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We appreciate that this country cannot tackle on its own the issue of controlling carbon dioxide and getting effective reductions; it clearly needs international action. That is why we invest such a great deal of our commitment in the EU Emissions Trading Scheme. The noble Lord has to face up to the fact that, with his proposal, he may merely control certain kinds of electricity generation in this country, with the option of the use of coal—and the carbon that that represents—being taken up by other countries, with no net advantage, therefore, either to Europe as a whole or the world in its entirety; it would merely transfer the potential of power stations.

Of course we are committed to meeting greenhouse gas reduction targets. The Climate Change Bill, which the House debated earlier this year, means that the United Kingdom will be the first country in the world to set a framework for achieving carbon reductions through legally binding targets and carbon budgets. The noble Lord, Lord Teverson, and the noble Baroness, Lady Young, with her particular knowledge of the matter, referred to the large combustion plant directive. The directive does not include CO2—it concentrates on sulphur dioxide, nitrogen oxide and other noxious substances—because the European scheme for CO2 emissions provides a framework for dealing with that dimension. It sets Europe-wide greenhouse gas emissions targets but allows companies to identify the most cost-effective means of delivering them.

Lord Teverson: My Lords, the EU ETS has provisions to include the other greenhouse gases, including some of the greenhouse gases contained in the large combustion plant directive. If one was consistent in the argument that the Minister has just used, one would have CO2 as part of that directive.

Lord Davies of Oldham: My Lords, we regard the Europe-wide ETS scheme as effective, with the capacity to meet the powerful and important objectives that we have established. I was emphasising that not only are

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we in the lead on these issues but, only this year, we announced that we intend to reduce emissions by 80 per cent of the 1990 baseline by 2050. It has met with much approval across the nation and across all parties that the Government have stiffened these targets and objectives. There is no questioning the Government’s good faith in terms of their objectives; we merely disagree with the noble Lord about the methods by which we attain the targets that we have set out to meet.

The ETS is at the heart of our global efforts to tackle climate change. We have worked with the EU Commission and other member states to ensure that in phase 3 and beyond, as we move towards that stage, it is strengthened and consolidated with increased transparency and improves stability in order to make it a more effective tool to tackle climate change.

The noble Baroness, Lady Young, and the noble Lord, Lord Teverson, referred to the fact that similar regulations to the one enjoined in the amendment obtain in California. There are aspects of the development of these issues in California which we all applaud. Several cities in California have, if not blazed a trail, then set a lead in terms of the way in which cities can respond to carbon pollution. These initiatives obtain in California because they do not have a scheme such as the ETS. The very fact that there is no overarching policy or framework means that they are obliged to pursue these extremely interesting initiatives, none of which I would do anything but applaud. The noble Lord says that the Californian experience ought to be translated to the British one, but we are operating in an entirely different context and the analogy does not hold.

The amendment is clearly targeted at energy generated from fossil fuels and at coal in particular. For the foreseeable future, fossil fuels are bound to play a part in the UK energy mix. That is why the Government’s existing framework for tackling carbon emissions is the right one and why the development of the new fossil fuel power stations can be compatible with an overall drive to reduce emissions. The noble Lord says that this will mean other parts of the economy bearing the strain. That may well be the case; in fact, the noble Lord is right—it is the case. That is against a background of the Government’s proper regard for the security of energy supply. In order to reach that target and offer that security—and I cannot think of a greater obligation upon Government than to foresee for the future the guarantee of energy supplies—these compromises may need to be made. That is the concept behind the trading scheme: it gives the opportunity for balance within an economy rather than suggesting that the issue can be tackled by action against one particular source of pollution.

The noble Lord, Lord Jenkin, referred to the danger of a potential dash for gas if coal is closed down. We would have to look at other energy sources as alternatives. Studying the recent history of gas—its prices and the security of supply—would surely counsel us against repeating the concept of a dash for gas when the dash would be not for our indigenous resources, as in the 1980s, but for gas that is supplied in rather different circumstances and from very limited sources.

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The Government share all the objectives that the noble Lord expresses when he says that this is what we need to achieve. He says that the amendment is directed towards that, but it is not acceptable to the Government. We believe that a strategy limit on carbon dioxide emissions from individual new fossil fuel power stations would not give us additional help in our efforts to reduce greenhouse gases; on the contrary, the effect would be to constrain the possibilities for delivering the diverse energy mix that the UK requires for ensuring the security of supply. That is an important dimension. It does not mean at all that the Government are doing anything else except meet, in an intensified form, the objectives that have been set, originally in terms of the Stern report but also of targets that the Government have indicated they are prepared to increase and substantiate. I hope that the noble Lord will therefore appreciate that we are discussing means to an end when we share those objectives, that he will accept that the Government have clearly identified the necessary means for the nation and that he will withdraw his amendment.

10 pm

Lord Teverson: My Lords, I thank the Minister for that interesting reply. I know he did not mean to, but he misrepresented my argument to a large degree, in that I am one of the House’s greatest advocates of the EU ETS. However, as most environmental reports say—including, I believe, the Stern review—it is not the only instrument that needs to be used.

I did not mention California; I meant to, but I forgot. I am glad the Minister did, though, because when I was on the climate change committee for the draft Bill we received evidence from California. One of the main objectives there was to introduce, along the west coast of the United States and into British Columbia and other western provinces of Canada, an emissions trading scheme based on the EU ETS, which is seen as the leading international cap-and-trade system. It is a priority of California to introduce such a system for carbon emissions in addition to, not instead of, a regime for regulating emissions standards for its power stations. It sees the need to have more than one policy instrument in this area.

I was interested to hear the arguments of the noble Lord, Lord Jenkin. Normally I treat his advice and comments very positively, but one of the few issues I disagree with him on in this area is the “dash for gas” argument. I was surprised, too, that the Minister used it. It is clear that the reason there might be another dash for gas is that coal will not be able to be used so much. But that is exactly the purpose of the EU ETS; there is no difference between the outcomes of this instrument and the EU ETS, particularly as the Government themselves wish to put carbon units out for auction for the energy industry. That will have exactly the same effect in terms of any preference for construction of gas powerhouses as emissions standards regulations will have.

With regard to uncertainty, I have agreed many times with the noble Lord about the fact that carbon pricing has been so variable that that is very unuseful

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to industry and long-term investment in terms of carbon pricing and the decisions it has to make. We accept that. It is one of the problems in terms of a market-based EU ETS, but we know it is the right way to go. With regard to government regulation, you can give signals to industry with either a stepped regime or announcing well ahead, as happens in the automotive and many other industries; those show much more clearly than pricing mechanisms what is expected of it in the future. When it comes to major investment, what will concern the power industry is not the major regulations that go through a proper consultation procedure, start at a particular time in the future that is reasonable and have sensible stepping thereafter. That is not generally an issue with industry; rather, this is about the unknowns and the risk factors. As I said previously, one of the issues that came out of the Stern review was that you cannot have just one policy instrument for various areas: you need more than that.

We talked earlier about carbon capture and storage, and the noble Baronesses, Lady Young and Lady Wilcox, were right in saying that sensible, future regulation will stimulate carbon capture and storage investment far more than the competitions that we have been talking about.

Lastly, I think that the Minister missed my final paragraph. In his response, he said that there was a problem; that such action needed to be taken at a European level; and that there was a risk that if we went ahead with the proposal, energy from elsewhere in Europe might undermine our own industry. I made an offer to the Government accepting that, saying that one of the ways out was to give a commitment to use the national emissions reduction plan and the large combustion plant directive, and to take it on in the Council of Ministers. That meets the Minister’s point exactly and, in a way, I would accept that as at least an act of good faith towards my proposal.

I believe that this issue is fundamental to the way in which we move forward. It is related to investment in energy plant that will exist beyond our tight 2050 targets, which I welcome. I think that on this issue the Government need to bite the bullet and I wish to test the opinion of the House.

10.07 pm

On Question, Whether the said amendment (No. 11) shall be agreed to?

Their Lordships divided: Contents, 14; Not-Contents, 34.

Division No. 2


Addington, L.
Anelay of St Johns, B. [Teller]
Crathorne, L.
Ferrers, E.
Fookes, B.
Greaves, L.
Montrose, D.
Norton of Louth, L.
Shutt of Greetland, L. [Teller]
Teverson, L.
Thomas of Winchester, B.
Whitty, L.
Wilcox, B.
Young of Old Scone, B.

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Adonis, L.
Andrews, B.
Bach, L.
Bassam of Brighton, L. [Teller]
Bernstein of Craigweil, L.
Borrie, L.
Boyd of Duncansby, L.
Brett, L.
Clark of Windermere, L.
Cohen of Pimlico, B.
Davies of Oldham, L. [Teller]
Dubs, L.
Farrington of Ribbleton, B.
Ford, B.
Foulkes of Cumnock, L.
Gale, B.
Gibson of Market Rasen, B.
Haworth, L.
Howarth of Newport, L.
Howells of St. Davids, B.
Hunt of Kings Heath, L.
Janner of Braunstone, L.
Jenkin of Roding, L.
Joffe, L.
Jones of Whitchurch, B.
Lucas, L.
Morris of Handsworth, L.

22 Oct 2008 : Column 1224

Patel of Bradford, L.
Reay, L.
Simon, V.
Snape, L.
Thornton, B.
Tunnicliffe, L.
West of Spithead, L.

Resolved in the negative, and amendment disagreed to accordingly.

Lord Hunt of Kings Heath: My Lords, I beg to move that consideration on Report be now adjourned.

Moved accordingly, and, on Question, Motion agreed to.

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