Grand Committee
Agriculture and Horticulture Development Board (Amendment) Order 2022
(2 years, 7 months ago)
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Lord Benyon
That the Grand Committee do consider the Agriculture and Horticulture Development Board (Amendment) Order 2022.
The Parliamentary Under-Secretary of State, Department for Environment, Food and Rural Affairs (Lord Benyon) (Con)
My Lords, I declare my farming interests as set out in the register.
This instrument delivers changes for a reformed and more accountable Agriculture and Horticulture Development Board that will play an important role in supporting farmers through a time of significant transition. While it marks an end to the AHDB’s levy work in horticulture and potatoes, it also marks an important new beginning for how the AHDB engages with and delivers for other sectors, including cereals, oilseeds, beef, sheep, pork and dairy. It respects the outcome of the ballots in the horticulture and potato sectors to end the AHDB statutory levy in their sectors; it is clear from the ballots and industry feedback that the statutory levy mechanism does not meet the very diverse needs of horticulture and potato businesses and that a different approach is needed going forward.
However, we must recognise that, while the overall result of the horticulture ballot supports an end to the statutory levy—with 61% voting against it continuing—there are a diverse range of views, with some subsectors such as soft fruit, tree fruit and mushrooms voting to keep a levy. I recognise the concerns of those subsectors at losing levy investment in important research and crop protection activities that the AHDB has traditionally funded and delivered. Therefore, while this instrument respects the ballot by repealing the statutory levy provisions, it also ensures that the horticulture and potato sectors can remain in scope of the AHDB order. This means that any parts of the industry that want to continue to work with the AHDB can do so on a voluntary levy or commercial basis in future. This will also enable the AHDB to continue to deliver legacy research and plant protection services to these sectors during a transition period.
I can also assure noble Lords that the Government continue to engage proactively with the horticulture industry to develop alternative industry-led funding models, such as syndicate funding for specific crop research and voluntary levies, that will better suit the diverse needs of the sector going forward.
I also highlight that this instrument marks the beginning of a new direction for the AHDB—an AHDB that is more accountable to levy payers in other sectors, including beef, sheep, pork, dairy, cereals and oilseeds. It delivers a new duty on the AHDB giving levy payers a regular vote on sector priorities. This will ensure that levy payers have more influence over the AHDB’s sector programmes, how much levy will be raised and what it is spent on in future.
The AHDB has been working hard to deliver this already through its “Shape the Future” campaign, where levy payers have recently voted on the priorities they want to see the AHDB deliver over the coming months and years. This could be such things as the work the AHDB does to open new export markets, its consumer marketing campaigns to promote UK produce and defend the industry’s reputation, or the market intelligence it delivers to inform farmers’ decisions. This is a momentous step forward for the organisation and marks a turning point in putting levy payers right at the heart of everything it does.
I also draw your Lordships’ attention to a technical drafting point. As a consequence of removing the horticulture levy provisions, this instrument will broaden the definition of the horticulture industry in the AHDB order. The definition will now include the growing of a wider range of horticulture products by way of business. This will deliver more flexibility in future, as it will enable more businesses in the horticulture sector to work with the AHDB on a voluntary levy or commercial basis if they wish to.
To support this flexibility, this instrument also includes provisions to clarify that the AHDB can charge to cover the costs of any services it may deliver in future to any agriculture or horticulture business in scope of the AHDB order. It also ensures that, where a sector is paying a levy, any additional charges can only be made for the cost of services not already covered by the levy.
In conclusion, these legislative changes sit alongside significant governance and cultural changes which the AHDB has already put in place to deliver a more inclusive, democratic organisation that is in a stronger position to meet the needs of farmers. I hope I have assured noble Lords on the need for this instrument, which establishes a reformed AHDB that will help farmers improve their productivity, reduce carbon emissions, engage in environmental land management and access new markets at home and internationally. I beg to move.
Baroness Bakewell of Hardington Mandeville (LD)
My Lords, I thank the Minister for his introduction and for his time—and that of his officials—in providing a briefing for this afternoon’s statutory instruments. It is important that those engaged in both the horticulture and potato industries know when the levy that they pay is to be removed, in order that they can plan. I assume that the consultation carried out has provided some indication of timetables.
The levy was first implemented in 2008 under powers in the NERC Act. In January and February, the potato growers triggered a call for a ballot. Only 5% of the membership is required to call a ballot, which seems a very low threshold. In the horticultural sector, there was a 69% turnout and, as the Minister has said, of those who voted, 61% voted to abandon the levy. In the potato sector, there was a 64% turnout, with 66% voting no to continuing with the levy—overwhelming figures. As a result, the Government have abandoned the levy for future years.
However, there is still the issue of how the money accumulated in the past and in future will be spent. A five-yearly vote on how the money is spent seems a long gap between decisions on spending priorities. Are the results of the vote on spending plans monitored against sector planned priorities? Paragraph 7.6 of the Explanatory Memorandum indicates that levy payers have a say in how the levy is spent. Can the Minister say whether this happens in practice?
With the abolition of the levy, there is a fear that the research and development work of the AHDB will be restricted. However, as the Minister has said, there is an opportunity for the AHDB to charge for services provided. I could not find any reference in the EM or in the statutory instrument itself to the scale of the charges. Paragraph 12.2 of the Explanatory Memorandum states:
“The impact on the public sector is the loss of levy funding for AHDB horticulture and potato services.”
Does this mean that the AHDB will be financially unviable for these sectors, or will the charges they can impose cover the loss of the levy?
There are 10 other sectors covered by this SI within the overarching definition of the horticulture industry—from protected vegetables grown in glasshouses and indoors to trees and saplings in tree and forest nurseries. It is important that research and development continue to provide protection for all categories, especially as many diseases are airborne and difficult to control.
The current levy produces an income of £5.6 million from the potato industry and £5.7 million from horticulture. This is a large sum to be replaced by charges, which appear to be ad hoc but I hope have some rational basis. All other sectors, including pork, beef, dairy and sheep, produce an income of £70 million. At this time of uncertainty in both the EU and other trading markets, it is vital that R&D capacity is not weakened across any sector. There is ongoing consultation with sheep producers on the levy. I look forward to the results of this consultation.
I am encouraged that the Government are listening to industry growers in abolishing the levy for potatoes and horticulture, but I am concerned about the effect on R&D. I look forward to the Minister’s reassurance but generally welcome this SI as a step forward.
Baroness Jones of Whitchurch (Lab)
I thank the Minister for his introduction and for the helpful briefing beforehand. I should declare an interest through my involvement at the Rothamsted agricultural institute. The Minister will be pleased to hear that we will not oppose this SI. The issue seems to be straightforward, particularly given the democratic ballots that have taken place in the horticulture and potato sectors. However, the fact that these changes have been felt to be necessary raises some wider questions, which I hope the Minister will feel able to address.
First, can the Minister explain when Defra and the AHDB became aware that there was such disillusionment among those sectors under the previous levy regime, and why was no action taken to change the levy system at that time? It seems rather extreme, if I may say so, that the two sectors had to organise themselves to demand a ballot when, had there been ongoing consultations, there might have been a bit more sensitivity to their disillusionment. I would be grateful if the Minister could say a little more about what happened in the run-up to the two groups organising a ballot.
Can the Minister also say something more about the underlying concerns that the sectors had about the levy? Was it just about the cost, or did they feel that they were not getting value for money in a broader sense from the payments that were being made? For example, was there a problem with the quality of the research and advice that they were getting for their money? If so, are we confident that that is now being addressed? And, if that is the case, why were those concerns not addressed at the time that we first became aware of them?
Secondly, as the Minister has explained, arrangements are now being made for the other sectors covered by the levy to have regular ballots, which is to be welcomed. Is he confident that those new consultations will prevent the other sectors from triggering unilateral ballots, now that they have seen the success of the potato and horticultural action? Is he confident that those arrangements are now settled and that people are now happy with the new proposals?
In addition, the Explanatory Memorandum makes it clear that the devolved nations also considered a
“proposal to extend the scope of the Order to other agricultural industries on a UK-wide basis”.
Can the Minister explain what is happening with the devolved nations? Are they all doing the same thing at the same time now—in other words, will the AHDB equivalents in the devolved nations all have these regular ballots? Is that what the proposal is? And how does that fit with the proposals before us today?
Thirdly, and most importantly—this echoes the point made by the noble Baroness, Lady Bakewell—what will be the impact of the loss of the levy on the work of the AHDB? Is there a danger that vital research capacity will be lost, which might have a wider impact on future disease control and climate mitigation techniques, for example, as well as investment in better techniques for cultivation in the future? Are there wider implications that the Government should have a concern about rather than just greater productivity? Are we sure that that ongoing research will still be addressed when the levy is no longer here?
Paragraph 7.2 of the Explanatory Memorandum also makes mention of delivering
“legacy research and plant protection services”
on a transitional basis. That is great, but what will happen when that research comes to an end? Presumably, it was felt to be necessary in the past, so what will be the future of that research and plant protection services? Are we confident that it will still be covered? Otherwise, given the UK’s ambitions for the agriculture sector, we might find that we are losing out if we do not have the research base in the future.
Fourthly and lastly, the EM makes it clear that, as the Minister said, sectors can continue to work with the AHDB on a voluntary or a commercial basis if they wish to. Can the Minister say something more about how that cost basis will be different to the old levy structure? Is there a danger that only the larger producers will pay the levy in the future? In other words, are we in danger of having a two-tier system where the big producers have the money to invest with the AHDB but the smaller producers do not and therefore fall further behind, when we would want to make sure that smaller producers have the research capacity as well? I am just a bit worried about how that cost basis will work.
Lord Benyon (Con)
My Lords, I am grateful for the views expressed on the order. I believe we all recognise the importance of respecting the outcome of the democratic ballots to end levies in the horticulture and potato sectors and the need for the AHDB to be more accountable to levy payers in future. I will try to respond as best I can to the questions that have been put on such an informed basis—I am grateful for them.
On the point made by the noble Baronesses, Lady Bakewell and Lady Jones, I recognise the concerns at the loss of £14 million of annual levy funding for the future of horticulture research and about retaining skills and research capabilities in these sectors. However, I can assure the noble Baronesses that we are working proactively with representatives from across the horticulture and potato sectors to agree new industry-led funding models for research and crop protection activities that can meet the needs of this diverse sector more effectively than the statutory levy has done in the past. Discussions with industry on these options are ongoing, with the aim of agreeing new industry-led funding models over the coming months.
It is clear that the current one-size-fits-all levy was not meeting the diverse research and support needs of these two sectors. Therefore, it is more appropriate in future for subsectors or groups of growers to come together to formulate plans for the delivery and funding of priority research activities tailored to their specific business needs. This could be through a voluntary levy or a statutory subsector levy if industry supports that approach. As a next step, we will engage in discussions with industry-led groups and trade bodies to explore in more detail the design of industry-led funding options.
I understand the point that the noble Baroness made about five years between seeking the opinions of sectors as to whether they want to continue with the levy. However, a body with 471 employees and a turnover of many millions of pounds needs a period of stability to produce research, to do the work it does on innovation and then to take it forward with the sectors concerned so that they can then make an informed decision about whether this suits them. We considered the views very carefully but concluded that we do not currently have the details necessary to make legislative amendments to deliver a subsector levy. For example, there are detailed questions that need exploring, such as who would pay the levy, how it would be applied and calculated and whether there should be any exemptions. We are engaging in discussions with industry to explore industry-led funding options, including syndicate grower-led funding for specific research projects and the potential for a voluntary levy to fund a co-ordinated approach to crop protection activities. We also remain open to exploring new subsectors of statutory levies if there is widespread support for this from the businesses that would be eligible to pay for it.
A point was made about the consultation response saying that the public funding will not pay for research or other actions that were funded through levy investment. The inferred question was: does that mean that horticultural and potato research bodies or businesses cannot apply for funding from Defra’s future farming schemes? Research organisations and businesses in these sectors can continue to apply for existing future farming schemes in England, all of which have a policy focus, such as the farming innovation programme, for which they definitely are eligible. These schemes are subject to open competition, with applications judged on their merits. It is important that industry provides leadership in formulating new industry-led funding models that will enable cross-industry collaboration for the delivery of priority research development and other activities to support their businesses in future.
If I got her point right, I think the noble Baroness also asked what would happen if it cost the AHDB more than estimated to wind up its horticulture and potato operations and would another year of levy be charged. The AHDB has built a small contingency into the wind-up budget to cover any such eventuality, and it is tightly managing the wind-down process to ensure that it is completed within budget. We are clear that the statutory levies on the horticulture and potato sectors are ending from April 2022, and the AHDB will not seek any additional levy after 2021-22, even if additional costs or liabilities arise out of that wind-up process.
The noble Baroness, Lady Jones, asked about issues relating to Scotland and the devolved Administrations. I shall just give some background to this. The organisation employs around 470 staff. The noble Baroness made a very good point about governance, and it is governed by a main board, with several sector councils representing each of the levy-paying sectors. In response to industry feedback, the AHDB has been delivering organisational change to modernise its governance, reduce central costs and bureaucracy and increase levy payer engagement to deliver improved value for money to levy payers. That is very much part of the process that she asked about.
The AHDB embarked on a major change programme to ensure that it is an effective and efficient organisation, fit to meet evolving levy payer needs in future. However, before those changes were fully delivered, a number of dissatisfied levy payers in this sector, as I have already described, utilised the provisions in the order to trigger a ballot. As has been said, a ballot can be triggered if requests are received from at least 5% of levy payers in the sector over a rolling three-month period. The horticulture ballot closed on 10 February 2021; 69% of horticulture levy payers turned out to vote, as has been said, and 61% of those voted no to the levy continuing.
To respond to the outcome of the ballots and implement reforms resulting from the earlier request for views, the UK Government and devolved Administrations ran a public consultation between November 2021 and January 2022 to deliver an end to the horticulture and potato levies and improve the accountability of the AHDB to other levy-paying sectors in future. This SI now implements those changes. A joint UK Government and devolved Governments public consultation delivered that answer. Some 1,196 levy payers voted, which, as the noble Baroness said, is a fairly decisive number.
A question asked was why we were not implementing proposals to expand the scope of the AHDB to other agricultural sectors. Having considered the range of views on this proposal, and some of the difficulties between respondents from different countries, we have decided not to deliver this legislative change now. However, as a next step, we will take forward discussions between the UK and devolved Governments to explore in more detail the benefits and safeguards needed to provide a broader scope for the AHDB to work in practice, with a view to implementing the legislative change in future, subject to the outcome of these further discussions.
It was asked whether there will be any further Defra funding to help fill the gap left behind by the levy. It is not appropriate for public funding to replace levy-funded activity, but we are keen to work with industry leaders on their proposals for new models to fund collaborative research and development and other activities to support their businesses in future, whether through a voluntary levy, commercial arrangements or a new statutory levy where there is widespread support for that. However, research organisations and businesses in these sectors can continue to apply for existing future farming schemes, as I have already said, including the farm innovation programme and the farm investment fund, for which they are eligible. These schemes are subject to open competition.
The noble Baroness, Lady Jones, asked what will happen to the horticulture and potato research and knowledge generated from levy funds since 2008, and whether it will still be accessible. AHDB horticulture and potato work will be archived and made accessible online via the AHDB website to levy payers by the end of March 2022, to ensure that the industry can continue to benefit longer-term from its investment. She is entirely right to raise this, as all data and research must be available.
We live in a fast-moving time for agriculture. We need to introduce new innovation and measures to support different sectors, and I hope that this will provide a meaningful future for this very important organisation. I hope I have addressed the concerns raised by noble Lords and that they will approve this instrument for a reformed and accountable AHDB that will deliver value for money, supporting farmers for years to come—
Baroness Jones of Whitchurch (Lab)
I do not want to make heavy weather of this, but it seems a bit odd to me that we are effectively cancelling—or running down via a transition—the research that has been taking place without a new model to replace it. The noble Lord has explained that discussions are going on, but in my limited experience an awful lot of agricultural research has to be ongoing—you cannot just stop it and expect to pick it up two years later. They may not be researching potato blight, but things such as that happen in field trials season by season, rather than stopping and starting again. We are where we are, and I do not suppose that anything will change, but it seems odd that we have stopped one scheme without having the follow-up replacement oven-ready to be there in future.
Lord Benyon (Con)
The noble Baroness will be a much greater expert than me on scientific research and support for agriculture, but she will also know that this is across a very wide spectrum of provision—all kinds of academic organisations, government-linked bodies and organisations funded through industry. We want all different sectors to be able to access the research they need to build on the very long datasets which have been built up over the years; 2008 to 2022 is a microscopic moment in time in terms of the development of understanding and knowledge about crops and animals and how to make them more productive and how to make our systems reflect the desire for good animal welfare and environmental standards.
I am sure the noble Baroness will continue to keep the Government’s feet to the fire on this. I will be very keen to share with her and others all the different avenues we are going down to make sure that there is adequate support for these sectors in future. I cannot be more specific than that, but we live in a broad-spectrum world of innovation and we must not be narrow in our approach but accept that the answers may exist in the minds of people yet to enter into academia and research —and also those abroad. We will take her point into account and I will keep noble Lords informed. If there are no more points, I beg to move.
Import of Animals and Animal Products and Approved Countries (Amendment) Regulations 2022
(2 years, 7 months ago)
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Lord Benyon
That the Grand Committee do consider the Import of Animals and Animal Products and Approved Countries (Amendment) Regulations 2022.
Relevant document: 37th Report from the Secondary Legislation Scrutiny Committee, Session 2021-22 (special attention drawn to the instrument)
The Parliamentary Under-Secretary of State, Department for Environment, Food and Rural Affairs (Lord Benyon) (Con)
My Lords, these regulations were laid before the House on 30 March 2022. Their purpose is to protect domestic food safety and biosecurity and to support trade by bringing the process for amending country-specific import conditions for non-EU trading partners in line with those already in place for EU and European Free Trade Association states.
The instrument makes technical and operable amendments to several pieces of retained EU law relating to GB food safety and biosecurity in order to remedy operational deficiencies arising from EU exit. It does not constitute a change in policy. These amendments will enable the Secretary of State—with the consent of Scottish and Welsh Ministers—rapidly to change country-specific import conditions in response to biosecurity or food safety risks in trading partners who have already been approved by this Parliament to export animals and animal products to Great Britain.
The amendments made by this instrument are necessary for two significant reasons. First, trading partners must comply with country-specific import conditions found in retained EU law. Regular changes to these conditions are required to respond to changes in risk. Amendments to retained EU law are currently made by statutory instrument. This means that, even when a negative procedure is used and the 21-day rule is breached, there is a significant gap between the identification of risk and the legal implementation of import controls. Both trade bodies and trading partners have raised concerns about the lack of responsiveness of the current legislative mechanism. By facilitating a move towards amendment by administrative procedure, this instrument will enable changes to be made much more quickly, thereby reducing the risk of exotic disease incursions into the UK.
Secondly, the instrument will also ensure that the United Kingdom meets its international obligations and treats all trading partners equally. The current situation allows country-specific import conditions for EU and EFTA states to be managed administratively but requires legislative amendments for all other trading partners. This discrepancy leaves us at risk of challenge at the World Trade Organization. Similarly, as timely amendments to country-specific import conditions are also necessary to meet trade agreement obligations, our current inability to make rapid changes for non-EU trading partners leaves us at risk of both legal challenge and of retaliatory action against exports from Great Britain by affected trading partners. This instrument will reduce these risks by establishing a uniform approach for all trading partners. It will also help to facilitate trade and agreement on future trade deals by assuring trading partners that we are capable of applying and lifting restrictions effectively and without undue delay.
Having outlined why this instrument is necessary, I want to address the concerns that the Secondary Legislation Scrutiny Committee has raised in regard to the loss of parliamentary scrutiny for changes to import conditions. I appreciate and fully understand such concerns. However, I emphasise that this instrument has been drafted in such a way as to ensure that as much parliamentary oversight as possible is retained. Its amendments remove a specific and very limited number of import conditions from legislation. Other import information, including that relating to country and commodity approvals, is unaffected by this instrument. Crucially, the approval and/or delisting of countries and commodities will continue to require secondary legislation in the form of a statutory instrument. It will, therefore, remain subject to parliamentary scrutiny. In other words, this instrument cannot be used to approve the import of, for example, chlorinated chicken or hormone treated beef, nor to lower food safety or animal health import standards in any other way.
The powers delegated in this instrument will instead be used to apply, lift and change country-specific import conditions in response to changes in risk in approved trading partners. The instrument stipulates that all such decisions must be informed by assessments of risk, taking into account specified animal and public health criteria and other relevant matters, requirements that have been retained directly from EU law. Assessments will be carried out or co-ordinated by veterinary experts in Defra and will be subject to approval from the animal disease policy group—a senior government body that brings together experts from across government. Furthermore, the legal implementation of any changes by the Defra Secretary of State will be, as it is now, subject to agreement by the Welsh and Scottish Governments, thereby providing a further layer of scrutiny.
To conclude, I state that the instrument covers England, Scotland and Wales, and that the devolved Administrations in Scotland and Wales have both formally consented to it. I beg to move.
Lord Trees (CB)
I very much thank the Minister for his explanation of this SI and thank his team for the helpful Explanatory Memorandum, which, I must admit, I particularly appreciated—I have to say that the instrument itself is hardly riveting bedside reading. I also noted the report of the Secondary Legislation Scrutiny Committee.
I need hardly tell this audience that the risks to the biosecurity of the UK animal population are ever present; we are in the midst of a huge avian influenza epidemic at the moment. That infection is particularly difficult to control because migrating birds and in particular wildfowl bring it to the UK. However, pigs do not fly, and what would be more serious would be an incursion of, for example, African swine fever. In recent years that has devastated the pig population of China, has been spreading westwards in continental Europe slowly but irrevocably and has in fact reached Belgium. Apart from causing serious disease in domestic pigs, it infects wild boar; when there is a wild animal host, it makes the eradication of such an infection doubly difficult. Worse still, of course, is foot and mouth disease, which we suffered from greatly in 2001, and I regret to say that our ability to deal with such major livestock outbreaks since 2001 has been seriously eroded by the shortage of veterinarians we now have, particularly those with livestock experience. For these reasons, it is extremely important that we maintain high levels of biosecurity, and regulation and inspection of imported animals and animal products is a key and important tool to maintain that biosecurity.
I therefore strongly support the principal objectives of this SI, which will enable, following expert advice from the animal disease policy group, a rapid administrative response to threats to animal and indeed public health by restricting imports from third countries instead of what could have been a dangerously delayed legislative process. It is relevant to note, as the Minister emphasised, that these changes simply bring into effect a process for third-country importations which will align with the current processes for imports from EU and EFTA countries.
However, as context to this particular instrument, it is a matter of great concern that, for the fourth time, recently the Government have delayed the implementation, for example, of checks on food imports from the EU to Great Britain. The failure to introduce such checks, apart from disadvantaging commercially our own farmers, may provide a short-term financial gain but risks a long-term extremely serious financial pain—remember that the 2001 foot and mouth outbreak cost the UK an estimated £8 billion in 2001.
With regard to this particular SI, my one concern, on which I seek reassurance from the Minister, is that I note that, as well as providing the administrative power to enhance our biosecurity in the face of assessed threats, it also provides for the reverse: the converse administrative mechanism to reduce inspection controls or remove or lift restrictions without parliamentary scrutiny. Will the Minister assure us that this instrument will not be a vehicle to enable the calls by some members of Her Majesty’s Government to unduly delay, reduce or in some way compromise important checks in future and potentially risk our animal health biosecurity?
Baroness Bakewell of Hardington Mandeville (LD)
My Lords, I thank the Minister for his introduction. The Secondary Legislation Scrutiny Committee debated this SI and asked several questions of Defra, which were raised by Friends of the Earth. I understand that, as a result of the avian flu outbreaks in 2020 and 2021 in Ukraine, a ban on the imports of birds covered the whole of that country, whereas the outbreaks were, in reality, confined to certain areas. Therefore, it seems sensible to restrict the import of affected animals and animal products to those specific areas, rather than the whole country. However, this could have consequences.
The noble Lord, Lord Trees, has eloquently referred to numerous animal diseases that could affect our domestic flocks and herds. Surveillance and vaccination are essential to provide protection. Might it be possible for an area of a third country to have an outbreak but not declare it in order to be able to continue to trade? Can the Minister say whether that might be likely to happen?
The Secondary Legislation Scrutiny Committee was assured by Defra that the power in the SI would be used very rarely and only in extreme and emergency cases. However, there is already legislation in place to enable emergency action to be taken where needed. Therefore, is it necessary to introduce new, stringent legislation, which is not scrutinised by Parliament? Parliament is being cut out of the process, and the decision rests solely with the Secretary of State, after consideration with the devolved Administrations.
The Explanatory Memorandum states, at paragraph 11, that guidance for trading partners and border control posts will be issued
“prior to the instrument coming into force.”
If I understand the process correctly, we debate this SI today, and probably tomorrow or Thursday the SI will be approved in the Chamber and will come into force immediately. This SI could have a devastating effect on our farmers and markets if disease outbreaks are not dealt with effectively and efficiently. Can the Minister say where the all-important guidance is currently in the legislative sausage machine, and when it will be published? Time is of the essence.
Paragraph 6.3 of the Explanatory Memorandum refers to allowing restrictions to be imposed immediately when a disease outbreak is notified, and states that restrictions can be removed quickly where risks are diminished. Can the Secretary of State be sure that the risk is diminished? Instead of rushing to release an area from risk, would not it be better to wait and be sure that it is completely disease free?
The new powers are primarily to be used for imposing import restrictions, lifting import restrictions and imposing and amending additional conditions that need to be met for trade to continue. All this rests with the Secretary of State at his or her discretion, with no reference to parliamentary scrutiny.
The animal disease policy group will recommend whether new countries can be added to the third-country list and make recommendations to the Secretary of State. Can the Minister reassure us that the processes and safeguards carried out by the animal disease policy group are sufficient to ensure the UK’s biodiversity? Will the Secretary of State use the same criteria in each case? I would like clarity on just what discretion the Secretary of State has. Is it likely that a country the Government are keen to admit to the list of third countries and begin trading with might not get the same rigorous assessment as others? Are some likely to get special treatment?
It is extremely worrying that Parliament is being bypassed on an issue which would be of considerable concern to the public if they were aware of it. I look forward to the Minister’s reassurance on this subject that all angles have been covered.
Lord Teverson (LD)
I apologise to my noble friend for speaking after her, but I used to chair—until it was abolished—the EU Environment Sub-Committee, of which the noble Lord, Lord Trees, was an excellent member. One of the things we were really concerned about was that, when we moved out of the EU, we no longer had access to TRACES, which, as the Minister will know, is the main system for controlling biological security in animal and food products. Exactly as the noble Lord pointed out, we have put off these import controls I think three times. Can the Minister clarify how we are substituting the information we had from TRACES and how that now works? Are the Government satisfied with it, and where will we go with it in future while we wait for those biosecurity controls to come in in respect of the EU?
Baroness Jones of Whitchurch (Lab)
My Lords, I thank the Minister for his introduction and for the helpful briefing he organised beforehand. I begin by very much echoing the concerns raised by the noble Lord, Lord Trees, about the Government once again delaying checks on food imports from the EU, and the biosecurity and consumer protection implications of all that. I also very much welcome the intervention of the noble Lord, Lord Teverson, on TRACES; we have discussed the issue many times and were always assured that there would be alternatives for TRACES in place, so it would be useful to hear from the Minister whether that is now the case or not.
I thank the Secondary Legislation Scrutiny Committee for drawing these proposals to the attention of the Committee and their implications for the loss of parliamentary oversight. The Explanatory Memorandum has set out the changes made by previous EU exit SIs and provides an explanation as to why these provisions are not considered sufficient to deal with urgent cases. We are acutely aware of the ongoing and changing threats to our animal and plant biosecurity, as well as to human health, and the need to have robust measures in place to act swiftly when new threats arise, as the noble Lord, Lord Trees, said. As such, we are sympathetic to the case being made and do not intend to vote against these regulations.
However, the Secondary Legislation Scrutiny Committee has quite rightly pointed out that, once again, we face the loss of parliamentary oversight on the imposition of these urgent measures. It specifically proposes that the Minister be asked to give an assurance that the regulations will be used only on the rarest of occasions, so I ask on its behalf: can the Minister give an assurance that the powers will be used only on the rarest of occasions?
Following on from this, I have some detailed points which I would like the Minister to answer. First, if our response times because of parliamentary delays have led us to be vulnerable to biosecurity and food safety risks, why has it taken Defra until May 2022 to address this concern? What has been happening in the meantime? Have we left traders and consumers exposed to extra risk because of our inaction? I would be grateful if the Minister could explain why nothing has been done before now.
Secondly, in correspondence with the Secondary Legislation Scrutiny Committee about the capacity of the animal disease policy group, Defra responded:
“The expertise, capacity and processes required to exercise the powers in this instrument appropriately are well established within government, and have already been used to effectively control a range of SPS … risks since January 2021.”
If we already have the means to control these risks effectively, does that not rather undermine the need to give the Executive these extra powers? Could the Minister give some examples of the effectiveness of the current control regime to provide some context to this debate? What are the effective control measures? Where were they lacking? Why do we need to give Ministers extra powers? Friends of the Earth has also written in, asking about the independence of the bodies making these decisions. It would be helpful if the Minister could shed some further light on the independence of the bodies carrying out these risk assessments and making recommendations to Ministers.
Thirdly, the correspondence from Defra makes it clear that the new powers will be used to impose import restrictions not just where there was a new biosecurity risk but also to lift existing import restrictions if, for example, a country had successfully controlled an animal disease outbreak. This point was raised by the noble Baroness, Lady Bakewell. Can the Minister explain why existing parliamentary oversight cannot be maintained for the lifting of import restrictions? This does not seem to be as urgent as when a new biosecurity threat emerges—where action may be needed in days or, at most, weeks. There would very much seem a role for Parliament in overseeing the lifting of import restrictions and in making sure that the country of import had taken all the necessary action.
Finally, paragraph 7.5 of the Explanatory Memorandum outlines some of the risks of delayed action. It talks about the threat of retaliatory action against exports from Great Britain. It also mentions the threat of intervention by the WTO. The Minister referred to this in his introduction. Can he expand on this concern? I am struggling to understand what these threats are. Can he give a scenario as to how serious this risk of WTO intervention is? From what he said about retaliatory action, are we developing a reputation for responding slowly to biosecurity risks? Is this a real concern about which we should be aware? I am just trying to understand what our competitor or trading nations feel our biosecurity level is and what the threat of retaliatory action is. It would be helpful if the Minister could shed some light on this. I look forward to his response.
Lord Benyon (Con)
My Lords, I am grateful to noble Lords for their interest in this issue and for their contributions. I will open by reiterating that the amendments in this instrument do not constitute a change in policy. The instrument seeks to establish a process through which we are able rapidly to implement country-specific import controls where significant risks to animal and public health have been identified from non-EU trading partners which are approved to import live animals and animal products into Great Britain, ensuring a consistency of approach across EU, EFTA and non-EU trading partners. The instrument cannot be used to approve or delist countries and commodities, nor to lower import standards in any way.
Furthermore, while I appreciate that the shift to an administrative procedure raises sensitive issues about parliamentary oversight, I have outlined why I believe that it succeeds in striking a balance between the requirement for appropriate scrutiny and the need for effective biosecurity and safety controls. It is also worth noting that noble Lords and Members of Parliament in the other place will, of course, continue to be able to hold me, other Defra Ministers and the department to account, through all the usual means, for the ways in which the powers in this instrument have been exercised.
Let me just for a second address some of the points on an apparent loss of parliamentary scrutiny. Of course, when we were in the EU, these matters were decided by tertiary legislation, so they were effectively agreed with people such as national Governments’ Chief Veterinary Officers and other officials, then at an official level within the Commission it was decided, and none of us within the two Houses would really have much say after that, unless something went badly wrong. What has happened since is that it has become a secondary legislation matter.
Noble Lords are right to ask why, and why now. I can give a scenario, which was touched on by the noble Baroness, Lady Bakewell. When we wanted to relist Ukraine last year, when an avian influenza outbreak had diminished, it took two months to get it through the necessary processes here. That is an impairment to free trade—and that addresses some of the points of concern to international organisations. It is right to say that what we are seeking here is more ability for executive action. There are still a lot of ways, within and without the statutory instrument, to hold Ministers to account for the decisions that the department takes. But we are a long way more responsive to noble Lords than we were able to be in the European Parliament.
Let me just address people’s concerns about border controls. This instrument cannot be used to remove border controls for any country, either in the EU or outside it. So it is really important that we are confident that we have the capacity and capability to undertake assurance functions previously carried out at EU level. The department has put the resources in place and drawn on additional expertise in its agencies and across government, in particular the Food Standards Agency.
I shall endeavour to answer other points that have been raised. The noble Lord, Lord Trees, wanted clear assurances that, if the Secretary of State is given the power to lift import restrictions via an administrative procedure, it will be done in a way that does not endanger biosecurity and food safety. That is an entirely valid point to make. Defra will not lift restrictions on imports of animals and animal products unless it is confident that it is safe to do so. We are committed not only to maintaining our high import standards but to continually improve on the processes in place to protect UK biosecurity and food safety. The UK Chief Veterinary Officer leads this work, following the repatriation of functions from the EU agency, DG SANTE F, in January 2021. To deliver this, Defra’s team of veterinary and technical experts oversee a detailed assessment and audit programme to ensure that any decision to change UK import authorisations are risk and science based. This includes: surveillance of emerging overseas disease and food safety risk; ongoing monitoring of trading partners’ regulatory regimes; and assessing non- compliance at GB border control posts. Where concerns are identified, we are able to undertake an emergency in-country inspection to verify that those imports are safe.
The noble Lord was entirely right to raise the impending risk of African swine fever. I chair a monthly biosecurity meeting, and I am brought up to date on a more regular basis on the progress across Europe of diseases like that, which are alarming. The noble Lord is right to say that it is running rife in some countries in their wild boar populations, and we are very careful about that. We recently exercised how we would cope with an outbreak of African swine fever. The whole purpose of what we do is, first, to prevent the disease coming here but, secondly, to be able to deal with it, contain it and ensure that it does not go through our domestic farm pig industry, which would be a very serious situation.
I hope I have also answered the point that the noble Baroness, Lady Bakewell, made about, if you like, a fraudulent regime that might seek to suppress information. Of course, that happened, or could have happened, under the regime which we are asking the House to approve we move away from. It happened when we were in the EU and it can be prevented only by good intelligence and good security, by working with our posts abroad and by continuing to work with our EU neighbours, making sure that the professional contacts at Chief Veterinary Officer level and other biosecurity official levels are maintained.
Baroness Jones of Whitchurch (Lab)
I am not sure if the noble Lord, Lord Teverson, wants to intervene, but I would like a bit more clarification. Is the alternative to TRACES up and running or not? The Minister talks about it still being developed—is it there? Is it functioning?
Lord Teverson (LD)
I thank the noble Baroness for intervening. It sounded rather like work in progress to the extreme; I thought we would be rather further ahead than that.
Lord Benyon (Con)
It will always be a work in progress, because we are developing new intelligence and data on what is going on. We have a formal system with the EU in our relationship as a third country and with other countries outside. As the noble Lord knows, we are no longer part of the TRACES scheme, but we have access to the information we need to keep us safe.
With this statutory instrument, traders will continue to move their goods from the EU to Great Britain as they do now. Since 1 January last year, the UK has put in place strict biosecurity controls on the highest-risk imports of animals, animal products, plants and plant products from the EU. These controls will remain in place and we will still be able to respond to changes in biosecurity risk. If there is a delay to our rolling out of border control posts, there is no saving, as I think was hinted by someone. We have recruited people and are using them in an intelligent way to make sure that we are controlling the interim and will then build up the capacity of border control posts over the next 18 months to be fully functioning.
We are also able to use safeguarding measures to protect our biosecurity where we have particular concerns and evidence about pest or disease risk. Given that we have close alignment with and strong knowledge of the EU rules, we continue to have a high degree of confidence in biosecurity associated with those imports. We will have powers to check and seize non-compliant products and deal with any pest or disease risk identified.
I have spoken already about the animal disease policy group. I hope that has reassured noble Lords.
The noble Baroness, Lady Jones, asked whether measures like those in this instrument, which will remove parliamentary oversight by conferring additional powers on the Secretary of State, will be used only on the rarest of occasions. It is a very good question, and I hope I can reassure her. I am aware that the Secondary Legislation Scrutiny Committee stated in its report that noble Lords may wish to obtain assurance from me that instruments such as this, which remove parliamentary scrutiny, will be introduced only on the rarest of occasions. This is a valid concern that I am more than happy to address. Noble Lords can rest assured that instruments such as this will be laid only in instances where they are absolutely necessary, as I hope they know.
In this case, as I outlined in my opening remarks, the shift from a legislative to an administrative procedure is vital to ensure that we can respond quickly and effectively to changes in risk in approved trading partners, thereby protecting animal and public health and supporting trade. The powers granted in this instrument will not, however, be used “on the rarest of occasions”. Indeed, it is precisely because regular changes need to be made to import conditions—lifting or imposing restrictions in response to constantly evolving levels of risk in approved trading partners—that the shift to an administrative process is so vital.
I am seeking inspiration on other questions that have been raised. The noble Baroness also raised points from Friends of the Earth in its submission on this. In our response, we made it clear that the expertise, capacity and processes required to exercise the powers in this instrument appropriately are well established within government and have already been used effectively to control a range of import risks since January 2022.
While the required risk-based and evidence-led decision-making processes are in place, there is currently no quick and effective mechanism for such decisions to be implemented in law for non-EU trading partners. In other words, we currently have the ability to arrive at informed decisions, based on appropriate assessments of risk, but we lack the ability to implement them quickly in law. This instrument is therefore needed to establish a process for ensuring that decisions can be rapidly implemented in law to protect biosecurity and the safety of this country.
The final point that the noble Baroness raised was why this has taken so long. We left the European Union at the end of 2019; why are we doing this now? We have been aware of the deficiencies in retained EU law and how, in practice, these deficiencies prevent us from amending country-specific import conditions sufficiently quickly. While recognising these deficiencies, Defra took the view that correcting them was not essential on day 1 of EU exit. As other pieces of legislation have been prioritised, including that which enables import conditions for EU and EFTA states to be managed administratively, it has not been possible to draft and present this instrument until now. The matter was brought forward by the case relating to Ukraine, which I quoted, which showed the necessity for this instrument. I hope that I have addressed the concerns of noble Lords. I beg to move.
Motion agreed.
Contracts for Difference (Miscellaneous Amendments) Regulations 2022
(2 years, 7 months ago)
Grand CommitteeRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Lord Callanan
That the Grand Committee do consider the Contracts for Difference (Miscellaneous Amendments) Regulations 2022.
Relevant document: 37th Report from the Secondary Legislation Scrutiny Committee, Session 2021–22
The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Callanan) (Con)
My Lords, these regulations were laid before the House on 31 March 2022.
The recent British Energy Security Strategy spoke of ensuring a new lease of life for the North Sea in low-carbon technologies such as carbon capture. The Net Zero Strategy set out the Government’s ambition to have a carbon capture and storage sector with an operational capability of capturing 20 megatonnes to 30 megatonnes of carbon dioxide per year by 2030. In its Sixth Carbon Budget, the Climate Change Committee re-emphasises the crucial role that carbon capture and storage—CCS—will play in reducing emissions from industrial processes, combustion, electricity generation and hydrogen production. The energy White Paper 2020, set out the Government’s view of how to achieve a low-cost, low-carbon electricity system.
While we cannot predict today exactly what the generating mix will look like in 2050, we can be confident that renewables will play a key role. However, in order to decarbonise while maintaining security of supply and keeping costs low, we will need to balance renewable variability against demand. To do this, we will need system flexibility, energy storage, and non-weather dependent low-carbon generation. We consider that thermal power with carbon capture and storage is one technology that can provide this at scale. In the subsequent Net Zero Strategy, the Government committed to using consumer subsidies to support construction of at least one power CCS plant to be operational by the mid-2020s.
In the round, these strategies illustrate the critical importance of carbon capture and storage technologies. To enable this, we have developed the dispatchable power agreement. This is a carbon capture and storage subsidy for gas-fired projects connected to a full carbon capture and storage system that are intended to provide low-carbon flexible power generation. The dispatchable power agreement contract is a bespoke contract based on the standard terms of the contracts for difference used in the allocation rounds; it has been amended in consideration of specific amendments to ensure suitability for power carbon capture and storage. The dispatchable power agreement will be a key tool used to encourage low-carbon electricity generation by bringing forward investment in power carbon capture and storage plants and to incentivise such facilities to operate in a manner which benefits the UK energy market. It is commonly referred to as a business model and is intended to implement this commitment.
The regulations were laid before the House on 31 March. The amendments in this instrument are needed to ensure that existing regulations under the Energy Act 2013 can be used to award dispatchable power agreements. These regulations are used to award contracts for difference currently. The proposed amendments are not intended to impact the standard contract for difference for the current allocation round or future allocation processes of the standard contract for difference.
This statutory instrument introduces three changes to the existing regulations, which are: the Contracts for Difference (Allocation) Regulations 2014, which we shall refer to, for the purposes of ease, as the “allocation regulations”; and the Contracts for Difference (Definition of Eligible Generator) Regulations 2014, which we shall refer to, for the purposes of ease, as the “eligible generator regulations”.
This statutory instrument, first, amends the eligible generator regulations, specifically the definition of an eligible generator. Currently, generating stations connected to a complete carbon capture storage system are eligible generators. The change allows for retrofitted carbon capture storage projects to constitute an eligible generator. It does this by widening the criteria for carrying out a generating activity to include altering an existing generating station into a generating station connected to a complete carbon capture storage system. By making this change, retrofitted power carbon capture storage plants can be eligible for the dispatchable power agreement.
This statutory instrument, secondly, amends the allocation regulations. Currently, the allocation regulations include a specific reference to contracts granted pursuant to Section 10 of the Energy Act 2013. The regulations refer to such contracts and suggest that they will include a “strike price” and “reference price” within their payment mechanism. The amendment retains the references to a strike price and a reference price, but by amending the language to state that a strike price and reference price “may be included”. An alternative payment mechanism which does not use these terms could also be used. This ensures that contracts which do not specify a strike price and a reference price can therefore be contemplated. This means there will not be a requirement for these specific terms to be used in a dispatchable power agreement and the alternative payment mechanism can be used, which will allow for the alternative payment mechanism under the dispatchable power agreement. Further details of this payment mechanism have been set out in the recent dispatchable power agreement publication.
The third change that this statutory instrument makes is to amend the eligible generator regulations. Currently, an eligible generator is defined as connected to a “complete CCS system”, which means
“a system of plant and facilities for … (a) capturing some or all of the carbon dioxide (or any substance consisting primarily of carbon dioxide) that is produced by, or in connection with, the generation of electricity by a generating station; … (b) transporting the carbon dioxide (or substance) captured; and … (c) disposing of it by way of permanent storage”.
The amendment proposes to add into sub-paragraph (b), after “transporting”, the words
“including by way of non-pipeline transport methods”,
to contemplate potential alternative transport methods. The consultation responses noted that it would be helpful to clarify that transport could be carried out by way of non-pipeline method. The proposed amendments in this statutory instrument intend to facilitate non-pipeline transport generally in the regulations, as has been set out. The proposed changes to the eligible generator regulations aim to be neutral regarding the different possible configurations of non-pipeline transport and will not exclude any particular form of non-pipeline transport.
In accordance with the Energy Act 2013, a consultation was carried out from July to September 2021, and the response was provided by the Government in March of this year on GOV.UK. We received 16 responses to the consultation from businesses and organisations, some directly involved in power CCS, and from trade associations, non-governmental organisations and other interested parties. The responses were largely positive in favour of the proposed changes but respondents requested some clarifications, which we have responded to in the published government response. These proposals will enable the award of the dispatchable power agreement, but they do not create any new commitment to offer support.
In conclusion, the measures introduced by the SI are aligned with the Government’s carbon budget and net-zero targets and help to enable power carbon capture and storage projects. I commend these regulations to the Committee, and I beg to move.
Baroness McIntosh of Pickering (Con)
My Lords, I thank my noble friend and congratulate him on presenting the regulations to us this afternoon. He will be aware that there were great hopes, particularly off the Yorkshire and Humber coast, that facilities had been identified which would be appropriate for exactly the type of venture that is set out in the regulations before us today. So I welcome the regulations, but is my noble friend able to confirm that he believes that the take-up on the proposals for carbon capture and storage will increase and multiply because of the content of the regulations before us this afternoon?
Separately—he might think I am going off-piste here, and I probably am—can my noble friend explain something? If I understood it correctly, one of the difficulties we have with wholesale gas prices impacting the UK as they have—though perhaps not as badly as in other European countries, which rely heavily on Russia—is that we have gas storage of only 60 days, which is about two months. That strikes me as being terribly low. I do not suppose that that would benefit from these proposals, but I would like to understand why, historically, we seem to have a lower storage capacity than other European countries. Is that something that the Government might be minded to look at that?
The only other point I wish to make, which I am sure my noble friend is very familiar with, is the point raised in the 37th report of the Secondary Legislation Scrutiny Committee, which I find myself in some sympathy with. Even though I am a lawyer by training and spent about nine months of my training going through all the scientific evidence—produced mostly by scientists rather than lawyers—on whether fluoride was a carcinogen, I find that even these small regulations before us this afternoon are full of jargon. There is a request in paragraphs 22 and 23 of the 37th report that the Explanatory Memorandum perhaps be revised to enable us humble Members of the House to understand better its contents. Can my noble friend simply confirm that that is the case? If that could happen in advance next time so that, when we see the Explanatory Memorandum we are better able to follow it, it would be very welcome indeed.
I thank my noble friend and his department for all they are doing at this particularly difficult time, and I give a warm welcome to the regulations this afternoon.
Lord Teverson (LD)
My Lords, in fact we should congratulate the Minister, because the officials have rewritten the Explanatory Memorandum. There are two versions of it on the website, and one of them explains all the acronyms in a footnote. Strangely enough, I knew all the ones they listed, but I was unclear about a couple in the rest of the report. It is not there—it is on the website.
First, although the Climate Change Committee and the Government are right that carbon capture and storage technology is needed, exactly as the Minister said, we also need a slightly cautionary note about it. In a way, certainly in terms of power generation, it is a far less efficient way of producing power; it takes energy to produce it, as we are all aware. An opportunity to produce power without CCS is obviously better, although I entirely understand that industrial processes are different.
The other thing I am always cautious about—I know that most of the basis is putting it back under the sea or wherever—is the element of putting pollution back under the carpet to a degree. I am not saying that it is unsafe or anything, but it is always better if we can avoid that.
On the propositions here, having read the Explanatory Memorandum, I understand that the fact that this can include retrofitted power stations is unclear. Clearly, it is much better in all sorts of ways to have retrofitted ones than have to build new ones, although I suspect whether that is economically possible or right depends on whether the particular gas facility—I presume it would be gas; I suppose it could technically be coal—has been future-proofed in terms of utilisation. That is good.
What really concerns me is that the SI says you do not have to use a pipeline. The amount of carbon dioxide coming out of a power generation station of any size will be quite substantial; the thought of trucks in urban areas moving carbon dioxide, maybe over many miles, across the surface outside a pipeline seems quite a challenge in terms of noise, congestion and carbon footprint—depending on how that transport works. I would be very interested to understand the logic behind that from the Minister. As I understand it, this will primarily be in clusters, which it seems to me will always need to be pipeline-based to get the carbon dioxide out to a storage facility, whether it is undersea or wherever. I would be very interested in the Government’s view of why this is necessary, what they expect and whether there will be any limits on how this transportation takes place. Clearly, pipelines must be absolutely right for this rather than some sort of other surface transport.
The SI also goes through the payment mechanisms. I am interested in the Explanatory Memorandum here, particularly on the availability payment. Paragraph 7.13 says that this is a payment for availability to dispatch electricity, and performance. I thought we had a thing called the capacity market to do that. Why do we need this? Does it not compete with the capacity market? I do not understand what the difference is or why we are inventing another load of systems for this. On the variable payment, again, would a strike price not work better? I understand that those options are still available, despite these amendments.
Then we come to the merit order, which says “We will compensate the price to make sure that we have non-carbon intensive gas stations producing electricity ahead of conventional ones”, which is clearly absolutely right for decarbonisation, but it has a cost. The economic analysis in the paper says there is no cost to the private sector, which I guess is right, but I would like to understand what the size of the cost to the taxpayer of all this is expected to be.
Lastly, I would be interested in the government estimate of the extra cost of producing CCS electricity through a gas station compared to conventional generation. The department must have done this to work out roughly what the public expenditure requirements might be.
Lord McNicol of West Kilbride (Lab)
My Lords, although it is a little tangential, I declare my interest as set out in the register as a commissioner on the UK Hydrogen Policy Commission, which is within the same field though not directly relevant to this SI.
First, as other noble Lords have done, I thank the Minister for his explanation of the regulations before the Committee. As we have heard, they make a few minor but important amendments to two previous sets of regulations—the eligible generator regulations and the allocation regulations. Before I dive into those, I reiterate our support for the continuation of contracts for difference as a method of securing energy capacity while ensuring that developers, government and customers can be confident in the security of long-term, high-cost and high-investment projects.
Regulation 2 in the draft regulations ensures that non-pipeline transport methods are included within the definition of complete CCS systems. My reading of the 2014 eligible generator regulations, and that of many who responded to the consultation, certainly did not appear to exclude this system. I am not convinced how necessary it is. I agree that non-pipeline transport of carbon dioxide is essential to decarbonised projects outside the clusters. As the noble Lord, Lord Teverson, said, we would hope that transport around and inside the clusters would be by pipeline.
The noble Lord, Lord Teverson, presumed that this would be on trucks. My presumption was that it would be on rails. Again, it would be interesting if the Minister had any information from the department about how non-pipeline transport would take place, as there is an environmental difference between rail and road transport.
Regulation 2 also widens the criteria for carrying out generating activity to include alterations of existing generation stations to connect them to a CCS system. As other noble Lords have said, this makes perfect sense. I agree that it is an important step to help retrofit a station to give access to the benefits of contracts for difference.
That change is appropriately repeated, in Regulation 3, for the allocation regulations, but the main thrust of Regulation 3 is to allow contemplation of contracts that do not specify a strike price and reference price, in line with the new payment method under the DPA business model. Instead, the DPA business model will implement an availability payment for low-carbon generation capacity and a variable payment, which links the new power CCS plants—again, there is a long time lead-in here, since we are hoping they will be in operation by 2030, so perhaps the Minister can confirm the dates for the completion of the CCS plants—with an unabated reference plant. This is said to incentivise availability and enable more flexible operation. Of course, it is right to ensure that the regulations are updated correctly, to allow for these new developments to take place, but perhaps the Minister could elaborate somewhat on how these changes will incentivise availability and when we can expect to reap the benefits from the new power CCS plants.
The noble Baroness, Lady McIntosh, has already picked up on—and I am sure that the Minister has read with excitement—the Secondary Legislation Scrutiny Committee’s 37th report. In paragraphs 21 to 23, as has been stated, the committee was critical. To be fair, all our interventions have been quite detailed. In the produced documentation, I have been able to understand clearly that it is of importance. We have already had from the department an Explanatory Memorandum on that. I hope that, before all future debates, these points raised on page 9 of the committee’s report will be taken into consideration.
Lord Callanan (Con)
First, I thank my noble friend Lady McIntosh, and the noble Lords, Lord Teverson and Lord McNicol, for their constructive points and comments. Let me start by emphasising that the changes contained in these regulations are essential to enable the award of power carbon capture and storage contracts. The Government are committed to reaching net zero and, of course, to decarbonising our electricity system. All noble Lords will be aware that the Climate Change Committee has described CCS as a necessity and not an option to help us on the road and transition to net zero. Therefore, CCUS will be essential to meeting the UK’s 2050 net-zero target—I think that all three speakers agreed with that point.
Decarbonising the power sector has so far led the UK’s efforts to reduce greenhouse gas emissions. Thirty years ago, fossil fuels provided nearly 80% of the UK’s electricity supply. In 1990, electricity generation accounted for about 25% of total UK emissions, but by 2018 that was down to only 15% of total UK emissions. Today, I am pleased to say that the country gets over half of its power from low-carbon technologies, and the majority of those are renewable.
We can be confident that renewables will continue to play a key and increasing role in our generation mix on the overall journey to net zero, to decarbonise while maintaining security of supply, and keeping costs low. But for when the wind is not blowing and when the sun is not shining—something that applies particularly to the homeland of the noble Lord, Lord McNicol—we will need to balance renewable variable against demand. To do that, of course, we need system flexibility and energy storage, and we need non-weather dependent low-carbon power generation. That is why we consider that thermal power with carbon capture and storage is one technology that can provide that at scale. Therefore, carbon capture storage technologies will be important for the trajectory to achieving our 2050 net-zero target, and they will play a vital role in levelling up the economy, supporting the low-carbon economic transformation in our industrial regions and helping to create new high-value jobs.
On the specific points that were raised, starting with my noble friend Lady McIntosh, I am pleased to say that these regulations will indeed facilitate the rollout of the Government’s CCUS programme but of course will not bring projects forward in themselves. However, I am pleased to say that we have also seen significant interest in the programme, particularly from the east-coast cluster that my noble friend mentioned. We will seek to bring forward at least one power CCUS plant in the mid-2020s. This will be achieved through the CCUS cluster sequencing process and is subject to the outcome of that process, including, as always, value for money and affordability considerations. I am sure that my noble friend would agree with that.
Around half of our demand for gas is met through domestic supplies, but in meeting net zero by 2050 we may still use a quarter of the gas that we use now. So, to help to reduce our reliance on fossil fuels, we have to fully utilise the great North Sea reserve: we have to use the empty caverns that we have created for CO2 storage, and we must bring through hydrogen to use as an alternative to natural gas and help to use our offshore expertise to support our offshore wind sector. As a result of those plans, the North Sea will still be a foundation of our energy security, but of course we will have reduced our gas consumption by over 40% by 2030.
As clarified by the noble Lord, Lord Teverson, who was doing my job for me, the Explanatory Memorandum was revised on 5 May with in-depth footnotes to explain the acronyms and technical terms. I apologise if it was not clear; obviously, it is a complicated subject.
On the points made by the noble Lord, Lord Teverson, we consider that the capacity for T&S networks to be able to accept CO2 from dispersed sites and from international sources, transported by ship, road or rail—which would be non-pipeline transportation—may be important for our long-term objectives of achieving our carbon budgets and net zero, so we do not want to exclude power CCS projects that can transport and store CO2 by non-pipeline transport. We will need significant volumes of new-build, low-carbon capacity to meet growing electricity demand and to take the place of retiring capacity. To complement expanding intermittent renewables, it is important that some of this capacity is flexible and can operate for extended periods when renewable output is lower.
Our existing gas generation capacity is ageing. Most of it was built in the 1990s, during the so-called dash for gas. Advances in gas turbine technology mean that a purpose-built, modern, new-build gas-fired power station with CCUS would be more efficient than an older design retrofitted with CCUS technology. However, utilising existing assets can of course improve value for money in some cases, and to decarbonise our electricity system in line with the targets of the fifth and sixth carbon budgets, we consider that we will have to use existing generation as well as new-build capacity, both of which of course would need to be abated.
On the capacity market, CCUS requires more support for capacity given the co-ordination problem with infrastructure yet to be built, and the DPA incentivises investment to bring forward low-carbon generation capacity. The availability payment also acts as a way to incentivise those power CCUS projects and helps to maintain high capture rates throughout the DPA. I will come back to the noble Lord in writing on his question regarding the “payback” from CfDs for departments, but I think the answer will revolve around the fact that the money goes into Ofgem and is therefore used to offset other CfD payments. I certainly do not think that any of it appears either in the BEIS or Treasury budgets, but I will come back to the noble Lord and confirm the details of that.
On the points raised by the noble Lord, Lord McNicol, we wanted to ensure that non-pipeline transport was explicitly and unambiguously included in these regulations, and there is certainly no presumption in favour of road transport. Indeed, rail or shipping may also be covered and are probably more likely forms of transport. To take one pertinent example, at the moment Norway is currently shipping CO2. I hope that clarifies the point for the noble Lord.
To close, I underline once more that these regulations are a vital part of the UK’s efforts to reach net zero and to decarbonise our electricity system. With that, I commend these draft regulations to the Committee.