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Noble Lords will anticipate all sorts of potential developments. I shall listen very carefully to them and shall take up the invitation of the noble Lord, Lord Jenkin, to write to him if I can reply further. However, the noble Lord has to establish why he thinks that it would be of benefit to break that crucial link; he must recognise that it is a basic principle of the Governments approach to the development of renewable generated electricity.
Lord Redesdale: It would be strange to break the link. By its very nature, biomethane has to be cleaned and scrubbed of CO2 before it can be injected into the grid network. Therefore, any gas produced in that way could be measured very carefully and, once it was pumped into the network, he would have a figure that showed how much biomethane was going into the grid network. It would not be beyond the wit of man then to work out that, if that was the amount of power going in, the amount of power coming out could be linked to it, and there would be a direct link between the two systems.
That is the current system under which offshore wind turbines are used and their electricity is fed into the grid. Wind turbines produce electricity that is measured and pumped into the national grid and is then used by companies that want to buy green electricity. Perhaps the Minister can say where I am wrong, but I do not see how that is not breaking the link, because the electricity is fed into the national grid. I do not understand why the controlled and measured dispatch of biomethane from the cleaning process into the grid network cannot be measured and dealt with in the same way.
Lord Davies of Oldham: Earlier, I sought to show one way in which the link might be broken. We would be concerned about our ability to track the movement of biomethane gas in this way. I return to the principle. Surely the noble Lord accepts that ROCs are awarded according to the generation of electricitynot on the use of the electricity nor on the production of the fuel but on the generation of the electricitybut his amendment would open up a crucial change to the ROCs concept. The principle of ROCs and the renewable obligation within the framework are critical to our strategy. That is why we find the amendment unacceptable.
Lord Jenkin of Roding: I am grateful for the Ministers offer to write a letter. He said that there would be nothing to add, but it would be very helpful to have a proper statement from the Government setting out why they cannot give the same kind of support to the coal bed methane industry in this country as the German Government have for some years given to the industry in Germany.
With regard to the link between the consumers bill and the source of the energy, I have never understoodI have never gone for it myself because I think that it has always been slightly bogushow people can opt to buy electricity from a green source by paying a bit more. I do not know how it works, but if gas is going to enter a gas grid, it should be perfectly possible to deal with it in exactly the same way as electricity being fed into the electricity grid.
I have to say that I feel that the noble Lord has not so much scraped the barrel as he has scraped what in polite society I should not repeat. The arguments simply do not add up. It is the same old story that we have seen in Bill after Bill, of desperately trying to protect the narrow field of activity that qualifies for the ROC. In an earlier Bill I described that as losing sight of the objective and concentrating on the means. The means and the objective are being confused. The objective is to reduce carbon and to supply energy, it is not to protect an artificial concept like ROCs. This is where the Government really have gone quite sadly wrong.
Lord Davies of Oldham: I will not make any progress if I seek to reply to the noble Lords points any further, but I recognise that there is considerable concern among Members of the Committee about the argument I have presented today. I do not doubt that a letter
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Lord Redesdale: I thank the Minister for the proposed letter. The noble Lord, Lord Jenkin, is right because we tend to think of these things in financial terms. We are thinking about how to stick to ROCs, but the whole basis for a renewables obligation and the reason so many of us are interested in this field is because we are running out of fossil fuelsthis is a way of bringing forward a renewable source of energyand we are worried about carbon. They are the issues that concern us most. We are hidebound by ROCs, so a situation has developed where enormous amounts of methane are allowed to escape into the atmosphere, yet we are stopping ourselves from using such sources developed on a local scale in order to reduce the amount of fossil fuel we use. Given that situation, there is a fundamental flaw in ROCs.
I cannot take the issue any further at this stage. I shall withdraw the amendment, but it is very depressing to think that while we are looking at ROCs as a way of promoting renewable energy, the Minister has just repeated an argument that the noble Lord, Lord Whitty, said is not new. It simply shows how the department is working in a way that actually destroys the very basis on which some of these industries will depend in the future. That does not mean just methane, but in other areas of microgeneration. I beg leave to withdraw the amendment.
Companies involved in the generation of electricity must show in their annual reports the amount and value of any allocation they have received from the European Union Emissions Trading Scheme and the amount that has been paid for such an allocation.
The noble Lord said: This amendment, which may be less exciting if less odorous than one or two that have gone before it, would oblige companies that generate electricity to disclose the amount and value of any allocation they have received through the European Union Emissions Trading Scheme. Noble Lords should understand that we are not seeking to impose unnecessary and costly extra burdens on business, but publishing this information would be advantageous to consumers and investorsand, we consider, should not be too costly to administer. Each round of the EU ETS will become more stringent. It is likely that soon the UKs allocation of credits will be auctioned off rather than simply passed on free to companies, so putting a clear price on them. This proposal should provide a higher level of transparency.
The Minister in another place said in response to a similar amendment that this is an issue that time would resolve. I would like the Minister to be more specific about exactly how time will resolve it. What form does he see company reporting mechanisms taking? As a price will be attached to allocations on their initial auction, it seems to me that a company will have
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Lord Teverson: I welcome the amendment about transparency in the EU ETS. I was very disappointed that since the Climate Change Bill moved to the other place, the Government have sought to take out the corporate reporting clauses that were accepted by the Minister in this House. I approach the amendment with some concern about the Government's response. The EU ETS is a very important instrument, and one that we will talk about under other amendments that we will propose from our Benches. The amendment leads to greater transparency and I very much welcome it.
Lord Bach: The proposed new clause pertaining to an amendment to the EU emissions trading scheme and company reporting was debated in another place. We thought that we had gone a great way to reassure honourable Members on the other side in another place that it was not necessary. Let me see whether I can reassure the noble Lord tonight.
The amendment is drafted with the aim of identifying the so-called windfall profits of companies participating in the trading scheme. Let me say a few words about the EU ETSnot many, I promisebefore addressing the new clause specifically. As the Committee knows, the EU ETS was launched in 2005 and in its first phase, which ended last year in 2007, companies were allocated carbon credits that could then be traded. The carbon credits and trading system established a market for carbon. The scheme was very ambitious; some might describe it as revolutionary; and, let it be said, it faced some problems in that first phase, most of which got pretty wide publicity.
For example, we recognise that generators have profited from the ETS. However, we in the UK and, I believe, in the EU generally, have learnt from those problems and are now attempting to improve the scheme from the experience that we have gained. Phase 2 began in January this year. It has reduced the overall allocation of carbon credits and raised the expected price for carbon from 2008 to 2012. It is currently at about €25 per tonne. In the second phase, the UK will auction 7 per cent of allowances to the large electricity producers. We are in discussion with the Commission about the post-2012 phase 3 of the scheme. We announced in this years Budget that we would auction 100 per cent allowances to the large electricity producers in phase 3. We believe that auctioning, as well as being the most efficient way to make allocations, will address the issue of windfall profits.
I turn to the amendment. As the noble Lord will know, the amount of carbon allocations that companies receive is already published by Defra on its website. Likewise, the market price for the allocations is already published. Therefore, requiring the generators to publish this information would create duplication and an unnecessary administrative burden.
The amount paid for the carbon allowances which generators buy from other EU ETS participants is not published, but is commercially sensitive information. The generators are not, for example, expected to publish the price they pay for coal, gas or oil, or the rates they pay their contractors, which we happen to believeI hope that the noble Lord does, toois absolutely right in a competitive market. Requiring suppliers to publish such information could lead to a distortion of the market.
For those two distinct reasonsfirst, that some of the information, which is not sensitive, is already published; secondly, that that which is commercially sensitive should remain sothe amendment should be withdrawn.
The Duke of Montrose: If under phase 2 of the EU ETS the units are subject to auction, surely the price will be different in each transaction, according to what the individual company offers. However, as the Minister said, one might wish to withhold that simply on the basis of commercial confidentiality, but I cannot see how the price will be known, because each company will strike its own price in every deal.
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