The Parliamentary Under-Secretary of State, Department of Energy and Climate Change and Wales Office (Lord Bourne of Aberystwyth) (Con)
My Lords, before I address the government amendments, I thank the Bill team, my Whip, my noble friend Lord Younger, and the ministerial team in the department for their help and support. I also thank all those who have scrutinised the Bill. I am extremely grateful to noble Lords for their participation in our proceedings in discussions in the Chamber and indeed outside the Chamber, which have been very helpful.
Although I know that there are points on which some of us do not agree, the debate on the content of this Bill has greatly benefited from the wisdom, experience and insight that a number of noble Lords, sitting on all Benches, have brought to deliberations. I also thank specifically the noble Baroness, Lady Worthington, for her contribution to the debate and wish her well in her future endeavours as she steps down from the Opposition Front Bench. She has shown incredible commitment and great brio and has made many very valid points, and I am sure that she will continue to do so from the opposition Benches.
This is an important Bill and although, as I say, we have not agreed on key elements—particularly the early closure of the renewables obligation for onshore wind—we have agreed on many issues, including the need to tackle the threat that climate change constitutes to the environment, our security and our economic prosperity. The Government will decarbonise the economy and will do so cost-effectively.
We have had a substantial measure of agreement on carbon capture and storage. If nothing else, I think I can take great credit for bringing together my noble friends Lord Ridley and Lord Deben and Members of all sides of the House on the importance of carbon capture and storage. I am most grateful in particular to the noble Lord, Lord Oxburgh, for agreeing to head a parliamentary advisory group on carbon capture and storage. This will provide advice to my right honourable friend the Secretary of State for Energy and Climate Change, Amber Rudd, within 12 months of the Act coming into force. I would feel less guilty if I did not know that if I am taking him away from anything, it is from orienteering with his family in his spare time. I know just how busy and able he is, so I am most grateful for that.
Government Amendment 1 is a minor and technical amendment to Clause 7, which reflects an error that has occurred as a result of other government amendments made on Report. The purpose of Clause 7 is to ensure that where functions are contracted out to the Oil and Gas Authority by relying on Section 69 of the Deregulation and Contracting Out Act 1994, they may be contracted out for a period exceeding 10 years. Clause 7 also provides that Welsh Ministers may enter into a contract with the Oil and Gas Authority, authorising that body to exercise the functions of Welsh Ministers.
Clause 7(1) limits the effect of the rest of the clause to circumstances where the Deregulation and Contracting Out Act 1994 has conferred functions on the Oil and Gas Authority. However, the subsections inserted by our amendments on Report are intended to deal with a set of circumstances where that Act does not apply—that is, a power for Welsh Ministers to enter into an agreement with the Oil and Gas Authority authorising that body to exercise the functions of Welsh Ministers. With that in mind, subsection (1) should apply only to subsection (2) rather than to the whole of the clause. This amendment corrects that error.
Government Amendment 2 is a minor and technical amendment to ensure that the levy to fund the Oil and Gas Authority is not payable in respect of functions that it carries out under agreement with Welsh Ministers. This is achieved by inserting wording into the list of matters in Clause 14 that the Secretary of State must ensure are not covered when making regulations on the levy. This provides consistency with the current provision which excludes the levy from being charged in respect of functions carried out under Section 69 of the Deregulation and Contracting Out Act 1994, for example on behalf of Scottish Ministers. It is also consistent with the approach taken towards fees under Clause 13, where the Oil and Gas Authority will not be able to charge fees for the exercise of functions that it is authorised to exercise either on behalf of the Scottish Government or by virtue of an agreement with Welsh Ministers.
Government Amendment 4 updates the Bill’s Long Title to ensure that it complies with the parliamentary convention that Bills should leave this House and move to the other place in a proper state. I beg to move.
Lord Wallace of Tankerness (LD)
My Lords, I do not wish to detain the House other than to respond to the opening remarks of the noble Lord, Lord Bourne, and to express gratitude and appreciation for his willingness to engage during the passage of the Bill. On many occasions he was left in an unfortunate position which was not of his own doing—for example, amendments coming in late and assessments not being available—but he has engaged, certainly with my party, in a most courteous manner. Although we were not able to agree on the earlier closure of the onshore wind renewables obligation, our discussions were nevertheless very useful and have no doubt paved the way for further discussions when the Bill reaches another place and comes back to your Lordships’ House.
The amendments the Minister has just moved are technical and sensible updating measures, but very much appreciated. The first Part of the Bill implements the proposals of the review by Sir Ian Wood, which we were committed to doing when in coalition government. I welcome the fact that this is now taking shape in statutory form, and thank the Minister for his engagement with the Bill.
Lord Foulkes of Cumnock (Lab)
My Lords, I think I speak on behalf of all my colleagues on the Back Benches who have sat through debates on the Bill when I say that we, too, will miss the enthusiasm and inspiration of my noble friend Lady Worthington on the Front Bench, but we know that she will still be with us in different ways, and we look forward to that.
As I am on my feet, I take this opportunity to ask the Minister to explain. Perhaps I have missed it, but I am still not exactly sure that he has explained when and how the Government will respond to the decision of the House of Lords on the former Clause 66, so that the uncertainty in the industry can be lifted. I hope that he will give us some indication of when and how the Government will respond when he replies.
Lord Bourne of Aberystwyth
My Lords, first, I thank the noble and learned Lord, Lord Wallace of Tankerness, for his most kind comments. It was a pleasure working with him and his colleagues, as it was with the noble Baroness, Lady Worthington. They were not difficult colleagues to deal with on the Bill, and I am sure that it is in many respects a better Bill than it was.
I also thank my noble friend Lord Howell for his comments and echo what he said about the noble Baroness, Lady Worthington. I am not sure that I can echo what he said about more energy Bills—I think I heard a thud from the Bill team behind me when he said that, as they thought of another energy Bill coming down the tracks—but we are looking at crafting a fresh approach on energy policy. This is a fresh Government, so you would expect that. At the moment we are in the middle of a spending review, but we are very conscious as a ministerial team of the importance of crafting a vision on energy policy bearing in mind the three issues that we need to address in the trilemma which is at the heart of our policy.
In response to the question of the noble Lord, Lord Foulkes, we responded immediately in a statement. The democratic House of Commons will look at it. I am not a Member of the House of Commons, and it is a matter for the House of Commons. As I made clear, we regard this as a manifesto commitment and all noble Lords will agree that the elected House will express its will and the matter will come back to us in due course.
Lord Foulkes of Cumnock
The Minister is not naive; I have worked with him before he became a Minister and I know that he has a lot of experience and knowledge of these matters. He knows that whatever is put to the House of Commons will be put to it by the Government, and he is a member of the Government, so he must have some idea what they propose and how it will be dealt with.
Lord Bourne of Aberystwyth
My Lords, I cannot make it any clearer. It is very clear what we are proposing. It was what we proposed to this House and it is what we will be proposing to the other House, as a Government. It is then for the House of Commons to give its view as the democratic Chamber on that issue. I beg to move.
Baroness Worthington
I thank my noble friend and the noble Lord, Lord Oxburgh, for tabling the amendment and for pursuing this aspect of our discussions to this point. I am very grateful to hear from the Minister what I think will be a very effective way forward in the creation of an expert group that will report to the Secretary of State. That is a very welcome development. It seems to be the season of paying tributes, and I pay tribute to the noble Lord, Lord Oxburgh, who, not just through the passage of this Bill but for many years has been a fantastic champion of CCS and the group of technologies that falls within that. I know that he is stepping down as the chairperson of the CCSA fairly soon, but he has played a pivotal role in bringing this technology to the minds of policymakers and decision-makers. I thank and congratulate him for that.
It is right that we have a brief discussion about CCS in this debate today, because of the Redcar situation, as my noble friend pointed out, which illustrates how important it is that we get our energy and industrial strategy right. There is a risk to dragging our feet and there is an urgency involved in sorting out our policies on how we are going to not just maintain but actively attract industrial players back to the UK to reindustrialise our nation.
We are home to brilliant engineers and bright graduates, and we have a skilled workforce. We have and need the infrastructure that requires us to have a vibrant primary industry. There are ways in which we can rekindle that industry, but it will not be through trying to push back the tide of green policy, trying to deny that climate change is happening or blaming green taxation for our woes; it will be the reverse. It is like a judo role. We have to go into this subject in a positive way and not just accept that we are going to decarbonise but do so with conviction. If we do that, if we embrace the fact that of course there are engineering solutions that will allow us to continue to produce steel but without the emissions, we can go forward with a positive investment agenda, attract European money and external investment, and persuade Tata that this is the country where it should be developing the steel production plants of tomorrow, now.
We can do that, because we can act without fear of falling foul of state aid. With every rescue package we try to put together that denies the reality of climate change or seeks to bail out companies that are failing for global trade reasons, rather than anything to do with carbon pricing, we will fall foul of state aid. If, however, we embrace the fact that we need inward investment into zero-carbon and low-carbon production, Europe will be on our side. We can then draw down funds, apply our own funds, and recycle funds out of our carbon pricing policies into an inward investment programme.
We have a policy tool almost readily designed to do that, in the form of contracts for difference. As they were introduced in the Energy Act 2013, contracts for difference were designed for power investment and power projects. They can be adapted. We can create a contract for difference, strike off the carbon price and make it available to industrial investors. That would derisk the investment and give a guaranteed income to people, so that they could see for certain that they will be able to come to the UK and that at least one of the factors that controls whether or not they will be profitable will be taken care of. If we move with the agenda of Europe towards decarbonisation and take CCS seriously, that is the way out of this problem. To do anything else would simply be to stick our finger into a dyke that will burst: there is no escape from the inexorable move towards a low-carbon agenda. If we want to maintain our industrial activities and investment, we have got to have technologies that allow us to do that with low carbon—and that means CCS. It does not just mean CCS on its own; it can be combined with electrification, once we have a low-carbon power system. But CCS is going to play a huge role.
As we have discussed previously in this debate, by CCS we do not just mean one technology. It is very similar to renewables; a whole group of technologies falls under that category, some of which produce a usable product. Carbon capture and utilisation is also grouped within this. I am very much looking forward to the creation of this expert group. We could not have chosen a better chairperson for that endeavour, and I hope that I might be able to play a part in my new role as a Back-Bencher. We can explore these issues; we have an opportunity here and should grasp it. We are almost on our own in Europe in understanding how important CCS is and having a populace that supports us in that. Germany needs it but cannot deliver it. The only other countries that are close to us in terms of understanding are Holland and Norway. We can work with them to form a North Sea alliance to make this happen. There is huge potential: the UK is blessed in terms of its ability to embrace this technology. I hope that that endeavour, led by the noble Lord, Lord Oxburgh, will lead to concrete changes in policy, a new approach, with new vigour and energy, and ultimately to UK plc becoming once again the home of industrial innovation and engineering excellence that will lift people in those communities currently suffering job losses, give them hope for the future and bring all the social and economic benefits that come from that.
I shall not detain the House any longer, although I am tempted because this is one of the topics I like to talk about a lot. I wish the Minister well in the remaining stages of the Bill and in the associated regulations and legislation that will come his way. There is a lot more work to be done. Some of the topics we have touched on, including the recalibration of the capacity mechanism, are urgent and outstanding areas of work. We look forward to hearing more about the CFD allocations in the autumn. There are big challenges outside the UK that the Minister and his department will be grappling with. Paris is upon us, and I am looking forward to that being a historic move forward in the world starting to take this issue seriously and moving forward on a united front. Europe has a huge part to play in this.
My final word is that on energy policy the best way to engage with Europe is to engage positively with new ideas, take our vision to Europe and persuade it that our technology-neutral, all-of-the-above, focus-on-least-cost way is the right way to do this. We have some great tools and great examples of policies that work. We must work with Europe and persuade our colleagues that ours is the right path. We should not seek to disengage. We can benefit hugely from Europe, and it can benefit from us. I hope that that will be the basis on which we continue. For now, I say thank you and goodbye.
Lord Bourne of Aberystwyth
My Lords, I thank the noble Lord, Lord Oxburgh. As has been indicated, the noble Lord is the right person to chair this group and I have no doubt that he will do so in the very fair way that he approaches all these proceedings. The remit of the committee has been worked through with the noble Lord, and it is for him to decide who goes on to it, but I am sure it will be done on a cross-party basis. I very much hope that the noble Baroness can be a part of it, but that is entirely a matter for the noble Lord, Lord Oxburgh.
I also thank the noble Baroness, Lady Maddock, for her kind comments. I agree with my noble friend Lord Howell that a lot of money is being put into carbon capture and storage. That is because the department regards it as a top priority. We have made sure that that is reflected in the Bill. I reassure the noble Lord, Lord Young, and I am glad he has come in with words of support for the main aim of the Bill which is to maximise economic recovery in the North Sea. That remains very much the thrust of what the Wood review sought to do, and it is an important part of moving us to a low-carbon future. We cannot get there instantly and we are going to have to depend on gas. It is far better that it is British gas with British jobs and all the safety features and so on that we ensure through the North Sea. It also provides us with an historic opportunity for CCS. We have already invested £130 million in this since 2011, and we are committed to spending a lot more during this Parliament. We already have two projects—White Rose and Peterhead—moving forward. CCS is a proven technology. There are 14 plants globally and a further eight under construction.
The noble Baroness’s contribution was a typical tour de force. It is absolutely right that we have to see how we can provide incentives for the steel industry to decarbonise, but I am sure she recognises that the trilemma is never more evident than in dealing with the steel industry. I know because I have been at meetings where a lot of MPs of all parties, including the Labour Party, have been pressing us to do something about the energy price. It is a factor, but it is certainly not the only factor. The noble Baroness is right that there are many other factors in play and we have to move towards a low-carbon solution. I am sure that she understands that we have to do what we can through Europe to see how we can provide assistance, but she is right that this is not the sum total of what needs to be done. I believe that much more can be done on the procurement front. In the department, we are looking at what we can do about public procurement with the much more relaxed rules that are now adopted in Europe. I think the UK has been the first country to have its rules cleared through this new procedure.