Oral Answers to Questions

Alan Whitehead Excerpts

Tuesday 13th December 2016 Commons Chamber

[Jesse Norman]

I certainly do, and I am very glad that my hon. Friend has brought that to the attention of the House.

[Dr Alan Whitehead (Southampton, Test) (Lab)]

After the latest capacity auction, the overall scores for the procurement of new combined cycle gas generation plant stand at one small buildable plant over three auctions, at a total cost so far of £3 billion and £12 a year on customer bills. Does the Secretary of State have any other good ideas up his sleeve to secure the procurement and building of new capacity up to 2020?

[Jesse Norman]

As the hon. Gentleman will know, the gas capacity market auction was an enormous success. It secured a widespread diversity of supply at low cost and in higher amounts than ever before, and it included some innovative new technologies. The Department should be celebrated for managing this.

Emission Reductions and Low Carbon Investments

Alan Whitehead Excerpts

Monday 12th December 2016 General Committees

[The Chair]

We now have until 5.43 pm for questions to the Minister. May I remind Members that questions should be brief? It is open to a Member, subject to the discretion of the Chair, to ask related supplementary questions.

[Dr Alan Whitehead (Southampton, Test) (Lab)]

I note that the Minister has set out the UK’s position on phase IV of EU ETS in a document supplied for the Committee’s attention this afternoon. In that document, mention is made of the overhang of allowances that the Minister said will remain within EU ETS, but no mention is made of any Government position concerning what might be done about that overhang as we go into phase IV. Does the Minister any views on that and does he think there should be a Government position on it?

[Mr Hurd]

Yes, we do. What we have argued for is what is called a volume-based approach. This is our second crack at this issue. In the 2014 initiative, we were instrumental in setting up the market stability reserve, which is basically a mechanism for taking surplus allowances above a certain threshold out of the system.

What we suggest this time around, and it seems to be gathering some support, is that we should accelerate that process, in terms of both scale and time. As the hon. Gentleman will know from his deep experience of tracking the ETS, that is because the fundamental problem is a structural imbalance of demand and supply allowance. Our proposal is a volume-based approach, which is seeing whether can we accelerate the mechanisms for taking this surplus out of the system.

[Dr Whitehead]

I thank the Minister for that reply. However, the question of taking surpluses out can be done by means of the market stability reserve, which will be completely transported from phase III to phase IV, with all the surpluses, as things appear to stand at the moment. That means that, because the system is currently trading at about 200 million allowances below the capped level, there will be increased surpluses coming into phase IV, in addition to those in the market stability reserve and those carried over. The suggestion that might be put is that those should be forcibly retired in phase IV. Does the Minister have any views on that?

[Mr Hurd]

We are open to mechanisms and discussion about the how. The point that we are trying to make is that we need to accelerate the process of taking surplus allowances out. We think the MSR continues to be the right primary tool for doing that; the issue is the pace at which it is done. We are trying to gather support for doing that on a bigger scale at a faster pace.

--- Later in debate ---

[Mr Hurd]

We are talking about negotiating the principal elements of the reform of the emissions trading scheme. As far as I can see—it is a fairly opaque process—that is due to be completed by the end of 2017. That is when the base of the agreement is likely to be reached, and work can then begin on underpinning the implementation. That is well within the Brexit timeframe. Our view, therefore, is that we should continue to be a very constructive, positive, inquisitive voice at the table to ensure that the next phase of the emissions trading scheme—I would argue that it is in one of the most critical phases in its history—is structured in the right way.

[Dr Whitehead]

Pursuant to whether we will be a member of the EU when the fourth phase comes into operation, the Minister of course knows that a number of non-EU members are already in the EU ETS. First, does he have a model in mind of what our relationship with the EU ETS might be, bearing in mind that there are already non-EU members in the EU ETS?

Secondly, does the Minister have any views on the recent announcement in the autumn statement that there is no definite commitment to extend our carbon floor price mechanism beyond 2020-21? As was said in the autumn statement, it is possible that the EU ETS level will coincide with our carbon price support in the middle of the next decade, which strongly implies a relationship, whether we are in the EU or not, between the EU ETS and our carbon price support mechanism.

--- Later in debate ---

[Dr Whitehead]

We have had a good session, and the Minister was asked number of pertinent questions. They focused, first, on whether we are actually going to be there to influence the EU ETS in any way in the future, and, secondly, even if we are not there to influence it, on the extent to which it will continue to have a substantial influence on us, however it is sorted out in the absence of the UK as a member of the EU.

I suggested that it is worth examining the EU ETS’s structures in respect of the countries that fully participate in it but are not EU members. There are particular regulations relating to that, but those countries participate fully in the EU ETS and are not just observers at the table. They are bound by what happens in the ETS, but they are active participants in shaping it. I hope at the very least that, in our future relationship with the EU ETS, we aim to be a full member and sit round the table, even if we are not a member of the European Union, so that the fact that the development of the EU ETS reflects our country’s priorities for the decarbonisation of our industries and for climate change is fully taken into account.

The Minister made it clear that the Government’s aim in the discussions was to ensure that the allocations were retired or removed from the system at an accelerated pace. I very much concur with that aim, because we need to understand where the EU ETS stands at the moment and where it might position itself relative to our carbon price support mechanism in the future. We are coming to the end of phase III, but particularly because of the recession and crisis of 2008-09, the number of allowances that are being generated in the system—we have already achieved the targets that the EU ETS requires us to meet by the end of phase III—means, as I mentioned in questions, that we are not retiring or reducing allowances at the moment, but creating 200 million additional allowances before the end of phase III. The proposal for dealing with that—the market stability mechanism—effectively loads those allowances, which have been placed in quarantine, as it were, into the beginning of phase IV, in addition to the new allowances.

Unless we do something about rebasing where we start from in 2020, we have the prospect of a continuing overhang of emissions through the whole period of phase IV of the EU ETS. My first proposition, which I suggest the Government ought to look at in their continuing engagement with the outcome of this—although, as the Minister said, it will be on a vastly accelerated scale to that which was previously the case—is that the 2020 starting point for phase IV should be rephased so that it is based on actual emissions in 2020, rather than the trajectory that they have been on hitherto, which would mean that the 2020 figure did not reflect real emissions and therefore institutionalised the overhang of allowances in the system into the fourth phase.



This afternoon the Minister said that there is not a great deal of support for the linear reduction factor to rise from the proposed 2.2% per annum. Again, however, when it comes to attacking those outstanding allowances, some figure higher than 2.2% would be very helpful and important. Considering whether it could go up to something like 2.4% would be a useful addition to the fight to shape the EU ETS, so that it is fighting fit and combative over the next period, regarding what it is trying to do not only about the overall capping of emissions but having a reasonable price level for allowances. Of course, that is the big question over the next period—whether those allowances get that price, which can only be really achieved by the cap and those allowances decreasing, and their coming together to keep the price up to a good level.

I take the Minister’s point about energy-intensive industries and the aim during phase IV of reducing allocated allowances from 80%—I think—to 23%, and therefore concentrating those allowances particularly in relation to energy-intensive industries and making sure the carbon leakage is properly accounted for over the next phase. I fully support that.

However, the Government’s present position regarding what the EU ETS will look like in phase IV is not sufficient, particularly in the context of what we have said about the future of our own carbon price support system. It is not sufficient at the moment to secure that convergence, which is potentially so important regarding what we do about the future of our own carbon price support system.

We have two possible ways forward. We either commit ourselves now, at an early stage, to saying that we think the EU ETS, in whatever form it is going to be in, will have, a respectable-ish price for allowances, but because we will not have solved the overhang problem, we will never get to the right amount so that we can confidently say that our own carbon price support system will at any stage start to align with whatever that price is in the mid-2020s. In that case, we presumably need to say, “Well, we act now to secure our own carbon price support system for the long term and we take a decision on that fairly early”, or we press for proposals that are quite a bit more radical within the EU ETS, so that it can achieve that particular level.

To my mind, that means, first, that we need mechanisms that do rather more than the market stability reserve to retire allowances, and have them permanently retired and not quarantined for future reference—actually taken out of the system entirely over phase IV—and, secondly, that we have a realistic starting point for phase IV, so that it allows those retiring allowances to have maximum effect on price over the next period.

Without looking at those particular aspects of EU ETS over the next period, we will almost certainly have a level of crisis in EU ETS over the next decade similar to that we have at the moment, as that overhang of allowances takes its toll on the good intentions of EU ETS.

I would appreciate hearing any thoughts that the Minister has on that particular way of going about things, which I think is important. I know that he cannot say too much about this, but a small nod and a wink in the direction of saying that we are pretty committed to staying in the EU ETS, although we cannot actually say so right now, would be very helpful for future discussions.

Tidal Lagoons and UK Energy Strategy

Alan Whitehead Excerpts

Tuesday 6th December 2016 Westminster Hall

[Dr Alan Whitehead (Southampton, Test) (Lab)]

We have had an excellent debate, with contributions from Members on both sides of the Chamber indicating almost unanimous support for the Swansea bay tidal lagoon. That outcome—the clash of ideas in the white-hot heat of full agreement—should be impressed on the Minister. Even though there was what might be regarded as one dissenting view from the hon. Member for Eddisbury (Antoinette Sandbach), I think that she supports the idea. She made some important points about value of money and about how careful one needs to be to get that right.

We can, I think, say that there is agreement, more or less, about the principle of the Swansea bay tidal lagoon and full agreement, at least by the Opposition, about the practice. Indeed, Opposition turnout and the first-rate contributions made by my hon. Friends the Members for Aberavon (Stephen Kinnock), Swansea West (Geraint Davies), Swansea East (Carolyn Harris), Newport East (Jessica Morden) and Workington (Sue Hayman), and by the hon. Member for Aberdeen South (Callum McCaig), indicate just how full the support is on this side of the House, not just from south Wales Members but across the country. I think that is because we need to make it clear that support for Swansea needs to be based, as Members have emphasised, not just on whether we build that tidal lagoon but on what it means for tidal lagoon technology for the UK’s future and what it means also for the series of lagoons that can come about as a result of the Swansea proving lagoon.

That series of tidal lagoons is not a concept based on thin air; it is not about harnessing an as yet untried technology that might come from the middle of nowhere and save us as far as low-carbon power is concerned. Essentially, it works on a simple principle of proven, well-known technology, of water entering the lagoon subject to its flow through a turbine, both when it is coming in and on its release when the lagoon is full, that allows for the generation of some 14 hours of utterly predictable power. We know that the principle works well because, as the Rance barrage in France has shown, the technology is reliable over many years and, as has been mentioned, it is a power source with a lifetime far in excess of those estimated for wind, gas and even nuclear. It is likely also that the outage time over a long period will be relatively low.

Swansea is not a large lagoon in terms of what is possible. It will have an installed capacity of 350 MW, which is approximately a tenth of the most worked-up second lagoon, in Cardiff bay, which comes in at a capacity close to that of Hinkley Point C power station. However, it is the possibility of Swansea being the proving ground for a number of tidal lagoons that will not only be cheaper to construct and operate than Swansea but will open up the prospect of a large contribution—perhaps 10%—of our electrical power needs that ought to be a condition for supporting it. What we should be investing in as a country is not Swansea, but Swansea and the prospect of all the others as a major component of our future energy make-up.

As Members have mentioned, as far as our country’s overall energy make-up is concerned, power plant is going offline at an alarming rate, with 23 GW of conventional thermal plant being closed or mothballed since 2010, and a further 24 GW—mostly of coal and nuclear—to be closed by 2025. It is unlikely that nuclear will even begin to make up that gap. Hinkley is delayed by longer than seven years and will probably not be on line until 2026-27 and, according to the latest consultation, coal is due to come offline by 2025.

We need replacements for the lost capacity, and a lot of that will come from the aggregation of renewables, but at present the only plan appears to be that gas-fired power stations will be built out at some pace between now and the late 2020s. We know that gas power stations are not, at present, getting built and, indeed, the Government are pursuing expensive capacity market operations—with an auction today or thereabouts possibly costing us £2.5 billion—for capacity over the next period. That is the last chance saloon, one might say, for gas plant procurement under the present arrangements. Swansea, and other lagoons, would certainly serve as a substantial alternative to some of that build, which, if procured, would cost substantial amounts—something that needs to be taken into account where value for money is concerned. All energy, at the moment, is expensive to build. All energy, at the moment, is being subsidised in its build. It is not about considering just what Swansea might cost but about what the alternatives might cost as well. Under those circumstances, Swansea performs, in the long term, very well.

Within a few years, perhaps, a number of those replacement power stations will need replacing anyway. Meanwhile, Swansea and other lagoons would have sailed through the period, producing reliable ultra-low-carbon electricity. By the way, in terms of a larger lagoon strategy, they will be able to supply reliable and known amounts of power pretty much round the clock, for the simple reason that the time of high tide varies considerably along the UK coast. I always like to try to introduce a not very well known fact into my contributions and today it is that, right this minute—this very minute—it is high tide in Morecambe bay. That means that if there were to be a lagoon in Morecambe bay it would produce power for seven hours either side of its high tide.



It is not high tide in Swansea. High tide was at 10.20 am. Power could be produced seven hours either side of that high tide, which would overlap almost exactly with the power produced in Morecambe bay on its high tide. With a series of lagoons, there would be round-the-clock, reliable, known, predictable power that was just as predictable and round-the-clock as any nuclear power station or gas-fired power station that we might care to build in this country.

The benefits of developing Swansea and subsequent lagoons are manifest from a low-carbon energy point of view. As Members have alluded to, there would be considerable other benefits, too. Jobs and supply chains would be created, mostly in the UK. It is estimated that 65% of the pathfinder project spend will go on UK content, which is close to the figure achieved by the North sea oil and gas industry. There would be 200 jobs in Swansea and perhaps 11,000 jobs in Cardiff during construction, and several thousand jobs during operation. Developing Swansea is important for what UK plc should be doing to secure the exportable potential of those technologies in which we are world leaders. We certainly are leading in tidal, tidal stream and wave.

As the hon. Member for Aberdeen South said, we only have to look back a little to see how close we came to securing exportable UK industry in wind before we lost our lead and most of our manufacturing and expertise to others, most notably Denmark, because we did not back the development of our world lead through industrial strategy. Yes, I have mentioned the words “industrial strategy”. It appears in the title of the new Department—the Department for Business, Energy and Industrial Strategy—but there is still an absence of anything that looks like an actual industrial strategy from the Government. We were promised a Green Paper on industrial strategy would appear shortly. With lagoons, we have an industrial strategy in the round already, with jobs, a supply chain and exportability. It is running up to us, metaphorically asking us to bite its hand off, and at the moment we are not responding in a positive way.

In all of this, we have to consider the question of value for money, which the hon. Member for Eddisbury mentioned. Comparatively, lagoons provide value for money. Undoubtedly even Swansea will come in as better value for money for electricity-generating purposes than the deal we have concluded with Hinckley C. Comparatively it is in the same league as offshore wind. A series of lagoons would certainly be much better value overall, although we need to cast our minds towards the longer term in thinking about value. Swansea is asking for a CfD for 60 years. That is half the operating life of the lagoon, with payments reducing substantially over that period. Swansea is not asking for a block CfD degressing through future projects; it is asking for a CfD degressing within the project’s lifetime.

I know the Government have not been idle in all this, although on the surface not much has happened since general support for the idea of the Swansea bay lagoon was included in the Conservative party’s 2015 election manifesto. Indeed, as my hon. Friend the Member for Aberavon said, it was also in the manifestos of all the other major parties. I hoped we would hear something positive about Swansea in the autumn statement, but nothing was announced. We will have to wait until the Hendry review has been examined. That review is headed by an estimable former Energy Minister, the right hon. Charles Hendry. I am confident he will have a positive look at value for money and the bigger picture I have described of the lagoon, but we do not know where that review is. We think it is on its way to Government as we speak, but we have not yet had any confirmation that it has been received, or whether there is a timetable for looking at that review or for action after it has been considered. I join my hon. Friends in calling for early publication of the review so that we can all have sight of what it is about. We also call for an early Government response to that review, even if a final decision about proceeding with the Swansea tidal lagoon has not been made.

I conclude by emphasising that timing is important. We have a worked-up, permitted, committed plan that cannot stand in suspended animation while people spend so long making up their mind. Swansea bay, in case anyone needs reminding, is not an interesting concept that we can cogitate on at our leisure, but a real project that needs to be developed within a reasonable timescale. Otherwise all the money invested in it—£50 million—will start to go stale and the project may fail, possibly never to be revived. We need to get on with it, not just for Swansea’s sake, but for the sake of a real solution that could be producing power by the very early 2020s if it is given the go-ahead now. It would be a solution for our mounting energy gap in the early part of the next decade.

[Ian Paisley (in the Chair)]

If the Minister can take about 12 minutes, that will give Mr Crabb a minute and a half to wind-up at the end.

draft Contracts for Difference (Allocation) (Excluded Sites) amendment regulations 2016

Alan Whitehead Excerpts

Monday 14th November 2016 General Committees

[Dr Alan Whitehead (Southampton, Test) (Lab)]

I reflect the Minister’s pleasure at serving under your chairmanship, Mrs Moon. He made a good job of attempting to explain what on earth the draft regulations are all about. To the extent that there can be clarity, he has provided it, so we should not be detained too long by this business.

Labour Members welcome the thrust of the statutory instrument and the greater clarity that has been achieved regarding the questions I asked in a previous statutory instrument Committee about the next allocation round and the future of CfD allocations, and in the light of the publication that arose last Thursday, which sets out in greater detail what allocations will consist of and the support for future allocation rounds over the next period. We still have several questions about that arrangement, particularly about how it is going to relate to the overall progress of the levy control framework, but that is not really a discussion for today.

I have two specific questions on how the changes to the 2014 regulations are going to work in practice. First, the changes will considerably widen what was in the excluded periods in the 2014 regulations, which could give rise to substantial greater questions of possible interpretation about what it means not to have delivered within 13 months or to have been excluded from a further auction round for two years, given the circumstances in which that exclusion might have taken place. For example, someone wishing to put in an application for an allocation at a subsequent auction round may consider themselves to have been unfairly treated in how they were excluded by the widening of the regulations. Are processes in place that can provide for a legally robust way to ensure that that exclusion can be properly managed and that we are not going to open ourselves up to a series of actions that could be debilitating for the auction round when it comes to pre-qualifying for a subsequent auction and the process of putting in an auction bid? I would be grateful if the Minister clarified that.

Secondly, under the circumstances outlined, the regulations are not just about exclusions from future bidding, or an excluded period if someone has not either signed a CfD or undertaken the milestones in a CfD agreement previously. They are also about the extent to which otherwise frozen CfDs may be unfrozen for future use as a result of those people who are not taking up their CfDs in a proper way having perhaps put in a bid that was never realistic in the first place. It is a matter of making sure that the CfDs freed up by the implementation of that process are available for future auction processes.

As there is no impact assessment with the report other than the general impact assessment relating to the process overall, I wonder whether the Minister has looked at the circumstances where that release of CfDs might apply; whether he has made any assessment of what level that is likely to run at; and, if he has, what arrangements he might have in hand for ensuring that the CfDs will be recycled in an orderly manner when future auctions come up. It may be that they could be so significant as to lead to the possibility of further sub-auctions as the process develops. How significant might that part of the process be in carrying out the whole auction process in the most efficient way?

Oral Answers to Questions

Alan Whitehead Excerpts

Tuesday 8th November 2016 Commons Chamber

[Mr Hurd]

I know my hon. Friend to be a great champion of his area and of innovation there. Cornwall has interesting assets in relation to geothermal. I have written to him, but I can place on record here that the answer is yes.

[Dr Alan Whitehead (Southampton, Test) (Lab)]

On clean energy, we are close to the first anniversary of the announcement by the Secretary of State’s predecessor that all unabated coal generation would close by 2025 and that a consultation on that closure would be launched in spring 2016. As we can see, it is not spring any more, and no consultation appears to be in sight. Is that because the Department is reconsidering his predecessor’s commitment, or because the Department has not got around to writing the consultation yet?

[Mr Hurd]

The hon. Gentleman will not have to wait much longer for the answer to that question. The Government are committed to the transition from coal to clean energy. In fact, he will know that this year is the first in which we will generate more electricity from renewable energy than we do from coal.

Draft Contracts for Difference (Allocation) (Amendment) Regulations 2016

Alan Whitehead Excerpts

Monday 24th October 2016 General Committees

[Dr Alan Whitehead (Southampton, Test) (Lab)]

It is a pleasure to serve under your chairmanship, Mr Brady. I welcome these proposals. As the Minister set out, they are, in principle, not controversial; indeed, they are the opposite of controversial, inasmuch as they extend the delivery date from the original cliff edge of 2020 to 2026. That is a positive move, which clarifies and makes possible the announcement in the last Budget that £730 million of support will be available through future auctions for offshore wind and other less-established renewable electricity generation technologies before 2020, for operation after 2020—that is, between 2021 and 2026. That is set out in the policy background statement to the regulations.

Although I have no concerns about the extension of the delivery date and the framework within which, therefore, CfDs can now be allocated, I do have concerns about the statement in the policy background document. I would be grateful for the Minister’s elucidation of those concerns.

My first concern is that what is said in the policy background statement is not, in fact, exactly what the then Chancellor announced in Budget 2016. I would be grateful if the Minister clarified the differences between the Chancellor’s announcement and what is now set out in the policy background statement.

The then Chancellor announced that

“the government will auction Contracts for Difference of up to £730 million this Parliament for up to 4 GigaWatts of offshore wind and other less established renewables, with a first auction of £290 million.”

However, the policy background statement says that

“the Chancellor announced…£730 million of annual support for future auctions for offshore wind and other less established renewable electricity generation technologies.”

That is a small difference, apparently, in framing, but it is a potentially large difference in eventual meaning.

When the then Chancellor announced £730 million for this Parliament, many people took him to mean that the sum was a one-off borrowing, as it were, from the levy control framework—which had, as yet, not been finalised—from 2020 to 2026 of £730 million. It was thought that that would be available for CfDs for offshore wind in the main, but also for other less established technologies, which I will come to in a moment, and that the borrowing would take place such that, although the auctions would take place within the levy control framework as it stands at the moment—that is, until 2020—the effect would be felt in the next period of the levy control framework.

The levy control framework is the framework within which this all takes place. That framework coincides with the delivery dates, which were originally set as 2015 and 2020 for the two periods of the levy control framework. We are now waiting to see what the levy control framework will look like for the next delivery period. The regulations sketch in but do not completely fill in the picture of what the levy control framework will look like up to 2026.

My question is that, given that it is now being said that the £730 million is annual support for future auctions, does that mean that for every year for the next period of the levy control framework, £730 million of putative tax and spend will be available to support offshore wind and other less developed technologies? Alternatively, does the Minister mean that there will be a one-off allocation—not a payment because it is putative tax and spend—of £730 million, which may be followed by other measures, completing the total picture of the levy control framework?

If the latter is the case, presumably there is more funding to come within the overall levy control framework picture up to 2026, and the £730 million is a part of that. If the former is the case, it is conceivable that £3.65 billion is the total amount allocated under the levy control framework for the next period up to 2026. It would help if we were clear about the differential and whether it points to the allocation being a one-off or a part of a series of available funds.

My second and third questions relate to the detail of that. Whether the available money is a one-off or continuing, presumably it will have to deal with the existing picture of the levy control framework up to 2020 because this statutory instrument essentially extends the period through which the levy control framework will work. If that is the case, we know that the controls set in place with the levy control framework and agreed between the Treasury and the then Department of Energy and Climate Change are likely to be exceeded by 2020.

I asked a parliamentary question in December 2015, and the answer indicated that the levy control framework up to 2021, even if changes are made to feed-in tariffs for solar PV, onshore wind and various other things, looks likely to be overspent by about £1.3 billion to £1.4 billion. According to the agreement between the Treasury and DECC, that overspend has to be clawed back within the levy control framework itself. So if this SI is to extend the levy control framework to 2026, that £1.3 billion overspend should, in principle, be clawed back within the overall total of the levy control framework up to 2026. If that is the case, the real cost is either £3.65 billion over five years, minus the £1.3 billion that is clawed back, or it is £750 million with some other money coming in but with £1.3 billion being taken off the total.

In either case, it would appear that the £730 million total, depending on what it is, is not necessarily one on which we can rely in the next period of the levy control framework. If that is the case, the indication that there is £730 million, or indeed £730 million times five, available for offshore wind and other less developed technologies is something that we might put a large question mark against.

Finally, what does the Minister mean by

“other less-established renewable electricity generation technologies”?

If he means what is at present in the less marketable pot of the levy control framework—things such as tidal power and wave power, etc.—he appears to be saying that, post-2020, support will be available only for offshore wind and technologies that are less close to market, which is presumably not solar PV and other forms of wind, and possibly not biomass. If that is what he means, it would help if he told us so. If, however, he has another interpretation of that statement, it would help if we were to hear that instead.

I have essentially asked three questions on a move that I welcome overall. If my questions are answered fully and successfully, this SI will provide a framework for a suitable way forward for remunerating renewable technology over the next period, albeit with the continuing degression of CfDs and underwritings as the technologies come closer to market. Nevertheless, it is a framework that, subject to those clarifications, the market and investors can look forward to working in, making their investments accordingly over a much longer period than has hitherto been suggested.

--- Later in debate ---

[Jesse Norman]

I thank hon. Members for their questions. The hon. Member for Southampton, Test asked three questions: the first was about levels of funding under the contracts for difference scheme; the second was about whether there is an overspend relative to the levy control framework; and the third was about what is included.

The overall picture is that there is up to £730 million per year to be allocated in up to three auctions. This is the first auction, which is for £290 million a year of annual support. Each contract will be for 15 years and will begin, at a time to be announced, between 2020 and 2026. That leaves headroom of £440 million a year of support that could, in principle, be offered via other auctions.

[Dr Whitehead]

I understand from the Minister that £730 million is available each year over a number of years throughout the next delivery period. I assume he means that £730 million is available each year for new applicants and that each of those applicants will then get a 15-year tail on CfD from a successful application. The total amount of money for new applicants is therefore £730 million times three, or five, or however many pots are available, and the first auction is part of that overall pot. Have I understood the Minister correctly?

[Jesse Norman]

Unfortunately, there is an ambiguity in the phrase “new applicants”. The position is that £730 million is available under auctions. That money will be paid per year under the auctions. The first auction is £290 million; each contract period is 15 years long. I do not have the numbers to hand, but one can run the numbers out as to the total amount of money, in constant pounds, that will be paid out over those contracts in total and as they are announced individually. That is the position.

The hon. Gentleman asked whether there was some overspend under the levy control framework. The levy control framework, as he said, runs until 2020 and the Government are considering whether and how that framework will be extended. At that point, it will become appropriate to ask whether or not there could be any overspend. His third question was about what is included. The included technologies are offshore wind, wave and tidal stream, advanced conversion technologies— gasification and the like—anaerobic digestion, and biomass for combined heat and power. Those are the less established technologies.

Finally, I turn to the question from the hon. Member for Luton North. I am afraid he was telling such a beguiling story about the installation of solar PVs on his own property that I missed the central thrust of the question. I think he was asking whether the regulations were really focused on renewables, and I assure him that they are. There is an entirely separate framework, also known as a contract for difference, that applies to nuclear supply in the case of Hinkley. That is under a completely different scheme and is not the subject of the legislation today.

Renewable Heat Incentive Scheme (Amendment) Regulations 2016

Alan Whitehead Excerpts

Wednesday 19th October 2016 General Committees

[Dr Alan Whitehead (Southampton, Test) (Lab)]

I beg to move,

That the Committee has considered the Renewable Heat Incentive Scheme (Amendment) Regulations 2016 (S.I., 2016, No. 718).

It is a pleasure to serve under your chairmanship this afternoon, Mr Owen. Hon. Members might be a little puzzled about why I am moving the motion, but this a statutory instrument made under the negative procedure, which has been prayed against and is therefore coming before us today. So I am starting off and the Minister will respond, which is the opposite way around from what we normally expect. I hope that that is now clear to everyone.

I have, in essence, three questions to ask about the regulations. First, why were they introduced at all? Secondly, if they were felt to be necessary, why did no consultation take place, as outlined in the accompanying explanatory note? Thirdly, as it was felt necessary to introduce such a measure, why was no impact assessment undertaken, as should normally be the case for regulations of this kind?

I want to make the case that, given those three questions, it is necessary to suspend the changes, undertake an impact assessment and a consultation, and look again at the regulations in the light of those two procedures. That is what I will dwell on briefly this afternoon. I trust that the Minister will be able to satisfy me on at least some of those points as we discuss the regulations.

First, the measure is about combined heat and power, and the availability of credits under the renewable heat incentive for the operation of biomass-based CHP. At the moment, such operations are based on the achievement of a CHP quality certificate and the allocation of RHI credits according to the operation of a grant under that certificate. The change made under the regulations—a change that has come very abruptly, which I will come on to—is a new distinction between RHI-based CHP plant that produces 20% or more of its total energy output as electricity, and plant that produces less than that 20%.

The explanatory documents might lead one to believe that that distinction is being made to ensure that any plant that receives RHI underwriting is as efficient as possible. The policy background section of the scheme’s explanatory memorandum states:

“Some types of CHP plant deliver only low levels power output and/or poor overall efficiency…Such plant are therefore in receipt of the biomass-CHP tariff for all their heat output despite not delivering the benefits in terms of efficient use of resources”.

Frankly, that is not so, or, at best, only partially so.

As I am sure the Minister is aware, the way in which CHP plants work is based on the efficient capture of all the energy inputs into the plant and the most efficient outputs from the plant—be that electricity and/or heat—whereby the CHP plant captures what, in a conventional plant, normally goes up the chimney as wasted heat, instead using that heat for district heating, industrial purposes or other uses. There is no intrinsic delineation within the construction of a CHP plant that causes more or less than 20% of its output to be electricity. The electricity output of those plants varies considerably depending on the heat load the plant is required to service, which may vary throughout the year.

CHP plants are normally based on a turbine that produces steam and a capture of the exhausts from that turbine process. The high-level steam produced from the turbine is normally used to produce electricity; the lower-level steam, which comes about as a result of the exhaust processes of the turbine being driven, is captured for heat. However, it is not necessarily the case that one cannot be transferred to the other; indeed, it frequently is. Some of the high-level steam, which may be used to produce electricity if the heat load requires it, may be diverted to supply the heat.

As far as CHP is concerned, the normal case is not that a plant producing less electricity than its output is less efficient than a plant producing more electricity—it is simply designed for a different site purpose. It may well be that the site purpose is to provide a high, constant heat load, or there may be other site purposes for which the heat load is different. Frankly, the policy background part of the explanatory memorandum is at least somewhat misleading on the rationale for the imposition of this abrupt change in remuneration for CHP plants.

It does not matter, in terms of overall power output, whether a CHP plant is producing a lot of electricity or a little bit, providing that the overall output is captured efficiently either for heat or electricity, and that the overall conversion of the fuel input to heat or electricity output is as efficient as it can possibly be. That is the criterion that should be applied to CHP plants. I suggest that it has not been applied under the regulations.

There may be other reasons for the imposition of the frankly arbitrary 20% level, which may relate to what funding comes from where and for what purpose it is used. I am sure the Minister will expatiate on that when he responds. In principle, it does not seem to me that there is any justification on efficiency or power output grounds for the changes to be made.

My second question is, if the changes were to be made, why was there no consultation? Among other things, that might have teased out some of the issues I have raised. The documentation relating to the regulations states that no consultation was considered, although some informal soundings were taken from industry. The reason given was that CHP plants that came in at under 20% might smuggle themselves through the process at the last minute and get the higher rate of RHI remuneration, thereby thwarting the purpose of the regulations while the consultation was taking place. That, I kid you not, is exactly what it says in the documentation. That is plainly a nonsense, because it takes between 18 months and two years to get any CHP plant planned, commissioned, purchased, installed and under way. The idea that any CHP plant that was not in receipt, or potentially in receipt, of RHI would suddenly spring up and install itself while a consultation was taking place is a bizarre thing to contemplate.

There must therefore be other reasons for there having been no consultation. Cabinet Office guidelines provide for consultation to be the norm on such occasions unless there are exceptional circumstances. However, what I have described is not, frankly, an exceptional circumstance. It is suggested that it is such a peculiar circumstance that it is exceptional—perhaps it is exceptional, but only in its peculiarity and for no other reason.

Thirdly, the Department did not produce an impact assessment on the changes, either. The claim is that that was because

“no impact on the private or voluntary sector is foreseen.”

That strikes me as a rather strange locution. Because CHP plants take a long time to commission and introduce, a number of plants, which the Department had encouraged to go ahead, were in the process of being commissioned and installed when this abrupt change was announced on 7 July for implementation on 1 August. Those plants had no opportunity to change their mode of operation, their installation arrangements or anything else before the change came into place.

One direct example is that a number of plants had been in the process of being installed for poultry producers. Those plants were potentially going to be very efficient, in that they were to use poultry litter as their power source and have a slave heat load. They were therefore calibrated so that the majority of output would go to the slave heat load for heat, because that was how the plant was to be designed to serve its purpose—it was not going to be inefficient—and about 6% to 7% of the overall output was to be electricity.

It would be possible for those plants to be installed with a different calibration and therefore come under the scheme guidelines, but the producers would have to work out how to reinstall and recalibrate the plants to provide a heat load for the poultry in the first place. The effect is that a number of those plants will have great difficulty in going ahead, and it has been estimated that £170 million of investment is at risk. Therefore, far from the changes having no industrial or voluntary sector effect, there is a substantial industrial effect as a result of the changes.

For all those reasons, I suggest that the safest course of action would be to suspend the changes, carry out a consultation and produce an impact assessment. That would not lead to any danger of new plants suddenly coming in under the wire. If it is still felt necessary to make the changes after all that, and after consideration of what CHP plants can do to make the changes necessary, so be it. However, I suggest that to go ahead with the changes on such a thin raft of evidence, and on such a poorly designed basis of operation, does not make safe our goals of ensuring that the renewable heat incentive provides for the decarbonisation of heat in an efficient way and of encouraging plants to develop in that way. I suggest to the Minister in a friendly manner that securing those goals might be the best course of action not just for the industry and the renewable heat incentive, but for the future of decarbonisation in the heat sector as a whole.

--- Later in debate ---

[The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Jesse Norman)]

It is pleasure to serve under your chairmanship, Mr Owen. I welcome the contributions of the hon. Members for Southampton, Test and for Aberdeen South and my right hon. Friend the Member for New Forest West. I, too, welcome the hon. Member for Southampton, Test back to his place. He has great expertise in this field, and the hon. Member for Aberdeen South is also demonstrating a burgeoning expertise. I recognise that I am very much the new guy on the block.

I will address all the issues that have been raised today and talk a little further about the regulations, as the Committee properly demands. Where there is a demand for both heat and electricity, combined heat and power offers the most energy-efficient use of fuel, with the potential to deliver savings of up to 30%. The renewable heat incentive offers support for the deployment of CHP plant, including that using solid biomass fuel, recognising the role that that technology can play in decarbonising heating and power production. The Government introduced a dedicated biomass combined heat and power tariff into the non-domestic RHI scheme in May 2014. That tariff is approximately double the tariff for large biomass heat-only plants. The biomass combined heat and power tariff is 4.22p per kilowatt-hour, compared with the large biomass heat-only tariff of 2.05p per kilowatt-hour.

The higher support tariff offered to biomass combined heat and power plant, when compared with biomass boilers producing only heat, reflects the higher capital costs generally faced by these plants and also the benefits that biomass combined heat and power plant can deliver for the efficient use of fuel. Given that the biomass CHP tariff is more than double the large biomass tariff, it is important that CHP plants deliver the efficiency benefits that the tariff exists to incentivise. Recently, my Department became aware of some types of combined heat and power system that could qualify for the higher RHI biomass CHP tariff of 4.22p per kilowatt-hour. Those types could be used for all eligible output despite delivering only a relatively small amount of power, or having relatively low levels of power efficiency—in some cases as low as 1%. Plant with very low power efficiency does not necessarily face significantly higher capital costs, or deliver the comparatively efficient use of biomass that the biomass CHP plant tariff is design to incentivise. That is part of the answer to the question that the hon. Member for Southampton, Test raised—there are higher capital costs associated with such plant, as well public benefit from the combined heat and power.

[Dr Whitehead]

Can the Minister fill us in a little more on the distinction between plants that have reduced overall efficiency as a result of their design, which he has mentioned, and those that do not have that reduced efficiency but have a differential deployment of electricity and heat production? If he makes that distinction, would not a better route have been to target the less efficient plants specifically, rather than catch all plants that vary in their output, as the regulations do?

[Jesse Norman]

Of course, in retrospect there are many ways in which the system could have been designed. However, the system is well established, in ways that I will describe, and it is important to recognise that the regulations are designed to incentivise combined heat and power. A plant that overwhelmingly provides heat and produces very small amounts of power may not require the same capital costs as another plant, and it may not discharge the purpose for which the combined heat and power tariff is intended, let alone the much higher rate. I think that speaks for itself. The point is that plants with low efficiencies do not necessarily face capital costs.

Not targeting the group that was intended to be included in the original proposals for the tariff represented a potential risk of significant overcompensation, and therefore a risk to the value for money of the RHI scheme, particularly if a large number of plants such as I have described were to come forward. The regulations took action to address that issue, adding a new requirement, as the hon. Gentleman described, for biomass combined heat and power plants to achieve a minimum power efficiency of 20% to qualify for the higher tariff for all their eligible heat use. That change safeguards the value for money of spending through the scheme and protects the interests of the taxpayer.

The Government carried out a consultation on reforms of the RHI schemes in March. That consultation asked whether any types of CHP plant would be overcompensated by the current tariff arrangements, and the responses supported action to ensure that heat incentive support is focused on installations offering value for money.

The hon. Gentleman asked why there was no impact assessment. The answer is relatively straightforward: regulatory impact assessments are produced in cases where a policy imposes regulatory burden on business. Their purpose is to assess the impact of a change—that is why they are called impact assessments. The renewable heat incentive, by contrast, is a voluntary subsidy scheme. The impact on industrial, commercial, public sector and not-for-profit organisations applies only if they are owners of eligible renewable heat installations and choose of their own account to apply for the RHI.

[Dr Whitehead]

Which was the case for the poultry plants that the Government had previously encouraged to apply for RHI, which were assured by the Department that their arrangements were perfectly satisfactory for that purpose but found out subsequently that they were not. That appears, to go by the Minister’s own words, to be within the definition of something that should have been the subject of an impact assessment.

[Jesse Norman]

The RHI is a voluntary scheme for those who qualify for it and choose to apply for it. It is not imposed on business. The point about an impact assessment is when the Government use their sovereign power to burden business. In this case, we are not doing that; we may be changing the terms of the tariff arrangements, but we are not burdening business.

A decision was taken at that time not to carry out a further consultation on the specifics of the change. That was due to the significant financial risk to taxpayers’ money that could have been involved. It was judged that further consultation would raise awareness of how the regulations could be exploited to enable high returns. That would increase the risk that more plants of that type would apply to the RHI before a change could be made.

It is true that CHP projects can have quite a long delivery period—a point raised by the hon. Member for Southampton, Test. Even so, there was a substantial risk of a potential rush of applications in the three weeks between the publication of the regulatory change and its coming into force. During that period, the Department saw 11 new biomass CHP applications come to the RHI for support. Although that may not sound like many, it was more full biomass CHP applications than have been received since the renewable heat incentive started in late 2011. The issue was live and serious, and posed a genuine threat to value for money. In some cases, mechanisms were rising in the market that enabled non-qualified heat plant to qualify for the higher combined tariff, without necessarily any further significant capital investment being made.

Following the introduction of the regulations, my Department indicated that it was happy to listen to the views of stakeholders who felt they might have been affected by the change. It received information from individual projects, as well as from trade associations, about the impact of the change on potential biomass CHP applications to the renewable heat incentive. Having examined that information, the Government still hold to the point that the higher biomass CHP tariff is in place in recognition of the higher capital costs and the additional efficiency benefits, which biomass CHP—including power—can deliver, compared with the separate generation of power and heat.

It is right that the higher biomass combined heat and power tariff is available to those installations with higher capital costs that deliver additional efficiency benefits and value for money for the taxpayer. It is also reasonable to limit additional payments to installations that do not deliver those additional benefits.

The hon. Member for Aberdeen South spoke about goalposts moving. Government policy plays an important role in this fast-moving, technologically-enabled area, so it can occasionally be necessary, in the taxpayer’s interest, to accommodate changing circumstances. The Department remains concerned about the value for money of giving the full biomass CHP tariff to projects with very low power efficiencies. Some projects have power efficiencies as low as 1%, which would deliver low efficiency gains even against separate heat and power generation.

However, we very much recognise the impact of the change on a number of companies with projects under development, in particular smaller biomass CHP plants that may be delivering higher power efficiencies but are still below 20%. Some businesses have invested in various types of CHP projects in good faith. If the hon. Gentleman has specific evidence of misleading information, he is welcome to write to me; I would be interested to see it. The Department has always had a very close relationship with the Scottish Government and I would be very surprised if there were any genuinely misleading information, but I would be happy to look at any evidence.

--- Later in debate ---

[Jesse Norman]

My right hon. Friend makes a wider point, and I enjoy the move to head off the Government. Two things: first, whether markets perform more effectively than Government depends on the question we are seeking to answer. I certainly do not accept the claim that they are always more effective. [Interruption.] I am afraid I cannot hear the hon. Member for Aberdeen South chuntering from a sedentary position. He is welcome to make the point in an intervention, if he wishes.

The second point to my right hon. Friend is that although in some cases industrial strategy has been done badly, in others it has been done rather effectively. Parts of Scandinavia have seen effective industrial policy, although I am not suggesting for a second that the industrial strategy that this country develops will necessarily model that. I am sure it will take the best of all thinking on this topic. It is perfectly proper for Government to seek to decarbonise industry, given that industry has an intrinsic market-driven tendency to burden the environment with costs that it need not meet itself through what economists call “externalities”.

[Dr Whitehead]

I am grateful to the Minister for giving way again on this issue of the announcement he just made on the grace period or dampening period, perhaps, that he is envisaging. I recall him saying that schemes that applied after 1 August for an unspecified period—he has not specified a period—would be eligible for the higher rate if they were more than 10% efficient so far as electricity production was concerned. Is that the situation? I have two questions on that. First, what is the period? Secondly, why is it from 1 August onwards? That makes no difference to the schemes that were previously under way and now find themselves in difficulty as a result of the changes.

[Jesse Norman]

I thank the hon. Gentleman for his comments. In my enthusiasm to oblige the Committee, I took a series of interventions before I could finish the point I was making, so allow me to do so now. The enabling legislation will reduce the 20% power threshold to 10% for a transition period. That will apply to all plant that has qualified for the scheme since 1 August 2016. The intention is that that threshold will revert to 20% after 31 March 2017. That is the period he asked about. With something of this kind, a date has to be struck at some point, and that is the date the Department has settled on. As I said, it allows for a significant degree of recognition of concerns that have been raised by those affected.

Indeed, based on the information we have received, the change should allow the vast majority of existing projects to gain RHI accreditation under the lower 10% power efficiency provision. May I just add one other point? It is described as a threshold, but of course it is pro rata, so those running up to that threshold will be enabled to take value from the higher rate for whatever percentage they have up to the threshold. It is not a cliff edge.

It is important to note that, as before, the 10% power efficiency provision, far from being a cut-off, will operate, as I have mentioned, on an incremental basis. So projects with a power efficiency near 10% will get more heat paid at the higher biomass CHP tariff than those with lower power efficiency.

We recognise that this revised approach will not remove all the impacts of the change from all projects, but we feel it achieves the right balance between delivering value for money and ensuring the efficiency benefits that CHP is supposed to deliver, and making sure that those benefits are indeed delivered, while also reducing the impact on projects that are under way. In particular, it reduces the impact on those projects that aim to deliver higher power efficiencies rather than lower ones.

I think I have addressed all the questions that have been put, so I will leave it there.

[Dr Whitehead]

I find myself in a bit of a difficult position. On the one hand, I really want to welcome the change in position that the Department has apparently undertaken—I say “apparently undertaken”; I would like to see the small print—in respect of the grace period being suggested and the different level of power efficiency being incorporated into that. Nevertheless, I have to say that at first sight it does not appear to satisfy the concerns of those plants that properly undertook a development process on the assumption that the RHI higher remuneration would be available to them, having applied before 1 August 2016, and that find they cannot complete their operations.

However, I want to emphasise our continued concern not about that concession but about the basis on which the whole thing was undertaken in the first place. The idea of having no consultation and no impact assessment, and there being a sudden change, as reflected by hon. Members in the debate this afternoon, is in many ways, frankly, an example of the bad practices—chopping, changing and bringing about sudden changes in the remuneration regime—that have been so deleterious to industry confidence in renewable deployment over the recent period. As it stands, this change looks like another example of that and, frankly, unless we have a proper reassessment in addition to the concession the Government have made, which I welcome, I will still think this proposal is very inadequate.

For that reason, I seek to divide the Committee this afternoon.

Question put.

Oral Answers to Questions

Alan Whitehead Excerpts

Tuesday 13th September 2016 Commons Chamber

[Jesse Norman]

Kingspan is a company I know very well, since it has a substantial operation in Herefordshire. Valuations in this area are made by the independent Valuation Office Agency. The Department is liaising with the industry and the VOA on this issue, but I certainly would be delighted to meet Kingspan and my hon. Friend to discuss it.

[Dr Alan Whitehead (Southampton, Test) (Lab)]

On that matter, has the Minister carried out any analysis of the effect of the proposed hike in business rates on payback periods for commercial and rooftop solar, and particularly school solar? Does he intend to change the tariffs if the proposed business rate revaluation comes into effect?

[Jesse Norman]

I simply repeat that the matter is under review. We have not seen what the agency will propose, but we will look at it closely when we see what it suggests.

Paris Agreement on Climate Change

Alan Whitehead Excerpts

Wednesday 7th September 2016 Commons Chamber

[Mr Hurd]

I thank my hon. Friend for that constructive and positive intervention. I am delighted that we are doing our bit to shift the tone of this debate, which is much needed. I will go on to address her point about how we intend to maintain our leadership and this international influence.

[Dr Alan Whitehead (Southampton, Test) (Lab)]

The Minister is quite right to point to the two-stage process of ratification, and the question of how the UK will go about that process in conjunction with the EU. The fact is that that process is undertaken in the UK by laying an order to achieve the objectives of an EU treaty, by having it debated by both Houses and by it coming out the other end. That process has already been completed by France, and yet the UK is nowhere near even thinking about it. Is that the Minister’s understanding, or is such a process imminent in this House?

[Mr Hurd]

The hon. Gentleman has a long and distinguished record. We served together on environmental Committees a very long time ago. I thank him for his interest. He is right on one point. Yes, France has completed its domestic processes. He is entirely wrong on his second point, which was that the Government have not even begun to think about the process. We have, and we will be in a position to make our announcement on this at an appropriate point. I am sorry that it is not today, but we have made it clear, as the Prime Minister set out explicitly today, that we do intend to ratify as soon as possible.



On the important question of international influence, the challenge is not just how we meet our own commitments in the fairest and most cost-effective way, but how we maximise our influence to make sure that others play their full part. Those two aspects are linked, because it is easier for us to keep our people, businesses and private sector with us on this journey if they feel that other countries are fully engaged, and if they see that the global opportunity offered by the low-carbon economy, which I will come to, is real, substantial and growing, and that we must maximise our involvement in it.

I want to address the question of an international instrument, which the hon. Gentleman is rightly and understandably probing and which underlies the motion. UK diplomacy is widely recognised as having played an important role in shaping and securing the Paris agreement. The framework for the commitments to which countries have signed up has clearly been influenced by the structure that we have set up in the UK. That is enormously welcome. Our influence was built not on symbolism, but on substance.

We were the first to put our own house in order, putting world-leading targets into law and implementing the policies to meet them. We then established what is still the most extensive network of climate attachés in our embassies overseas. We gave other countries practical help in areas such as carbon pricing, energy planning, power sector reform, low-carbon urban development, green finance and climate legislation. Climate change researchers are now, apparently, working with the Chinese on the structure of their own emissions trading scheme. In many of these areas, UK expertise is world leading, and sharing it has strengthened our bilateral relationships and opened up commercial opportunities. I pay tribute to Sir David King for the work that he has done over many years with commitment and passion, which he maintains today.

We have also played a leading role in international climate finance. Ahead of Paris, we committed to providing at least £5.8 billion—that is serious money—of international climate finance over the next five years to support poorer countries in raising their level of ambition to reduce emissions and strengthening their resilience to growing climate insecurity. In the Department for International Development, I had responsibility for the climate finance brief. On regular trips to Africa, I saw the exposure, vulnerability and cost attached to lack of resilience to climate change, which made even clearer to me the importance of international climate finance. I am very proud of the lead that we have taken, and of the fact that we have been asked by the global community to take the lead in Marrakesh on setting out the road map for further progress.

We arrived in Paris well respected, with a strong set of relationships. On top of that, the UK negotiating team in the UN is recognised as one of the strongest in the world. It was rightly praised after Paris for playing a key role in bringing diverse countries into the agreement. Before I close on the past, it is appropriate to put on record my personal appreciation, and I am sure that of many colleagues, of the leadership role played by the then Secretary of State for Energy and Climate Change, who is now Home Secretary.

I can reassure the House that all these elements of our influence remain strong. Our bilateral co-operation on climate and energy with key international partners remains as wide ranging and ambitious as ever. As I said, our climate finance over the next five years will be 50% greater than it was over the past five years. Our investment in clean energy research and development will double over the next five years, and we are a leading member of a group of 20 countries that have all made such a commitment. The Governor of the Bank of England is leading the way globally on green finance and the important issue of climate risk disclosure. The Bank of England co-chairs the G20’s working group on green finance with the People’s Bank of China. Our negotiating teams across Government remain active and influential, not only on the US process that will meet again soon in Marrakesh, but in critical negotiations on emissions from civil aviation and the maritime sector, and hydrofluorocarbons.

I agree that ratifying the Paris agreement early is important symbolically. That is why we will ratify as soon as we can, but it is not credible to suggest that our international influence hangs on this one symbol when it is so firmly rooted in substance. We in this Government are proud of the leadership that the UK has shown and we have no intention of surrendering it.

Our influence overseas will always rest on our action at home. Few countries can lay greater claim to leadership in decarbonisation than the UK. Through the Climate Change Act, we were the first country to set a legally binding 2050 target to reduce our emissions by at least 80% compared with 1990. That target is in line with the Paris agreement’s goal of keeping the temperature rise to well below 2º C. We have not just set targets; we have acted. At home, just as abroad, we focus not on symbolism, but on substance. We reduced UK emissions by 36% in 2014 compared with 1990. Between 2010 and 2015 alone, we reduced emissions by 17%, which was the biggest reduction in a single Parliament.

On this journey, we have proved something that was in doubt when we started debating the issue in 2005 and 2006: whether cutting emissions comes at the expense of economic growth. We have proved in the UK that it does not. UK emissions have steadily decreased since 1990 while GDP has increased. By 2014, emissions had fallen by 36%, while GDP has increased by 61% since 1990. We have proved that green growth is a reality.

We have invested in clean energy, with 99% of our solar power being installed since 2010. Renewables now provide a greater share of our electricity generation than coal. I am confident that that impressive progress will continue. During this Parliament, our investment in clean energy generation is set to double, and we are on track for 35% of our electricity to come from renewables by 2020.

I will respond to the provocation from the hon. Member for Brent North. As we develop our emissions reduction plan, which is one of the Department’s top priorities, we will set a course towards deeper emission reductions in both heating and transport. The hon. Gentleman asked me about the emission reductions plan and, I think, manufactured a suggestion of gossip from the Secretary of State. The hon. Gentleman totally distorts what I said last night. He needs to check his sources.

The emissions reduction plan matters enormously. Any suggestion from the hon. Gentleman that this Government are not taking it seriously, are sliding away from it or do not understand its importance is misleading and misrepresents our position. It is important for the reasons that he states: to underpin the credibility of our progress towards challenging decarbonisation targets, and because, as he stated, if it is done well, it will send signals to market for investment and for the mobilisation of private capital and the private sector that is fundamental for success. It is essential that we get our carbon reduction plan right.

--- Later in debate ---

[David T. C. Davies (Monmouth) (Con)]

I begin by welcoming the new Ministers and indeed the new Department. I am very pleased at the fact that industrial strategy is going to be a huge part of what is going on. I think it is impossible to separate industrial strategy from climate change and energy.

With the greatest respect to Ministers, experienced though they are, I suggest that when their teams of advisers and experts tell them that the temperature is rising directly as a result of carbon dioxide, they should merely deploy the scepticism and intelligence that I know they have and ask a few pertinent questions. They should at least try to get some rational answers before embarking on decisions that will have a huge impact on industry, particularly energy-using industries such as the steel industry, which is an important one for me.

I do not intend to speak for too long today, but every time I speak on this issue, I deliberately and repeatedly make the point that I accept climate change. I have never tried to deny climate change; in fact, I have never met a scientist who does. The climate has always changed, and the ice age is testament to that. Those changes have gone on over the course of millions of years, and over the last 2 million years, we have seen ice ages usually lasting about 100,000 or so years, followed by interglacials, which are usually about 10,000 to 12,000 years. We are possibly coming towards the end of an interglacial at the moment, so we might want to turn our thoughts to what will happen when the earth inevitably starts to get cooler, as it will.

Of course I do not deny that the climate will continue to change; no sensible scientist has ever done so. The point I always make is that the climate change we have seen over the past 250 years is not particularly exceptional. Although it is of course true that carbon dioxide is a global warming gas—there is no doubt about that either—and that if we have begun to emit more carbon dioxide, it follows logically that it must have had some effect on the climate, that does not mean that it is responsible for the relatively small increase in temperature seen over the past 250 years.

I believe that the hon. Member for Aberdeen South (Callum McCaig) said that the temperature had increased by about 1°, and in common with many other commentators, he has linked that directly to increases in carbon dioxide emissions. In fact, the temperature increase that is generally agreed on—it is, of course, open to question—is 0.8°, but even the Intergovernmental Panel on Climate Change recognises that a significant amount of that is not due to man-made carbon dioxide emissions. The first question that I would put if I were ever to become a Minister in the Department—which I accept is probably an unlikely proposition—is, “What percentage of that 0.8° has come about as a result of man-made carbon dioxide emissions, and what percentage is due to the natural forcings that we know are there?”.

I have mentioned the ice ages and the interglacials, but over the last 2,000 years there has been a well-documented series of climate changes that have had nothing to do with carbon dioxide emissions. We know, for example, that 2,000 years ago, when the Romans ruled Britain, there was what was called a Roman optimum, a warmer period. That was followed by the dark ages, when things were cooler. There was then a medieval warming period during the Renaissance, which was followed by what was commonly referred to, and scientifically recognised, as a “little ice age”. That came to an end in about 1800, which, coincidentally, is when we started to industrialise.

Another important question that I would love to put to experts—in fact, I have put it to experts on many occasions, but have never received a rational answer—is, “How much of that 0.8° increase in temperature is due to the fact that the temperature was warming anyway because we were coming out of a particularly cool period, when the Thames”—just outside the House—“used regularly to freeze over so solidly that ice fairs could be held on it?” Some of that warming is clearly natural.

If people are still not convinced, we can look at the correlation, or rather the lack thereof, between carbon dioxide emissions and the temperature increases that have taken place since industrialisation. If it is the case—as some of the more alarmist commentators would have it—that this 0.8° increase has occurred directly as a result of carbon dioxide emissions, it would logically follow that one could correlate a line between carbon dioxide emissions that have taken place since, say, 1800 and temperature increases, but obviously, if we look at the graph, we find that there is no such correlation. We see that over the last 250 years there have been periods, once again, of warming and cooling, regardless of carbon dioxide emissions. In the first part of the 20th century, for example, there was a significant warming. From 1940 until about 1970, or probably a bit later, there was a significant cooling, which led to people beginning to suggest—

[Dr Whitehead]

indicated dissent.

[David T. C. Davies]

The hon. Gentleman shakes his head, but that is a fact. There was a cooling from the 1940s onwards. That is why, when I was growing up in the 1970s, people were worried that the next ice age was coming.

From the mid-1970s until about 1998 there was a significant amount of warming, but from 1998 until now there has been no statistically recognisable warming. People keep referring to the third hottest year on record, or whatever it is, but the reality is that when we look at the actual temperature increases, we see that they are absolutely minute. They are almost impossible to detect. Scientists who are asked about it will also have to admit that the margin for error within those increases is much greater than the increases themselves. Given the level of increase that we are seeing, it is perfectly possible to explain it away, because we are not comparing like with like. We are using slightly different temperature gauges, the areas in which we are using them have moved, some of the areas that they are in have changed over the years, and they can be subject to something called the urban heat island effect or to other natural factors. So there has not really been an increase since 1998.

Members may shake their heads, but I have raised this with the Met Office, and also with Professor Jim Skea. Scientists refer to it as the Pause, and they have come up with numerous explanations for it. I have heard about volcanoes, for instance, and the heat going into the ocean. At a meeting in this building, Professor Skea suggested that a pause over 16 or 17 years was statistically insignificant, which prompts an obvious question: if 17 years of temperatures not rising are insignificant, why are 30 or 35 years of temperatures increasing slightly so significant that we have to make radical changes to our economy and our industry to try and tackle that?

--- Later in debate ---

[Dr Alan Whitehead (Southampton, Test) (Lab)]

The hon. Member for Wells (James Heappey) described the hon. Member for Monmouth (David T. C. Davies) as an “oracle”. I cannot resist observing that the oracle at Delphi was a priestess known as the Pythia who raved incoherently under the influence of the noxious gases coming up from beneath the earth’s surface and whose comments were then translated by the priest for the delectation of the general public. I shall simply let that observation fall to the floor, for what it is worth.

Today’s debate is about not just the ratification of the Paris accords, but the consequences of their ratification for the UK, and the ability of the UK to ratify them in good faith and good order on the basis of what it recognises as the commitments it will undertake as a result of being a party to the accords. In that context, it is important not only to clarify one or two points about the ratification process, which we have already done to some extent today, but to review the process and how it relates to issues such as the existence or otherwise of a low-carbon programme that actually sets out what we are committed to. I would have thought that it would have been a particularly good idea—or should be particularly good idea—to make the low-carbon programme available at the same time as the consideration of the ratification process so that we could have the full raft of information in front of us, but I will return to that point in a moment.

It is clear that the ratification process has two stages, as we have discussed, and that the UK’s particular responsibility now is to put an order—the EU treaty converted into an order—in front of the House and to get our bit done, which, as I mentioned in an earlier intervention, France has managed to do. That is important not only to get the business done for our country, but to ensure that the EU ratification is made as speedily as possible by getting the full process undertaken, especially by the heavy-hitters such as the UK, at the earliest possible time.

It is also important to clarify what we are undertaking in our joint ratification with the rest of the EU. As my right hon. Friend the Member for Doncaster North (Edward Miliband) underlined earlier, we need to clarify our ratification position as the Brexit process is undertaken. As far as we are concerned, the INDCs that were put on the table in Paris form part of the European bloc for the international negotiations. We have a joint INDC with all other EU member states, and the commitments that come from that relate to ambitions not for 2050, but for 2030, given the 40% reduction in emissions between 1990 and 2030 that was jointly agreed among all participating EU states.

The INDCs will then be the subject of progress reports. The INDCs together represent a reduction in temperature of substantially less than the 2°/1.5°C ambition, coming in at 2.6° or 2.7° in the overall INDCs. Therefore, the conference of the parties progress reports on how the INDCs are going will not only consider whether countries have carried out their INDCs, but form part of a process of strengthening them over time to get further commitments and to move them down towards a reasonable target or ambition for global temperature stability.

In those circumstances, by my reading, we will be in the first review period just at the point when we will be undertaking Brexit, so the INDCs that we had negotiated jointly with the EU may no longer be seen as tenable for the UK. The question we may have to start to face in those international negotiations is: do we, as my right hon. Friend the Member for Doncaster North said, seek to nail ourselves down in the EU discussions on the INDCs, or do we decide at some stage that we are somehow going to develop our own INDC, which will be recalibrated from whatever it is we think we have allowed ourselves to be put in line for within the EU? If we do that, does that recalibration indicate a lessening or an intensification of our commitment? Better still, is there simply an agreement that, whatever else Brexit may say, we are committed to that joint INDC on the basis of whatever is shared out by the EU as the process goes forward? I would value a thought from the Minister about what the intention on the INDCs might be, because that is important for clarifying our long-term commitment over the next period in reality.

Notwithstanding that, the ratification process will take place on the basis that we are committed to being part of the European basket of a 40% reduction by 2030 as our offer from Paris and beyond that. The question of the missing low-carbon programme therefore starts to loom large because, as a result of Paris, we need to know whether the UK is really able to deliver on that 40% reduction, be it separately or as part of that EU programme. The whole issue of ratification must have that as one of the questions within it—are we able to do what we said we would be doing at the time of the agreement?

At the time, it was welcome news that the Government went ahead and agreed to the fifth carbon budget, and that they did so without any suggestions that there might be caveats attached, unlike what happened with the fourth carbon budget. That sent a clear signal about what our overall ambitions should be. A question then arises about the fourth and fifth carbon budgets moving forward, and whether we can fit what we have agreed regarding the INDCs into the process of agreeing those carbon budgets and their consequences. That is where we start to have a problem. I am increasingly concerned about whether we have the policy instruments in place and the wherewithal to reach a position where we can say, hand on heart, “Yes, we are in this seriously.” Indeed, that concerns not only me but, more importantly, the Committee on Climate Change. Its recent progress report to Parliament on carbon budgets made the important point that although, as the Minister mentioned, our progress on tackling overall emissions has historically been looking pretty good over the recent period, with emissions falling by an average of 4.5% a year since 2012, that has been almost entirely due to progress in the power sector, not progress in the rest of the economy.

The Committee on Climate Change says that, in the rest of the economy, emissions have fallen by less than 1% a year on a temperature-adjusted basis. It specifically says that that is because of a slow uptake of low-carbon technologies and the behaviour of the building sector—low rates of insulation improvement and low take-up of low-carbon heat—as well as because improved vehicle efficiency has been offset by increased demand for travel. It also says that there is minimal evidence of progress in the industrial and agricultural sectors. The Committee is beginning to sound alarm bells about the extent to which we will be able to make the progress that is needed if we are to carry out those INDCs properly.

The Committee on Climate Change points out that, even as far as the energy sector is concerned, some areas have seen progress. It says that funding for offshore wind has been extended to 2026, which I very much welcome as an important step towards attaching the next stage of the levy control framework to offshore wind. However, the Committee says that there are backward steps in other areas, and Members will not be surprised to hear what they are: the cancellation of the commercialised programme for carbon capture and storage; the reduction in funding for energy efficiency; and the cancellation of the zero-carbon homes standard.

The Committee on Climate Change also says that other priorities have not moved forward. There have been no further auctions for the cheapest low-carbon generation, no action plan for low-carbon heat or energy efficiency, and no vehicle efficiency standards beyond 2020. It also says that progress on improving the energy efficiency of buildings has stalled since 2012. Annual rates of cavity wall and loft insulation in 2013 to 2015 were down 60% and 90% respectively from annual rates between 2008 and 2012. I cite these points from the Committee given its status as an expert body.

The carbon budget and carbon programmes have substantial ramifications for endeavours, aspirations and targets way beyond the size of what appears to be the policy put in place at a particular moment. I have a lot of sympathy with the Minister in his task of putting the new low-carbon programme together over the next period. He inherits a number of issues that have percolated down to short-term policy decisions, which have substantial ramifications on climate change targets over the longer period. Like my right hon. Friend the Member for Doncaster North, I would like to big up the Minister’s new post. It is a good idea to have a Minister for climate change who is completely onside as far as climate change is concerned. Not only is he onside, but he has a long record of being onside. His commitment to this cause is absolutely unquestionable.

[Edward Miliband]

We have finished him off now.

[Dr Whitehead]

Indeed, yes. That is now two stabs to the heart of the Minister’s career.

In his responsibilities and those of his Secretary of State, the Minister has a problem arising from the flurry of policies over the past year on the long-term considerations relating to climate change effects. If his new Department lets those policy changes lie, or runs further with them, the problem will be exacerbated, and his problem of writing a low carbon programme will be magnified.

The new Department benefits from particularly good appointments in the form of Ministers who completely understand and are at ease with the question of what we need to do, where we need to do it, how we need to do it and what the effects will be. We need to identify where those effects may continue to be felt outside the new Department. We can point the finger at what happened with some of those changes under the previous Department of Energy and Climate Change, and we can point the finger in the direction of the Treasury. During the latter stages of the previous Government and in the first period of the present Government, we had the Treasury’s energy and climate change policy and the Department’s energy and climate change policy, and the two rarely coincided. Let us guess who came out on top in terms of policy direction.

My first plea, coupled with kindly advice to the Minister, is to get on top of the Treasury straight away. If Treasury domination of energy and climate change policy is allowed to continue, regardless of the long-term climate consequences, the writing of a new carbon policy will end in tears. To illustrate that, we can look at the previous carbon plan, which came out in December 2011. That plan not only contained some bright ideas, but set out where we were, where we wanted to be in 2050 and how the transition would be undertaken in each of a series of sectors, and that was analysed thoroughly for those sectors.

In the context of the 40% emissions cut that we are now looking at in the European INDCs, the assumptions underlying a low carbon plan are important. How effectively do they cover where we are now, where we are going to be in 2050, how we make that transition and how that transition works in 2030, which is the period that we are now considering? The carbon plan 2011 is clear about carbon saving, the green deal and ECO. It envisages that all practical cavity walls and lofts will be insulated by 2020 and up to 1.5 million solid walls will be insulated. We know that that has gone. There is no longer even a remote chance of such an achievement, particularly with respect to solid walls and probably also with respect to other forms of insulation, because the green deal has gone and ECO has morphed into a pretty restricted version of the original ECO. Yet, the Committee on Climate Change, in its preamble to the fourth carbon budget, suggested, as an assumption in that carbon budget, that by the early 2020s over 2 million treatments of solid-wall properties would have to be undertaken as a central contribution to carbon reduction. So that has gone.

The 2011 programme says carbon capture and storage will

“make a significant contribution by 2030”.

In the scenarios modelled, it is estimated that CCS will contribute as much as 10 GW. Well, that has gone. The Treasury managed to bundle CCS into a cupboard very neatly just a little while ago. Personally, I thought that was one of the biggest enviro-crimes committed by the Treasury, in terms of its policies of cutting off the fundamental route to decarbonisation of remaining baseload power over the period and apparently not worrying about the consequences.

The 2011 carbon plan says:

“From 2030 onwards, a major role for gas as a baseload source of electricity is only realistic with large numbers of gas CCS plants.”

We have committed ourselves to close down coal by 2025, although we have yet to see the consultation on that, but that is to be undertaken, it is stated in the relevant consultation, only if the progress on building new gas plants is sufficient to allow that to happen—that is, the commitment is to phase out coal, but to replace it with a new dash for gas. Yet, the carbon plan and, indeed, the Committee on Climate Change indicate very clearly that gas itself can be maintained as a baseload only if it has a substantial amount of CCS attached to it. We are apparently going ahead with the dash for gas over the next period without any thought that in the reasonable future CCS may come in as far as gas itself is concerned. That has a substantial impact on our ability to meet the fourth and fifth carbon budgets over the next period.

The low carbon plan says:

“Looking to the future, between 21% and 45% of heat supply to our buildings will need to be low carbon by 2030”,

but the then Secretary of State warned last year that we are failing badly on our 2020 heat targets and there is no chance at present of getting to our 2030 target, so that contribution has also gone.

Finally, let me just pick out some of a larger number changes from the 2011 report. The report said

“all new homes from 2016”

will “be zero carbon”, which would make a considerable contribution to the fourth and fifth carbon budgets. Well, of course, those homes will not be zero carbon, because the zero-carbon homes plan has also been pulled.

[Barry Gardiner]

My hon. Friend always speaks with such authority on these matters. In relation to CCS, is he as concerned as I am that the cross-Yorkshire and Humber pipeline has just had its planning deadline extended by the Secretary of State? It looks as if, yet again, these projects are being put into cold storage.

[Dr Whitehead]

There is perhaps an irony in the words “put into storage”, because the whole purpose of the exercise in the first place is storage. However, my hon. Friend is absolutely right that the whole question of what will happen with not only CCS pilot projects but the infrastructure and the prospects for CCS as a whole appears to have been put into the long grass, and that is a profound problem as far as our future climate change commitments are concerned.

It is going to be hard to write a convincing new low carbon programme in the light of just some of these things unless the Department gets to work very rapidly and unpicks the damage to the long-term low carbon prospects that have been underlined by the savage changes of the past year. I know that the new Minister is committed personally to making sure that the consequences are right, so that is perhaps an early task on his desk. Let us turn this round so that we can put into the low carbon programme positive consequences for the future rather than the negative consequences that there are at the moment.

These two issues go very closely together. We have to get on, very soon, with doing our bit on ratification. I am encouraged to hear from the Minister that if the documentation is not imminent, perhaps it is pretty imminent.

[Mr Hurd]

indicated assent.

[Dr Whitehead]

The Minister is sort of nodding his head, so that is good. At the earliest opportunity, we need to have a good look at the new low carbon programme to see whether what we are committing ourselves to do can really be carried out, and, if it cannot, what we must do next to make sure that we can meet those commitments. That is part and parcel of the documentation, and the sooner it can come forward, the better. I hope that by putting the two issues together, we can get a real grip on what we have committed ourselves to and how well we can do it for the future.

--- Later in debate ---

[Jesse Norman]

I am enjoying the sedentary contributions from the Opposition spokesman, but he has had his moment. Let us focus on the two themes that came through, loud and clear, across all the speeches and interventions today. The first is that the issue of climate change is now in the absolute mainstream of our political debate. Whatever people’s specific views, climate change is recognised across all parties, in all the nations and regions of this country, as a central issue of public concern. The second point follows from that, and it is that we cannot and we must not view this country’s commitments in relation to climate change in a narrowly partisan or party political way. The Paris agreement has been welcomed by Members from across the House, as has the concerted action taken this week by China and the USA.

As the Prime Minister underlined only a few hours ago, this country has long exercised global leadership in this area. It has balanced great ambition with a sober recognition of the costs involved—costs that can hit not merely industry but often, directly and indirectly, the poorest people in our society. There is so much more to do, but what the UK has done is cause for celebration, not regret.

We can all agree that climate change is one of the most serious threats facing the world, and that has been brought home to us again today by the excellent examples highlighted in the contributions of the hon. Member for Glasgow North (Patrick Grady), my hon. Friend the Member for South Ribble (Seema Kennedy) and the hon. Members for Wirral West, for Llanelli (Nia Griffith) and for Wakefield, as well as by my brilliant colleague the Minister of State. We agree that climate change is one of the most serious threats facing the world. We agree that the UK has played, and will continue to play, a unique and important role in global action to tackle the changing climate. We agree that that action is an opportunity for growth, for new jobs and for improvements to health, to cities and to our daily lives.

That consensus is the prerequisite. It is the essential long-term basis for concerted action in this area by all Governments, at any time. It will be especially helpful to us as we look forward to the COP22 meeting in Marrakesh in November, which will help to set many of the rules relating to the Paris agreement and so will mark a shift from aspiration to implementation. That consensus, and the need to maintain it, is fundamentally why I still hope that the hon. Member for Brent North will not press this needlessly divisive motion to a vote.

The Government have made it very clear that they welcome the push by the US, by China and by other countries towards the early ratification of the Paris agreement. We remain firmly committed to that agreement and to ratifying it as soon as possible. The convention, however, is that all European Union member states ratify the agreement together, collectively. We hope that that will happen, as has been said, as soon as possible.

Unfortunately, it is not true, as was stated by the hon. Member for Sefton Central (Bill Esterson), that France has ratified the agreement. The Commons Library briefing of 6 September says:

“As set out on the UK French Embassy website it will not do so until all Member states and the EU are ready to do so, and will focus”—

in the meantime, on—

“encouraging other Member States to make progress”.

France was reported in the press as having ratified the agreement, but it has not in fact done so.

I appreciate that we have heard some perfectly proper concerns about the Paris agreement coming into force before the EU has ratified it. However, there is widespread international understanding that in the event that the agreement enters into force early, countries that have not yet completed their domestic processes to allow ratification to take place—very important processes of consensual ratification—should not and will not be prejudiced. Not to do so would mean that as many as 140 countries, including some of the very poorest and most climate-afflicted nations in the world, would be denied a full seat at the table. COP22 in Marrakesh in November will, I hope, take a formal decision to that effect.

Turning to recent history, few countries have been more active in decarbonisation than this one. We were the first country to set, through the Climate Change Act, a legally binding 2050 target to drop our emissions by at least 80% on 1990 levels. Far from not having a strategy, we have just signed off our fifth carbon budget, which sets the terms for the overall picture. The UK has made great progress in reducing its emissions, which had fallen by 36% by 2014 on 1990 levels. During the past five years, between 2010 and 2015, our domestic greenhouse gas emissions have fallen by 17%, which is the biggest reduction in a single Parliament. We already have domestic obligations that keep the UK well below the 2° rise in temperature goal mandated by the Paris agreement.

[Dr Whitehead]

The Minister mentions the signing off of the fifth carbon budget and my pleasure about that, but perhaps he missed the point I made earlier, which is that the Government are nowhere near in any possible way meeting the terms of the fifth carbon budget, as a result of the policies they have recently put in place. That is presumably of some concern to him.