Energy Bill [HL]
(9 years, 2 months ago)
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“( ) The OGA must lay any guidance issued under this section, and any revision of it, before each House of Parliament.”
““Part 2AInfrastructureRequirements to provide information
(1) The Energy Act 2011 is amended as follows.
(2) In section 87 (powers to require information), after subsection (5) insert—
“(5A) A notice under subsection (1), (2) or (3) that imposes a requirement on a person must specify when the requirement is to be complied with.”
(3) After that section insert—
“87A Appeals against requirements to provide information
(1) Any person on whom a requirement is imposed by a notice under section 87(1), (2) or (3) may appeal against the notice to the Tribunal on the grounds that—
(a) the information required by the notice is not relevant to the exercise by the OGA of its functions under this Chapter, or(b) the length of time given to comply with the notice is unreasonable.(2) On an appeal under this section the Tribunal may—
(a) confirm, vary or cancel the notice, or(b) remit the matter under appeal to the OGA for reconsideration with such directions (if any) as the Tribunal considers appropriate.(3) In this section “the Tribunal” means the First-tier Tribunal.
87B Sanctions for failure to provide information
(1) A requirement imposed by a notice under section 87(1), (2) or (3) is to be treated for the purposes of Chapter 5 of Part 2 of the Energy Act 2016 (power of the OGA to impose sanctions) as a petroleum-related requirement.
(2) But the OGA may not give a revocation notice or an operator removal notice under that Chapter by virtue of this section.””
The Parliamentary Under-Secretary of State, Department of Energy and Climate Change and Wales Office (Lord Bourne of Aberystwyth) (Con)
My Lords, I will now speak to government Amendments 33 and 34. Amendment 33 inserts a new Part 2A into the Bill which amends the third-party access to upstream petroleum infrastructure regime found in the Energy Act 2011. Specifically, it amends Section 87 of the 2011 Act, which relates to powers to require information, and inserts new Sections 87A and 87B, which make provision for appeals and sanctions respectively. This amendment requires that where the Oil and Gas Authority issues a notice under Section 87 of the 2011 Act requiring information to be provided, it must specify a time for compliance with that notice.
The amendment also provides an appeal right to the First-tier Tribunal against the issuance of a notice on the grounds that the information required is not relevant to the Oil and Gas Authority’s functions relating to third-party access or that the length of time given to comply with the notice is unreasonable.
Amendment 34 also allows for any requirements imposed by such a notice to be treated as petroleum-related requirements and therefore to be sanctionable under Chapter 5 of the Bill. However, the Oil and Gas Authority will not be able to revoke a licence or terminate an operatorship in relation to such breaches.
Amendment 34 inserts two new sections into the Energy Act 2011, which established the third-party access to upstream petroleum infrastructure regime. New Section 89A allows for applications for access to upstream petroleum infrastructure made under Section 82 of the 2011 Act to be assigned to another party. New Section 89B allows for a new owner of infrastructure to which an application for access has been made to be treated as a party to that application. The amendment also ensures that where ownership of infrastructure in respect of which a notice under Section 82(11) imposing access rights has been issued is transferred, the obligations under the notice transfer as well.
Once such an assignment or transfer occurs, anything that was done by the original party is treated as having been done by the party to which the application was assigned or the ownership transferred. The provisions allow for the third-party access regime to continue rather than having to restart on a change of party, facilitate the transfer of non-commercially sensitive information already provided to the Oil and Gas Authority and ensure that all new parties are aware of the relevant history of the application.
The amendments will increase the utility of the third-party access to upstream petroleum infrastructure regime, which is an important tool in the Oil and Gas Authority's pursuit of maximising economic recovery for the United Kingdom. I beg to move.
Lord Teverson (LD)
I thank the Minister for his explanation of a somewhat technical new clause. I think that the Minister went through liability, but very quickly. Clearly, all sorts of liabilities are potentially incurred by someone who has these access rights. If there is a change of ownership or the rights are assigned to a further party, who takes any legal liabilities that may not have been resolved or may be found after the date of transfer that relate to the period before? I wonder whether that is clear, because I imagine that such liabilities could in certain circumstances be quite onerous. I would be interested to hear the Minister’s remarks on that.
Baroness Liddell of Coatdyke (Lab)
My Lords, perhaps I may ask the Minister a question relating to new Section 89A introduced by Amendment 34. I drew attention at Second Reading to my entry in the register of interests as a non-executive director of the Offshore Renewable Energy Catapult. I drew attention, too, to some interesting ideas that are developing about the use of decommissioned oil and gas facilities in the UK continental shelf for renewable energies, in particular in the area of offshore wind.
Given that the new sections introduced by the clause relate to the powers of the Oil and Gas Authority, would that be a limiting factor given that these renewable technologies are not hydrocarbons? I find it quite a complicated clause to work my way through. I am seeking to ascertain—it may be that the Minister cannot give me an answer today, but perhaps officials could take a look at it—whether there is protection of the possibility in future of previous hydrocarbon capabilities being used for offshore renewable energy. I took some comfort from the use of the word “facility”, which suggests that there might be some leeway there, but given that I am not a lawyer—although there are people in this Chamber who are—perhaps the Minister can give a slightly better answer to those of us who do not have that kind of expertise.
Baroness Worthington (Lab)
My Lords, I am grateful to the Minister for introducing these amendments at the beginning of the second day of Committee. Before going on to discuss them, I am afraid that I want to revisit the issue of the impact assessment. Since our debate on Monday, a partial impact assessment has been issued. The date on the impact assessment as published is 17 June 2015; the date of signing by the Minister is 7 September 2015. What happened in the intervening months? Why was it not made available to us during the Summer Recess? In fact, it could have been made available to us before Second Reading, had it been published closer to the date on which it was presumably drafted.
Now we have it, but it is only a partial impact assessment. We are still missing the impact assessment for the most controversial elements of this Energy Bill—namely, the clauses on onshore wind. Will the Minister give me a strong confirmation that we will have that in good time for our debate on Monday? If that is not the case, we may have to take further steps because this is simply not good enough. The Committee is not being treated in the way that it should be on these issues. This information is important and it is an important Bill. We should not be seeking to rush it through without due scrutiny. That said, I will move on to the amendments.
The impact assessment is interesting, as these things tend to be, which is why we like to see them. It confirms some of the issues that we debated on Monday such as the rapidly changing nature of activity in the North Sea. The impact assessment reiterates that we are seeing a sharp decline in production and investment into the North Sea and times are changing very fast. However, unfortunately, the impact assessment does not give any reassurance that the Government are applying any long-term vision to this issue. On page 10 of the impact assessment, we see that there has indeed been talk in the Government about what to do about these rapidly changing circumstances. Ideas have been discussed and mooted, and four of them are mentioned on page 10. There is absolutely nothing about repurposing the North Sea or considering how it might be reused.
I am grateful to my noble friend Lady Liddell for her contribution. She talked in terms of reuse for renewables, but I am far more concerned, as I am sure the Minister is now aware, with reuse for carbon capture and storage. There is no mention of repurposing a site for storage and no mention at all of decommissioning within the role of the OGA in relation to this moving forward. We have an impact assessment, but it does not exactly give me any great cause for reassurance. I am hoping that we will continue to revisit these issues when we come to Report. They relate very much to the scope of this piece of legislation.
Turning to the amendments, I want to give one illustration of why the scope issue of the OGA is so important. Under Amendment 33, we are being introduced to the concept of the right to appeal. After Clause 56, the amendment would insert new Section 87A, under which an appeal can be lodged if,
“the information required by the notice is not relevant to the exercise of the OGA or its functions under this Chapter”.
On Monday, we had considerable debate about the issue of the functions and the principal objectives of the OGA. Will the Minister reassure me that yet again this reference to the OGA functions includes the need for information to be made available in relation to carbon capture and storage?
I hesitate to go over the ground we went over on Monday, but we need clarity on the principal objectives of this new body. I request that we have the primary objectives as set out in the Infrastructure Act, which amended the Petroleum Act 1998, stated on the face of the Bill. We could have some consolidation. Instead of having to refer back to pieces of legislation that then amended other pieces of legislation, could we not have some clean objectives clearly stated so that we can then interpret all of these powers and changes that the OGA will be overseeing in light of the clear statement of the primary objectives? Those primary objectives must be fit for purpose. They must cover the issues we have raised in relation to decommissioning and repurposing for use in carbon capture and storage.
I hope that the Minister will be able to respond with some reassurances on the general point about the Bill handling but also in relation to that specific issue on Amendment 33. Can he assure me that the appeals will not allow the industry to claim that requiring information in relation to carbon capture and storage activities falls foul of this requirement, being outside the primary objective of the OGA?
Lord Howell of Guildford (Con)
My Lords, following the remarks of the noble Baroness, Lady Worthington, perhaps I may take the opportunity of this amendment to thank my noble friend the Minister for circulating overnight the impact assessment, which we have all read with interest. It does seem to have a discouragingly large number of “Not availables” in various boxes throughout, which rather puts one off. However, I can see that my noble friend has made a considerable effort and I am grateful to him.
The impact assessment states that last January the Oil and Gas Authority began to undertake an urgent piece of work involving industry to come up with practical measures to mitigate the immediate risks that the downturn in oil and gas prices present. That is a high ambition, but we open the papers each morning and read of thousands of redundancies, talk of fields closing down and a real sense of crisis beginning to envelope the industry, as the oil price for Brent crude remains resolutely down at around $50 and much lower for West Texas Intermediate. Can we be assured that as we go through this stage and the Report stage that we have a little more meat on the description of what these practical measures are and how, as the sense of crisis develops, it is going to be mitigated by the work and the powers we are assigning to the Oil and Gas Authority? I think that a new sense of urgency is coming to the debate which may not have been the case in January or when the new authority was set up, but we now need to incorporate that as we handle the legislation that is necessary to send the authority on its way.
Baroness Maddock (LD)
My Lords, I am delighted to hear that some noble Lords have received the impact assessment, but I wonder if the Minister can tell me how it was distributed, because it has not come my way yet.
The Parliamentary Under-Secretary of State, Department of Energy and Climate Change and Wales Office (Lord Bourne of Aberystwyth) (Con)
My Lords, perhaps I may deal with the last point first. I certainly gave instructions that the impact assessment should be sent out in hard copy form and by email. I take the inference from what the noble Baroness says that she has not received a copy in one of those two ways. She should have done so, and I can only apologise for that. I hope that no one else is in that position.
I shall now deal with the issue of impact assessments. I apologised on Monday for the fact that the impact assessment had not been circulated earlier. It was held up through processes in government—documents are cleared by a particular Minister, but that is not the end of the process, as I am sure the noble Baroness is aware. I can only confirm that it is the case that the assessment was not cleared until Monday. I think I indicated then that that was when it was cleared, and it was only then that we were in a position to notify noble Lords. I hope that I can offer some reassurance because all morning I have been chasing the remaining impact assessments, and indeed a note was passed to me just as the debate opened that they have now been cleared and will be circulated, it is hoped, by the end of the day. However, I will add a word of caution by saying that we will ensure that they are sent around by tomorrow. Once again, I apologise.
I will focus on the general points made by the noble Baroness, Lady Worthington, in relation to carbon capture and storage. I thought, as she did, that on Monday we made considerable progress on this issue. There is a shared feeling across the parties that these issues are important and on Monday I gave an undertaking that we would be looking at them between Committee and Report. Letters are going out today to noble Lords who spoke on Monday, as well as to the noble Lord, Lord Judd, who indicated that he could not be here. I have asked that he should be sent a letter. Moreover, anyone who speaks today but who did not speak on Monday will also receive a letter asking about their availability between now and when the House returns on 12 October so that we are able to call a meeting, or potentially a series of meetings. We will ask everyone to the same meetings so that we can thrash these issues out.
My own feeling is that we want to do something; I have not changed my view and I hope that noble Lords will accept my good will on this matter. I am keen that we should move forward, but I do not think that this is the stage at which to talk about exactly how that is going to happen because it is not something that can easily be done. Carbon capture and storage is important to the Government. We committed a significant sum of money to it in our manifesto and that remains very much government policy. We have a good story to tell in that as a country we have the important potential of the North Sea for carbon capture and storage, so I am keen that it should be incorporated in the Bill in a way that it is not at the moment.
My next point will, I hope, address points quite rightly made by my noble friend Lord Howell, and I thank him for his thanks in relation to the impact assessment. Work has started but, in relation to the focus of the Oil and Gas Authority, it is important that we do not load too much work on the authority and diffuse what it seeks to do. There is a balancing act: we are very keen to ensure maximising economic recovery from the North Sea at the same time as realising the great potential that we have from carbon capture and storage. They remain very much our objectives.
I turn to the more technical points, quite validly raised by the noble Lord, Lord Teverson, and the noble Baroness, Lady Liddell, as to what this clause does and what these amendments seek to do to the clauses in the Bill. Although I am a lawyer, that does not mean that I perhaps have any greater insight. Therefore, I tread with trepidation and have spent some time on this. I believe these provisions seek to ensure that, on an assignment of ownership or rights by a party, there is no delay in them being able to take up the rights that were previously enjoyed by the transferor, if I can put it that way. We will have a look at that and I will write to noble Lords on this issue to ensure that it is not any more complicated than that and that it does not prejudice the issues that the noble Baroness, Lady Liddell, and the noble Lord, Lord Teverson, raised. That is certainly not the intention and I do not believe that it creates difficulties in the way that they indicated might be the case. But I will certainly confirm that.
I hope that that answers the points raised by noble Lords and therefore ask noble Lords to support these amendments.
“Applications to use infrastructure: changes of applicant and owner
(1) The Energy Act 2011 is amended as follows.
(2) In section 82(13) (contents of notice securing rights to use infrastructure), omit paragraph (b).
(3) In section 87(6) (circumstances in which information may be disclosed)—
(a) omit the “or” at the end of paragraph (a), and(b) after paragraph (b) insert “or(c) the disclosure is made under section 89A or 89B.”(4) After section 89 insert—
“89A Assignments and assignations of applications
(1) This section applies where—
(a) there is an assignment or assignation of an application made under section 82 from one person (“A”) to another (“B”), and (b) the following are notified of the assignment or assignation—(i) the owner of the pipeline or facility that is the subject of the application, and(ii) the OGA.(2) A notice under subsection (1)(b) must—
(a) be in writing, and(b) specify the date of the assignment or assignation.(3) For the purposes of this Chapter, anything done (or treated as done) by or in relation to A in connection with the application is treated after the assignment or assignation as having been done by or in relation to B.
This subsection is subject to subsections (4) and (5) and does not apply for the purposes of subsections (6) and (7).(4) Any provision of this Chapter that requires the OGA to give the applicant an opportunity to be heard has effect after the assignment or assignation as requiring the OGA to give B an opportunity to be heard (whether or not the applicant was heard under that provision before the assignment or assignation).
(5) Subsection (3) does not apply in relation to any notice given under section 87 before the assignment or assignation (and, accordingly, the person to whom the notice was given remains under an obligation to comply with it).
(6) Any information relating to the application obtained by the OGA before the assignment or assignation from any person who at the time was the applicant may be disclosed to B.
(7) Before disclosing any such information to B, the OGA must remove any information which the OGA considers may prejudice the commercial interests of the person from whom the information was obtained.
89B Transfers of ownership
(1) This section applies where the ownership of a pipeline or facility that is the subject of an application under section 82, or to which a notice under subsection (11) of that section relates, is transferred from one person (“C”) to another (“D”).
(2) For the purposes of this Chapter—
(a) anything done (or treated as done) by or in relation to C in connection with C’s ownership of the pipeline or facility is treated after the transfer as having been done by or in relation to D, and(b) any obligations imposed or rights conferred (or treated as imposed or conferred) by or under this Chapter on C in connection with C’s ownership of the pipeline or facility are treated after the transfer as imposed or conferred on D.This subsection is subject to subsections (3) and (4) and does not apply for the purposes of subsections (5) and (6).(3) Any provision of this Chapter that requires the OGA to give the owner of the pipeline or facility an opportunity to be heard has effect after the transfer as requiring the OGA to give D an opportunity to be heard (whether or not the owner was heard under that provision before the transfer).
(4) Subsection (2) does not affect the obligation to comply with any notice given under section 87 before the transfer (and, accordingly, the person to whom the notice was given remains under an obligation to comply with it).
(5) Any information relating to the application obtained by the OGA before the transfer from any person who at the time was the owner may be disclosed to D.
(6) Before disclosing any such information to D, the OGA must remove any information which the OGA considers may prejudice the commercial interests of the person from whom the information was obtained.””
Lord Oxburgh
“Carbon capture and storage
Within one year of the coming into force of this Act, the Government shall undertake a consultation on measures requiring extractors and importers of petroleum to contribute to the development of carbon capture and storage.”
Lord Oxburgh (CB)
My Lords, Amendment 34A seeks to impose certain open discussion on the possibility of imposing on importers or extractors of fossil fuels certain obligations with respect to managing the emissions associated with them. To backtrack for a moment, we are building up towards the Conference of the Parties in Paris later this year. One cannot avoid the feeling that there is something in the air, including President Obama’s initiatives on climate change in the United States, the new undertakings offered by China and the letter from half a dozen major oil companies to the United Nations urging for a high carbon price in order to manage global emissions. There is a general recognition that, unless something changes, business as usual will mean an inexorable march towards a 4-degree world. I do not think that anyone really wants that.
There is no single silver bullet to avoiding this but, having said that, I do not think that there is any credible solution to the problem of global emissions that does not involve carbon capture and storage. The Minister has already made reference to that. Despite the Government having made a continuing and substantial effort, one of the difficulties with CCS is that progress has been glacially slow. The discussion about carbon capture and storage has now been going on for more than 10 years. Perhaps I may remind the House that that was the time from the beginning of the space race to putting a man on the moon. What we are talking about is not space technology, but something much more readily tractable. It is a matter of getting the will and the institutions to get something done in time.
There are various reasons why we have not made progress. It was expected that the Emissions Trading Scheme would be successful, but it has failed to achieve a sufficiently high carbon price to promote carbon capture and storage and to drive substantial change. One of the problems is that many parties—I do not mean in the political sense, but the many interest groups and stakeholders—support carbon capture and storage but none can make the business case for urgent action or commit substantial resources, whether they be coal companies, oil and gas companies, electricity generating companies or cement companies. All have an interest in carbon capture and storage, but it is not the specific responsibility of any of them. In that sense, CCS is an orphan technology. It has numerous well-meaning aunts and uncles, but no parents who will really acknowledge it. Therefore, there is no one to take driving and fundamental responsibility for pushing it forward.
The amendment provides an opportunity to discuss a proposal that has its origins primarily in the universities of Edinburgh and Oxford, but which has support from a number of others. For those who might want to look at this proposal, which I have to say is immature in a number of ways, it can be found on the website of Scottish Carbon Capture and Storage in its third working paper for 2015. I am told that that reference is now in place. The amendment, which I will describe in a minute, would provide carbon capture and storage with very clear parents with a very strong interest in ensuring that the offspring thrived. Basically, what is proposed is a regulatory requirement,
“on producers and importers of fossil fuels to sequester, or pay for the sequestration of, a small but rising fraction of the carbon content of the fossil fuels they extract or import into the United Kingdom”.
This would be a major change in the way that CCS activity is supported. It would involve no call on the public purse. The call would be on the purses of the importers or extractors. Carbon capture and storage would be driven by what is exclusively a market mechanism. That is how the attention of these major corporations would be very securely obtained. They would find a way to do this as efficiently as possible.
This mechanism is relatively easy to implement. It would attack a number of problems that are currently major stalling blocks for carbon capture and storage. One of the big problems is how you get the infrastructure in place in the North Sea: who will take responsibility for it? If CO2 is captured on land, who will pay for a pipeline or for the storage? It would be absolutely clear who had to do this if this way of supporting CCS was introduced. We would find that the major corporations that operate in the North Sea would simply continue the kinds of co-operation that they have at present to make joint use and maintenance of pipelines et cetera where that is appropriate.
As this kind of mechanism is phased in, the other carbon levies, of which there are several, could be phased out. Nothing desperately urgent is proposed but these things could be merged. Costs are obviously important. The estimate of the groups in Edinburgh and Oxford is that if a mechanism like this were introduced gradually, at the very first stage there would be, for example, some tiny fraction of a penny increase on the cost of petrol. Rising over 10 years as the fraction of emissions for which the companies were responsible increased, it could go up to 2p, but it is not big and could be introduced gradually. The big point to bear in mind is that we could do carbon capture and storage for all our CO2, even on the more extravagant estimates, for a tiny fraction of the change in value which we have seen in the oil and gas markets. We are talking about something very small here by comparison with the fluctuations which we have seen over the last 12 months.
Baroness Worthington
My Lords, I am grateful to the noble Lord, Lord Oxburgh, for introducing this amendment, to which I was very pleased to add my name. Like the noble Lord, I would like us to take a step back and think about this debate in context. I am grateful to Professor Myles Allen at the Oxford Martin School and Professor Stuart Haszeldine from Edinburgh University, who have provided some very interesting briefing materials on the amendment. Myles, in particular, has a very interesting way of describing the challenge that faces us. To help us comprehend this issue and that of climate change and the problem of the unburnable carbon, to coin a phrase from the Governor of the Bank of England, Mark Carney, let us imagine seven lumps of coal, each representing half a trillion tonnes of available fossilised carbon. That represents what we know to be the available fossil fuel reserve: 3 trillion to 4 trillion tonnes of usable carbon. It might actually be much higher than that. Our seven lumps of coal might be closer to 14 if we include unconventional sources such as shale gas, tight gas and tar sands. So we have an awful lot of stored carbon on this planet.
Over the past 250 years we have burned and dumped into the atmosphere one lump; that is, half a trillion tonnes of carbon. As a result, temperatures have now risen on average by 0.9 degrees globally; there is a time lag so that figure may go up. We should remember that 0.9 degrees globally means very different temperatures at the poles. There might be double the warming—closer to 2 degrees—happening in the polar regions, where of course there are large amounts of ice, in both the Greenland ice sheet and the Arctic itself. I know that the noble Viscount, Lord Ridley, will speak shortly but this is reasonably uncontested science. This is simply the physics of the additional loading into the atmosphere.
At the rate we are currently burning fossil fuels, it will take us just another 30 years to burn the next lump— the second of our seven lumps of available carbon—which will likely exhaust our safe carbon budget. We can have a debate about “safe” and about the scale but, by and large, in about 30 years’ time we will have emitted as much again as we have since the Industrial Revolution. The third lump will almost incontestably take us over the 2-degree limit. Two degrees is the supposed safe threshold—again, this number will probably be revisited time and again but it seems likely that beyond that point we will be into the realms of an unsafe climate. The next lump takes us to 3 degrees, and so on.
Now, if we have 14 of these lumps and we are burning through them at the rate that we are, the obvious conclusion is that we are going to have to come up with some mechanism for either leaving some of this carbon untouched or burying the associated greenhouse gases back underground, if we want to use these resources. So far most of the debate has been about trying to burn that second lump of coal a little bit more slowly and nobody is facing up properly to the scale of the challenge of what we do with our carbon assets and how we transition into a new future.
I think there is something in the air—sorry to be a little bit cheeky but there are also 400 parts per million of carbon dioxide in the air—and there is a mood shift. It probably is precipitated by the Paris talks. International negotiations provide a useful chance for us as a global community to take stock and assess what we are really doing to address this problem. I hope that Paris will be a success but it is evident that that is just a staging post and the hard work will start afterwards, when we sit down and consider the implications of what we are setting out to try to do in terms of decarbonising our energy systems.
Obviously, we should pay tribute to the companies and individuals and, indeed, all the previous Energy Ministers who have helped us to lift ourselves out of poverty and have a higher standard of living using our hydrocarbon resources, but the game is changing and in the future we are going to have to recognise the risk of climate change and take action to mitigate it. For our generation and for future generations, this is something that we simply have to do.
So, in the run-up to Paris, here we are with an Energy Bill that seeks, on the surface of it, to extract more hydrocarbons from the North Sea—and, as a side issue, to not have any more onshore wind. That does not seem completely in tune with the general sense outside these Chambers, government and Whitehall that we need to take climate change seriously. What we are trying to do in these Committee sessions is to make sure that this Bill is fit for purpose in terms of the challenge it is trying to address and is making good use of our parliamentary resources.
I happen to think that the idea that has been circulated and which the noble Lord, Lord Oxburgh, is now encouraging us to debate has merit. I am not saying that it should be policy, and there are many unanswered questions that relate to it, but it has some very interesting features. We should first acknowledge that although we have carbon budgets in the UK that cover our whole economy, in reality there is nothing in policy measures that prices carbon into the heat and transport sectors. There is a cap on electricity and on emissions coming from heavy industry, some of which is of course from gas. That is taken care of: there is an EU scheme and a UK top-up measure, so we at least have some handle on that. When it comes to the other sectors, which mainly means the distribution of gas into the heating of buildings and the use of oil as petroleum in transport, we do not have a policy that explicitly addresses the emissions. We have taxation, of course, and we hope that the Treasury is recycling some of that into good things, but by and large it is an uncapped sector in which there are very few measures—I cannot readily think of any—that address the totality of those emissions from those sectors.
I am sure that we could look at this in lots of ways but the idea being circulated in the briefings is elegant. It simply states that upstream, at the very point at which a product is brought out of the ground or imported into the country, we would place an obligation on those importers and extractors so that they then source the least-cost ways of storing a proportion of their emissions underground and addressing the impact of their product. What I like about this is that it would create an obligation that sits in the hands of the private sector. It would also create an obligation on a group of people who have a great interest in seeing carbon capture and storage come to fruition because it lengthens their business plan. It gives them an opportunity to continue what they are doing without imperilling the planet, so they seem the right people to talk to.
We all know that certain companies, including Shell, are pushing ahead. They are seeking contracts for difference from the Government to move ahead with a CCS project. But I am sure they would readily admit that in a world in which their competitors are not doing the same, it is incredibly difficult to do this. If they say that they will take on an extra price burden, they are necessarily dependent on government subsidy to get it going because of the fact that their competitors will not be doing the same. They will come under shareholder pressure saying, “Why are you taking on these extra costs when no one else is?”. So we can either carry on in this way, giving out subsidies and negotiating bilaterally with these companies, or we can say, “Let’s try to do it a different way, creating the right framework to get the right players involved”. They bring unrivalled engineering expertise and excellence with their knowledge of the North Sea. If we genuinely think that the North Sea offers a new economic opportunity for the UK—and I think that is the case, not just for our emissions but for Europe’s—then let us harness these giants of engineering and get them to apply their minds to this task.
As the noble Lord, Lord Oxburgh, mentioned, there would of course be a modest price passed through but if we start at a low percentage of emissions then it would be almost unnoticeable—certainly much less than the fuel duty we currently charge. I think we would find that the cost of carbon capture and storage that was uncovered would be far and away lower than we can imagine. I know from my time in the Civil Service that we would imagine what costs were going to be, but then be completely startled when industry went off and did the things we asked it to do. It came in at much lower cost. One of the best examples of that is the carbon market set up under Kyoto, where at the time of negotiation the belief was that chemical companies which produced HFC gases would have to be buyers of permits. It turned out that as soon as someone did the maths, they were completely capable of reducing their emissions at very low cost and bringing forward huge amounts of certificates to the market, which then crashed the price. They were sellers at such a volume that they managed to make the price almost negligible, so apply market forces to these problems and you will see costs coming in lower than civil servants and we are able to imagine at the moment. That is hugely important because affordability of decarbonisation is a massive challenge. We must keep our focus on that. We will not have a licence to carry on if we keep having high costs when we do not need them to be so high.
As your Lordships can tell, I am quite in favour of this provision because it has a market element but I do not want to trivialise the role of the Government at the moment in helping to stimulate the demonstration projects. I wish nothing that I have said today to make investors feel nervous that we are somehow not going to back the demonstration projects at White Rose, Peterhead and Grangemouth. They are very important projects—the first of a kind—and we want to see them succeed. I think it is fair to say that there may well need to be more state involvement in making the infrastructure work and so that it is done at the right scale for those demonstration projects. However, if we look a little further forward beyond those demonstration projects, we know that we need to get into a world where these technologies are, as far as we can make them, standing on their own two feet and competing with each other to keep costs low.
Lord Howell of Guildford
My Lords, I take it that the noble Lord, Lord Oxburgh, is referring to the very interesting paper put forward by Professor Stuart Haszeldine and his colleagues about the financing and development of CCS. The noble Lord, Lord Oxburgh, is himself always at the forefront of new thinking and developments in this important area, and this is certainly a very interesting set of thoughts. Basically, the idea in the paper, as I understand it, is to spread the costs of further CCS development away from falling exclusively on the already burdened consumer and also to spread them through time. The argument is that, as we get to the end of the 2020s and into the 2030s, the real crunch and crisis over CO2 will come and that the burning of coal particularly is going to become absolutely decisive in shaping future influence on climate change.
Furthermore, the noble Lord, Lord Oxburgh, is absolutely right about the centrality that he gives to the whole carbon capture and storage task. When one considers that 2,117 new coal plants are now being planned or built around the world, one begins to realise the enormity of the task to somehow ensure either that they are diverted or that the coal plants operate in ways that reduce carbon emissions. Carbon capture and storage clearly is the most satisfactory technical answer to that, although there are problems of cost, but there are of course much cleaner ways of burning coal, which both the Chinese and the Poles are urging, using very advanced technology built on the conventional platform but also supercritical boilers and other devices to ensure that much more energy emerges from a tonne of coal. That way, by definition, you get more energy or electricity out of a coal-fired station but save on the amount of emissions that would otherwise result. So there are other techniques as well, which are obviously decisive.
Most coal stations will be built in India, Indonesia and Turkey—mostly in Asia, although some in Europe. The whole attempt effectively to keep global warming to a 2 degrees centigrade rise will stand or fall on what happens to that vast number of new coal stations and the huge commitment to increased coal burn. It is the official policy of the Government of India that there must be a doubling of coal production and a very substantial increase in coal burning there, because the primary aim is the reduction of poverty and economic development. Unfortunately, given the economics of the present and near future, coal is much the cheapest way to produce the essential cheap power that developing nations of that size and with those challenges must have.
This is the problem. The noble Lord, Lord Oxburgh, and the noble Baroness, Lady Worthington, are absolutely right to call our attention to this, but the question left in my mind is how relevant it is to the extraction of oil and gas in the North Sea. If we are to carry forward experiments effectively, we need to develop the storage techniques that go hand-in-hand with carbon capture and storage. That is very important and there is a lot of work to be done on that.
I will strike a slightly diversionary note from what has been said in the debate so far. The aim here is maximum economic recovery. The aim is to cope with an industry which is shrinking very rapidly. On the front page of the Times this morning I read that 65,000 jobs are about to go in the industry. The industry is under very great pressure. As I understand it, our aim in the Bill and that of the OGA is to ensure that gas and oil are extracted economically, commercially and successfully in these shrinking conditions. We know that gas is considerably lower carbon when burnt than coal, so if we are trying to sequester our coal carbon emissions or move from coal to gas, it is more gas we want, not less. Everything needs to be done—as I understand the OGA is trying to do—to encourage the extraction at economic prices of gas from the North Sea that can then be burnt, thereby saving considerable carbon emissions. We need to copy the American example, where there has been a huge reduction in carbon emissions—at least on the production side; consumption is another story, of course—because they have switched from coal to gas as a result not of government policy but of the shale revolution.
I leave a question mark over the amendment as to whether it really applies as directly as some have suggested to the North Sea offshore operations. It is clearly vital that something is done to halt the massive increase in coal burn lying ahead. I think that 46% of the entire world’s electricity comes from coal, and that is probably rising, not falling. That is decisive, but whether at this stage the additional obligations in the Bill should be placed on this particular industry, which is struggling in desperately difficult conditions in both a geographic and an economic and commercial sense, I am not so sure. I end my comments with this question, although it may be that this is not quite the right place to think about this vital issue.
Lord Teverson
My Lords, I am a great disappointment to the noble Lord, Lord Oxburgh, because over the years, I have become a CCS sceptic in all sorts of ways. The reason for that is not because it is not necessary or a good way to move forward the decarbonisation agenda but because, exactly as he himself said—I have been talking about this for the nine years that I have been privileged to be a Member of this House—we have got a very short distance in terms of making it happen. Obviously there has been important progress, with projects in the formative pipeline at the moment, but one reason for that is that CCS is large scale, demonstration projects are very expensive and it stands aside from the fossil fuel-based industry that it is trying to help. The two are not directly tied up.
What I like about the amendment, and why I have put my name to it, is that it tries to find a number of ways through that puzzle. First, it says that CCS is important, and is a future technology. I really welcome the Government’s positive messages about this. From where I stand, the decarbonisation agenda seems to be rather on the back foot and going in the wrong direction, but in this important area I really welcome the Government’s positive mood music. But there are a couple of other things. One was referred to strongly and effectively by the noble Baroness, Lady Worthington. If there is greater stakeholdership of CCS by the fossil fuel industry, there is likely to be more push for there to be a real effect and for something to happen. It is also an ongoing basis on which this technology can be funded, rather than on the erratic one-off mega-subsidies and funding systems that we have at the moment.
For those reasons, this is a really positive suggestion and a way in which we can start to move forward. It is also in line with the philosophy, with which we all agree, that the polluter pays—or it is in that ballpark, if not absolutely perfectly. For that reason, I was very pleased to put my name to the amendment, as it helps to bring that forward. But as other noble Lords have said, clearly this is the start of an idea. That is why it is absolutely right that the amendment talks about a consultation process, rather than saying that it should happen. So I very much welcome this amendment and welcome the Government’s positive view towards CCS, and I hope that this can be seen as a way of moving this agenda forward more practically than we have achieved in the past.
Viscount Ridley (Con)
My Lords, I apologise for not being here on Monday to take part in the debates then, and I hope that the House will indulge me in speaking today. I declare my interests in surface coal-mining in the north of England. None the less, and to their astonishment and probably horror, I would like to support the amendment in the names of the noble Lord, Lord Oxburgh, the noble Baroness, Lady Worthington, and the noble Lord, Lord Teverson. It has enormous merits and is a good suggestion, although they should not worry because I will disagree with them on things towards the end of my remarks.
I welcome the remarks of my noble friend the Minister that he wants to discuss CCS further, and I hope that he might be able to include me in those discussions. I want to suggest as an extra twist—and the noble Lord, Lord Oxburgh, touched on this—that we must link this to some kind of alleviation of the carbon imposts on the industry, which are throttling various British industries at the moment, in particular the carbon floor price. What I like about the suggested amendment is that it avoids the distortion of supporting carbon capture and storage through the contracts for difference, and that it should work at no cost to the taxpayer and makes use of market mechanisms.
I think that we now have to agree that the world needs fossil fuels during this century, if only to give the billion people in the world who have not got access to electricity the chance to have access. We cannot get emissions reduction without using CCS, if we are going to use fossil fuels. We are still searching for a way in which to get emissions down without hitting affordability and security, to solve the trilemma. So far, the two main ways in which we have tried that have not worked. Subsidising renewables has worked very poorly in getting emissions down and has done so at the cost of affordability. So far, wind and solar have managed to take 1.3% of global energy use, after billions of pounds invested in it worldwide, while having a minimal effect on emissions reduction. So the renewables agenda is putting affordability at risk without achieving its goals.
The other tactic that we have tried is simply to put heavier and heavier taxes on fossil fuels, and we can see the effect of that on our electricity supply in this country. Power station after power station is closing. In the Queen’s Speech debate on 4 June I suggested rather rashly that there was now a risk that Eggborough would close—and now that has come to pass. Therefore we are genuinely looking at a worrying lack of energy security in this country. The two mechanisms we have tried for cutting emissions have either hit affordability or security, so we are still searching for a way to do decarbonisation cheaply and without hitting energy security. The best way to achieve that would be to build more gas-powered power stations and to encourage the use of gas instead of coal, but that is not possible at the moment in this country, because renewables are making it uneconomic for anybody to build or open a new combined-cycle gas turbine.
Baroness Worthington
I apologise if I have risen too soon; I look forward to hearing what the noble Viscount is about to say. It is true, is it not, that there is a time lag between our emissions and changes in temperature? We are therefore likely to have a 30 to 40-year period in which we know we have committed ourselves to higher temperatures, and yet we are waiting for the impact. That surely means that we should be concerned sooner, rather than later. Secondly, does the noble Viscount not acknowledge that a global average temperature rise of 1 degree would be double that in the Arctic? A 2 degree global rise would therefore be 4 degrees in the Arctic, which could have a significant impact on the melt, leading to sea level rise.
Viscount Ridley
On the first point about the lag, yes, but the whole point is that I am comparing the rate of temperature increase with the rate predicted by the IPCC, which knew about the lag and built it into its models. Essentially, the noble Baroness is talking about the difference between equilibrium climate sensitivity, which is reached after many centuries, and transient climate response, which is what you immediately get. Yes, there is a big difference there, but the climate sensitivity figures—I was coming on to this—are based on 14 new studies, one of which Myles Allen co-authored.
Lord Winston (Lab)
Forgive me, but is not this discussion a little irrelevant to the amendment? What we are trying to do in this Bill is to create a plan, and in considering this amendment that is what we should be focusing on, rather than the arguments about climate change.
Viscount Ridley
I do not disagree—I was simply picking up on a couple of points made by the noble Baroness, Lady Worthington, and the noble Lord, Lord Oxburgh. I will wrap up my remarks very soon, but let me point out that the only scenario that the IPCC considered in its models that gets us to 4 degrees by 2100 is RCP 8.5, which assumes that the world will be burning 10 times as much coal in 2100 as we are today. That is not very realistic, and it also assumes that by then, we will be getting our motor fuel from coal. Nobody thinks that is going to happen, so one has to be careful about which of the IPCC scenarios one looks at. That one is not very plausible.
Anyway, I think we agree that this is an excellent amendment, and I will leave it at that.
Baroness Maddock
I was going to congratulate the noble Lord, Lord Oxburgh, on introducing an amendment that has actually brought together both sides of the climate change argument. Unfortunately, that was rather spoilt by the latest comment of the noble Viscount, Lord Ridley. We were spared that on Monday, when we debated carbon capture and storage. However, I do hope that the Minister will take this proposal and this amendment seriously.
The final point I want to make, which I made on Monday, is that I am concerned that, in our rush to make sure that we keep the oil and gas industry as profitable as it can be in the circumstances, we do not put anything in the Bill that will prevent us developing carbon capture and storage. We have heard how slow and difficult progress has been, so I welcome these proposals, which we should look at. I hope we can have a good discussion of the issue, but I point out that, other than next week, it is very difficult for me to get together here in London to discuss it before we return in October.
Lord Bourne of Aberystwyth
My Lords, we have been treated to a veritable tour d’horizon on this amendment, going far beyond the amendment itself. I certainly do not criticise that; I think that in a sense it is important, and it has been a very good debate. I shall try to pick up the points that were made.
To echo what the noble Baroness, Lady Maddock, has just said, there is an attraction in getting everybody on the same side, including my noble friend Lord Deben, who is not in his place today—he is just in his place; I am sorry. Getting everybody on the same side of the argument as my noble friend Lord Ridley in relation to CCS is indeed seductive, if for no other reason than that this matter certainly demands close attention, although it demands close attention for many other reasons.
The noble Lord, Lord Oxburgh, introduced his amendment with great authority. He spoke widely about something being in the air and the challenges that we are facing as a global community, as well as the Conference of the Parties that is taking place in Paris at the end of this year. I associate myself entirely with what he says about the challenge there and the fact that there are positive moves and ambition in the air. However, I would not want anybody to think that this is a done deal. There is a lot of hard work going on. Our own Secretary of State, my right honourable friend Amber Rudd, is spending most of her time on this, working around the clock. She has been given a major role on finance by the French President to try to bring countries together. That, again, is a good thing for us as a country and for all concerned, as she is the right person to do that. It is important to try to keep the 2 degrees centigrade increase in sight, and that is a real challenge. However, it is right that there is ambition in the air and many positive things are happening.
The noble Lord, Lord Oxburgh, was right when he said that this is a germ of an idea, and the noble Lord, Lord Teverson, said that it was the start of an idea. I agree with that. This is very much a nascent amendment and it certainly deserves attention in the broader context of looking at carbon capture and storage, which, I repeat, we are very happy to do within the context of this Bill.
The noble Baroness, Lady Worthington, spoke with great passion—and understandably so—about the narrow focus of this legislation. It is narrow in many ways but I understand that we have the support of the Opposition in ensuring that the Wood review becomes law. That is important. I am very aware that we do not want to lose sight of the central focus, which I think my noble friend Lord Howell referred to with words of caution. The jobs are important, as is gas, in our move to a carbon-free environment. Maximising the economic return in getting gas and oil from the North Sea is vital and we do not want to lose sight of that.
That said, we are very keen to ensure that CCS features centrally within the legislation. The Government have in place one of the most comprehensive programmes in the world on CCS, as recognised recently by the Global Carbon Capture and Storage Institute. This includes a carbon capture and storage competition, with up to £1 billion capital, plus operational support for up to two commercial-scale carbon capture support projects and a £125 million research, development and innovation programme. That said, my noble friend Lord Ridley is absolutely right that it is only Canada that we can look to as somewhere where this is working commercially. DECC officials have spent a lot of time looking at that. They have visited Canada on many occasions and will continue to do so.
I am keen that CCS remains very central to what we are thinking about. I repeat the undertaking that all Peers are invited to join in this process, and all Peers who have spoken will receive a letter inviting them to indicate their availability. If it is difficult to get one meeting because of lack of availability then we will put on two, but we will not be splitting them on a party basis, because I think that there is a genuine cross-party feel on this issue. I do not think that there is any real difference between people on this, which is a very good thing.
I am very keen that we should move forward in relation to this carbon capture and storage issue. I appreciate the debate that we have just had. It has been very helpful, although, as I said, it was much more wide-ranging than the amendment. However, I respectfully ask the noble Lord to withdraw the amendment on the basis that the Government have given an undertaking to look at carbon capture and storage in relation to the Oil and Gas Authority and to do so between Committee and Report.
Lord Oxburgh
My Lords, I thank all noble Lords who have participated in our lively and interesting set of exchanges, which are too numerous to answer all in detail. However, the noble Lord, Lord Howell, asked about the implications for the North Sea. I probably did not make my submission too clearly, but one of the reasons that CCS is creeping along glacially is that no one can make a business case and there is no investor confidence. A regulation of this kind would plan a clear way forward for industry and CCS would become much more investable for the private sector—and there would be much less dependence on government.
The noble Lord, Lord Teverson, commented on the large scale and expensive nature of CCS. We do not really know what it costs. We know what the operation in Canada has cost, and it is a lot of money. However, there is a hockey stick curve for all these things; they are expensive at first but prices come down. All new technologies and new ways in which to capture carbon would be explored and invigorated with a clear drive from government, and there would be responsibility on companies to find a cheap way of doing this.
The noble Viscount, Lord Ridley, made a number of points, including on the carbon floor price. I am indeed worried about the delay. He commented on the overseas implications. I agree that among the things that we would have to tease out would be the implications for the UK of doing this by itself. What would be the implications for our position more widely? Might we be able to persuade other EU countries to come in on this? For a lot of people, this kind of approach is a no-brainer; it is the obvious, “polluter pays” way forward. I say to the noble Viscount that I never believe the figures on climate projections. He will have noted that, although I mentioned 4 degrees, I did not say when. What is beyond doubt is the direction of change, and cutting down our emissions and putting them out of the way as quickly as possible is a sensible precaution to take.
I thank the Minister for his words.
Baroness Worthington
I should like to respond to one question about how this matter relates to the Bill and the North Sea. I want to offer this fact to Members of the Committee: over its time, the North Sea has produced 42 billion barrels of oil. It has been of great benefit to us as a country; however, those barrels have contributed 18 billion tonnes of CO2 to the atmosphere. There is a definite link to not only the North Sea’s inevitable economic benefits for us but the environmental consequences of that. I should also say, for information, that buying CO2 commercially as a feedstock at the moment costs £100. We must be able to sort something out whereby the producers of CO2 and those who buy it at £100 can be brought closer together, so we can begin to see the development of an industry in getting CO2 safely out of the atmosphere.
Lord Oxburgh
I thank the noble Baroness for her intervention and remind myself that I should have thanked her for her support of the amendment. There are few people in the House, if anyone, whose knowledge of the industry is as deep and authoritative as hers. I beg leave to withdraw the amendment.
Lord Wallace of Tankerness (LD)
My Lords, when we return on Monday for the third day of Committee, we know that we will be dealing with some of the more controversial parts of the Bill, not least on Clause 60. The Government have announced that a grace period will be incorporated into the legislation, and have been seeking views on the draft proposals. Can the Minister indicate to the Committee that, before the next Motion that the House do resolve itself into a Committee upon the Bill, we will have an opportunity to see the amendments? They are important, of course, not only to the industry but to your Lordships’ House if we are to carry out our proper job of scrutiny.
Lord Bourne of Aberystwyth
I am grateful for prior notice of this question from the noble and learned Lord, Lord Wallace. I can update the Committee on this. I have been chasing the impact assessments over the last period. As things stand, and I think I probably indicated this in passing in the debate on Monday, we are carefully reviewing the feedback and evidence provided during the engagement exercise to ensure that the final policy strikes the right balance between public interest and the interests of developers and the wider industry. I am sure noble Lords appreciate the importance of that. I will aim to bring forward any government amendments in relation to this policy as soon as possible. If I have any more information on the dates when that will happen, I will share it with noble Lords, but I do not think that that will be ahead of the debate on Monday.