Hydraulic Fracturing
The Committee consisted of the following Members:
† Baldwin, Harriett (West Worcestershire) (Con)
† Birtwistle, Gordon (Burnley) (LD)
† Byles, Dan (North Warwickshire) (Con)
Davies, Geraint (Swansea West) (Lab/Co-op)
Donaldson, Mr Jeffrey M. (Lagan Valley) (DUP)
Evans, Graham (Weaver Vale) (Con)
† Fallon, Michael (Minister of State, Department for Business, Innovation and Skills)
† Greatrex, Tom (Rutherglen and Hamilton West) (Lab/Co-op)
† Herbert, Nick (Arundel and South Downs) (Con)
† Phillipson, Bridget (Houghton and Sunderland South) (Lab)
† Rees-Mogg, Jacob (North East Somerset) (Con)
Sharma, Mr Virendra (Ealing, Southall) (Lab)
Whitehead, Dr Alan (Southampton, Test) (Lab)
Sarah Petit, Committee Clerk
† attended the Committee
The following also attended, pursuant to Standing Order No. 119(6):
Coffey, Dr Thérèse (Suffolk Coastal) (Con)
European Committee A
Tuesday 8 April 2014
[Hywel Williams in the Chair]
Hydraulic Fracturing
8.55 am
The Chair: Does a member of the European Scrutiny Committee wish to make a brief explanatory statement about the decision to refer the documents to the Committee?
Jacob Rees-Mogg (North East Somerset) (Con): May I say what a pleasure it is to be serving under your chairmanship bright and early this morning, Mr Williams?
I would like briefly to describe the background to these documents and to explain why the European Scrutiny Committee recommended them for debate. Although the European Commission says that the EU is well on track to meet its climate and energy targets, it has identified a number of outstanding issues arising from the economic and financial crisis, high fossil fuel prices and the development of renewable energy. It has therefore sought, in one communication, to set out a policy framework until 2030, including an EU-wide target to reduce greenhouse gas emissions by 40% and a renewable energy target of 27%, which would be binding on the EU as a whole, but not on individual member states, and the contribution of increased energy efficiency. Subject to examining the subsidiarity implications, the Government broadly welcome the Commission’s approach and, indeed, would like to see a 50% reduction in emissions as part of an ambitious global deal on climate.
The other communication concerns the issues arising from the access that technological progress has given to unconventional fossil fuels, notably shale gas in the US. It notes that that has created expectations in the EU that fracking can provide a substitute for more carbon-intensive fossil fuels and reduce the EU’s import dependency, but it also notes the health and environmental concerns that have governed the response by some member states. The document identifies the opportunities and challenges stemming from shale gas extraction, and it is accompanied by a non-binding recommendation setting minimum principles that should apply. The Government are generally content but have some concerns relating to EU competence and the proposed time frame.
In its report of 26 February 2014, the European Scrutiny Committee noted that the communication setting out a policy framework for climate and energy from 2020 to 2030 addressed a subject of considerable importance and identified a wide range of issues at EU and national levels. It therefore recommended the document for early consideration in European Committee. Likewise, it considered that the other two documents addressed a subject of considerable topical interest, and that, although they appear in general to be in line with existing UK practice, they should be debated alongside the policy framework.
The Chair: I call the Minister to make the opening statement.
8.57 am
The Minister of State, Department of Energy and Climate Change (Michael Fallon): May I, too, welcome you to the Chair, Mr Williams? I thank my hon. Friend the Member for North East Somerset for his elegant introduction and his expert summary of the Government’s position. I hope it is not too long before he is presenting the Government’s position on these matters in another context. This important communication allows us to discuss the 2030 climate and energy framework and, specifically, the exploration and production of hydrocarbons such as shale gas.
We are cautiously optimistic that the Commission’s 2030 framework proposals and the outcome of last month’s European Council are encouraging steps towards the outcome the UK Government have advocated: an ambitious emissions reduction target, with the flexibility to achieve that cost-effectively while ensuring that our industries remain competitive. Much more work is needed to ensure early agreement of an acceptable package. That is important to unlock investment, and, indeed, to put the EU in a stronger position for the global climate negotiations scheduled for next year.
We welcome the proposed target for reducing Europe’s greenhouse gas emissions by 40% by 2030. The Commission’s analysis identifies 40% as the right milestone in 2030 to establish a cost-effective path to hitting the EU objective of cutting emissions by 80% to 95% by 2050. The UK and 12 other member states from the green growth group have also advocated a 40% binding domestic greenhouse gas target for 2030. We still consider that a 50% EU target for 2030 is the right contribution from the EU if there is a global and comprehensive climate agreement for the period beyond 2020. We welcome the indication that the EU could increase its ambition in the event of such an agreement in 2015.
A well-functioning carbon market that promotes low-carbon investment is vital for cost-effective emissions reduction. However, today’s market is hampered by inflexibility in responding to economic shocks. As a result of those factors and of the economic downturn, there is a large supply-side surplus in the system that weakens the incentive for low-carbon investments. The proposed restructuring of the emissions trading system to include a market stability reserve is a step forward, although not the comprehensive reform, including cancellation of surplus allowances, advocated by the UK and other member states.
We welcome the Commission’s decision not to propose nationally binding targets for renewable energy. That reflects our call for national flexibility to meet emissions reduction targets cost-effectively. The Government, along with 12 other countries including Germany and France, have indicated support for an EU-wide renewables target of 27% on the proviso that it is not translated into binding national targets.
In principle, the proposal on governance to ensure that the EU meets its climate and energy objectives is sensible. More work on the detail is needed, and the arrangements must strike the right balance between the increasing coherence of EU efforts to reduce emissions and respecting member state competence over energy policy. The UK will need a diverse energy mix, including renewables, nuclear, carbon capture and storage, and
shale gas. It is important that the plans we adopt nationally are sufficiently flexible to meet changing technology costs.We welcome the Commission communication and recommendation on shale. The UK has a robust regulatory framework for exploration and production, and already practises or requires much of what the Commission has recommended. The Commission’s decision not to bring forward new legislation was a positive step, and it is important to emphasise that much of the legislation governing shale exploration is EU legislation in the first place.
Finally, the European Council has indicated that it will take a decision on the 2030 framework by October at the latest, subject to further work from member states and the Commission. We remain well placed to engage in and to influence that work. I look forward to hearing the Committee’s views and to attempting to answer any questions.
The Chair: We now have until 9.55 for questions to the Minister. I remind Members that these should be brief and that it is open to Members, subject to my discretion, to ask related supplementary questions.
Tom Greatrex (Rutherglen and Hamilton West) (Lab/Co-op): I apologise, Mr Williams, if I appear to be squinting. It is not because I am quizzical about the Minister’s answers; it is just because we, unusually, have some sunshine coming in to the room. On the regulation of fracking, is it the Government’s position that EU recommendations that differ from the UK’s current legislative position will not be adopted?
Michael Fallon: Recommendations are not binding, so member states are not bound by those that they do not see as fitting their national circumstances. As I said, much of what is in the recommendation is already either legislation or good practice in the UK.
Tom Greatrex: I thank the Minister for that answer, but one thing in the recommendation that is not covered by current UK regulation is full public disclosure of frack fluid composition well by well. He will be aware that Cuadrilla has voluntarily agreed to provide that information, but the regulation does not cover that in those specific terms. Will he explain his objection to that, and in what way he thinks it does not fit in with UK circumstances?
Michael Fallon: The hon. Gentleman has made my point—that there is already good practice on this in the UK. He quoted the example of Cuadrilla. We do not want to burden the companies we are incentivising to explore for shale gas with unnecessary or new legislation. Most of legislation they have to abide by is European legislation in any event. We do not need new legislation, but where there is good practice we will disseminate it and encourage other companies to abide by it.
Tom Greatrex: The Minister says he will encourage other companies to abide by that good practice, but what is his objection to transparency on the content of frack fluid, so that such information is mandatorily published and available for the public and others who
are concerned to see it? He has made the point on a number of other occasions about the issues associated with confidence in shale. Surely, transparency is key to that public confidence. What is the reason for not mandating the publication of information on the composition of frack fluid well by well?Michael Fallon: Nobody is objecting to transparency. The hon. Gentleman has described a good example of transparency, but we do not want to burden the exploration companies with unnecessary new legislation and requirements. I will certainly look at the point he has made, but the approach to this package is that the Government and some other member states do not want to see the European Union binding those—we are not alone in this; a number of other member states wish to get on and explore for the shale gas that lies beneath them—that do not want new legislation at the European level. Where there is good practice we will disseminate it and encourage other companies to abide by it.
Dan Byles (North Warwickshire) (Con): I warmly welcome the Minister’s statement. What is the right balance at the European Union level between emission reduction targets and renewable energy targets, which are not quite the same thing?
Michael Fallon: Indeed they are not the same thing, and while we accept a Europe-wide emissions target that all member states should be bound by, we think it is a mistake to have binding national targets. We are all starting from a different place on renewables. We have increased the proportion of our energy that comes from renewables markedly in the past two or three years. Renewables reached some 18% of electricity generation in the last quarter of 2013. Other member states started earlier and have gone ahead, but we have all started from a different place and we all have very different economic positions. It is important not only that we are free to determine our own energy mix, but able to decarbonise our economy at a pace consistent with our economic recovery.
Dan Byles: On unconventional oil and gas regulation, one thing that was strongly welcomed was the Government’s rigorous, evidence-based scientific approach. For example, they commissioned the Royal Society to look into some of the concerns and do further work on fugitive methane emissions. Does the Minister share my concern that, although the EU proposals are not binding, it is not entirely clear that member states all have the same rigorous evidential underpinning as the work that is being done in the UK?
Michael Fallon: Yes, and that is one reason why we do not want new legislation, unless there is very strong evidence for it. It is important, whichever side of the debate people are on, that we proceed, where we can, on the basis of evidence. My hon. Friend will know that the Government have moved through these various areas of concern and, where we could, we have commissioned evidence from academics and others on the actual effects, whether of water or of methane emissions, or on the potential seismic effects of drilling. It is very important to proceed on the basis of actual evidence.
Jacob Rees-Mogg: Will the Minister say something about the costs that may fall on the United Kingdom, because the Commission’s document says that the effort
“must… be allocated among the individual Member States in an appropriate and timely way” ?
That may mean higher costs for the richer countries. What is his view?
Michael Fallon: I am not sure which costs my hon. Friend is referring to. Is he referring to the costs of meeting the targets? Again, he is quite right: if there was to be a binding renewables target on each member state, it would of course fall to the Commission to police it and to ensure member states that were lagging behind had rapidly to alter their policy mix to catch up with the target. We are looking carefully at the wording, in terms of the governance of this framework. While there is a legitimate role for the Commission in assembling the information—indeed, in seeing how member states are proceeding with their national plans—we do not think it is a Commission competence to start policing the way those plans are implemented or to start imposing additional costs.
Jacob Rees-Mogg: I am grateful to the Minister for that reply. Am I right in thinking that the Commission has suggested that it may bring forward further legislation in the event that member states do not meet their greenhouse gas emission targets, rather than the renewables targets?
Michael Fallon: Those matters are still under discussion. Indeed, I discussed them with Commissioner Oettinger yesterday. The framework has yet to be finally agreed, but our position is absolutely clear: we think it right that there should be a binding greenhouse gas emissions target, but each member state should be free to pursue the overall renewables target in its own way, determining its own policy mix and proceeding at a pace that respects its own national economic position.
Jacob Rees-Mogg: Moving slightly on from that, the Commission document notes:
“Taxes and levies represent about 30% of final electricity prices for households”
across the European Union. However, the documentation is generally very weak on giving figures for the costs that will fall on individuals as a result of these proposals. Have Her Majesty’s Government done any work on this? Do they have any concerns about the lack of competitiveness that may afflict the European Union generally, but the United Kingdom more particularly?
Michael Fallon: My hon. Friend will certainly be aware of the work the Government have done to introduce greater transparency in our own green taxes and levies. I think there is now much wider public understanding of the amount and likely trajectory of some of these levies. I am sure my hon. Friend will join me in welcoming the reduction in those taxes and levies of some £50 per average household in next winter’s bills. It is important that they be presented in an easily understood way, so that people can understand what proportion of their bill is required to meet various environmental objectives and what proportion will be required to add new capacity
to our system as old capacity is reduced. We might well explore how we improve the nomenclature and rather curious labels under which these taxes are gathered.My hon. Friend asked me a second, supplementary point—
Jacob Rees-Mogg: It was on economic competitiveness.
Michael Fallon: Exactly. I am sure my hon. Friend will welcome the proposals of our right hon. Friend the Chancellor in the Budget. We have started reducing green taxes for households and we are also reducing green taxes for industry. In particular, we have started to propose exempting the important foundation industries—energy-intensive industries such as steel and chemicals—from the renewables obligation and feed-in tariffs, with effect from 2016-17. We have also taken the important step of freezing the carbon price floor. Both those steps have already been welcomed by the industries concerned and will do a great deal to help regain some of the competiveness we would otherwise be in danger of losing, not least to the United States.
Jacob Rees-Mogg: I have one final question. On page 27 of the bundle, under “Key complementary policies”, the Commission refers under “Transport” to
“smarter pricing of infrastructure usage”
“how fuel and vehicle taxation can be used to support greenhouse gas reductions”.
I want to flag that up, because smarter pricing of infrastructure usage sounds remarkably like road pricing. Rather obscure language is being used to hide something that would not be at all popular—at least in this country. Will the Minister remind the European Union that taxation matters are a matter for member states, not the European Union?
Michael Fallon: I am very happy to do that.
The Chair: If no more Members wish to ask questions, we will now proceed to the debate on the motion.
Motion made, and Question proposed,
That the Committee takes note of European Union Documents No. 5644/14 and Addenda 1 and 2, a Commission Communication: A policy framework for climate and energy in the period from 2020 to 2030, No. 5706/14 and Addenda 1 to 5, a Commission Communication on the exploration and production of hydrocarbons, such as shale gas, using high volume hydraulic fracturing in the EU, and No. 5700/14, a Commission Recommendation on minimum principles for the exploration and production of hydrocarbons, such as shale gas, using high volume hydraulic fracturing; supports the Government's objective of securing an ambitious EU emissions reduction target for 2030 in order to support the EU in meeting its long-term climate and energy objectives; and further supports the Government's objective of maintaining maximum flexibility for Member States to choose their own energy mix, including by exploring the potential for domestic resources, in order to secure their emissions reductions in the most cost-effective manner, given their particular circumstances.—(M ichael Fallon .)
9.15 am
Michael Fallon: May I thank hon. Members for their questions? I will make one further point before we begin our debate. As I have outlined, we are working hard to secure early agreement on an ambitious greenhouse gas
emission target for 2030. We must combine that ambition with a hard-headed, cost-effective approach to reducing emissions. European industries—not simply industries in the United Kingdom—face relatively high energy prices, and our climate and energy measures must be consistent with our wider approach to maintaining our industrial competitiveness. We have to adopt a flexible approach, and we need to avoid nationally binding renewables targets. The Commission’s own analysis makes it clear that an ambitious emission reduction target will stimulate investment in renewables across the European Union, but without the inflexibility, costs and risks of a technology-specific target.Finally, recent events in Ukraine illustrate the need to ensure that Europe is not over-reliant on a limited number of sources of energy, nor is it vulnerable to external pressure. In addition to diversifying our sources of supply, we must be able to develop indigenous resources, including low carbon, but also shale gas, allowing the United Kingdom and the rest of Europe to benefit from a more diverse, sustainable and secure energy mix. What has happened in Ukraine only increases the case for early agreement to a well-balanced energy and climate regime to 2030. Having moved the motion, I look forward to hearing further contributions from hon. Members.
9.17 am
Tom Greatrex: May I begin by welcoming much of what the Minister said about the 40% target? He will be aware that this is something that we broadly supported before the Council meeting in February and when we discussed it previously. We agree with the thrust of the Government’s position on an EU-level binding renewables target. We do not believe that such a target is the best way of encouraging low-carbon generation, and investment in that generation in the UK or other member states, because it is self-evident that different member states start from different positions. While the goal is to reduce the level of carbon emissions from electricity generation—not just because of binding targets, but also because the importance of energy security, which the Minister referred to in his speech—that is best done by having a degree of flexibility and optionality in the choices available to member states, who take different views about different technologies, whether it is CCS, nuclear or renewables. For that reason, we welcome the Government’s position in relation to those targets.
We have touched on unconventional gas and hydraulic fracturing. I want to underline the point that, in the context of declining returns from the North sea, an indigenous source of gas could have a positive impact on security of supply. There are important secondary benefits, potentially as a feedstock for the chemicals industry, which is a way of also moving some of the value locked into the wholesale price of gas into the UK. I also note from these documents and others that the impacts on prices that have been analysed by the Commission are very different from those suggested by some commentators. There is therefore a need to be cautious about what might, or might not, be the impact on consumer and business prices of the exploration of unconventional gas, whether it is shale or coal-bed methane gas in the UK. There is an economic cost associated with that exploration and extraction, and it will be economically viable only if the wholesale gas
price is at or above that economic cost. To suggest that it would have the impact that we have seen in the US is to misread the American situation, where currently there is no ability to export that gas.The Commission states that in the best-case scenario, shale gas will contribute up to 3% of our energy mix in 2030. Does the Minister have any views on that? He referred to evidence and I return to the importance of mandatory disclosure on a well-by-well basis, which provides the evidence to give comfort to the public that hazardous fluids cannot be injected as part of the fracking fluid. Concerns have arisen as a result of what has often been bad practice in the US. In some cases, that has been to do with the chemical content of that fracking fluid.
I remind the Minister that in discussing evidence, it is important to be able to address the legitimate concerns that people in communities that may be affected have about the extraction of unconventional gas. Their concerns are entirely different from the concerns of those who have an absolutist and ideological objection to the extraction of gas. Those two camps are very different. I caution the Minister, as there is wisdom in ensuring that the maximum amount of evidence and transparency is available. Despite his answers, I see no reason why it should be a significant burden on potential operators to disclose the content on a well-by-well basis and for that information to be published. That goes slightly further, but not a huge amount further, than the regulations currently in force in the UK.
I share the concerns that have been expressed about the as yet unconcluded governance framework. An important point of which we all need to be cognisant is that there may be a potential conflict if member states’ policies are seen to be out of step with the Commission as a result of the monitoring process. I do not necessarily object to there being a framework for monitoring, but the corollary of having an overall greenhouse gas reduction target is that member states should be able to work with that target as they see fit to meet their security supply obligations and, importantly, to do so in the most affordable way. That work should not be hampered by an attempt by the Commission to take its role beyond monitoring into enforcement. I should be grateful if the Minister reiterated his view on that, told us how that would be taken forward in future discussions, and explained which other member states share that general position—I am sure there must be a few.
The Minister touched on the emission trading scheme. The memorandum from his colleague, the Minister of State, Department of Energy and Climate Change, the right hon. Member for Bexhill and Battle (Gregory Barker), says:
“The Government has called for urgent reforms that will address the surplus of allowances.”
How does the Minister regard the permanent removal from the system or cancellation of an ambitious volume of allowances, which the Government have said they would like to see? What does he expect will be the time frame for progress on that? On the future agenda, he said that he welcomed the 40% target but that the Government were seeking to secure a 50% target for the EU in the context of wider global discussions. Can he confirm that the Government will push for that 50% target at the Paris conference?
In relation to fracking—I will finish on this point—being cautious, careful and concerned about the evidence base is not the same as being opposed to the potential for the extraction of unconventional gas. To reiterate the point that I have made to the Minister on a number of occasions, in debates in this House and elsewhere, having a cautious and proportionate approach to the matter is probably the best way of ensuring that the economic benefits are understood and therefore realised, rather than suggesting that fracking is the silver bullet for all our energy problems in the UK. I am not suggesting that the Minister himself has said that, but a number of Members in this House and the other place have made comments in that regard. I do not think that that is borne out by the evidence—certainly not by the content of the documents before us this morning. If the Minister is able to respond to some of those points in his closing remarks, I would be grateful.
9.26 am
Jacob Rees-Mogg: It is reassuring that my right hon. Friend the Minister is in charge in this area. Much of what he has said has given comfort to those of us who are concerned about the pious hopes expressed from time to time in the documentation.
It is worth beginning with this thought in the documents:
“Japan’s emissions remain unchanged over the period 2005 to 2012 but have increased since 1990 and are on an upward trend.”
Japan has scaled back its plans to reduce greenhouse gases by 2020, as have Australia and Canada. Therefore, when we put the issue into the international context, there is a risk that the European Union is proposing to take on burdens that other countries are not taking on and which will have high costs both for our industry and for individuals. I make no bones about the fact that I want my constituents to have cheap energy and a competitive economy, which I am not sure will come about by reducing our greenhouse gas emissions at a much higher rate than is being done elsewhere in the world.
I am also concerned that there is an iron fist inside the velvet glove that the European Union appears to be wearing. The document says that there would be European governance of national energy plans for the period 2020 to 2030, and that member states would draw up their plans and submit them to the Commission for assessment. Such plans would help to show, among other things, how they contribute to EU energy and climate objectives. It states:
“If the plan is deemed insufficient, a deeper iterative process would take place with the Member States concerned with the aim of reinforcing its content.”
That seems to be where the iron fist comes into it—a “deeper iterative process”. One always knows that, when the European Commission uses words that are not commonly used on the Clapham omnibus—although no doubt they are regularly used in North East Somerset, by people of the highest intelligence—it is going to do something, if it can get away with it, and that people would not like it if it were put in simple language.
The Commission also notes that the governance structure
“may need to be set in legislation at a later date if the envisaged co-operative approach is not effective.”
There we have it. There is quite a clear threat in the documentation that, if the European-wide target is not met, legislation will be introduced by the EU. The document goes on to say—I have asked the Minister about this—that the richer nations will pay the biggest share. There is, hidden away within the document, the threat of making our industry less competitive and the costs for our consumers higher.
Looking further through the documentation, one can see what has been happening so far and what will continue to happen.
In an abuse of language, if I may put it that way, the Commission notes that renewable energy must, in future, be exploited in a way that is market driven as far as possible, but by “market driven” it means driven by the other targets that it is itself setting. It does not mean market driven by the ordinary rules of supply and demand and the ability to provide cheap energy.
Importantly, the Commission notes that food-based biofuels should no longer receive public support. Sometimes, rushing ahead with things that sound nice, beneficial and good, such as biofuels, and therefore not extracting fossil fuels from the ground, can turn out to put up food prices, which is a major concern not just for my constituents, but more globally. The document notes that retail prices have increased, so the costs of support schemes are passed on to consumers. It says that in a sort of gentle way, without remembering that fuel poverty is a serious problem even in this country, which is one of the richer countries in the European Union. I do not want retail prices to increase. I am pleased that the Government are taking steps to stop that within their ability to act. My concern is that if they sign up to pious-sounding documents, they will limit that ability.
Security of energy supply is extraordinarily important, but the UK has an opportunity to have a pretty secure energy supply if it does not focus on emissions at the same time. It cannot entirely do one or the other, but there is a balance, and I am not convinced that the aims set out at the moment achieve that balance. We are going towards being more in favour of reducing emissions than security of supply. Although I may find that hydraulic fracturing is not suitable in my constituency, it may turn out to be an enormous opportunity in the country at large. I apologise if that is a nimby statement, but my constituency is one of the most beautiful parts not only of the UK, but of the whole world. It contains, and completely surrounds, the world heritage site of Bath. It is therefore exceptional and of a much higher quality than anywhere else I can think of. [Interruption.] My hon. Friend the Member for West Worcestershire is against my saying that. I am sure Worcester is quite nice too, but it is not as nice as Somerset.
Hydraulic fracturing offers a genuine opportunity for this country. It seems that every time one reads a report, the figures on how much is available to be extracted are larger than previously said. The success of hydraulic fracturing in the United States is amazing. It is fascinating that the report from the European Commission initially goes on about vertical drilling, then states that
“operators are now testing further the high volume, essentially horizontal, drilling adopted in North America”.
We all know perfectly well that it is horizontal drilling that will make shale gas economically effective, so it is important for energy security.
I am nervous about EU recommendations, because they are the beginning of competence creep. The EU issues a recommendation, which is not necessarily followed up, and it goes on to more direct regulation or directives. Bits of the recommendation essentially extend the EU’s competence, not only for unconventional, but conventional hydrocarbons, offshore and onshore. The Minister is right to be suspicious of the EU’s ambitions and to be prudent about what is being aimed for.
I have a couple of final points. I raised with the Minister the question of tax levels. It is good news that they are going down here, but the taxes and levies component of industry’s electricity costs increased by 127% over the period cited in the documents. It is crazy to rack up high costs in economies that are doing quite badly, which is why I am even more concerned that we might end up with excess costs if other European economies are weak and the EU says that the costs will be shared out equally. I have made that point before. I shall finish with the point on the smarter pricing of infrastructure that I raised with the Minister, who kindly agreed with me. It is important, because it is exactly how we have seen the EU extend its powers in the past; it puts some worthy and relatively innocuous sounding proposal into a document, it then takes silence to mean consent and says, “You’ve all basically agreed, so let’s see what the EU policy should be for road pricing.” Even if they want road pricing, I doubt that there is a single Member of the House who thinks that the EU should introduce it. When something is hidden in obscure language in the depths of the text, that is when—as anyone who has ever watched “Yes Minister” should know—it is at its most dangerous and most important. Likewise on fuel and vehicle taxation.
We and the country need to ensure that we are not going faster than anyone else in the world. We need to remain competitive and look after our own constituents’ interests first. We will do that if we point out to the EU that going further and faster than anyone else, when others are giving up, will not achieve what it wants. It will actually push back our economy, put burdens on our constituents, and not achieve the emissions reductions that the EU wants, because the emissions and the economic growth will simply go elsewhere in the world.
9.35 am
Dan Byles: I shall be relatively brief. I concur wholeheartedly with most of what the Minister said, and I strongly welcome the Government’s position. I do not support a binding EU target, but it is important for investors to see a clear and unambiguous direction of travel as we continue down the path towards the 2050 target that this country has already adopted in law through the Climate Change Act 2008. I put on record once again that that is one of the toughest emission reduction targets enshrined in law anywhere in the word. Sometimes we in this country have a habit of forgetting that we lead the way on ambition with emission reduction targets.
I also welcome the Opposition’s broad support for the measures. Although we may disagree about many details of energy policy—disagreement is healthy in a democracy; it enables us to test and challenge one another—a degree of consensus at the core of UK energy policy is helpful for the confidence of investors, many of whom are making large investment decisions
that cross election time frames. It is important that they have confidence in the long-term direction of travel, regardless of the colour of future Governments.I strongly welcome the Government’s resistance to additional binding EU regulation on shale gas. The UK has been developing onshore and offshore oil and gas reserves for many decades, and we are widely seen as having among the highest standards of regulation and operational practices anywhere in the world. The Government’s approach with the establishment of the Office of Unconventional Gas and Oil is sound. We should look at proposals from the EU with an open mind, and we should be open to incorporating any good evidence-based proposals, should there be any, but we should resist allowing the EU’s competence to creep into this area in a binding way.
The UK should encourage the adoption of high regulatory, environmental and operational standards among other member states that are looking at developing their shale gas reserves. It is not in our interests for inadequate standards to be adopted anywhere else in Europe, although I see no evidence that that is likely to happen. We should encourage the spread of best practice—much of which has, of course, been developed here in the UK—across Europe so that all the citizens of Europe can have the high protections that we enjoy here in the UK.
9.37 am
Michael Fallon: If I may, I will speak to the various contributions in reverse order. My hon. Friend the Member for North Warwickshire is absolutely right to draw the Committee’s attention to the importance of investor certainty. This is an area in which investors respond to signals, so it is important that we send the right ones. We want those who are prepared to invest in all forms of low-carbon generation to be clear about the path of the various support mechanisms. I welcomed what he said about energy mix, which is a member state competence, and there is no case for further mission creep by the Commission into this particular area. We must be free to determine both the mix of our energy and the pace at which we move towards a lower carbon economy.
My hon. Friend made an important point about disseminating good practice. We have many years of good experience regulating the North sea offshore. We also have experience onshore, as we have been regulating onshore oil and gas drilling in this country since the second world war. There is plenty of good practice that we can disseminate. He might like to know that I shall be taking some of that work forward in the UK-Poland shale taskforce, which it falls to me to progress in the next few months.
My hon. Friend the Member for North East Somerset made several points, beginning with the importance of securing a competitive economy, on which I am absolutely with him. I described earlier the measures that my right hon. Friend the Chancellor is taking to reduce the burden of taxation when we think that the levies proposed at the European level are too onerous. We have relentlessly sought compensation through several schemes and, indeed, have sought an exemption for some of our most important industries, and we shall certainly continue to do that.
My hon. Friend drew the Committee’s attention to the Commission’s ambitions for the national plans that might flow from the framework, if it were adopted in this form. I think that he is right to question the phrase “deeper iterative process”, as I have no idea what it means. I am not sure that even my hon. Friend really understands it, and that should certainly be a warning to us all, as we need to ensure that there is no hidden threat. Governance and the way in which national plans will be monitored are key parts of the negotiation that is proceeding under the framework and we shall be rigorous in defending our national interest.
My hon. Friend also spoke about biofuels and various support schemes. He warned the Committee that we should not get over-enthusiastic about particular support mechanisms that turn out to be too expensive later. We are the first member state to move towards the competitive allocation of support for renewables. That is welcomed in Brussels, where there is a desire to see us move, as these technologies mature, towards a properly competitive regime in which renewables are not subsidised for a day longer than they need to be.
My hon. Friend then turned to shale, and he was right, of course, to stress that shale is also a matter for member state competence. I sensed a slight ambivalence in his attitude to shale—it seemed to be something that should be pursued nationally, but not quite in Somerset. Somerset, of course, has always played its part in our national story. I am not sure that, on reflection, he would want the whole of Somerset to be exempted from the excitement of the search for shale, but he did draw the Committee’s attention to the evolution of horizontal drilling. It may well be that the shale lying underneath Somerset can be reached horizontally from wells outside the boundaries of his county, but perhaps that is something we can explore later. However, I would not want his constituents to miss out on the opportunities that now lie in front of us.
I welcome the fact that the hon. Member for Rutherglen and Hamilton West is with us on renewable targets. It is really useful and important, certainly when I am discussing these matters in Brussels with the Commission, or with potential investors, that I can to point to the degree of consensus that lay behind the Energy Act 2013 and that I think lies behind renewables policy generally. He asked us to be cautious about shale prices; we should be neither optimistic nor pessimistic. It is perfectly true that there are differences between the gas market in the United States, which is relatively insulated, and the gas market where we are and in Europe, which is, of course, much more exposed to wholesale price movements. The truth is that we cannot yet be sure exactly what the impact of shale will be.
The hon. Gentleman pressed me again on transparency about shale itself. It might help the Committee if I describe exactly the legislative position at the moment, before we consider whether he is right—if I understand his questions and comments correctly—that we should be asking for additional European legislation in this regard.
Tom Greatrex: Will the Minister give way?
Michael Fallon: Let me just set out the position at the moment on the fluids involved in fracturing. The Environment Agency has the power at the moment to demand the disclosure of the composition of fracturing fluids. It will also require information about any of the chemicals contained in the fluids. Details of the chemicals used in those fluids would normally be made available to the public, although details of the quantities can be withheld by the Environment Agency for reasons of commercial confidentiality. Any environmental permit required for fracturing will include conditions requiring the reporting of incidents, so there is legislation in place at the moment.
It is for the hon. Gentleman to make his case for further European legislation in this area. It might not be adopted until next year; it might take another year or so to go through the European Parliament; and it would then have to be implemented in this House. If we were suddenly to suggest that we need yet more European legislation, it might well inhibit or delay the exploration of shale for two to three years. It is for the hon. Gentleman to make his case, however, and I will now allow him to do so.
Tom Greatrex: I am grateful to the Minister. I would not want him to misunderstand what I said, because at no point have I said—today or previously—that European legislation should be used for this purpose or any other purpose in relation to shale. I would not want him to misunderstand or misinterpret my remarks in that regard.
My concern is that there is an aspect of these recommendations that I believe the Government should consider in relation to UK regulation. I am sure the Minister is aware that compared with the conditions adopted by the Government in December 2011, when the moratorium was lifted, the difference is that the Commission document refers to well-by-well disclosure. That difference is crucial and significant. To underline the point again, it is important for the evidence base, and for public confidence in Somerset, Kent or wherever, that people understand the process that may be happening beneath them.
Michael Fallon: In Somerset and Kent—and, indeed, in Scotland, where there is shale gas in the central belt—we all have an interest in these matters. I think it is for the hon. Gentleman to make it clear what he is asking for. If he wants well-by-well disclosure, does he want new legislation to require that? If he does, the Europeans are ready to add to our legislative requirements. We think that this can be achieved through existing good practice and legislation, and the requirements already imposed by the Environment Agency. If he wants us to go further than that, he has to admit that he would be imposing new regulation. If that is his position, that is fine, but he should be clear with the Committee about that.
Tom Greatrex: For the sake of absolute clarity, the point I am making is that there is an issue that is not covered in the regulations that apply to the UK. The Government should consider that as supplementary evidence for the transparency and accountability that are vital if the industry is ever to develop in the UK. My simple point is that the Government need to consider that. I am saying not that that should be dealt with
through European legislation, but that the existing regulations should be amended to ensure that well-by-well disclosure is covered.Michael Fallon: This has been a useful exchange because we have now elicited from the hon. Gentleman that he wants an amendment to the regulatory framework. It does not matter whether he wants to change domestic or European regulation; he wants more regulation. He says that the regulation does not cover the particular point of well-by-well disclosure, so he wants to go further with regulation. That is absolutely understood and respectable, and he is probably suggesting it for the best of motives in terms of public confidence, but he needs to be clear that that would add to regulatory requirements, so we need to be careful about that. I will certainly look at the point he makes.
The hon. Gentleman also spoke, as did my hon. Friend the Member for North East Somerset, about the monitoring of national plans and enforcement. He asked me where we stood vis-à-vis the other member states. Other member states have similar concerns that the Commission would want greater competence over national plans, rather than simply monitoring or collecting information about the progress made by member states. There is support from other member states. I would not want at this stage to go into the detail of each member state’s position because this is still a negotiation, but let me reassure the hon. Gentleman that there are other member states that support our position.
We want to tackle the problem of surplus allowances before 2020. Again, this requires agreement not only with other member states but with the European Parliament. It may be that the new European Parliament takes a slightly different view from its predecessor, but I have set out our position. We welcome the progress the Commission has made in terms of suggesting the reserve, but the overhang of surplus allowances needs to be tackled.
The hon. Gentleman asked about progress in the international negotiations on climate change and what can be done before 2015. Of course, we have the Ban
Ki-moon summit before the conference of the parties negotiations, which is why we wanted a reasonably early agreement on the framework, so that the European Union can take it into the summit in the autumn and on into the COP negotiations.Finally, the hon. Gentleman again said that we should be cautious about shale and equally, it should not be regarded as a silver bullet. I am not so sure that we should regard it as something to be cautious about, or as a magic bullet. We should be neither victims of shale nor fanatics about it. We have this huge potential—we know there is two to three times more shale gas underneath us than we previously thought—and it would be highly irresponsible not to encourage companies that are prepared to explore for shale gas without any support mechanism to get on and see what the potential really is. The Government will certainly continue to encourage them to do that.
That the Committee takes note of European Union Documents No. 5644/14 and Addenda 1 and 2, a Commission Communication: A policy framework for climate and energy in the period from 2020 to 2030, No. 5706/14 and Addenda 1 to 5, a Commission Communication on the exploration and production of hydrocarbons, such as shale gas, using high volume hydraulic fracturing in the EU, and No. 5700/14, a Commission Recommendation on minimum principles for the exploration and production of hydrocarbons, such as shale gas, using high volume hydraulic fracturing; supports the Government's objective of securing an ambitious EU emissions reduction target for 2030 in order to support the EU in meeting its long-term climate and energy objectives; and further supports the Government's objective of maintaining maximum flexibility for Member States to choose their own energy mix, including by exploring the potential for domestic resources, in order to secure their emissions reductions in the most cost-effective manner, given their particular circumstances.