot of this is owner-occupied, this has to be a fairly concerted push, coupled with, yes, grants even for those people, and Council Tax reductions to make the incentives worthwhile, and, if you like, social pressure from around there. I would also like to see regulations on refurbishment so that for significant refurbishment they have to meet not only building standards but the house as a whole has to meet certain standards. It is no good putting a highly energy-efficient extension on a house where its loft is not insulated. Have I got the whole package in my head? No, but there are a number of strands that you can see would have to be part of the package, in particular tackling the owner-occupied sector where you would not have to use private cash.

Q58 Sir Robert Smith: I will declare another interest as an Honorary Vice President of Energy Action in Scotland, a fuel poverty charity. Every year in Warm Homes we go into houses to promote insulation, and one of the most depressing visits was to a semi-detached house getting cavity wall insulation where I said to the installer: "What are doing with that chain?" "We have to put that chain down to make sure the neighbour does not get any insulation because they don't want it". We all talk the talk about how it is the low hanging fruit, but it is not hanging quite as low as we want. Do we not have to have quite an education campaign as well to give people the confidence to allow these intrusions into their houses because in the long run they will benefit?

Dr Parr: Yes. I think it is too easy to think about a lot of these things as technologies, and every technology has a social context, and every technology - whether you are talking about new forms of agriculture or whatever - has a social interaction. I think that there are ideas where you can provide that "nudge", like evidence on bills about how other people in the street are doing and how poorly they are performing compared to others. In the end that means nothing if they do not care about it. So my personal preference would be not to go down the coercive route unless other routes have been explored. In the end, that might be necessary but I think the dynamics of social pressure, when everybody around in the street is getting their own house upgraded, should be enough to get most people to play ball.

Q59 Sir Robert Smith: I was thinking of someone trying to get a condensing boiler and the installer says: "Ooh, you don't want one of those new-fangled things; it's far too difficult to maintain". There is a big education exercise out there still.

Dr Parr: Yes, I do not disagree with that. I did cite the Federation of Master Builders, but they are quite upfront about the relatively low level of skills of some of their members in being able to deliver this. So, training, yes, and education, yes, has to be a component of it, absolutely.

Paddy Tipping: Let us spend our last few minutes to talk about carbon capture and storage.

Q60 Mr Anderson: In your evidence to us you mentioned that you are concerned that the development of CCS would possibly impede opportunities for renewable energy. Can you expand on that?

Dr Parr: Yes, I think there are two areas where we see that potential: one is the level of support that carbon capture and storage would require from the taxpayer. As I see it, both of the main parties are now advocating something where it is paid directly by either the taxpayer or by bill-payer rather than by the utilities. In a world of finite resources you would have to worry about whether that would be taking money from other incentive schemes for other technologies. So that is one area. The other area is that we see the future of the power grid as one that is rather more dynamic, responsive - "smart" is the conventional term. Again, as we understand it, carbon capture and storage would have to be run pretty much at base load to make the most of the investment. So the potential for conflict with very large amounts of renewable energy on the grid is there, just as identified by EDF in their submission on the renewable energy strategy.

Q61 Mr Anderson: Is not the reality that if we want to keep a balanced energy mix and we want to maintain base load then coal is an inevitable part of that mix? If we accept the fact that we cannot go on in the way we have then we have got to develop CCS, we have to accept the inevitability of burning coal?

Dr Parr: I think we have to look at where we are in the development of CCS and where we will be in, say, another decade, because the work that we did jointly with WWF and done for us by Pöyry Energy Consulting says that over the period to 2020 if we meet our targets that we have committed to under the EU Directives, both on energy efficiency and on renewable development, then there is, as things stand, no current need for conventional generating capacity over that timescale. I think for CCS we have to be very clear about what our objectives are in developing it, and for the moment there is no absolute need for us to develop new coal capacity with or without CCS.

Q62 Mr Anderson: Can I just be clear on what you have just said? If everything is done by 2020 there would be no need for conventional - are you saying we will not need coal, we will not need gas, we would not need ----

Dr Parr: We would not need new gas, we would not need new coal. That was done for us by Pöyry Energy Consulting, and I would be very happy to send it to you.

Mr Anderson: I would be very happy to see it.

Q63 Colin Challen: Just on clarity of objectives for CCS, what would you say would be - if we had to have it - an acceptable rate of capture? Some people, in my view, are selling CCS on the basis of anything over 50 per cent. I am not sure if the Government has reported on its consultation on definition yet but what would be your definition of CCS if it were to be part of the mix?

Dr Parr: I do not think we have come up with a figure; we have not got to that stage. I think if we were to come up with a figure, the considerations we would have are: when is this power station going to be operating (assuming it is a new one), and when it is going to stop, given the commitments we have to reduce emissions over the period to 2050? The reason that we have been very focused on coal and coal-fired power stations, just like Heathrow third runway, is that it is building in infrastructure that will have a very long-term carbon footprint. Now, if we talk about a new coal station (say it is fully fitted with CCS and it is not a demo), if it is fully fitted with CCS presumably a new coal station would only be built in something like 2020 or 2025 even, and for existing stations that would mean it would be operating well into 2050. What would any residual emissions look like compared to emissions that we know are going to be very hard to deal with, such as from aviation and from some of the building stock? What is left at the end of that? So that is the sort of context in which we think: "Is there an acceptable figure for CCS?" given what I have said previously about whether the UK, in particular, has a need for it, which is not clear to me.

Q64 Paddy Tipping: Thank you very much for that. You promised us a couple of pieces of information and we would be grateful if you could let us have those. If there is anything else that you think "I should have told them that" it is still not too late to drop us a note.

Dr Parr: Okay.

Paddy Tipping: Thank you very much for coming.