Energy and Climate Change Committee - Minutes of EvidenceHC 60

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Oral Evidence

Taken before the Environmental Audit Committee

on Wednesday 10 July 2013

Members present:

Joan Walley (Chair)

Martin Caton

Caroline Lucas

Caroline Nokes

Dr Matthew Offord

Mr Mark Spencer

Simon Wright


Examination of Witnesses

Witnesses: Rt Hon Gregory Barker MP, Minister of State for Climate Change, Department of Energy and Climate Change, Ravi Gurumurthy, Director of Strategy, Department of Energy and Climate Change, and Ben Golding, Deputy Director of Strategy, Department of Energy and Climate Change, gave evidence.

Q151 Chair: Minister, may I say how grateful we are to you for returning once again to this Committee, of which you were once a member. We believe the current inquiry we are doing on Progress on Carbon Budgets is an important and timely one, given the fifth progress report we have just had on the preparations for the review of the fourth carbon budget. We very much look forward to the evidence session this afternoon with you and your two colleagues. We do understand maybe one of them may have to leave early. Can I ask you this firstly, just to get us off the ground? One thing that has been put to us in evidence is we need to have a quickening in the pace of emissions reduction and there is a sense that the Government has not delivered the step change we need to have if, in the long term, we are going to reach our final destination. I wondered what your view on that is.

Gregory Barker: Good afternoon Chair and good afternoon Committee. May I introduce my officials: Ravi Gurumurthy, Director of Strategy, and Ben Golding, the Deputy Director of Strategy. I would dispute your central suggestion that there has been some sort of slackening off of ambition. The Coalition is absolutely committed to meeting our carbon budgets and the objectives of the underlying legislation set out in the Climate Change Act. By our own central projections we will overachieve by 90, 132 and 71 million tonnes of CO2 equivalent in each of the first three budgets. I do not think there is any doubt in that. There is-and I think this has been brought up-a gap to fill in the fourth carbon budget period, but we have made that clear in our own carbon plan. That simply reflects the reality that 2023-27 is still a fair time into the future and we have not set out a detailed policy that far ahead to date. I do not think that is unreasonable but, at the same time, it does not mean in any way that we are complacent about that challenge.

We have announced that we will review the fourth carbon budget in early 2014 and this reflects uncertainty at the time the budget was set around what the EU’s trajectory will be over the 2020s, something that is a matter of live debate currently within Europe. The EU as a whole is on course towards its target of 20% emissions reduction by 2020, but the UK continues to push for a greater ambition both in 2020 and 2030. This will be an important part of framing the negotiations ahead of a COP, in Warsaw and beyond that, in the run-up to a global deal, hopefully in 2015. I don’t think we would accept there is a problem. We would accept there is further work to do as we go further into the future, but overall we are achieving our carbon budgets, over-achieving them in fact, and we have a robust set of policies in place to ensure that continues.

Q152 Chair: That is all very helpful. I did not in any way intend to suggest there was not a commitment to meeting the Climate Change Act requirements. My question was more related to the report we have just had from the Climate Change Committee where, if I am right, they identified the need for a quickening in the pace of emissions reduction and a sense that some of the reductions we have had have been more linked to austerity and the economy than to actual measures put in place. What I wanted to get from you is this step change in the pace of emissions reduction and whether or not you feel they have a point there. It is not a criticism but I am just trying to understand the situation.

Gregory Barker: Clearly there does have to be a quickening of the pace. Clearly there does need to be a driving forward of ambition, and as you get closer to decarbonising the economy it gets harder. The low hanging fruit gets taken.

Q153 Chair: Would you accept that there is a need for a step change at this stage?

Gregory Barker: Yes, but the important thing to say is we are planning for that step change and we have in process the policy drivers that will deliver that step change, not least our electricity market reforms. The decarbonisation of electricity and the roll-out of renewables in conjunction with the retrofit of homes and businesses to increase energy efficiency in that period is going to be a very key driver.

Ravi Gurumurthy: Just to add to that, if you take the levy control framework that we announced, that goes from £2.4 billion today to £7.6 billion in 2020. About 11% of our electricity is currently renewable and that will go to over 30%. For the first time we can say we have a budget to sign the deals we are planning to do through the EMR framework. As Greg said, that upward curve is very much planned in. You would say the same thing about car emissions. If you look at how car emissions each year are coming down faster than projected towards the 95 grams that was the provisional benchmark set for 2020, that shows that we are going to see deepening progress towards the back end of this decade.

Q154 Chair: You do not see the need for a step change?

Gregory Barker: No, there is a need for a step change. What we are saying is we have that step change in hand. It is part of a plan. This is quite a complex area and there is no single silver bullet, as we know. What I have brought along, if I might share with the Committee, is a summary of our policies that contribute to our carbon savings in carbon budgets 1, 2, 3 and 4. You can see from this table the differing profile and the impact of policies on different things.1 As Ravi said, by the time you get to carbon budget 4, the impact in the reduction of emissions delivered by EU CO2 emissions targets on new cars goes from practically nothing in the first carbon budget, and just 7.5 megatons in the second budget, to 58 in the fourth carbon budget. If you look at these projections you will see the changing pattern and a real quickening of the pace that you are seeking to understand.

Q155 Chair: I am sure this chart will be helpful in identifying where you have accelerated the progress you are making. But, bearing in mind the report of the Climate Change Committee and the comments they made that new policies are needed in the next two years to get us onto the trajectory for the third and fourth carbon budgets, for those two five-year periods, do you accept that prognosis from the Climate Change Committee and, if so, what are you doing to look at the new policies they suggested?

Gregory Barker: We will make our full response to the Committee's report in detail in October, and obviously this is an important document. We are taking it very seriously and it needs proper analysis, and we have only had it a couple of weeks.

Ben Golding: It is probably worth adding that the Committee’s report does not say as such that the policies we have coming on stream and things like EMR will not have a substantial impact on emissions into the future. What it says is simply that the underlying trend rate of emissions in 2012 was about 1% to 1.5%, and if that trend rate continued every year from now to the third carbon budget we would not be on track. It is probably important to make the distinction between the policies that are coming on stream and are not yet at full speed, as the Minister and Ravi have brought out, and the Committee’s assessment of if we just carry on at current trend rate, what will happen.

Gregory Barker: What we have is not the need for new policy. What we have is a need to deliver the potential of the policies we have set in place.

Ravi Gurumurthy: As a matter of fact, our projections are based on our existing policies and they show that we should achieve carbon budget 3 but there is a gap in carbon budget 4. There is uncertainty and a risk there, because we have to get the implementation right, but I don’t think now is the time to invent new policies. All we have to do is implement EMR effectively.

Q156 Chair: We will come on to carbon budget 4 shortly. But I hear what you say about considering in due course the response to the Climate Change Committee’s report. I just thought that if you are going to be looking at new policies, now would be the time to start looking at what those new policies may be. I know some of the ones they suggested are in relation to the Green Deal or commercial energy efficiency. Are those areas where you are having policy discussions in preparation for that response to the Climate Change Committee report?

Gregory Barker: In terms of the Green Deal-

Chair: I do not want to get into the details of what you are doing. I just want to know whether or not you are preparing for a strategically-

Gregory Barker: We are not preparing for any U-turn or major deviation in policy. What we are preparing for is to deliver the policy we have in place; things like the Green Deal, the ECO, our proposals for energy efficiency driven in the new capacity market under EMR, the whole array of the decarbonisation elements of the EMR Bill. These are things that will require implementation. We have the policy, we believe. Nothing is perfect. I am quite sure we will look to iterate policy to improve it, but we are not expecting to have radical departures from what we think is a core, robust policy.

Q157 Caroline Lucas: One issue is what new policies you might be designing and you have explained it is better to keep on with what you are doing and make sure that you put those into place. What about some of the concerns about other policies that can undermine what you are doing? The kind of thing I am thinking about is the analysis in the Carbon Tracker report that suggested we can only safely burn about 20% of known proven fossil fuel resources. At the same time, for example, yesterday we were talking to the Foreign Office Minister about exploitation of the Arctic and so on. What worries me is that what you described might sound a fair enough-

Gregory Barker: Are you talking about globally or nationally?

Caroline Lucas: Both, but what I want to get from you is your view on something like the Carbon Tracker report. It talks about globally but it also has a very specific UK focus. The report says that at the same time many of our companies and other companies are trying to find more fossil fuels to exploit. In fact, if we are to keep below 2° warming, we can only safely burn 20% of known reserves. Why are we going off trying to find many more?

Gregory Barker: I worked in the oil and gas industry before I came into politics, so I know all about the nebulous nature of reserves, including proven reserves, and how greatly their value is discounted, and how difficult it is to take oil and gas, particularly from far-flung regions, and get it to market where it can be commercially exploited. I don’t think there is necessarily a direct correlation between oil and gas that is in the ground, and coal, come to that, and what will end up being burnt commercially.

I would say as a more general point that the debate around gas is often misplaced. As far as I am concerned, the big challenge for the climate agenda is how we keep coal in the ground. How do we skip past coal? That is not just an issue for China and developing economies. It is also an issue even for Europe. We have seen an increased level of coal burning, and the possibility of abundant cheap gas as an intermediate solution offers very great potential. In the longer term we obviously have to go to a world where carbon capture is freely available and where there is a much greater level of renewables. But in the medium-term, particularly in the period that is under discussion here, through the 2020s, I think the increased supply of gas with the potential to keep coal in the ground and work well in conjunction with intermittent renewables is a positive thing, particularly if it can keep coal in the ground in places like India and China.

At the moment we have a sub-optimal situation where some markets have access to cheap gas and that is displacing coal into other markets. While America's emissions are lower, and it is very welcome, it is not a great help to the planet if it is simply displacing dirty coal into other markets. But if we can encourage those other markets to not take cheap coal but to burn their own gas, we could see a step change in the same way that the UK saw a step change in the 1990s when we switched from burning coal to burning gas. That is one of the biggest drivers of why we are able to be overachieving our 1990 benchmarked climate reductions, our emissions reductions.

Q158 Chair: This is such a complex subject to try to get round in our session this afternoon, and we will come to some more of these detailed points. You just talked about overachieving and, given the fact that we have-with minimum effort is the wrong phrase to use-achieved the results in this first budget, do you feel that we should be not resting on our laurels but going out to do everything we can to hasten the arrival of the next phase that we need to see?

Gregory Barker: Absolutely. Certainly we are, as we said in our opening remarks, set not just to over-achieve our first but second and third budgets as well. But we are very much taking your point, and that is why we are pressing for a higher level of ambition in Europe. It is important for Europe to achieve the least-cost pathway towards decarbonisation and gain a commercial lead in the low carbon technologies of the future, but also to enable us to play a leadership role in the global talks within the UNFCCC.

Chair: That is exactly what Martin Caton is going to follow through.

Q159 Martin Caton: Minister, you are committed to tightening the second and third carbon budgets if you move to a 30% emissions reduction target for 2020. Do you see any prospect of that target being put up to that extent before a UN climate change deal in 2015?

Gregory Barker: Sorry, do I?

Martin Caton: Do you think there is any likelihood they will put the target up to 30% before the UN-

Gregory Barker: What we would like is not an unconditional raising of the target, but we would want it to be raised as a result of a successful negotiation within the UNFCCC. We definitely want Europe to make that offer.

Q160 Martin Caton: To make an offer but then see if the UN will go along-

Gregory Barker: We want the EU to play a leading negotiating role in there, and to have a higher level of ambition as part of our offer.

Q161 Martin Caton: We have already heard in this inquiry that some people are not particularly hopeful of getting a good deal out of the UN climate change negotiations. James Hanson, for instance, told us in May that he did not have much faith that a global deal will be reached, and he therefore advocated groups of key countries agreeing to take action. He mentioned that he felt the US and China could draw in other countries. Would you think about the UK joining such a group as a fallback position, unilaterally, without acting in concert with the rest of the EU, if you thought that was the way forward globally?

Gregory Barker: Sorry, what group?

Q162 Martin Caton: It is not an existing group. What he was suggesting was that because he is not hopeful of a global deal, key nations would try to come to an agreement to move forward-

Gregory Barker: It is too early for that. The UNFCCC is certainly imperfect but it is the only show in town, and we remain committed to pursuing, however challenging it may be, a global deal. The prospects of a global deal are a little more encouraging now than they were 12 months ago. In particular, the commitment by the US President and the Chinese President to meet for a leaders’ meeting in the margins of the UN in New York in September 2014 means that the atmospherics are improving: President Obama intends to drive climate change policy with a greater level of ambition in his second term, the noises we are hearing from China, and obviously we have the EU. We are pushing for the EU to adopt a target of 50% reduction by 2030 in the context of a global deal. Ideally we would like a 40% reduction even without a global deal, but the fact that the EU is prepared to go to such a high level of ambition if we are able to secure a global deal, we hope will further push us towards the deal. But I think making a plan B at this stage would not be helpful, just when we are starting to see a glimmer of hope.

Q163 Chair: Can I just press you on that a little bit before Mr Caton continues? I can understand what you are saying about not wanting in any way to undermine negotiations that are going to be so precious, and which are taking place at the moment, and therefore not wishing to have a plan B situation. Is it not the case that there are certain individual examples of different countries-for example, China, Mexico and other countries-who have unilaterally adopted climate change legislation? The more they do that, increasingly there is a greater opportunity for informal pressure to be bubbling up that, in itself, may put greater pressure on the international COP talks that are ongoing.

Gregory Barker: Absolutely, and we have a very strong bilateral programme with a number of important states within the UNFCCC, both small and large states. Ravi, perhaps you might talk about the work we have been doing internationally on population and so on.

Ravi Gurumurthy: Yes. Firstly, we are acting unilaterally through the Climate Change Act. We do act through a number of different fora; G8, G20, major emitters. We have been doing that for the last 20 years, but we are also doing a lot bilaterally, so let me give you an example of the 2050 calculator. We have been working with the Chinese Government-

Gregory Barker: In a good way.

Ravi Gurumurthy: In a good way, to try to help them think through the practical implication of emissions reduction. Let us not have an abstract conversation about 2°. Let us say, as we have done, "How many power stations, how many homes, how many cars do you have to change to get different types of emissions reduction?" That technical work to try to get to the energy ministries of each of those countries to understand the implications is exactly what we are doing.

Q164 Martin Caton: Continuing with this, whether we act unilaterally or in partnership with other nations, if it ends up that an unambitious global deal on climate change is secured in 2015, would the Government look to slacken the UK carbon budgets so that they were consistent with the wider international community?

Gregory Barker: We have a legally binding commitment to reduce carbon emissions by 80% by 2050. That is the law of the land.

Q165 Martin Caton: That is good. As you know, the European Commission is now consulting on Europe's energy and climate change target for 2030. Is what you are looking to see come out of that something equivalent to the UK’s fourth carbon budget?

Gregory Barker: We would certainly want something that was consistent with meeting our own ambitions on carbon. The exact numbers play differently for different countries, but we would want the level of ambition to be commensurate with what we are taking in the UK and across the EU.

Ben Golding: The way we have done the provisions has not been by reference to the domestic targets. The calculations are on what we think the EU would have to do to be consistent with this trajectory to 2°. The negotiating position the Minister set out, 40% unilateral, 50% in the event of a global deal, is focused on that 2° pathway.

Q166 Caroline Lucas: Can I just finish off one last bit on that about the issue of the EU moving to a 30% emissions reduction target for 2020? Were you saying that within the EU your position would be to say that ought to be offered, but doing it would be conditional on there being a global deal?

Gregory Barker: We are pushing now for a 30% reduction.

Q167 Caroline Lucas: Irrespective of what everyone else is doing? Perfect, good.

Gregory Barker: Yes. We are pushing that. That is contingent on a global deal and is a 2030 target that, as we were saying, could be 50% versus 40% in 2030.

Q168 Caroline Lucas: Yes, I just wanted to clarify that, thank you. Talking about the review of the fourth carbon budget, when we had David Kennedy here a week or so back he was saying that the Climate Change Committee will report to you in December. Can you say a little bit more about the timing of when you think the decision on the fourth carbon budget will be taken, and also what other evidence you will be looking at in terms of making a decision?

Gregory Barker: We will be reviewing the fourth carbon budget pretty early in 2014. I do not have a specific date yet but I would certainly expect that we would come to a view in the first half of 2014.

Q169 Caroline Lucas: Do you know what other inputs there will be to your decision beyond the information coming from the Climate Change Committee?

Gregory Barker: Obviously it will be what happens in Europe. We hope that there will be a White Paper published by the Commission indicating the level of ambition and action on the part of fellow EU member states.

Ravi Gurumurthy: Since the last carbon budget was set, the context has changed quite a lot. In particular, given the economic slowdown in Europe, some of the targets have become easier to achieve. To give you one example, in the traded sector of the fourth carbon budget, when the CCC recommended 690 megatons, that equated to a power sector decarbonisation level in 2030 of about 50 grams. When we set it, it equated to about 100 grams because already by then the economic slowdown had affected the emissions productions. Now, that fourth carbon budget equates to about 200 grams emissions intensity, so the numbers have changed quite a lot and achieving some of these carbon targets has become slightly easier. Those are the sort of factors we are going to be doing analysis on, particularly around the decarbonisation of the power sector. That will feed into this review.

Q170 Caroline Lucas: I think Lord Deben has written to the Secretary of State saying that the fourth carbon budget cannot be amended simply because the Commission has not moved to a 30% emissions reduction target. Is that something that you are happy with? I think that is a real concern, isn’t it, that the fourth carbon budget will be watered down? There will be massive pressure from the Treasury and they might well use the fact that the Commission has not moved to the 30% emissions reduction target as a reason to weaken the fourth carbon budget?

Ravi Gurumurthy: It is probably worth explaining some facts about how carbon budgeting works, because it is quite complicated. The power sector and industry are capped under the EU ETS and we simply take our share of the EU Emissions Trading Scheme cap as our traded section of the carbon budget. If the EU decides to loosen it or tighten it that will simply be enshrined as our share. We all agree across Government that we need to align the fourth carbon budget traded sector with whatever the EU ETS cap is. The question is when to do that-to do that before we know what the picture is post-2020 or after. But the fact is we are going to align with EU ETS.

Q171 Caroline Lucas: There are two things there, are there not? One of my next questions, in fact, was exactly to say that, given that the Commission is likely to be still working on improving the ETS in 2014, why not delay the review until after they have done that? Let me put that to you first.

Ravi Gurumurthy: That is one of the factors we are going to consider. Do you want to revise the cap twice, because no doubt we will not get the exact cap right if we revise it in advance, or do you want to revise it just once? That is one of the decisions we will have to make.

Q172 Caroline Lucas: Could it then be, rather than a decision being made in the early part of 2014-as the Minister was just suggesting-that a decision is taken not to announce anything until towards the end of 2014, after the ETS negotiation has happened?

Ravi Gurumurthy: We are committed to a review in early 2014. We will have to look at a whole range of evidence, scientific, economic, the power sector story that I talked about earlier, and we will look at a full range of options, from preserving the existing budget to revising it.

Q173 Caroline Lucas: But one of your options might be to announce that you might postpone the decision until after the ETS discussions have happened. You are saying on the one hand you have said you are going to review it in early 2014. If in the process of that early review in early 2014 you decide that it makes a lot more sense to wait until after you know what is happening in ETS-

Ravi Gurumurthy: It is a hypothetical question. A review can come to all sorts of conclusions. It can come to a conclusion to look at it again, to change, to stay, but we do not know.

Caroline Lucas: Let me try you on another question.

Gregory Barker: It is worth pointing out, though, that regardless of what happens to the carbon budget, we are still set to over-achieve. Do you want to just explain that, Ravi? Setting a budget does not actually alter what we are on track to achieve.

Ravi Gurumurthy: In some ways this is a-

Q174 Chair: Sorry, but the staging posts between now and 2050 are each of the fiveyear carbon budget periods. Therefore the fourth carbon budget is absolutely critical in getting you to your final destination.

Gregory Barker: Yes, but what I am talking about is what we are likely to achieve rather than what is the notional budget. What is the practical likelihood of us achieving reductions?

Ravi Gurumurthy: As I said earlier, because the context has changed so much the fourth carbon budget is not the binding constraint on how much action we take on decarbonising the power sector. We are committed to try to get the least-cost routes to an 80% reduction in 2050.

Q175 Chair: I do not understand what it is, in the context that you are saying, has changed that would justify a departure from the fourth carbon budget.

Ravi Gurumurthy: As I said earlier, when the fourth carbon budget was set it felt much tighter than it does now because the European economy has really slowed down. Let me just go back to the power sector again. Because of the renewables target we are going to go from 450 grams per megawatt hour today to 200 grams. The fourth carbon budget, if we revise it upwards, would allow us to recapitalise the power sector and build coal in the 2020s, because it would allow us to have up to 300 grams. That is not consistent with our other targets like the 2050 target. You are not going to be able to start a big, aggressive roll-out of renewables, stop and then start again. We are already on a path to overachieve against the fourth carbon budget in the traded sector. If you look at our projections, we are looking to be under the 690 cap that exists at the moment, let alone a revised carbon cap.

Q176 Caroline Lucas: There are two things there. One is that you may feel wonderfully concentrated by that 80% by 2050. I am not convinced that the Treasury feels that same degree of concentration. They might be slightly more concentrated by the carbon budget process, which is more visible, more immediate and more explicit. We know obviously, it is in the public domain, that it was the Treasury that lobbied for this review. They must have wanted the review to be able to have the capacity to revise it down.

Gregory Barker: The Treasury are concerned about the real impact on the real economy, rather than notional budgets or notional trajectory. The thing the Treasury will take the greatest comfort from is exactly this point that Ravi has been making. I can understand the concern the Treasury would have hypothetically: with the rest of Europe reducing their level of ambition, would the domestic unilateral budgets in the UK act as a constraint on growth? That is what it is about. What Ravi is explaining is that while that might have been something we were worried about two years back, the change in economic context means that we are not in reality simply bumping up against those constraints. Theoretically, standing back without looking at it closely, I can understand why the Treasury may feel that they do not want to be constrained if the rest of Europe is slacking off ambition. The reality, when we look at the figures and the trajectory, is that is not going to be a constraint.

Q177 Caroline Lucas: That is very comforting, so why can we not make an announcement now to say that in this review there is no circumstance in which the budgets will be made larger? In other words, the targets would be made-

Gregory Barker: That would not be a review then, would it? We are committed to the review and we will do that.

Q178 Caroline Lucas: Yes, but you will know that the review is causing concern to a lot of industry and many others. You will also know that there are reputable people like John Ashton just the other day-very reputable-your former climate change ambassador, saying, "Just scrap the review. The review is deeply unhelpful". If you are also agreeing, in a sense, that there is not much likelihood, as far as you can see, that the review would lead to bigger budgets and therefore less ambition, then why not just say that and give comfort to industry now?

Gregory Barker: I have huge respect for John Ashton and others, and I do appreciate the point that you make. But in government we do not make policy on a daily basis, and we try-

Q179 Caroline Lucas: Yes, you do. You do it all the time.

Gregory Barker: It seems like it sometimes.

Q180 Chair: We are here on the basis you are making policy.

Gregory Barker: But we try to set out a roadmap and then stick to it. We announced two days ago that we would have this review in 2014 and that is what we will do. I think the thing that undermines investor certainty, the thing that undermines confidence in Government policy, however tempting it is, is when we do exactly that; when we announce a review and then things change a bit and we do not have a review or we announce a review and then a year ahead we pre-announce what we are going to look at in that review. I appreciate the logic of what you are saying, but if we want to give certainty the important thing is we do as we say and we say as we do.

Ravi Gurumurthy: Can I have one more go at this? Because of the way the Climate Change Act is framed, we have to have the same emissions as the EU ETS cap. So it is going to change no matter what. Our view is that, whether the EU ETS discussions go well or badly, we need to do even more than that to be on a sensible cost-effective trajectory to 2050 because, even in the existing fourth carbon budget, it would assume a plateauing of decarbonisation in the 2020s, which is not sensible.

Q181 Caroline Lucas: But you are not talking about the non-traded sector at all, are you?

Ravi Gurumurthy: The review is explicitly about the traded sector. It was explicitly about that.

Q182 Chair: That is precisely the question that we want to have a look at, whether or not the Government is on track to meet the fourth carbon budget in respect of the non-traded sector.

Ravi Gurumurthy: We are not. As Greg said earlier, we have not set our policies and budgets for 2023 to 2027. We have not set out our EU regulations on product standards, so there is a huge amount of policy work to do. What we said in the Carbon Plan was that there are two critical swing factors that will determine whether we achieve our targets. Firstly, vehicle emissions and whether they go down from the 95 grams that we want in 2020 towards 50 to 70 grams in 2030-that was the rough trajectory-and low carbon heat where we think we need to get between 20% and 45% of heating being low carbon in 2030. In the 2020s we are going to have to accelerate very hard on low carbon heating and electric cars. We can’t determine that now. What we can do is get those industries off to a good start and get electric vehicles deploying and get the renewable heat programme going. Later on we will rely on bigger levers like the EU vehicle emission standards to drive the deployment.

Gregory Barker: I think you want to have a degree of flexibility in order to ensure that we go down the least-cost pathway because there is technological uncertainty in terms of which of these options are going to deliver best value for money.

Q183 Mr Spencer: I just wondered how easy it is for someone to get a snapshot of where we are at, just to look at how the Government is managing delivery of emission reductions to meet the carbon budgets.

Gregory Barker: Well, I certainly agree it can be a slightly bewildering and complex business understanding the very many factors that make up the carbon reduction agenda, but we have four key reports that we publish each year to ensure accountability, not least to this Committee, and monitor progress against the carbon budgets. Those are the Annual Statement of Emissions; the Committee of Climate Change’s Annual Progress Report, obviously; the Government’s Response to CCC’s Annual Progress Report, which we will be publishing in October; and the Updated Energy Emissions Projections. For the convenience of the Committee, I have brought along copies of the most recent of each of those documents.

Q184 Mr Spencer: If we could look at the Committee on Climate Change, obviously they have their own indicators that they work to and an example of that would be where they want to see all lofts insulated by 2015. In the Carbon Plan, you are saying we should try and do that by 2020. So we are working to different targets. I just wonder if there is a disconnect there somehow.

Gregory Barker: The important thing about lofts is to understand the differential between no lagging and optimum lagging. The fact of the matter is we have made huge progress in the last 18 months on effectively lagging all of the easy-to-treat lofts and easy-to-treat cavity wall spaces in the UK. There are very few left. There is not a big programme of untreated lofts out there to be done. A lot of people have asked why we have stopped treating lofts under previous programmes. The reason is because we have done extremely well and are close to declaring victory. What we do need to do is go back and visit either the hard-to-treat lofts, which are in difficult out-of-the-way places or scrappy and difficult to access, or those where there is insufficient insulation either in the loft or in the cavity wall. Now, obviously the incremental benefit from doing that is a lot less than putting lagging into a virgin loft. That is a programme of work that does need to be done, but you are not going to get the same returns in terms of carbon savings that you get from lagging a virgin loft and the virgin lofts agenda is pretty much there.

Q185 Mr Spencer: But if one of the criteria of the Climate Change Committee is to try to do that by 2015 and the Government is trying to achieve that by 2020, by its very nature you are going to fail one of those criteria.

Gregory Barker: I do not have the number off the top of my head but I think the differential in terms of carbon saved between doing it in 2015 and 2020, given the marginal savings that come from doing hard-to-treat rather than virgin lofts, does not present such a huge problem. It is just a difference of emphasis. The thing about the CCC report is that it should be seen as guidance and a critique. It is not the only way to achieve these objectives. I don’t think anyone thinks that it should be Stalinist one-solution proposition.

Ravi Gurumurthy: It is also worth saying we take a reasonably conservative approach to this issue because we just do not know how many of these lofts are treatable. Rather than assuming that they all are and therefore doing less in other sectors, we have said, "Let’s take a slightly more cautious approach to the sector".

Gregory Barker: Those hard-to-treat lofts are, by definition, hard to treat and they can be hard to treat for a number of reasons. You can’t get access, not just the fact that it is difficult from a building point of view; but there are a number of reasons that make them harder to treat.

Q186 Mr Spencer: The Government must be keen to demonstrate that it is responding to the Climate Change Committee’s findings and its report. If you were to introduce a new policy or change direction, how could the normal person measure or see what that would mean for emissions reductions?

Gregory Barker: We are going to come back with our response to the CCC’s report in the autumn, once we have had an opportunity to analyse and take on board what they have had to say. As I say, I don’t anticipate any dramatic policy shifts, but they have come up with some good ideas and where we can iterate policy and improve it we will take on board what they have to say.

Ben Golding: Just in terms of specific policies, obviously we do publish an impact assessment for any new policy that sets out emissions projections associated with this, so how much we expect to save. On the way in which that final report talks about the updated emissions projections as calculated, it takes all of the cumulative impacts of the impact assessment we have done for every policy, including any new ones, works out the total impact of those, feeds them through our models and then you work out the emissions savings from exactly that. It is the total emissions savings you will see across the economy and that is the basis of the table that the Minister handed round earlier.

Q187 Mr Spencer: How important is it not only that you make these targets and you reduce emissions but also that people can see that you are achieving those goals and they feel part of the plan to do that and they can contribute to it?

Gregory Barker: Very important, but I don’t think people want to get that much interested in the nitty-gritty. I have presented the Committee with a table with relatively few indicators on it and I think that is baffling enough for professionals let alone for members of the public. I think what the public want to be reassured of is that there is a plan, that it is sensibly costed, that we are committed to it and we are on target to deliver it. The key benchmark of success is: are we hitting our carbon budgets? As we have said, we have over-achieved carbon budget 1; we are set to over-achieve 2; over-achieve 3; and the fourth in the mid-2020s, we need to fill in more of the blanks to ensure that we achieve on that as well. But, in terms of the overall direction of travel, I think the public can be pretty assured that, despite the challenges the Government faces, we are on track.

Q188 Caroline Nokes: I just wanted to ask a bit about how the Government is managing its carbon budgets. The National Audit Office has indicated that Government has stopped using the Carbon Plan to track its progress. Are there any plans to update the Carbon Plan and to reinstate it?

Ben Golding: The Government has not stopped using the Carbon Plan to track progress as such. The National Audit Office said that we have not published the last couple of quarterly reports in quite a long time. The reason for that is essentially that since the Carbon Plan was published a lot of the indicators and the milestones in the annex to the Carbon Plan are taken from Departments’ business plans. They are the things that individual Government Departments have said they will do on climate change. Since the Carbon Plan, Government Departments have updated those. They produced new business plans and we are just in the process of updating and aligning the Carbon Plan milestones so that we are consistently reporting against the same things. We are taking the opportunity just to look at all of the additional milestones that were not in Department business plans and making sure that they are up to date, as clear as possible and, where possible, that we are adding further in. One of the other points the NAO made was there are fewer detailed milestones later in the Parliament and it seems an appropriate opportunity to think about things that have just moved on a bit and where we can add more detail and get better reports.

Q189 Caroline Nokes: Who has responsibility for deciding if things have just moved on a bit and to make sure that things are implemented and the process is working effectively?

Chair: When will they do it by, as well?

Ben Golding: Hopefully they will do it very shortly. The Carbon Budget Steering Group co-ordinates the process, which is my team. Obviously the actual milestones of business plans are agreed at ministerial level and they are published by the Cabinet Office and by Departments.

Q190 Caroline Nokes: What does "very shortly" mean?

Gregory Barker: A very good question.

Caroline Nokes: Minister.

Ben Golding: The first half of this year.

Q191 Caroline Nokes: The National Emissions Target Board has met less frequently than was originally planned and with lower ranking officials. There seems to be no evidence that Departments are being held to account against the policies in the Carbon Plan. Can you explain why the board has not been working as it was originally intended?

Gregory Barker: It is fair to say that the work of the board revolves around the work to be done. There was a flurry of meetings back in 2011 in the run up to the setting of the fourth carbon budget. Once that budget period had been set there was less work for them to do in terms of requiring new policy. It was a question of understanding that that work was in train and so the board met less often, but I would now expect more meetings of the board in the run up to the review of the fourth carbon budget in 2014 and the setting of the fifth carbon budget in 2016. I think it ebbs and flows and we are going to be ramping up the number of meetings in the coming months.

Q192 Caroline Nokes: When it is flowing and not ebbing do you attend the meetings?

Gregory Barker: No, I don’t. It is chaired by the Permanent Secretary-the new Permanent Secretary at DECC is Stephen Lovegrove-and it is headed by director levels from DCLG, HMT, Cabinet Office, BIS, Defra and DfT.

Q193 Caroline Nokes: If you don’t attend, how do they report back to you?

Gregory Barker: I think they report to the Secretary of State through the Permanent Secretary.

Ravi Gurumurthy: We basically escalate issues when they need to be escalated. The whole point is it resolves disputes between Government Departments. If they do not exist there is no real need to meet. If we can’t resolve it at the NET Board then we will often have a bilateral between different Ministers.

Gregory Barker: I certainly have not been shy of getting involved in, not specifically these issues, but similar issues; for example, when I chaired the pan-Government GHG reduction target taskforce in 2010-2011. Again, the meetings of that group depended on the progress we were making. There was a flurry of meetings at the outset to task everyone with their appropriate reductions. Once that was agreed and they were in train they then slackened until there were one or two that we needed to chase up towards the end, but where there is a need for ministerial involvement there is not a shortage of political will. The ideal scenario is that Ministers do not have to get involved because we deliver.

Ben Golding: It is probably also worth just harking back to those annual published reports. Things like the Government’s Response to the Committee of Climate Change’s Report are obviously agreed at ministerial level and they are agreed at Cabinet Committee level before publication. So there is quite high-level ministerial engagement in holding Departments to account through that route.

Q194 Dr Offord: David Kennedy told us last week that there are four main areas of progress that he wants to see if the Government is to achieve its carbon budgets. I will briefly run through the four areas and perhaps you would like to give your opinion whether you think changes should be made or provide some justification. The first area he identified was the insulation of solid walls. The second was energy efficiency in the industrial and commercial sectors. Thirdly, he spoke about vans and electric vehicles and the fourth area was renewable heat. Do you agree that new policies and incentives are needed in these four areas and, if not, why not?

Gregory Barker: Overall, I don’t think we need new policy. That is not to say that we might need tweaking or further incentives or streamlining where it is too bureaucratic. What we need is to put our shoulder behind these and deliver. A number of the policy areas that you referred to, Dr Offord, are very early in their life.

Q195 Dr Offord: Which ones in particular?

Gregory Barker: For example, the rollout of solid wall through ECO and the Green Deal is very early indeed. Now, we need to see a scaling up of that, but what we have put in place now is the framework to deliver that; particularly the ECO programme, which is going to be the primary driver of solid wall insulation. The reason for that is solid wall is still a relatively expensive measure that is unlikely to meet the golden rule of Green Deal finance. Most people putting in solid wall at the moment will require either partial or full subsidy from ECO to install that. The early signs are that the solid wall market is growing, but we are going to have to keep that under very close watch because this is a very nascent market. We want to make sure that we deliver cost effectively.

Our brokerage of ECO means that we are now delivering ECO very much in line with the impact assessment estimates of around £1.3 billion to £1.4 billion per annum, but we want to make sure that an increasing amount of that is delivering solid wall. We hope, as we scale up the delivery of solid wall, that the cost of solid wall will come down with the economies of scale from production and the learning that comes for installation. We will be growing with the industry and watching. So it is not that new policy is there, because we have the policy for solid wall in place, but we do need to make sure that we keep on track and are not afraid to iterate that policy going forward.

Q196 Dr Offord: That is understandable but when you look at something like electric vehicles, which was the third point I mentioned, the framework may be in place but the infrastructure is not. One of the questions I have asked the DCLG is how they are working with local authorities particularly to introduce charging points, for example. What work have you done with the DCLG and, in turn, local authorities to increase the number of charging points across the country for public access?

Gregory Barker: Obviously that is a DfT/DCLG lead. I personally have not been involved in that policy. I don’t know if you can shed any light on it, Ravi?

Ravi Gurumurthy: Yes. We second one person from my team on to the Office of Low Emission Vehicles precisely to look at the interaction between infrastructure and grid infrastructure and EV rollout. The strategy that they published initially depended on private sector infrastructure and lots of innovation at an early stage rather than regulating and mandating it right from the start, but the two things go hand in hand. Because actual sales of EVs have been a bit slow, and slower than imagined, it is harder to put in the infrastructure.

Q197 Dr Offord: But it is chicken and egg, isn’t it?

Ravi Gurumurthy: It is and it isn’t in that most of the evidence about EVs and how they are deployed suggests they do not need huge amounts of public infrastructure and that most people charge at home. Most people have that range anxiety before they purchase but once they buy the vehicle they find that they do not necessarily need charging points. That is why there has been some reluctance to do a big rollout before the technology has been taken up by consumers.

Q198 Dr Offord: What about the area of energy efficiency in the industrial and commercial sectors?

Gregory Barker: There we are seeing some very interesting developments that have yet to make themselves felt in the economy. The Green Investment Bank, one of our real achievements I think, have now invested over £690 million in their first few months of operation-created out of something in the region of £1.6 billion, a leverage of around one to three-and established in that a new specific subgroup on industrial energy efficiency. It is still very early days but they are demonstrating that they are able to scale up the size of projects that can be funded and dealt with. The problem with energy efficiency projects to date is that you have typically dealt with projects that have been valued in millions or tens of millions at best rather than hundreds of millions or even billions compared to other projects within the energy sector. That is now changing. It will also mean that they are in better shape to respond to the opportunities that we are creating through EMR in the capacity market that will allow for energy efficiency projects to compete for investment alongside more traditional power projects. Then obviously we have the Commercial Green Deal that is just beginning, which will be a big boon for SMEs.

Dr Offord: The way you have approached it is totally correct, I believe, but what about smaller SMEs or SMEs generally?

Chair: Sorry, before we move on I think Mr Gurumurthy wanted to come in.

Ravi Gurumurthy: No, I was going to turn heat.

Dr Offord: Can we come back to that?

Ravi Gurumurthy: Yes.

Q199 Dr Offord: For SMEs, I have a small business. How can you help me?

Gregory Barker: The Green Deal is for you. It could even be the Domestic Green Deal rather than the Commercial Green Deal. The big problem for many SMEs is that they do not own the building that they operate out of and, traditionally, there has not been an incentive for landlords to improve the building because they pay out and all the benefit goes to their tenants. The rent does not go up, at least not in the short term, so why would you? Also there have been a couple of snagging problems with the interpretation of the law that we are putting right on the rented sector. Under the Green Deal what will happen is that landlords will be able to put in the measures to improve the long-term energy efficiency of the building but the savings will help offset the financing of that. So there will not be a financial barrier to SMEs doing that and that will either work because the landlord wants to improve the building or, more often I think, because the SME makes that request of the landlord. It will take a while to take off and I think it will be next year before we start to see the Commercial Green Deal motoring. It is very promising. This is a 20-year market we are talking about, but there are rich pickings in the SME market for energy efficiency.

Q200 Dr Offord: Mr Gurumurthy, you just wanted to mention renewable heat?

Ravi Gurumurthy: Yes. We have seen a slow deployment of renewable heat, but it is not even across the different technologies. We have seen good deployment of medium biomass and some small biomass but not enough on large-scale biomass and on air and ground-source heat pumps. That is why we are changing the tariffs. We had the tariffs set to low before, but we are changing them quite substantially. I think that is a good example of not new policy but amending, adapting and improving our existing ones.

Gregory Barker: It is important to also point out, in respect to heat-we learned from the experience of other countries and particularly Germany on the tariffs set for renewable electricity-there is no comparable tariff system anywhere in the world for renewable heat, so we are pioneering a global first.

Dr Offord: Thank you. That is very useful.

Q201 Simon Wright: A few questions on domestic energy efficiency. First of all, I wonder if you accept the analysis of the Climate Change Committee regarding their belief that new incentives are needed to help improve take up of the Green Deal. For example, are you looking at fiscal incentives or linking the Green Deal to building regulations?

Gregory Barker: Yes.

Chair: That is very clear.

Gregory Barker: We are looking at new incentives. I can’t comment on which particular incentives but, thanks to the Chancellor, we have a significant amount of money to fund a range of incentives. We already have our cash-back scheme out, but that will not take all of it. We are looking at street-by-street projects. I think the street-by-street model for the rollout of the Green Deal is the way to get this moving, blending ECO finance and Green Deal finance, but we are looking at a range of other alternatives. I see what they say about stamp duty. Stamp duty in a market where housing sales are relatively depressed is not necessarily particularly effective, but we are looking at it and we are actively considering these things in DECC at the moment.

Q202 Simon Wright: Can you give an indication of when you might be ready to say more on that?

Gregory Barker: Certainly I would expect us to say more in the autumn.

Q203 Simon Wright: Very good. In light of the data that was published at the end of July, what are your latest projections on take up over the next few years and are you still confident that you will be able to meet the commitment in the Carbon Plan to have all lofts and cavity walls insulated by 2020?

Gregory Barker: Yes. I think it is important to look at the numbers of plans that were written in the first six months of the year in context. Everyone looked at that in the sense that only 250 plans have been written and it has been going since 28 January. The reality is that reflected a couple of weeks of plans being able to be written because, while the scheme was launched, all of the things that the Government committed to do were in place for 28 January. The individual private companies took longer to complete what the Green Deal Finance Company call the on-boarding process than was anticipated. They identified glitches with their software. Each wanted individual legal advice and slightly different legal agreements around consumer finance. The software had to be synchronised and there was learning on the Green Deal Finance Company’s part as well.

As a result, it was only some two or three weeks in the case of British Gas, I think, that they had been offering the ability to sign a plan when the cut-off date was reached, and on the part of the other two or three companies it was almost a matter of days. There had not been a sustained period when the customer had been able to get a Green Deal plan signed. That is frustrating for us but what is encouraging is the fact that 38,000 people have had assessments and the majority of those people indicated that they either had, were going to have or were contemplating measures as a result of those assessments, which is a much better level of take up than I was hoping for. So that is encouraging, but what we have to get is the finance moving. Because it is a new market and because consumer finance does have a relatively heavy level of regulation attached to it, I guess we should not be so surprised that these companies that are coming to this for the first time are a little bit more cautious than maybe we believe they need to be.

But the big driver, I think, is the fact when we announced the level of plans to June, four companies had just come to the market. By Christmas the Green Deal Finance Company estimates that something in the region of 50 companies will have come to the market and substantially more the year after. It is very early days and I think the real driver of this is not going to be the Big 6, interestingly. It is going to be the SMEs. That does mean that some of the distribution in the early days is going to be more patchy because those SMEs will not have national coverage, necessarily, but I think what you are gradually going to see over the next year or two is beacons of success and that will fan out over the country as a whole. I am certainly planning SME roadshows in the autumn, at the start of the traditional heating season, when a number of new entrants are also planning to launch their commercial offer rather than during August when we are all at the beach.

Q204 Caroline Lucas: Yes, it was that image of the beacons fanning out, but the question was about the finance, as ever. Given that the numbers of people getting the assessments is quite high but then, at the moment-and some of us think it will continue-there are significantly fewer who translate that into getting the finance from the Green Deal, will you be capturing in some way the people who do get a Green Deal assessment but then choose to get finance either by extending their mortgage or doing something that might well be cheaper at the moment than taking the Green Deal finance? Will you have those numbers in some way?

Gregory Barker: I hope so. We don’t have the ability at the moment to do that exactly, but I want to be clear. For me, Green Deal finance is a means to an end. It is not the end in itself.

Caroline Lucas: Sure. That is why I wanted to know what the numbers are.

Gregory Barker: One of the things I did not mention was that several thousand people have had a Green Deal assessment and decided to take all of the savings themselves and self-finance.

Caroline Lucas: Exactly.

Gregory Barker: I think if you are giving independent advice to somebody, if you have the money, if you have the savings, it is actually a very sensible thing to do not to take any form of finance, whether it is a lower interest rate that you can get from Tesco or a mortgage or Green Deal finance or any other. Do it yourself. Take all of the savings and clearly a number of people are choosing to do that. We know that because they have taken the Green Deal cash back. Certainly I will want to know that. We don’t yet have it, for technical reasons, as part of our figures but we will certainly want to know and track the overall take-up of Green Deal measures, however they are financed, whether that is through ECO, whether that is through Green Deal finance or whether that is through self-paying.

Q205 Simon Wright: David Kennedy argued that the ECO as currently designed will not focus on the quick and cheap wins, loft insulation and cavity walls. I wonder whether you are considering relaxing the rules for ECO to allow for this.

Gregory Barker: No. On the contrary, it is almost the opposite. The big challenge is solid wall insulation. As I outlined earlier, the easy wins of treatable lofts and treatable cavities, and the statistics that-do you know when we are publishing the next round of statistics?

Ravi Gurumurthy: No.

Ben Golding: No.

Gregory Barker: We are publishing soon, shortly. That will demonstrate just how much progress was made in the last 18 months. Part of that progress was because we-or rather I-changed the rules of CERT.

You may remember that under the last Government you had the nonsense of millions of light bulbs being sent unsolicited through the post and then stuck in people’s cupboards and no real demonstrable savings accruing as a result. We got rid of all that nonsense. We have made it much more focused on the easy-to-treat cavities and lofts and, as a result, we have a very high level of penetration of that market. The challenge now is not to pretend that there are lots more easy-to-treat lofts out there, or easy-to-treat cavities, but to revisit the hard-to-treat and, more importantly, begin to scale up the solid wall insulation market. That is the big challenge, particularly for off-gas grid customers who face very high bills, particularly in rural areas.

Q206 Caroline Lucas: I know we have talked about it before in terms of the difference between what the Climate Change Committee says in terms of the lofts remaining to be done and your version because some have minimal loft insulation versus none. I was just looking back to the figures. They are so different. When you have the Committee saying that there are 6 million lofts that require insulating versus, I think, 200,000 that is coming from Government, that figure seems massively-

Gregory Barker: But what type? Is that secondary insulation or primary insulation? Because this is the difference, we are talking virgin lofts versus lofts that require a further visit, and obviously the incremental improvement either in terms of efficiency or lowering your heating bills or in carbon-save for a revisit is much, much lower.

Q207 Caroline Lucas: But it depends, though, doesn’t it? It will certainly be lower but it just feels to me that there is such discrepancy between those two figures-

Gregory Barker: Not if it is between untreated and treated.

Caroline Lucas: -in the sense of trying to understand that some might have such basic insulation that it is not providing very much help at all and some might be pretty good but still having room for improvement.

Gregory Barker: But it is diminishing returns. Obviously you want the optimum amount of insulation in-don’t get me wrong-but it is diminishing returns. You will never get the savings like the first six inches of loft insulation that you put in and it will be diminishing returns thereafter.

Q208 Caroline Lucas: Is there a process whereby somehow those figures will be reconciled? Will you be going back to the Climate Change Committee and asking them?

Gregory Barker: Yes. I would really like to get to the bottom of this because it is frustrating for me as I am sure it is for you. I think we are all aligned in what we are wanting to achieve and, while we are all entitled to our own opinions, we do not want a situation where we are all using our own facts. So I think it would be really helpful-maybe with this Committee-if we try to agree at least what the absolute agreed position is and had some way of reconciling our different ways of accounting things.

Q209 Chair: Would that be something that you would consider would be a matter for your Department or for the National Audit Office to do?

Gregory Barker: I would have to take advice on that but I would certainly like to get to a point where we could all at least agree what the numbers are even if we do not agree on the priorities.

Q210 Chair: It would be helpful if you could perhaps let us know how that might be achieved.

Gregory Barker: When we release the next set of figures perhaps we might have an informal session with the Committee to run through how we arrived at it and maybe invite the Committee on Climate Change as well.

Chair: That would be helpful.

Q211 Martin Caton: Basically it is not the EAC disagreeing with the Government, it is your Climate Change Committee that are pretending that there are easy-to-treat cavity walls and easy-to-treat lofts. From my memory of Mr Kennedy’s evidence-and I do not have it in front of me-he does believe that the science is on his side or the fact that-

Gregory Barker: We have access to-

Martin Caton: Some of them have a very pathetic amount of insulation.

Gregory Barker: Yes. I think that is the point that Ms Lucas was making: it is all relative. I think what we need to do is bring greater clarity of what we mean and make sure we are using the same terminology but I think there will be an opportunity, when we publish the next set of complete figures. Let’s make an effort to try to get on this page because it is a slightly boring argument for everybody else who is trying to understand this.

Q212 Martin Caton: So it may be that the Climate Change Committee is not pretending-

Gregory Barker: I would not accuse the Committee on Climate Change of pretending. Those would not be my words.

Martin Caton: You did use those words. That is what I am saying.

Gregory Barker: No, I didn’t say they were pretending, I-

Martin Caton: You said, "It’s no good pretending there are easy-to-treat cavity walls and lofts". The only reason we are raising this question is because it was raised with us by the Climate Change Committee so if anybody is pretending it is the Climate Change Committee.

Gregory Barker: Yes, but we have an understanding of what the new set of figures that will be released soon will show. We have access to that data and that informs our view of what is happening out there. That data needs to be audited properly and go through a process before it is released. We are basing our assumptions and our view of the sector on very up to date data. I do take these points that the Committee makes on board and I would like to get to a situation where we can at least all agree on definition and terminology.

Q213 Simon Wright: A final question: it is on EMR. The CCC are calling for greater long-term certainty to 2030 and beyond. Can you tell us anything about adjustments you might be planning to make to EMR to produce that certainty that they are looking for?

Gregory Barker: I think the key people we need to listen to most of all on this are the manufacturers like Siemens because there is no question that we are not going to get the level of developer support to meet our very ambitious off-shore wind goals, for example, or other technologies.

The question is really around the decarbonisation target, which I think you are alluding to, and it is about whether or not there is certainty for the long-term market that will bring in the OEMs to ensure that we have a higher level of UK content in off-shore wind, on-shore wind and the other renewables technologies that we need to see deployed here.

I had proper discussions, as have officials and the Secretary of State, with the Chief Executive of Siemens Europe, for example, and they are very clear that the main driver of them making substantial investments in a UK supply chain in off-shore wind is industrial support rather than a target beyond 2020. 2020 is a pretty good certainty, there is nowhere else in Europe that not only has a target but also has a funded subsidy regime all the way through to 2020. Germany does not have that; France does not have that. The level of certainty, transparency and longevity that you now have both in financing and policy, and a clear trajectory, is evident to see.

Last Thursday I was with the Prime Minister at the inauguration of the London Array, the largest off-shore wind farm in the world, and he made it very clear that he saw this as the beginning of a roll-out, and it certainly was not going to be a roll-out that was going to fall off a cliff edge in 2020. Interestingly, the Chief Executive of E.ON also made clear that the long-term future of off-shore wind that is going to be deployed through the 2020s had to be on a basis where it was comparable in price terms with other forms of generation.

I think what people mean when they say they need a decarbonisation target beyond 2020 is, "Well, we need a target because there’s going to be a requirement for large subsidy of these technologies". In actual fact, once we get through to the 2020s we must be driving towards the goal of zero subsidy so the issue of needing big subsidies and targets to pull that subsidy through hopefully will abate because we should be in a situation by then where we have low carbon technologies that have reached grid parity or thereabouts and can compete on an open market with other forms of generation. That is where we aim to get to, at which point these targets fall away and it becomes just another source of reliable, sustainable, clean energy.

Do you want to add something to that, Ravi?

Ravi Gurumurthy: The only thing I would add is that in order to meet the climate change targets, it is more cost-effective to do energy efficiency and electricity first then transport and heating later. So that makes a strong argument for doing a lot in the 2020s because one thing that the Government is absolutely committed to is the least costs pathway to 2050.

The second thing is that if you are going to have to build maybe 100% more electricity capacity in 2050, because you have electrified heating and transport, then you really need to have to do a lot in the 2020s because the build rates will have to be very aggressive if you delayed action. I think we do need to give some greater clarity to industry that the 2020s will be a time for continued deployment of low carbon technologies. However, we cannot say, we cannot lock in deployment of particular technologies in the 2020s because we have to keep the pressure on industry to cut costs. If they do not cut costs then they are not going to be able to compete with the lowest cost low carbon technologies.

Gregory Barker: If you could tell me the cost of off-shore wind versus biomass versus CCS in 2024 then we could give you a bit-it becomes very difficult until you get into the 2020s. What we have underpinning all of this, of course, is the absolutely copper-bottomed certainty of the Climate Change Act. This is where it all rests and we are absolutely committed to meeting that, as I expect successive Governments to be.

Q214 Caroline Lucas: Going back to the areas where emissions are exceeding, for example, the non-traded sector, we were just saying was increasing at 3.1% last year in terms of its emissions. Then if you look at consumption emissions or imported emissions then the Climate Change Committee was saying that that had more than offset reductions in emissions produced in the UK. So focusing specifically on those consumption emissions, notwithstanding the difficulty of measuring them, is the Government looking to monitor them in any fashion or form?

Gregory Barker: Yes, we are. That was the recommendation of the April 2013 report of the Climate Change Committee and we agree with that so we certainly think that you need to balance your effective reporting of territorial-based emissions with a context and understanding of consumption. We think that unless the entire world changes there is a huge opportunity for confusion there and for the foreseeable future, I think quite rightly, territorial emissions remain the most effective way of tracking local progress and we play our part in that.

The most effective way of getting a solution is to secure a global deal, although it is interesting to watch the way that patterns of emissions are changing with the on-shoring-certainly into North America but we are starting to see it here in the UK-of manufacturing and energy-intensive industries that have in part-not wholly of course because that’s partly due to consumer goods-played a role in reducing emissions if manufacturing has been sent to the Far East and that is changing.

Ravi Gurumurthy: I think it is just worth remembering certain facts about emissions since 1990. Since 1990 transport emissions have stayed static despite 7 million more cars on the road; emissions from heating buildings have gone down by 9% despite about 4 million more homes being built; and emissions from electricity have gone down by over a quarter despite 19 gigawatts more electricity capacity. Even in industry, industry has grown on average by about 1% a year since 1990 but emissions are far down, partly because of off-shoring but also because our industrial base has shifted and we have gone to more value-added-

Q215 Caroline Lucas: You are not suggesting that, although presumably efficiency has had a huge amount to play and new technologies and so forth in developing that result, it would be possible to decouple completely growth from emissions?

Gregory Barker: We have to be able to decouple growth from emissions. The key, and the most difficult sector, is heavy industry and that depends on technologies like electrification, carbon capture and storage and radical resource efficiency. If we can’t do that we will not meet our climate change targets.

Q216 Caroline Lucas: Just to finish on that. I know it is a slight diversion but it is the debate that we were having not very long ago with the thinking of Professor Tim Jackson, talking about the fact that there is no example on earth where we have managed to get such efficiency gains so that we have been able to have that decoupling, which therefore brings you into some of the debates about growth, which we will not go into now.

Ravi Gurumurthy: It is impossible to say to the billions of new Indian and Chinese middle classes that you are not going to have the goods and services that we take for granted now so-

Q217 Caroline Lucas: Precisely, which is why we, in the richer countries, might have to say to ourselves, "Well, perhaps we can’t go on flying forever, whenever we want to" because the impact that we would therefore have in our production consumption patterns would be using up the kind of space that people in India and China and elsewhere, quite rightly and legitimately, expect to be theirs on a more equitable basis.

Ravi Gurumurthy: But the emerging market trends will far outweigh any savings we can make, so the critical thing is: can we make heavy industry low carbon? I think there are technologies there that are credible and we have to invest in them.

Q218 Caroline Lucas: Going back to consumption emissions, can you give any indication of the kinds of policies you might be looking at that would reduce consumption emissions?

You have talked a little bit about the already happening trend of a bit more on-shoring and stuff coming back to Britain whereby I guess you could then subject them to our own regulations rather than waiting for a global regulation. Would you ever think about having some kind of target to go alongside consumption emissions, even if that would be kept separate from domestic emissions because they are different? As well as monitoring them so we know what they are-clearly we want to go down not up-would some kind of target be helpful?

Gregory Barker: I am not clear that the policies for reducing consumption emissions are any different to the policies for reducing territorial emissions. What is it you have in mind that would be different?

Caroline Lucas: Well, for example, re-localising the food supply might mean that if you were growing and eating more of your food at home, if that was an explicit climate policy rather than maybe an agricultural policy, that would mean that you would not be involving so many emissions in the transportation of whatever you are importing-chicken from Thailand or whatever it might be.

Gregory Barker: That is a very good point. We are keen, for reasons of food security as well as for emissions reasons, to encourage greater productivity at home. Again, I think that in itself will also deliver absolute carbon emission reductions as well as consumption emissions. Being very honest we do not have any plans that I am aware of to introduce a new suite of policies aimed specifically at consumption but it is something that we are increasingly aware of and I think need to make sure that there aren’t unintended consequences, or perverse consequences, from territorial emission-based policies that inflate unnecessarily consumption issues.

Q219 Caroline Lucas: So are they being measured in some way now?

Gregory Barker: We are. We are committed to doing that. I do not know if you can say?

Ben Golding: Yes. We actually are already publishing data on consumption-based emissions so the Government publishes data on the carbon footprint basis every December. The last set came out in December 2012 for 2011. We will have another set out this December.

Q220 Caroline Lucas: Is that the first time?

Ben Golding: I think it was, yes. As I say, we will have a set covering the 2012 emissions released in December 2013.

Q221 Caroline Lucas: Just going back to the issue of a target, do you think a target is useful or too premature?

Gregory Barker: I think it is a bit premature. I think I have a slight scepticism that the more targets you have the greater the chance of missing some of them. I think overall, on the climate agenda, there are too many points of intervention leading to a thicket of policy targets and what I want is very clear, robust targets that everyone is aligned upon. That way we stand the greatest possibility of achieving.

Q222 Caroline Lucas: One very quick thing, which is more to do with liaison with your counterparts in Defra; I wanted to ask you a very quick question about F-gases, which I know is a Defra lead, not your own. But given that F-gases have such a strong climate impact, can you just let me know, are vigorous discussions going on in Defra? For example, because you have the Climate Change Committee saying that they think that the Government should move to more rapid phase-out of some of the gases, even more rapid than is currently being suggested by the EU, could give any reassurance that that is on your-

Gregory Barker: I know that we have a lot of sympathy for that but I am not aware of any-

Ravi Gurumurthy: The main lever that we have is the EU product standards, which Defra own. We do engage quite heavily with Defra on trying to influence those EU discussions and it is something that is a live issue.

Q223 Chair: We are almost at the end of the session. I just wanted to ask about local authorities because, Minister, you will remember that our 2011 report was quite critical of the Government for, if you like, adopting a voluntary approach towards local authorities. We had reservations about the way in which local authorities would, if you like, implement climate change measures. I am just interested to know, in view of the further work that I believe you very kindly commissioned following on from that recommendation of this Committee and the work that the Climate Change Committee then did to give advice to local authorities and the recommendations that they have made to Government, whether or not it is your intention to respond and, indeed, implement the recommendations of the Climate Change Committee in respect of local government?

Gregory Barker: Well, we are not going to be prescriptive and introduce-at least not for the moment-a statutory duty to develop and implement low carbon plans. What we do want to do is empower local authorities to take the initiative that is best for their areas. That said, I have stated that we intend to enforce the Home Energy Conservation Act much more rigorously and we took measures in the Energy Bill that introduced the Green Deal to do that.

I have just had back now the reports that each local authority have prepared and we are in the final stages of analysing those reports from each individual local authority in the Department. There are still a few that have not yet completed and we are chasing those up. It is not our intention to respond formally to the CCC guidance for local authorities.

DECC commissioned the CCC to provide guidance for local authorities and what they can do. I was there actually for the publication of that report; it was a very good report. We had an event with the LGA who are supportive of that. I pushed the CCC to bring that report out sooner rather than later and they responded very positively to that.

Q224 Chair: But you will not be responding formally to the CCC on that report?

Gregory Barker: It is the local authorities. I think it will be unnecessary for us to respond. We support the report, the piece of work that was done; we have launched it with local authorities. The LGA is endorsing it and now the ball is in the court of the local authorities.

Q225 Chair: But wasn’t the recommendation of the CCC that the Government should look at a statutory duty being placed on local authorities-which might not in itself necessarily be prescriptive-saying how it should be done but nonetheless to have that statutory duty, which largely arose out of the failure of so many local authorities to grasp this agenda?

Gregory Barker: Well, we are not supporting that at the moment. We think that the best possible way is to empower local authorities to do this. As you will know, Chair, one of the key themes of this Government has been localism and it-

Q226 Chair: But isn’t the localism at variance with the level of ambition in respect of the Climate Change Act?

Gregory Barker: Well it depends on your belief in local politics. I am perhaps more optimistic.

Ravi Gurumurthy: Could I just add two things we are doing with local authorities? First of all many of them have set their own very ambitious targets, like Manchester and Birmingham, but they do not actually have a good way of understanding what is their responsibility in local government and what is national Government’s responsibility. We have worked with Birmingham and Manchester to try to help them create their own version of a carbon plan focused on the things they can affect. So they have a big effect on public transport, on housing stock, on heat networks and we wanted to focus their activity there rather than the things we are sometimes doing on the national electricity supply.

We are helping them with the analytics and then there are two particular funds we have been working with them on: one around Green Deal and Go Early where we have supplied funding and the second is around heat networks where we really feel cities, in particular, and city regions can play a big role.

Q227 Chair: Just on that, although 200 local authorities have reported in terms of what they are doing, that was out of a total of 353 so there are 153 who are not engaging with this agenda at all.

Gregory Barker: Yes, you are absolutely right, Chair, and we are chasing them. I think we are sceptical of a one-size-fits-all approach and the number of local authorities is not proportionate to the overall percentage of commissions that they cover.

As Ravi said, we are working with core cities who are best placed to deliver the largest reductions in emissions by focusing with them on a bespoke range of measures, particularly district heating, Go Early, Green Deal, ambitious street-by-street roll-outs, a whole range of measures. We think that a more nuanced approach, recognising that there are local authorities that have both a greater appetite and also ability and resource to effect change, is better than trying to drag everyone at the same speed and uniformity and squander our resources. I think one willing volunteer local authority is worth several dragged kicking and screaming.

I am very pleased to say to the Committee that by and large the response from our largest local authorities-the big metropolitan areas; some of our second tier cities as well-is very positive as indeed are some of the counties like West Sussex, for example.

Q228 Chair: You could easily require them to produce a carbon plan, couldn’t you?

Gregory Barker: Well, we have asked them to have a programme for delivering the Green Deal and over 80% of authorities have now responded to that. What we want to do is take the best learning from those who are real pioneers and then cascade that down through the rest of the local authorities rather than have a sort of one-size-fits-all approach for the whole country. Ultimately we have got to spread it across the whole country but it hasn’t all got to be done this year.

Q229 Martin Caton: I think there is something very helpful in that-and I hear what you are saying about Birmingham and Manchester-but if you get more local authorities prepared to be the willing volunteers, are they going to get the same level of support in moving forward to develop their own carbon plans or whatever?

Gregory Barker: Honest answer, no. Those that sign up early will get the early mover advantage and will get the additional funds because they would be the ones who will be pioneering the learning, providing the beacons, potentially having to make mistakes and then correct them because no one has done it before. We are recognising that and there are Go Early funds specifically to encourage innovation and early movers. Logically it makes sense for local authorities to grasp this agenda sooner rather than later because they can be more certain that they will get funding.

Q230 Chair: I will bring this to a close before 4pm but can I just go back to our questions earlier on about the fourth carbon budget and try to understand the Government’s position in relation to the letter that the chairman of the Climate Change Committee, I believe, sent to Government? Could you just clarify, yes or no, whether or not you agree with the contents of one of the paragraphs in that letter, which I will read, "However, the budget was not premised on the EU increasing ambition in its 2020 emissions reduction target from 20% to 30% on 1990 levels. The fact that this has not happened does not constitute a change in the basis upon which the fourth carbon budget was set. It is therefore not relevant to the review and could not be the basis for changing the budget."

Could I just ask, Minister, whether or not you would agree with that summary of the position so that it would not be relevant to the review, or indeed Mr Gurumurthy?

Ravi Gurumurthy: It is true to say that when they recommended to us the level of the fourth carbon budget they did not predicate it on a shift from 20% to 30% in 2020. That is as read. When, however, the Government responded to the CCC and made its own internal decisions, European ambition was right at the centre of those discussions so we certainly factored that into our discussions. The change of circumstances is something that is a matter for interpretation but certainly, on our side within Government, that EU ambition was a really core part of the decision making.

Chair: Okay. At that stage I will bring the session to a close.

Can I thank each of you for your contribution this afternoon and say to you, Minister, that we do look forward to following up some of the points that we have covered. We have had an example of that kind of informal working previously. We hope our report will be influential in taking this whole agenda further forward. Thank you very much indeed.

[1] See Appendix A

Prepared 3rd October 2013