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Charles Hendry:
I have great respect for the hon. Gentleman, but there is a fundamental difference here. We are talking about policies that will help to drive investment decisions, which need to be made in a relatively short period. The people who are making them need to know the long-term scenario in which they are investing and the environmental and financial criteria that will be relevant. If there is no clarity, persuading people in boardrooms in Madrid and Essen will become that much more difficult. What we seek to do-we have
broad cross-party agreement on this-is find a way to provide that certainty but at the same time help to deliver on the low-carbon commitments on which we all agree.
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Mr. Weir: The hon. Gentleman assumes that a change in Government policy would mean the introduction of an EPS or similar mechanism, but there is another danger. The only coal plants likely to be built in the next few years are those that will be subject to the levy and will effectively be subsidised. We may get to a point in 2020 at which the plants have been built but CCS is not working or is not economic, and there is then a real danger of a change in policy, with the Government saying, "We will not go ahead with this, because we have invested so much money in these plants." We could therefore end up with higher emissions in the long run unless there is an EPS from the beginning that would force down the emissions or mean that the plant would not proceed.
Charles Hendry: One concern is that the Bill states that the levy may in due course be used for retrofitting. It does not state that there is an automatic right for it to be so used. Although the Minister has said today that it could be, there is no legal basis for her words in this House being used in a court in years to come. It is the words printed in the Bill that will be used. Accordingly, an element of doubt will remain. People will say, "Yes, I may get the levy for the first 300 MW, but what about for the next 900 or 1,200 MW, or however much more there will be?" Companies will say that that is not guaranteed, so we need to consider what the likely framework is and how we can give them the assurance that they need.
What we want is an emissions performance standard that helps to give investors certainty, so that when they come to make their decisions they know exactly what the investment criteria will be. That is why I believe-
Charles Hendry: I will make a bit of progress, and then of course I will give way to the Minister when she has heard me develop my argument a little more. [Interruption.] The Secretary of State says that I am being a bit churlish. I would hate to be in any way churlish, so I give way to the Minister.
Joan Ruddock: The hon. Gentleman is making the case that industry requires certainty, so I invite him to provide us with the evidence given to him by companies that have contacted him to argue in favour of an EPS at this time.
Charles Hendry: What companies have told us is that they are concerned about an EPS that is too high and that would deter investment. They accept, however, that an EPS set at the right level could help to provide certainty and drive things forward. That is why I believe new clause 15 is very much better than new clause 8. As always in these matters, I pay tribute to the hon. Member for Nottingham, South (Alan Simpson), who has campaigned on them for a very long time and has a tremendous understanding of them. I am glad that he and we were able to reach agreement on a new clause that we could support.
The critical point is that new clause 15 would put in place a time scale. It is a tight one, suggesting that proposals should be established for consultation within six months and confirmed and laid before Parliament within 12 months. In the time scale in which decisions would have to be made, businesses in Britain or elsewhere would know exactly what would be expected of them for some decades to come. That degree of clarity would be extremely helpful to them.
New clause 15 would also provide clarity about what factors should be taken into consideration. It mentions evidence from the Committee on Climate Change, affordability and other issues affecting consumers, which we should bear in mind, and security of supply.
Dr. Desmond Turner (Brighton, Kemptown) (Lab): The hon. Gentleman's remarks about giving the market a clear signal would carry some weight if such a signal were contained within the new clause that he and my hon. Friend the Member for Nottingham, South (Alan Simpson) have proposed. However, it leaves the EPS so open-ended that it could mean absolutely anything. It could even encompass the emission levels of a current plant. Without having some definition of what the EPS would be, the market still would not have a clear signal.
Charles Hendry: The hon. Gentleman is right, but we were determined not to put that figure in the Bill, because that would be counter-productive in the long term. No decision on new coal will be taken in this country in the next six months, and no new investment decisions are likely in that time. Under new clause 15, within those six months industry would know the recommended figure and whether it would be enforced within the following six months. Within the time scale for new investment decisions, there would be complete clarity for investors so that they could make the appropriate decisions.
Mr. David Anderson: One of the points made by people who prefer the market approach is that the market is better than the state because it will always find innovative ways to do things. We heard that argument this morning in the Energy and Climate Change Committee. If that is the case, what does the market have to be worried about? If the EPS is not in place, it will find innovative ways of addressing the matter. If the hon. Gentleman does not believe companies can do that, will he tell the House which companies they are, as my hon. Friend the Minister asked?
Charles Hendry: Markets work better if people understand the framework within which they are investing. If a big cloud of doubt is hanging over them, it is very difficult for them to make a rational long-term decision. We are saying that within six months, confirmed within a year, we would provide greater clarity. That is how we can provide support, advice and help to potential investors.
Colin Challen: The hon. Gentleman is a highly respected member of the Energy and Climate Change Committee, but on this occasion his arguments have more holes than Swiss cheese. Will he confirm or deny the story in The Guardian this morning suggesting that although he and his Front-Bench colleagues will troop through the Division Lobby in support of the new clause, his Back Benchers are on a one-line whip?
Charles Hendry: It is a great shame that Tim Webb did not check the story with us before he wrote it, as we could have told him that it was without foundation. I am not aware of a single colleague who has said that they want to be away tonight because this issue is inconvenient to them. [Interruption.] The Secretary of State may have heard of them, in which case he may wish to name them. As far as we are concerned, some people will be away doing other business that was planned a significant time ago, but the story in The Guardian is without foundation.
I wish to address some of arguments the Minister used in the letter that she sent to her Labour colleagues. She wrote that an EPS
"could mean no investment in new coal at all thus making the development of carbon capture and storage (CCS) technology impossible in the UK."
That is absolute nonsense. The levy will pay for the demonstration projects and there is scope for it to pay for retrofitting 100 per cent. of the plant's capacity, so that all those bidding under the CCS competitions would know that all their extra costs would be covered. The Minister paints a picture of what the EPS would do that takes no account of the level at which it might be set after further consultation. She writes:
"There is no EPS anywhere in the world that operates along the lines of NC6."
However, the important new clause is new clause 15, which addresses the concerns by highlighting the range of different issues that would be taken into account in deciding the level at which the EPS would be set.
I am afraid that the Minister is rather partial in the quotations that she uses. She has undoubtedly used the truth, but I am not sure that it is the whole truth and nothing but the truth. Her letter quotes the CCC as stating that it
"does not yet have a view on which measures would best tackle the risks."
She leaves out the section in which the CCC states that it
"believes that all should be seriously considered in the near term",
Charles Hendry: I hope the Minister will tell me that that was an oversight.
Joan Ruddock: Not at all-if the hon. Gentleman had been listening, he would have heard me give that quotation in full in my speech.
Charles Hendry: I have to say that more MPs will have read her letter than heard her speech. Looking at the number who are present in the Chamber to take part in the debate, there is no doubt that many more will have been swayed by what she tried to tell them in writing. I hope for her sake that more read the letter than heard the speech.
The Minister also expresses a view that an EPS could cover gas as well as coal, which of course is true. Indeed, both she and the Secretary of State have referred to the fact that both coal and gas would be likely to be involved in CCS. However, investors in gas-equally as much as those involved in coal-need to know what will happen in years to come. Leaving things so open could
drive away the crucial investment that we need in new gas capacity in this country, because not only coal will be affected.
In conclusion, an EPS, set at the right level, encourages investment, because it gives the clarity that investors need on long-term policy making. The Government need to give long-term clarity to investors in coal with carbon capture, just as they have done for investors in nuclear and renewables. The latter already have such clarity in the shape of the policy framework and the funding regimes, which ought to be applied to coal with carbon capture. New clause 15 is proposed by a broad coalition, and I hope that when the Minister reflects on this debate, she is prepared to reconsider her position on it.
Dr. Strang: It is worth registering that there is an overwhelming consensus in the House that we need to take effective action in response to the threat of climate change. The statistics issued by the Department for Energy and Climate Change are very interesting in that they emphasise the importance of the energy and electricity supply in that context. The figures from 1990 to 2008 are striking because they show that energy supply and transport account for well over half of total emissions, and that emissions from energy supply are more than 50 per cent. more than for transport. The Government are right to believe that energy supply is at the centre of where we need to take action to tackle climate change. The nub of the argument is whether there should be an emissions standard or standards in relation to our power stations. There is a strong case for having more than one emissions standard, and I am of that view, and a case for more effective regulation of our power stations in future.
Government new clause 8 is constructive and takes us forward. Subsection 2(a) states that the report will tell us
"whether use of carbon capture and storage technology in generation of electricity on a commercial scale has been, or when it will be, successfully demonstrated".
We should not forget that. It is implicit that such technology may not be successfully demonstrated and that any emissions reductions may not be cost-effective. Of course we can have CCS in some form or other, but the question is whether we can develop it effectively to reduce emissions sufficiently significantly-by more than 50 per cent., as my hon. Friend the Member for Morley and Rothwell (Colin Challen) indicated-and whether that will be cost-effective. We should not lose sight of the fact that that is where we are.
There is a consensus in the House that we should go down the road of providing financial support for CCS. That is fine, and it is important that we acknowledge that Government new clause 8 is constructive because it provides for a report. However, it is essentially retrospective, in the sense that we will always be looking back and seeing what happened, which is very different in principle from setting out standards that will apply in future. Of course, there could be different standards for new coal, old coal, gas and, indeed, in theory, for every single power station. The problem is sufficiently important that we must drive down emissions for new power stations and old.
3.15 pm
I shall just touch on the two new clauses that attract my interest because I know that other hon. Members
wish to speak. I am grateful to my hon. Friend the Minister for drawing my attention to the fact that the proposal for an actual emissions standard that must be met is a Liberal new clause. I pay tribute to my hon. Friend the Member for Nottingham, South (Alan Simpson) for his tremendous commitment to taking action on climate change and for the amount of work he has put into the matter in recent years. He may disagree, but new clause 6 is far better than new clause 15. New clause 6 is similar to the measure he proposed in Committee. New clause 15 refers only to new power stations. I am not suggesting that we ignore them, but that measure envisages a hugely different degree of intervention and regulation.
I was attracted to the formulation of my hon. Friend's proposal in Committee and to new clause 6 because they emphasise the plural. In theory, we could have one EPS for every station in the country, and every station would have to be below it. My view is that it would be more practical to have different emissions standards for different classes of power station. That is another reason why I find new clause 6 more attractive than new clause 15, but it would nevertheless be an advance if it were possible to win support for the latter.
Again, there is a consensus not only that CCS should be encouraged, but that we should be prepared to put quite substantial sums of money in the way of the companies. The companies that will provide the framework for research and development are large, transnational companies. However, we must try to ensure that we get value for money. It would not be unreasonable for the heads of some of those large companies to say, "Look, we want as much money as we can get with no strings attached," given that they are in business and that they want to get on with research, investment and, of course, making a private profit.
Mr. Redwood: Does the right hon. Gentleman agree that the Government must have targets and standards in order to allocate subsidy and penalties?
Dr. Strang: That is an interesting point, but I will not respond directly to the right hon. Gentleman because I do not have time. However, I do not see the logic of the argument that setting a standard will somehow deter investment, because the reality is that companies want a rough idea and framework for the future. He is criticising the new proposals and saying that we should not support them because they do not give figures, but, obviously, their strength lies in the fact that there will be a year's consultation and discussion, after which the Government can decide on the appropriate EPSs for our various power stations.
New clauses 15 and 6 are not asking for an awful lot. No one is trying to lay down a prohibitive standard-or standards-that will frighten off investors. We should remember that the investors we are talking about will get large sums in subsidy from the levy towards their research and development.
Mr. Phil Willis (Harrogate and Knaresborough) (LD): If we follow the right hon. Gentleman's argument on new clause 25, having a set date by which companies must have carbon-neutral stations with full CCS would be the best incentive in terms of giving certainty to the market on the delivery of those technologies.
Dr. Strang: I am not knocking new clause 25, and I will be interested to hear what the hon. Gentleman and others say about it; I was trying to concentrate my remarks on the principle of the EPS.
Finally, the case for publishing the emissions standards within a year has to do with transparency. If we did that, we could have proper dialogue and debate both in Parliament and outside, and real transparency.
Paddy Tipping: Is my right hon. Friend confident that within a year we can correctly define the emissions to a target standard? New CCS will not be up and running within 12 months: it will be far later than that before the technology is proven. Any definition at this stage, or in 12 months, will be premature.
Dr. Strang: I agree with most of what my hon. Friend says, but the standards will not be set in stone. They will not stay the same for the next 10 years. Individual standards will be the standard for the year or three years to which they apply-
Dr. Whitehead: That is a recipe for uncertainty.
Dr. Strang: Well, it is less uncertain than zero standards. We are responding too kindly to the understandable position of the transnational companies which want the money without strings attached.
Martin Horwood: I join the hon. Member for Wealden (Charles Hendry) in giving credit to the Secretary of State and the departmental team for the progress they are making in, for example, tackling climate change and addressing issues such as carbon capture and storage. It is worth casting our minds back to the days before the appointment of the current Secretary of State to a time when we had no Committee on Climate Change, no Climate Change Bill and no feed-in tariffs. We did not even have the expectations that we now have for CCS by the 2020s, and there was limited competition to incentivise it. We should recognise the progress that is being made.
However, this debate takes place in inauspicious times. According to an opinion poll this morning, there is growing scepticism about the reality of climate change and the anthropogenic causes of it. There is growing scepticism in the media, in newspapers such as the Daily Express, and among those on the Conservative Benches. Indeed, I see that the right hon. Member for Wokingham (Mr. Redwood) and the hon. Member for Northampton, South (Mr. Binley) are breathing down the neck of the hon. Member for Wealden. That kind of scepticism is on the rise, but it is important that we reiterate that the overwhelming scientific consensus is still that climate change is certainly happening and it is overwhelmingly likely that it has man-made causes.
We also meet in the context of the failure at Copenhagen to agree a rigid international framework for tackling the next phase of carbon emission reductions worldwide. The world's Governments are drinking in the last chance saloon when it comes to tackling climate change in time.
Other hon. Members have referred to the warnings from the Committee on Climate Change, the newly established Government advisers on this subject. It says:
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