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Lord Davies of Oldham moved Amendment No. 198:

The noble Lord said: My Lords, never let it be said that we are not a listening Government when sensible arguments are put at any stage of a Bill. We listened to the significant representations that were made. They were not unduly protracted, but were made with considerable force and argued that we should make a

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change because noble Lords were concerned that the power in this paragraph would provide for the tearing up of,

    "any agreement or code that the Secretary of State thinks it desirable".—[Official Report, 24/2/04; col. GC 72.]

That would be a terrifying power and is not one that we have ever intended. We indicated in our response that the power was restricted to a narrow purpose—that is, when a change is needed to an agreement or codes as a consequence of changes to a transmission licence for the purpose of BETTA.

However, it was clear that there was great anxiety in Committee over this issue and we were pressed to come back with a different form of wording. As ever, we have considered those representations with the greatest of care and have tabled an amendment that brings the language in line with the drafting in the other clauses relating to BETTA—that is to say, from a "desirable" test to a "necessary or expedient" test. Noble Lords will recognise how enormously grateful I am for the advice that was proffered on that last occasion. I beg to move.

Lord Jenkin of Roding: My Lords, at the risk plagiarism, may I tell the Minister I am enormously grateful to the concession he has made and it greatly improves the Bill? It makes the whole Grand Committee procedure worth while.

On Question, amendment agreed to.

[Amendments Nos. 198A and 198B not moved.]

Clause 116 [Grant of transmission licences]:

[Amendment No. 198C not moved.]

Schedule 18 [Property arrangements schemes]:

Lord Davies of Oldham moved Amendment No. 199:

    Page 217, line 10, leave out paragraphs 21 and 22.

The noble Lord said: My Lords, the amendment again fulfils a promise that we made in Committee. Considerable criticism was made of the contents of paragraphs 21 and 22 in schedule 18. This amendment removes them. I beg to move.

On Question, amendment agreed to.

9.45 p.m.

Lord Woolmer of Leeds moved Amendment No. 200:

    After Clause 121, insert the following new clause—

"Exemption of nuclear and large scale hydroelectricitygeneration from climate change levy

(1) The Climate Change Levy (General) Regulations 2001 (S.I. 2001/838) are amended as follows.
(2) In regulation 47(1), leave out "provided that it is not electricity generated from a large hydro generating station".

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(3) In regulation 47(2)—
(a) in the definition of "generator", leave out "except in the definition of "hydro generating station" below,"
(b) in the definition of "hydro generating station", leave out "other than stations driven by tidal flows, waves, ocean currents or geothermal sources",
(c) leave out the definition of "large hydro generating station",
(d) in the definition of "renewable sources"—
(i) leave out "or nuclear fuel" and insert ",",
(ii) at end insert "and also includes nuclear fuel".
(4) Nothing in this section affects the power of the Commissioners of Customs and Excise to make or amend regulations under section 30 (climate change levy) of and Schedule 6 (climate change levy) to the Finance Act 2000 (c. 17)."

The noble Lord said: My Lords, at this late hour I shall be brief. First, I give the apologies of my noble friend Lord Lea of Crondall who has sat through much of three days of Report stage and unfortunately as we reached this amendment was unable to be with us. I extend on his behalf apologies for absence.

Her Majesty's Government are firmly committed to a national goal of a 20 per cent reduction in carbon dioxide emissions by 2010. I am sure that we wish them well in that ambition. However, as well as being a tax on energy, the climate change levy, introduced in April 2001, is, I presume, intended to contribute towards reducing carbon dioxide and other greenhouse gases. There is common agreement that nuclear power for electricity generation results in no carbon emissions or other greenhouse gases. The same goes for hydroelectricity.

Common sense appears to be that nuclear power for electricity generation should not have to pay the climate change levy; yet it does. A quarter of all climate change levy revenue is collected from nuclear power-generated electricity. I welcome the fact that high quality combined heat and power from coal is given a dispensation for the levy. That seems to show a welcome flexibility. I hope that the Government can extend not only flexibility but good sense to the nuclear industry and nuclear power.

I support the Government's efforts to back wind power as an energy source with low greenhouse gas emissions. It will be an expensive option with significant issues surrounding reliability and back-up capacity, but that may be a price worth paying to achieve low-carbon technology. The Government would be correct to back wind power as a major source of low emissions energy. Figures published recently by the Royal Academy of Engineering demonstrate that offshore wind power varies between two and three times the cost of new nuclear plant.

Most objective commentators are clear in their conclusions. If the UK is to achieve its Kyoto commitments, we need a significant nuclear contribution. There is some inconsistency in the way in which the emissions trading scheme will differentially impact against carbon dioxide producers, yet the climate change levy

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appears to discriminate against an important industry that can contribute to reducing carbon dioxide emissions in our climate.

Exempting from the climate change levy electricity generation for nuclear power and large-scale hydroelectricity can make a significant contribution to reducing greenhouse gases. It would bring consistency in the Government's approach to the use of the weapons of the climate change levy and the emissions trading standards. I beg to move.

Lord Jenkin of Roding: My Lords, I was happy to add my name to the amendment in the name of the noble Lord, Lord Woolmer of Leeds, and his colleagues. I too regret the absence of the noble Lord, Lord Lea of Crondall. He brings to these debates a mordant wit, which would serve us well on this occasion. One needs a considerable sense of humour to recognise that what the Treasury—it was a Treasury introduction—called a climate change levy was not actually anything of the sort.

To the ordinary man in the street—I say this with great respect to the noble Lord, Lord Woolmer, who moved the amendment with charm and modesty—the Treasury naming the tax the climate change levy gave the public the view that it was an important step in our efforts to achieve our Kyoto targets for the reduction of greenhouse gases. But it is not. Otherwise, why should there be no dispensation for large-scale hydro, which produces no carbon dioxide, or for nuclear power, which also produces no carbon dioxide? To paraphrase the Treasury, it is an energy tax with a dispensation for renewables as defined.

That was not the impression given to the public when it was introduced: it was thought that the tax was specifically directed to help achieve our Kyoto targets. It is very much like Humpty-Dumpty—I make words mean what I want them to mean. I am not sure whether Humpty-Dumpty might have been the metaphor over the door of Alastair Campbell.

The noble Lord, Lord Woolmer, made clear that it is plain dotty to call something a climate change levy and to make the firms—the customers—pay the levy, even though they are buying electricity from generators who generate no carbon dioxide. It is totally and utterly illogical and it is high time that it was put right.

I am one of those who was persuaded by the report of the Royal Society a year or two ago that we need a carbon tax. I know that that is not everyone's favourite dish, but it would make a great deal more sense than the so-called climate change levy because it is nothing of the sort.

For those reasons, I was happy to add my name to the amendment. It is an attempt to make sense out of what was a very misleading instrument when it was introduced by the Treasury in 2000. It is an economic instrument which can work in diametrically opposite directions. It may have played its part in driving British Energy to the wall—after all, anyone who bought nuclear power from British Energy had to pay

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the climate change levy. Why should people choose that rather than go for some of the other sources, on which they might pay less?

The Government have committed themselves to a strange and tortuous business. The amendment is an extraordinarily valuable effort to try to make some sense of it because manifestly it is a nonsense.

Baroness Miller of Chilthorne Domer: My Lords, we on these Benches would welcome a carbon tax. However, we do not support the amendment because, although rightly it calls for us to debate the issue, it perpetuates the mechanism that the Government have put in place. Perhaps in Committee we should have proposed a carbon tax as a way of achieving the outcomes. Nevertheless, there is an emphasis on the inadequacy of the current mechanism.

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