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On the technical issues, all I can say tonight is that we are continuing to work with the national grid to overcome some of the technical issues concerned with injecting biomethane into the gas transmission system. When I am in a position to update noble Lords, I will write to them on it.

Lord Teverson: My Lords, I thank the Minister for that positive reply—

Lord Hunt of Kings Heath: My Lords, I am grateful to the noble Lord for giving way, because inspiration has just reached me about the question that he asked me at the beginning. I am glad to say that the demonstration programme is open for bids until 9 December. I hope that bids are being made, as we would encourage them.

Lord Teverson: My Lords, that is good news. I look forward to seeing the response and the outcome. I do not know whether there would be pre-combustion anaerobic digestion as well as post-combustion. The point about the heat side is important and I accept that the Government now take it seriously. If there was a way of integrating that into the solution, we would find that acceptable. Given the Government’s wish to do that, which is positive, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Teverson moved Amendment No. 11:

11: Before Clause 80, insert the following new Clause—

“Provision for greenhouse gases emissions performance standard for electricity generation

(1) The Secretary of State may by regulations, make provision for a greenhouse gases emissions performance standard to set the maximum level of carbon dioxide that may be emitted per unit of output by any generating station requiring consent for construction or extension under section 36 of the Electricity Act 1989 (c. 29) (consent required for construction etc of generating stations).

(2) Regulations made under subsection (1) may include provision specifying—

(a) how proposed generation stations may comply with any greenhouse gases emissions performance standard and demonstrate compliance with any regulations made under this section, including by the capture of carbon dioxide at the generating station and its transport to and injection into geological storage provided that such activities are licensed in accordance with applicable laws and regulations;

(b) the basis on which emissions of greenhouse gases from combined heat and power generating stations shall be calculated such that the unit of output includes useful heat produced in addition to electricity generated by any such generating station; and

(c) any sources of electricity generation, including electricity generated from renewable sources, that are deemed to be compliant with any greenhouse gases emissions performance standard.

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(3) No consent shall be granted under section 36 of the Electricity Act 1989 for any generating station that does not comply with regulations made under subsection (1).

(4) Before making regulations under subsection (1) (including setting the level of the greenhouse gases emissions performance standard), the Secretary of State must consult such persons as are, in his opinion, likely to be affected by or have an interest in the regulations.

(5) Regulations made under subsection (1) shall be made by statutory instrument, and shall not be made unless a draft of the instrument has been laid before, and approved by a resolution of, each House of Parliament.

(6) In this section “greenhouse gases emissions performance standard” means a standard prescribed by regulations setting the maximum level of carbon dioxide that may be emitted per unit of output from an individual generating station.”

The noble Lord said: My Lords, many amendments have been tabled to this Bill, but it seems to me that this area is one of the most obviously important and straightforward in terms of concept, in terms of being able to deliver it and in terms of the positive effects that it would have on future greenhouse gas emissions. We are very clear and we understand very well that for ordinary capital goods such as you and I might buy, such as motor cars, there are regulations about emissions. One of the successes, and one of the ways in which Europe is starting to lead the world, is in emissions regulations for motor vehicles. In doing so, it leads the world and the rest of the world catches up, because Europe is such an important market in that area.

Cars produce a certain amount of carbon dioxide, and transport is important; but the energy generation sector is even more important in terms of emissions. Why do we not then apply emissions standards to power stations? That is hardly a eureka moment; it seems so totally obvious that we should do that. To make that reasonable, since power stations have long lives, it would be unacceptable to apply such a standard to existing power stations, because it would be very difficult to make them comply. We do not want to allow the lights to go out across the nation.

This amendment makes the straightforward proposal that the Secretary of State should have powers again to set such standards. This is one of the areas in which we could again show leadership within Europe; more than that, it is particularly important because power stations are pieces of capital equipment that have very long lives indeed. If you build them and you start operating them, they will operate to those standards for many decades, and it is, therefore, important that we get the standards of emissions of such power stations right now.

There is an argument, which the industry makes, that none of this is necessary because the EU Emissions Trading Scheme has a carbon cap which should solve the power sector’s issues around carbon emissions by itself. That is a completely erroneous argument. The EU ETS is extremely important, but we all know—and this has been accepted on all sides of the House in many other ways—that just relying on one type of instrument is not sufficient in the area of climate change. We have to use a number of those instruments.

If the power sector used up a large number of the carbon units allowed under a cap-and-trade system, that would technically work, but it would mean, because

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of the inelasticity of the demand for energy, that the rest of the economy had to deal with a hugely lower number of carbon credits, because the rest would have been used up by the energy sector, given that it was unable to respond quickly enough because of its old technologies. That would create a situation that everyone, from the Stern review to the Government, wished to avoid. It would force the rest of industry to go through a forced and accelerated decarbonisation process in the main part of the economy, whether it be manufacturing, services, mining or farming—all of those areas—particularly in terms of the EU ETS. Large areas of industry would have to adjust even quicker to those caps coming down.

The answer to that is to have other instruments as well. Regulation, which is accepted for every other sector of product design and installations, should be applied to this area. Should we really allow power stations that will last for some 50 years to be built to the wrong standards, when they cannot necessarily be modified? That would be unacceptable. Even in terms of the timescale for the 2050 targets under the Climate Change Bill, power stations that are built now will still be operating at that time. That time is not far ahead.

When I researched this subject, I was interested to note that the EU Large Combustion Plant Directive—the Minister probably knows far more about this than I do—covers noxious substances such as sulphur dioxide, nitrogen oxide emissions and particulates. Nitrogen oxides are some of the worst greenhouse gases. Yet, strangely, that directive does not include carbon dioxide. I would say to the Government that there is a route. There is an organisation that I did not realise existed called the UK National Emission Reduction Plan, NERP—which I noted from the Defra press release was a rather unfortunate term; I would not work for an organisation called that—whose secretariat has an important role. If the Government cannot accept this type of enabling amendment, I would at least like to hear that they would lobby the European Council and the Council of Ministers very strongly to widen that directive to include emissions that are equally important in terms of climate change and carbon dioxide. I beg to move.

9.30 pm

Lord Jenkin of Roding: My Lords, I have listened to the noble Lord with interest, having refreshed my memory of what was said in Grand Committee on this subject. I was amused by his description of the National Emission Reduction Plan. It is just as well it was not called the British emissions reduction programme as the acronym would be even less attractive.

Following the debate that took place in Grand Committee, I too have tried to find out what lay behind the Minister’s reply. I found that there are some quite powerful arguments against what the noble Lord, Lord Teverson, proposes. There is a widespread recognition that the most efficient way to control CO2 emissions is at least to do so on a Europe-wide basis and eventually there may be a more international—a more global—system. At the moment, it is run through the EU Emissions Trading Scheme. That is what the Government, against much criticism in which I have

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not joined, have taken as the basis for how they will ensure that this country plays its part under that scheme.

Cap-and-trade schemes are the most efficient way of achieving that. That is the ETS. The noble Lord mentioned the Stern report, which I quote to support my case rather than his. It emphasises the importance of using market instruments to reduce CO2 emissions and states:

“In practice, cap-and-trade systems ... control the overall quantity of emissions, by establishing binding emissions commitments. Within this quantity ceiling, entities covered by the scheme—such as firms, countries or individuals—are then free to choose how best—and where—to deliver emission reductions within the scheme”.

In effect, I think that is the basis of the argument against individual cap and trade.

I understood what the noble Lord said about refrigerators, cookers and so on. You have a system of graduated test approvals. Like most people, we have just had to replace a dishwasher and we got an A-rated one because that is the most energy efficient. However, it is quite impossible to run power stations like that. Within the system as a whole, the noble Lord made the point that a power station which emits CO2 means that everyone else has to cut their emissions by more. The answer is if it is emitting too much CO2 it will be uneconomic because of the way in which the Emissions Trading Scheme works: it will have to pay very large charges on that, therefore, it will be less competitive than those which do not emit. In a sense, nuclear power is bound to become much more effective because it has a very low emissions trajectory.

I think Stern supports the case I am making, rather than the case made by the noble Lord. Emissions standards will also add to regulatory risk as the ability of regulators to change standards progressively will create additional uncertainties.

I have also heard it suggested that if what the noble Lord suggests were to become law, it would promote a second dash for gas, because that is a relatively low-emission technology, at a time when, as we all know, we are going to import more and more gas from increasingly unreliable sources. I find myself coming down against the noble Lord’s amendment, and I hope the Government will share my view.

Baroness Young of Old Scone: My Lords, I hope the Government will not share that view because if the increased numbers of coal-fired power stations that are looming in the wings come forward, we will experience probably the greatest failure of the EU ETS and British energy policy for a considerable number of decades. I find it inconceivable that, when climate change is clearly the biggest threat and is an acknowledged part of government policy, we are even contemplating the idea of a number of coal-fired power stations when carbon capture and storage is an untested remedy and, even if it comes on stream, it will be possibly 10 to 15 years away. We know from the work of the climate change committee and from previous reports that the important thing is fast reduction of emissions. The 80 per cent target is important, but the most important thing is reducing total emissions in the early years. Having unabated coal technology coming on stream and pouring out carbon until such time as

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carbon capture and storage may come on stream will do nothing to resolve the problem that we have very little in the locker to reduce these early carbon emissions.

We have a failing of the EU ETS and of energy policy at this stage, although a number of things can happen. This amendment is one thing that needs to come into place. We need to get these early emissions down. The climate change committee highlighted the importance of decarbonising the power sector by 2030 and, as the noble Lord, Lord Teverson, said, many of these capital-intensive investments in coal-fired technology will be here for the next 40 to 50 years. Where will we be in 2030 if we still rely on coal-fired technology? If by then the EU ETS has made them uneconomic, are we seriously suggesting that investors should put their money into a technology that we know that economics will knock out of the market within the next 10 or 20 years? I do not think that is a wise proposition for the investment market.

What do we need to do? It is not unknown in the rest of the world for emissions performance standards to be brought in. They have them in some of the US states, Canada, New Zealand and Denmark. The noble Lord, Lord Teverson, raised the large combustion plant direction, for which, until recently, I was the regulator. It has emissions standards for a variety of pollutants, excluding CO2, and the coal industry accepted that as inevitable. The noble Lord, Lord Jenkin, put forward the idea that there is regulatory risk from ratcheting up standards, but business is well used to that from a string of European directives over the past 20 years and, provided it gets enough warning of ratcheted-up standards, it is relaxed about them.

The noble Lord, Lord Jenkin, quoted the noble Lord, Lord Stern. I shall quote in the opposite direction. In his original report, the noble Lord, Lord Stern, stated that:

“Carbon pricing alone will not be sufficient to reduce emissions on the scale and pace required”,

and that:

“In this transitional period, while the credibility of policy is still being established and the international framework is taking shape, it is critical that governments consider how to avoid the risks of locking into a high-carbon infrastructure, including considering whether any additional measures may be justified to reduce the risks”.

We are clearly running the risk of locking ourselves into a high-carbon infrastructure. The Government need to take additional measures. The amendment would be one of them, but they should do other things as well. If clean coal is genuinely a global technology that we must embrace because other countries will continue to rely on coal, let us look at ways in which we can accelerate the carbon capture and storage proposition both at a European level, where it should be accompanied by a directive, a timetable and a funding plan, and at a UK level, with our demonstration projects.

We need to ensure that the lights are not turned off by looking at how we deal with the energy gap and at the energy security arguments. A considerable amount of work is being done that shows that if we were serious about the energy efficiency and renewables policies which the Government have adopted, there

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would be sufficient energy to meet UK base-load capacity in the delicate periods between 2012, 2015 and 2025.

The Institute for Public Policy Research produced a recent report called After the Coal Rush—I declare an interest as a trustee of the institute—which looked at the policy options for coal-fired electricity generation. Its view was that if the government strategy for meeting the renewables targets and the energy efficiency targets were achieved, the commercial case for conventional base-load coal was extremely weak. The arguments are clear. We are in a weird position in which the only propositions that are being made apace are for the most carbon-intensive energy-generation methodologies that will be set in concrete for 40 to 50 years, and I commend the Government to think very seriously about whether an emissions performance standard for all new generation should be put into place. It would not be wildly out of kilter with policies elsewhere in the world.

Baroness Wilcox: My Lords, I find this somewhat embarrassing. I fear that I am not going to agree with my good friend, who is sitting behind me and who has such knowledge on these subjects. I hope that he will forgive me.

As I said in Committee, we support the amendment. An emissions performance standard would send a clear and much needed signal to the market about the future direction of UK energy production. It would prevent any more wobbles in the Government’s commitment to their CO2 reduction targets and to the recommendations of the Stern review—wobbles that would result in unabated coal plants being given the go-ahead. I believe that six are being considered. It would also encourage the long-term investment in carbon capture and storage that is needed if the UK is to develop the technological expertise that will become ever more critical as climate change moves up the international agenda.

The Government explained in Committee that they supported a carbon cap only when it was applied at an EU level. Their argument was that a cap delivered through the EU Emissions Trading Scheme, the level of which is of course decided with the involvement of all EU members, would result in a credible and effective framework for the reduction of CO2 emissions, but that a cap on individual UK power stations, set entirely at the discretion of the Secretary of State, would lead to a crisis in our energy supply.

As the noble Lord, Lord Stern, warned, the ETS will not make a sufficient impact on the power generation sector soon enough to prevent us from being locked into a high-carbon infrastructure. Why have the Government decided to ignore his recommendation that they take further steps to prevent this from occurring? Other countries have seen the danger of allowing new unabated coal-fired power stations and have imposed moratoriums of various sorts, so why not us, as the noble Baroness, Lady Young of Old Scone, has just said?

In further discussions, the Government have suggested that an emissions performance standard would be of no value because it would not automatically lead to

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the reduction of CO2 emissions from other EU countries. Will the Minister explain the value of the Government’s commitment to making all schools zero-carbon by 2016 and to reducing carbon emissions immediately in newly built schools by at least 60 per cent? Such policies will not directly improve the carbon emissions from other building development and will of course impose a cost on the taxpayer. Yet, in this example, the Government thought it worth while. I look forward to the Minister’s response and I hope that he will be more receptive to this enabling power than he was when it was last discussed.

9.45 pm

Lord Davies of Oldham: My Lords, this has been an important and fascinating debate. Let me make it absolutely clear that the Government, the noble Lord, Lord Teverson, and other noble Lords who have spoken are of one mind. Of course we want to have effective mechanisms in place for controlling carbon dioxide emissions. The point of difference between us is the mechanism by which we achieve that. The noble Lord indicated that we need a range of mechanisms to tackle climate change and his amendment is structured around one dimension of that approach, but the Government’s position is in line with that expressed by the noble Lord, Lord Jenkin, which is that we have the right mechanism for tackling CO2 emissions through the European Union ETS. The scheme will ensure that emissions are capped at EU levels and that the industry has the incentive to make reductions.

The mechanism is the point of difference between us. The noble Lord, Lord Teverson, supported by the noble Baroness, Lady Wilcox, in her contribution from the Front Bench opposite, has said that we should deal with this in terms of individual power stations and new build. I listened carefully to the noble Baroness, who reinforced the argument put forward by the noble Lord, Lord Teverson, but we must not be facile about the issue of energy production in this country.

Earlier today my noble friend responded to a Question that expressed anxiety about the margins on which we operate in terms of electricity generation in this country. The noble Lord, Lord Ezra, who tabled the Question, said that he had been asking it at around this time for four or five consecutive years; indeed, I can recall that I was obliged to furnish him with an Answer on at least three occasions. What he identifies is that the margins are a good deal narrower than they were a decade or two ago. That is for good reasons in so far as we are more cost-effective in our energy production, but that does not alter the fact that we must have due regard to the energy that we require—we cannot get into a position where there is a risk to supply. The whole House will appreciate the fact that inevitably, with the decline of the resources of North Sea oil and gas that we can control, we are dependent on imports, which means that we must consider the issue of security of supply.

Baroness Young of Old Scone: My Lords, perhaps I may draw the attention of the noble Lord to the fact that 75 per cent of the coal burnt in the UK last year was imported.

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Lord Davies of Oldham: My Lords, that is certainly so, but the noble Baroness will appreciate that we are rather more secure in our sources of supply of coal to this country than we are in other sources, particularly of imported gas. We have had difficulties in recent years because effectively we are at the end of the pipeline for Russian supplies and we all remember the enormous tensions that built up two years ago when market imperfections caused the price of gas in the United Kingdom to rise very high indeed. All noble Lords will be greatly concerned about energy costs at the present time and particularly how they impact on the less well-off in our community. These are real issues, to which there is no single easy solution. We cannot jeopardise the electricity generation resources that we have.

Of course I agree with the noble Lord, Lord Teverson, about the necessity for the cap, but he wants to put the cap on greenhouse gases on particular productive units and I want a cap that applies at the level of the economy. The Government maintain that this is the most marked and effective way in which we will be able to apply costs to productive techniques that have a high carbon content. It is the basis of the Government’s approach to this issue.

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