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"To resolve this legal uncertainty the UK should now amend the Energy Bill currently going through Parliament to include a UK CO2 EPS and notify the European Commission of its intention to rely upon Article 193 of the TFEU",
which I think is the Lisbon treaty. I realise that the very mention of the Lisbon treaty could cause apoplexy on the Conservative Benches, but it might be coming to our aid in this particular instance, because it should force the Government to resolve the legal issue.
In Committee, and today, the Minister of State made some quite alarming responses, implying that no action was likely in connection with introducing an emissions performance standard, even as a fallback, until after 2018. I would be grateful if she could confirm whether the Government intend to introduce such a standard at any stage before that. This kind of uncertainty creates other risks, and I want to ask her another specific question. How secure is the funding even for the competition project? Let us imagine for a moment that the Labour Government are re-elected and enjoy another Parliament in power. In those circumstances, how secure would the investment in this project be, if the Treasury were to say, "Actually, the rest of the world is so far ahead of us now that it isn't worth our while spending this money in the UK. We'll simply end up buying Chinese technology." Would the Minister care to intervene on me?
Joan Ruddock: I would be happy to accept the hon. Gentleman's invitation. The information on the competition will be available to Members a short time from now. There is no question about the funding, because it is part of the levy system. We have made it absolutely clear that the new levy arrangements will cover the winner of the competition. In addition, there will be another three carbon capture projects on coal-fired stations.
Martin Horwood: I notice that the Minister has not replied to my first question.
Joan Ruddock: The truth is that I said repeatedly in my earlier remarks that the reporting regime would begin with a report no later than in 2012, then again in 2015 and once again in 2018. If the hon. Gentleman read the clause, he would see that that if a conclusion were reached-based on all the considerations that he wants to be taken into account at each stage and on advice from bodies such as the Climate Change Committee-that we were not making sufficient progress, so CCS would not provide the answer to our decarbonisation goals, it would of course be possible to consider an emissions performance standard at any point. I stress again that the Climate Change Committee has itself said that the EPS is but one of four measures that it believes might appropriately be taken if CCS were not successful. That is why we have a rolling review-to make that judgment.
Martin Horwood: I have to say that that is one of the vaguest and most non-committal statements that we could expect to be made. Let me quote once again one of my favourite sources, the International Energy Agency greenhouse gas programme. Its report on worldwide investment supports the view already expressed that the rest of the planet is getting on with this. It says:
"Considerable work on CCS is being conducted throughout the world and these efforts are growing rapidly. Many scientists, engineers and geologists are now devoting their efforts to all aspects of CCS."
"The Canadian province of Alberta alone is planning to spend C$2 billion on new CCS projects. The Australian government has established its low-emissions coal initiative with funding of AU$500 million and has announced an international carbon capture institute funded at AU$100 million. Together, these and other countries are funding a diverse array of projects on every aspect of CCS and this funding is expected to grow."
The Minister asked about capture as well as storage projects. The three fully operational large-scale projects that I mentioned have storage-they include capture, of course, because carbon cannot be stored without having been captured-but while it is true that they do not capture from coal-fired generating power stations, they include capture from mixtures of gases from industrial processes.
The IEA report includes a list of dozens of projects worldwide-dozens of storage projects, but also dozens of capture projects. The truth is that more progress is being made in Norway, the United States, China, Brazil, Canada, Australia and Algeria on projects that include not only capture and storage, but transportation as well. Long pipelines are already in place and there is huge investment. The reason for it is obvious-that the prize of developing successful commercial-scale carbon capture and storage for coal-fired power stations will be fantastic. It presents a wonderful opportunity and for whichever countries or companies crack it, unbelievable numbers of jobs and revenue will follow from the successful exploitation of these technologies. While we hesitate, the reality is, sadly, that we may have missed the boat, so we will end up buying in this technology from China or the United States, which will cost the UK economy even more, because we will be expensively retrofitting something that we have not developed ourselves.
That is the unfortunate scenario that we face. We have been here before on renewable energy: despite this country's massive resources, we have ended up being overtaken by many other countries. We should have had a natural advantage in carbon capture and storage because of the North sea and its related oil and gas technology, but we are in danger of squandering it. The amending provisions offer an opportunity to try to catch up.
Joan Ruddock: The hon. Gentleman knows that my argument is that those same amending provisions totally undermine the investment programme that we have set out. I remind him that no other country in the world has a statutory funding mechanism, as is proposed in the Bill. He mentions various projects, but I do not believe that a single one of them includes capture, transportation and storage all within the same project on the scale that we envisage-capturing from coal-fired generation. He will not find a single example that combines all those elements, or a single example of a statutory funding package. He quotes the billions of pounds of investment, so I remind him that we are looking here at a potential of £9.5 billion being raised through the levy mechanism. That is an unprecedented amount-again, not found anywhere else in the world.
Martin Horwood: When we are discussing an investment designed to achieve a certain goal, it is easy enough to say that it is impossible to produce any examples of anyone anywhere in the world who has achieved that goal. The truth is, however, that there are dozens of capture projects-some relating to coal, some to gas, and some to other industrial processes-dozens of storage projects, and hundreds of miles of pipeline. All the individual technologies are being developed. Of course it is true that we have not yet achieved the goal for which everyone is aiming-that is rather self-evident-but every other Government in the world have provided much more encouragement, which is why those projects are all up and running.
Paddy Tipping: Notwithstanding all his bluster, can the hon. Gentleman name a single coal capture station project in the world that has been completed?
Martin Horwood: Let me again cite the IEA greenhouse gas R & D programme. The hon. Gentleman will have to forgive my pronunciation, but coal-related CCS projects include Cato/Castor/Brindisi, Ciuden, Calide, Mountaineer-I have to say that I do not know the locations of all these-ZeroGen Phase 1, Boundary Dam, Stanwell, FutureGen, GreenGen Phase 1, ZeroGen Phase 2 and Nordylland, which I think is Norwegian. The UK competition is also mentioned.
There are, in fact, plenty of projects around the world trying to exploit that technology. Of course it is true that we have not yet developed fully fledged commercial-scale capture of carbon from a coal-fired power station. That is what we are all trying to work towards, and we would not be having this debate if it had already been achieved. I think that this is a rather tortuous and superfluous argument.
The opportunity exists for a clear signal to be given to markets and investors in the United Kingdom, which would avoid the scenario that I have described, in which we end up buying the technology from abroad, and ultimately costing the UK economy more.
Martin Horwood: I am sorry, but I will not give way again. I have already given way many times; I have been very tolerant.
Let me briefly commend amendment 1. It is clearly nonsensical to impose a levy designed to combat carbon emissions on technologies that do not produce any carbon emissions. The Minister has tried to mount a defence of the imposition of a levy on renewable technologies as well, but that would have a serious consequence. At the margin-and some renewable technologies are at the margin of viability; investment decisions may hang on fine financial judgments-the imposition of such a levy could stop renewable energy projects proceeding. I urge the Minister to reconsider her attitude to the amendment.
Mr. Deputy Speaker (Sir Alan Haselhurst): Order. The Front-Bench speeches have taken just over an hour and a half, and we are still dealing with the first group of amendments. We have barely two hours left for consideration of the remaining amendments. I cannot comment on that; it is not my job to interfere in a rattling good debate, and I realise that Front Benchers have been provoked by interventions, which is always a feature of good-quality debate. Nevertheless, Back Benchers might try to be a little more concise so that we can enable every Member to speak, and make some progress.
Alan Simpson (Nottingham, South) (Lab): I intend to speak primarily about new clauses 6, 15 and 25. I shall seek to press new clause 15 to a vote at the end of the debate.
I do not think that the issue is the detail of what is or is not in an emissions performance standard. The question is whether or not we want a regulated energy market. Although my personal preference was for the clarity of new clause 6, I think that new clause 15 is capable of commanding the most support and consensus. Certainly the groups with whom we have worked outside the House have been happy with us to proceed with it on that basis.
I want to distance myself philosophically from a number of the comments that have been made about the need to make progress before setting standards. We would not be at all happy if someone trying to sell a house told us that it was foundation-ready. We have moved beyond the stage of messing around. All the great global controversies have arisen when people have proceeded with developments willy-nilly only to ask when catastrophe has struck, "Why were there no clear foundations to what they thought they were doing?" The people responsible should be imprisoned for allowing such developments to go ahead.
It seems almost nonsensical to me that we are having this debate. Every one of us could walk out of the Chamber today and on to the high street and buy a fridge or a freezer, and we would expect to know its energy rating. When people buy houses now, they expect to know the property's energy performance rating. We are saying in advance that post-2016 all new housing will be of eco-housing standard, so we stack standards ahead of the game-we define the game.
Sir Robert Smith (West Aberdeenshire and Kincardine) (LD): Will the hon. Gentleman give way?
Alan Simpson: Let me finish my little opening rant first.
In response to those who say that setting standards would somehow deter investment, I would refer to a fascinating seminar held this morning by the all-party group on social science and policy. It was addressed by the head of Deutsche Bank's global climate change research unit, who said that if we put together transparency, certainty and longevity, we provide what investors are looking for. He went on to say that investors in renewable energy ought to be differentiated from energy companies. And it is worth noting that many energy companies have said, "We don't like transparency. We like to do deals behind closed doors. That is how we can get the greatest arm-lock to lever resources out of Governments, taxpayers or customers."
Transparency is not the flavour of the month for existing energy companies, so it does not surprise me that they would not welcome the introduction of an emissions performance standard. For everyone else, however, from citizens to Government to investors, it is a no-brainer that that is a good idea. That is why we should address this issue within a framework that requires the Government of the day to come back within a 12-month period with a scheme that sets out the details of where we go from wherever we are, so that this would not be the end of the game.
The people from Deutsche Bank said to us this morning, "Look at the object lessons to be learned from Germany, where the introduction of feed-in tariffs has been followed by a series of reviews. That has happened because the regulatory framework drove the agenda for change." It drove the investments and innovation processes, and that is why they were able to go through a series of review processes that pushed way ahead of where the initial framework had envisaged that they could get to when they started out.
It seems to me that we get in a panic about power stations. The reason for that might be that when the energy sector was deregulated we gave it the powers to create the current oligopoly, which sees itself as beyond public control and accountability.
Sir Robert Smith: The hon. Gentleman's little rant has reminded me of a point that was made to me by people working in the refrigeration industry. Regulation to ban chlorofluorocarbons because of the damage to the ozone layer was introduced before the industry came up with the solution. It was driven to find a solution because regulation was already in place.
Alan Simpson: Absolutely, and we could broaden that point. The same sort of debate took place in California when the state wanted to introduce tighter controls on emissions from vehicles. At the time, the motor industry said, "This will kill the industry. There will be no new investment," but California had the courage to say, "Get lost. If you want to be a player on our roads, you've got to play by the standards we set."
I remember days during my childhood when schools were closed because of pea-soup fogs, and we all had to walk home because the buses were cancelled. Fortunately, the Government of the day introduced clean air Acts. They did not introduce tradeable breathing quotas, or personal soot allowances; they introduced clean air legislation that told industry that it had to clean up its act.
4 pm
Colin Challen: I am thoroughly enjoying this rant. My hon. Friend may wish to cite examples of established technologies to aid his argument, but what he proposes is not really the way to do it. Where were the standards governing fridges when they were first introduced around the time of, or just after, the first world war? Standards develop, because they must react to what we find. We cannot say that projects should have to be subject to standards when we do not yet know whether these things will even work.
Alan Simpson: No, the truth is that we must accept that we have what we have today; we cannot turn the technology clock back and we will have to work out how we deal with retrofitting and setting performance standards for the running of what we have. A range of low-carbon, hybrid vehicles are on the market and we accept that that is the new standard. We also accept that older vehicles have to have an annual MOT which sets a standard defining what is roadworthy.
This new clause puts a duty on the House-it is not a permission-to introduce a standards framework. What should or should not be in that framework and the different levels at which the standards should be applied to existing plant and new types of plant should be argued out within the year of that process. The House should not allow itself to get distracted by trying to anticipate those details ahead of the time period that is supposed to be set aside for that process.
In summary, the new clause provides for the introduction of a framework of emissions performance standards that will apply to all new power stations; sets out a clear timetable; acknowledges that decisions need to be based on a recognition of the advice that comes from the Committee on Climate Change; and provides for account to be taken of the impact of any policy changes on energy prices and energy security. All those things were built in to try to incorporate a recognition of concerns that were raised by Ministers and by the industry in response to the initial consultation.
Dr. Whitehead: I, too, am greatly enjoying my hon. Friend's presentation. If it is his intention that new clause 15 replace new clause 8-I presume that it would do were it to be passed by this House-an emissions performance standard would apply only to "new electricity generation plant." That is what new clause 15 states, but that provision was not in his original proposal. Does he, thus, accept that existing generation plants would be unabated and move into the 2020s with no emissions performance standard applying to them whatever?
Alan Simpson: That was one of my misgivings about the compromise that we reached on new clause 15-I always say to people that I am permanently undone by my excess of reasonableness. It would have been better had we stuck to new clause 6, but in order to get something through that commits us to a statutory framework, I can live with the notion-and so can groups outside this place-that we can work within what we have in new clause 15 and come back, as we will have to do, to address how we retrofit what already exists.
I wish to run through the arguments that have been floated against the proposal. The biggest scare story has been that any standards framework will deter new
investment. It was helpful to hear Deutsche Bank trashing that this morning. It made the point that when energy companies talk about new investment they will invariably come to the banks to raise the finance and it is the banks that are saying that they want TLC-transparency, longevity and certainty. That is the framework that they see as helpful in setting an emissions performance standard.
The issue about investment being driven elsewhere has been raised. Probably the best example from our shores that I can cite is the decision made by the company formed by BP and Rio Tinto-this relates to the projects of their hydrogen energy company. The original proposal was to build a power station in Peterhead, Scotland, but that was withdrawn and the decision was taken to build the power station in California, where a requirement for an emissions performance standard is already in place. The company was saying to us that if the combination of finance and regulation is put in place, that delivers the certainty that allows investors to invest. It seems nonsensical to claim that to have standards would deter investment rather than the contrary, which is that it would give the certainty to investment that investors are looking for.
Mr. Weir: Is there not another issue? The Minister has said that the difference for investment in this country is that £9.5 billion will be available through the levy that is not available elsewhere. That is a powerful incentive for big companies that want to build carbon capture and storage and show that it can work-and then, perhaps, take advantage of that elsewhere in the world.
Alan Simpson: That is exactly the point. As the right hon. Member for Wokingham (Mr. Redwood) said earlier, if the Government are making a commitment on such a scale-£9.5 billion-worth of investment support-why are we not placing performance conditions on the sector? It seems to me that if we take one step back and address the performance of the sector to date, what we have is another example of chronic market failure and a sector that is being driven by short-term calculations. As my right hon. Friend the Secretary of State said on "Channel 4 News" just a week or so ago, the profit margins that are now being enjoyed by the energy sector are at-I think that these were his words-"pretty much record levels."
When such largesse is being handed out, why on earth are we afraid to place conditions on it so that the outcomes for the UK economy and the UK environment are massively and substantially enhanced? The Government should be willing to place conditions on how we support industry rather than throwing money out of the window in the hope that those companies that have held the country in this arm-lock will behave differently from how they have behaved in the past. Many in the sector are already arguing that to set conditions would be a technology driver and would force the pace of innovation and change. We should not be afraid to address that.
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