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I have four main comments on the committee's report. The first echoes what other noble Lords have said: there are huge areas of contingency in all the policy innovations covered, especially when we are looking at targets relatively near at hand for 2020. It is like a spread bet. I am sure that most noble Lords will not be familiar with spread betting; in such a bet, you have to get a whole range of outcomes right-and you have to get all of them right if you are going to achieve your end. This is the case with the report; it reflects the fact that we start from so far back.
Everywhere you look, that is the case. Some previous wind power projects have either been aborted or delayed for as much as 10 years. We need a big change in respect of planning permission and other things. Three new nuclear power plants are envisaged but planning permission for Sizewell B took something like six years, so a terrific change is required there. The report notes:
"Currently there are no electric cars and plug-in hybrids commercially available in the UK market".
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The point has been made about CCS. We do not really know whether it will work or how available it will be commercially, and there are already quite big "not in my back yard" issues around CCS in several of the few plants that exist across the world.
I was reflecting on what one can do about this. It is not the fault of the committee; it is due to the fact that we start from so far behind the lead states on all this. Two things occur to me. One is that we could be more radical in one or two areas to make up for potential shortfalls in others. One is the area noted by the noble Earl, Lord Selborne, the one where we know we have the technologies and where we know we can make a big difference quickly: energy efficiency and insulation. I suggest a more radical attack on that. We are talking about a national plan here. Therefore, it should be taken to the people; it should not be introduced from on high, as it were, because the co-operation of citizens will be needed if there is to be any chance of success.
Secondly, I have objections to the form of the report, which essentially uses an additive or wedge approach. You get a certain proportion from this technology, a certain proportion from that technology, a certain proportion from this one, a certain proportion from lifestyle change, and so forth. The main problem is that the implications of each of these for all the others are not properly traced out. For example, new forms of taxation are mentioned at many places; they have to be put together and their overall implications assessed. If you recognise that we are talking about transformative change, you have to look at this holistically; you have to look at the impact of everything on everything else. I do not know what the noble Lord, Lord Stern, thinks-he may disagree-but it seems to me that even though the term "low-carbon economy" is readily bandied around, we do not really know what it will look like. We need to do a lot more intellectual work on it. It cannot possibly be an economy of the sort we have now, just with some renewable technologies grafted on. These sorts of transformations are pretty profound and therefore have implications for everything -employment, welfare, fiscal systems, skills training, and so forth. I see a huge task for economic, social and political theory in trying to work out what an overall low-carbon economy would be and how it would relate to active industrial policy, because it is plain that we must move back to that.
Thirdly, having spent some two years immersed in the literature on this, I find it hard to believe that we can achieve the reductions in greenhouse gas emissions that we need without any sacrifice. Basically, we are living in an unsustainable civilisation and are coming up against the limits of that sustainability. Climate change is the most dramatic and radical expression of that, but it is more generic too. We have to take account of the discussion of growth and GDP and their connections with welfare, which has received quite a lot of prominence in recent years. We should be discussing the Sarkozy report; after all, a cluster of prominent economists worked on it, including Joe Stiglitz and Amartya Sen. In a previous debate on the gracious Speech, I drew attention to the work of the Sustainable Development Commission, which has been mentioned. Whichever way you look at it, the various
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So far as I can see, we are looking for a different model of economic and social development. This will also apply to China, India and large developing countries. We accept that they can develop as we did, at least for a few more years, but at a certain point there will have to be a new model of development, and we have to pioneer what that would be.
Fourthly, I have a specific question for the Tory Front Bench. I stress that I do not in the slightest mean this as party-political point-scoring. My view is that climate change is not a left/right issue; I am very pleased that there is a consensus across the parties in supporting the Climate Change Act and the Energy Act. My point concerns the point made by the noble Lord, Lord Krebs. When we were talking about a national plan, transformation and a guiding role for the state, the state will appear everywhere in effectively implementing the provisions of the report of the Committee on Climate Change. I take the liberty of quoting what it says about the electricity market, which I think is perfectly true. It says that,
- "no other country has relied on a fully liberalised electricity market of the type that we have in the UK to deliver investments in low-carbon generation".
This applies to all areas of the document. We are talking about the return of the state, and in a big way. How will the Conservatives reconcile the need for the return of the state in what, after all, are big structural areas in our economy and society with their proclaimed intention to strip the state down?
7.05 pm
Lord Dixon-Smith: My Lords, in thanking the Minister for introducing this debate, it is only natural that I, like everybody else, should pay tribute to the Committee on Climate Change which has generated the report that is the background to all that we have heard. As always when I take part in one of these debates, I am impressed by the breadth and depth of experience which constantly confirms my feeling of privilege to be a Member of this House. Even my noble friend Lord Reay, whose contribution and approach to the subject are totally opposed to mine, made an important point. He drew attention to the vulnerability of our energy supplies in this country at this time, due in no small part to the dilatoriness of the Government over the past decade.
That said, we have a very serious subject to debate today. I want to step back from the report for a few minutes in order to look at the background in a bit more depth. The problem which the report addresses on a purely national level, as so many other noble Lords have said, is part of a very great international problem. In the end, every other country in the world must face the issues that we face today. Even those countries in the less developed world, which think that the whole problem is the problem of the developed world-and to a certain extent it is-cannot solve
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The implication that lies behind this is that the technological answers that we find have to be capable of development across the globe: if they are economic here they will be economic across the globe, and if they are not economic here they will not be economic across the globe. I will return to that point in a little while.
My second point is one that the Minister has touched on already, although very indirectly, when he said that we would have a debate some time in the new year on the implications for 2050. The focus of the report, quite naturally, is where we are now, what we can do now and the start of the process. The focus is inevitably short because there is too much consideration, in my view, of 2020 issues which have been established as a target by the European Community. But the critical target for this country and across the globe is the 2050 target, which might suggest some rather different, more radical approaches from anything we are doing at present.
I have said before that the shape of the 2050 economy can already be predicted in broad scope. By then, our 80 per cent reduction on 1990 levels implies, quite clearly, that only essential emissions will be acceptable after that date-emissions that can otherwise not be avoided. One could begin to list them. I declare an interest as a farmer, because agriculture is essential if we are to maintain our food production. We cannot do without livestock, and regrettably, that means greenhouse gases. We cannot do without the smelting industries that provide our metals, nor cement manufacture. I suspect that we cannot do without aviation and shipping although those can, like every other aspect of the economy, become more energy efficient.
That implies that the whole of the domestic sector, the whole of our industrial and commercial sectors and the whole of our land-based transport sector have to have zero emissions. We need to think about the technologies that will make that possible. The noble Lord, Lord Redesdale, thinks a great deal-and I have every sympathy with him-about anaerobic digestion producing gas, but that is but a step in the process. The gas can be used to produce electricity and post-2050 electricity will be the energy source that we use almost universally. There is a question mark over road transport, which I will not go into now because I have before. That is the background to where we are. One of the step changes we need to make is to stop looking at the 2020 targets and look very seriously at the 2050 target and the international implications of that.
We should not overcomplicate the issue. I hear so much about what needs to be done in the domestic sector. The Royal Institution of Chartered Surveyors has said that if you want to produce a top-quality energy-efficient house, the additional cost of doing so is £17,000 on the average home. But we have 23 million existing houses that have to be adapted and the cost of
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Of course, that depends on my electricity supplier being emissions free, but we will have to make the electricity supply industry emissions free anyway. I wonder whether we should not focus our finance and resources entirely on making sure that that is what happens and not worry quite so much about the domestic consumer. The domestic consumer already has responsibility for the energy efficiency of his own home and will have to make his own decisions. There was a time when I was responsible for the whole of the built estate for Essex County Council and a major consideration was the question of energy efficiency. Energy projects went in and out of programmes with amazing rapidity depending on the wildly fluctuating state of the then economy. We need to recognise that the important thing is that the decision to invest-and energy efficiency is an investment-belongs to the property holder and property owner and we should not take it away from him.
I have two questions for the Minister. One is almost a complete digression, but it has an important aspect to it. First, nuclear power is at the moment the only greenhouse gas-free energy source that we have in this country that is not dependent on the weather, which is an important criterion. Can the Minister give us any encouragement about the position of applicants with planning applications for nuclear power stations coming forward so that once the planning policy statement is approved and the planning commission is at work, there will be applications immediately for consideration? Going back to what was said by my noble friend Lord Reay, that work should really have been done last week.
My second question is slightly different and not intended as a red herring. Under the European Commission's environmental directives, if one interferes with an environmentally sensitive directive of major international importance, one has an obligation to replace the interfered-with assets as part of the project. The greatest difficulty with this process arises particularly in relation to the Severn barrage-the Severn estuary being the second most powerful potential electricity generator at the moment. We may not see how to undertake that scheme at present, but the time may well come when we can. We need to bear in mind that if we fail on the climate change initiative in toto, the Severn estuary will be ruined anyway, by rising sea levels and rising temperatures. Would it be worth approaching the European Commission for a derogation from the obligation to replace environmental assets where necessary in order to prevent the catastrophic change that is possible if we do not get the environment under control?
7.18 pm
Lord Turnbull: My Lords, on first reading the Committee on Climate Change's latest progress report, I found it an impressive document. It was broad in
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Unlike many of those involved in the climate change field, I have no pecuniary interest to declare, but I am a founder trustee of the Global Warming Policy Foundation, which seeks to bring rationality, objectivity and, above all, tolerance to the debate.
I have long been in the camp of what might be called the semi-sceptics. I have taken the science on trust, while becoming increasingly critical of the policy responses being made to achieve a given CO2 or global warming constraint. First, let us look at the Climate Change Act, which has been highly praised, even today, as the most comprehensive and ambitious framework anywhere in the world-a real pioneering first for the UK. However, it has serious flaws. It starts by imposing a completely unworkable duty on the Secretary of State to reduce greenhouse gas emissions by 80 per cent by 2050, even though many of the actions required lie outside his control. It would have been better, as the noble Lord, Lord Crickhowell, and I argued, for the duty to be connected to what the Secretary of State can control, such as his own actions and policies, and not the outcome, which he cannot.
In the Act's passage through Parliament, the target was raised from 60 per cent to 80 per cent, with little discussion of its costs or feasibility. It is a simple arithmetic calculation to show that if the UK economy continues to grow at its historic trend rate, we will need, only 40 years from now, to produce each £1,000 of GDP with only 8 per cent of the carbon we use today. That is a cut of 90 per cent. Many observers think that this is implausible. A recent report by the Institution of Mechanical Engineers reported that the rate of improvement in carbon intensity/productivity would need to quadruple from the 1.3 per cent achieved in the five years up to the recession to around 5.5 per cent. It would need to be even higher at the end of the period to make up for what the noble Lord, Lord May, calls falling behind the run rate.
Professor Dieter Helm has pointed out that the measurement system used in the Kyoto framework and in the UK's carbon accounts is a misleading guide to what is really being achieved. The carbon accounts use the territorial method-that is, the emissions from UK territory. In this way, the UK is able to claim that CO2 emissions have been reduced, but that is a misleading way of measuring a nation's carbon footprint and its impact on the world. It should include the carbon in its imports. If this was done it would show that we are going backwards, since we would be forced to take responsibility for the manufacturing that we have outsourced to such countries as China but are still consuming. The current method is, of course, politically very convenient as it allows us to label China as the world's largest emitter. The embedded carbon calculation is, I accept, far more complicated, but it is far more honest.
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Another flaw in the framework is that the targets are unconditional. It is a legal duty, irrespective of what other countries achieve. Some, including me, argue that there should be two targets: one of which is a commitment, and a higher one which we will argue for internationally but only undertake as part of an agreement. Ironically, this is precisely the approach that the EU is taking with its 20 per cent reduction target by 2020, which would be raised to 30 per cent as part of an international agreement. The danger is that by going it alone we could face a double whammy, paying for decarbonising our own economy, yet still having to pay for the costs of raising our sea defences if others do not follow suit.
Secondly, let us consider the specific policies that have been adopted. Current EU policy follows two inconsistent paths. On the one hand, the ETS seeks to establish a common price for CO2, against which various competing technologies can be measured. The market share of each is determined by the relative costs. This is attractive to economists, since it allows the cost per tonne of CO2 abated to be equalised at the margin, thereby ensuring that the cost of achieving any CO2 target is minimised. The problem is that, despite its theoretical attractions, the ETS is failing. It provides no clear signal on the price of carbon on which investors can base their decisions. The committee, in this report, estimates that the ETS CO2 price in 2020 will be around €22 per tonne. The committee has rightly identified the central contradiction in its own report: the carbon price will be too low and too uncertain to stimulate the low-carbon investments needed to validate the committee's projections.
At the same time, the EU is following a different approach under its 20:20:20 plan-to achieve a 20 per cent reduction in CO2 by 2020, with 20 per cent of energy coming from renewables. In this way, it predetermines a market share for a technology-renewables-rather than letting the merit order decide. The danger is that in pressing to achieve this target, which implies that over 30 per cent of electricity generation will come from renewables, some renewables capacity will be created which will be more expensive than other responses.
There is also a lack of clarity about the true cost of wind power, once we factor in the cost of retaining a large amount of underutilised conventional capacity, and the extension of the grid. The noble Lord, Lord Reay, has said more than enough on that so I do not need to follow that line of argument.
There is illogicality in the treatment of nuclear energy in the climate change levy. It is ridiculous that nuclear power, as a low-carbon source, is still in the taxable box. For 50 years, a major experiment has been conducted just 20 miles off our coast. France has generated three-quarters of its electricity from nuclear power. The French believe that it has been a huge success, delivering electricity which is secure, cheap and stable in price. France's carbon intensity is 0.3 of a tonne per $1,000 of GDP, compared to 0.42 in the UK, 0.51 in Germany-so much for it being a market leader-and 0.63 in the US. However, the French option has barely been considered in this country.
As part of the EU plan, 10 per cent of road fuel is mandated to come from biofuels, but by the time this
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Thirdly, there is the issue of cost. All we had to go on at the time when the target was set more ambitiously was the estimate by the noble Lord, Lord Stern, of 1 per cent of GDP. Many people were sceptical at the time and probably even more are now, including, it seems, the noble Lord, Lord Stern, himself. It was reported in the press last week that he now thinks that it might be 2 per cent, but could rise to 5 per cent. I hope he will clarify this when he speaks to us shortly.
In the document that we have before us, the committee says that it previously estimated that costs in 2020 would be about 1 per cent of GDP. That is consistent with its view that it might get to 2 per cent by 2050. In the new report it simply reaffirms the 1 per cent figure in just one paragraph in 250 pages. That is it. I have to say to the noble Lords, Lord Krebs and Lord May, that I do not think that that is adequate. It is difficult to relate these figures to what we are observing on the ground about the difficulties and costs of bringing on stream different technologies such as offshore wind and CCS.
One of the problems bedevilling the debate is the lack of transparency over the huge cross-subsidies that are being created by the renewables obligation and the regime for feed-in tariffs. There is no assurance that their extent is commensurate with the benefits in CO2 abated. My electricity costs me 11p per kilowatt hour. If I erected a wind turbine, I could sell the power I produced to the grid for a whopping 23p. I think I would go out and buy a gizmo which linked my inward meter to my outward meter. That excess cost is averaged over the bills of consumers as a whole, but how much is it in total, or for individual consumers? Here I differ from the noble Lord, Lord May. The whole issue of cost must be given far more attention. The Government cannot ask people to make radical changes to their lifestyle without being more open about the costs that they are being asked to bear.
I accept that "do nothing" is not the right option. Some measures, such as energy efficiency, heat recovery from waste and biomass, and stopping deforestation are probably justified on their own merits. More nuclear power, which in turn would open the way for electrification of our transport fleet, would enhance security of supply. Other measures may be justified as pure insurance, given the uncertainty that we face. But what is badly needed is a consistent metric that allows us to judge whether any given objective is being achieved at minimum cost. The recent book by Professor MacKay, the newly appointed scientific adviser at DECC, provides an excellent starting point. I also very much welcome the intervention by the noble Earl, Lord Selborne, debunking the waste hierarchy and the act of faith that that embodies.
There is the issue of the science, which I had previously taken as given; but many people's faith is being tested. We are often told that the science is
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Worse still, there are even controversies about the basic data on temperature. The series going back one, 10 or 100,000 years are, in the genuine sense of the word, synthetic. They are not direct observations but are melded together from proxies such as ice cores, ocean sediments and tree rings.
Given the extent to which the outcome is affected by the statistical techniques and the weightings applied by individual researchers, it is essential that the work is done as transparently as possible, with the greatest scope for challenge. That is why the disclosure of documents and e-mails from the Climatic Research Unit is so disturbing. Instead of an open debate, a picture is emerging of selective use of data, efforts to silence critics, and particularly a refusal to share data and methodologies.
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