UK Export Finance: Expenditure

Baroness Fairhead Excerpts

Wednesday 27th March 2019 Lords Chamber

[Baroness Sheehan]

To ask Her Majesty’s Government what proportion of UK Export Finance’s expenditure on support for energy production was spent on (1) fossil fuels, and (2) renewables, in (a) 2015, (b) 2016, and (c) 2017.

[The Minister of State, Department for International Trade (Baroness Fairhead) (Con)]

My Lords, UK Export Finance’s support is available for UK exporters in all sectors and its provision of support is demand-led. UKEF support for energy-related exports in 2015-16 through 2017-18 respectively was as follows: 99%, 97%, and 72% to fossil fuels, and 1%, 3% and 28% to renewable energies. It supported around 0.2% of the global annual investment in oil and gas in 2016. The support has helped to sustain UK jobs in a sector that employs over 300,000 in highly skilled work and is essential to our energy security. We recognise that climate change is a key issue for the world and it remains a high issue for UKEF, but support can be provided only where there is insufficient in the private market and at the moment there is significant liquidity there.

[Baroness Sheehan (LD)]

I thank the Minister for her reply. Will she acknowledge that there is a huge inconsistency between the Government’s international climate commitments, such as the Paris agreement, the UN SDGs, the G7, the G20, the EU—the list is very long—and the general support for fossil fuel production? Does she also agree that by providing billions to the enormously wealthy oil and gas industry while giving crumbs to the renewable industry, the UK Government are backing the wrong technologies and locking developing countries into decades of fossil fuel use which we will have to abandon if we are going to treat catastrophic weather events, such as cyclone Idai, with the urgency that the thousands of schoolchildren taking to our streets are demanding?

[Baroness Fairhead]

I cannot agree that it is inconsistent. Even the IPCC report states that there is a climate change imperative but that fossil fuels—oil and gas—will continue to be a significant part of our energy requirement and will require continued investment. The key is to make sure that that transformation and pivot towards cleaner energy is appropriate.

[Lord West of Spithead (Lab)]

Is it still government policy that one-third of the nation’s future energy supply should be provided by nuclear? If that is the case, how are the Government going to resolve the almost complete breakdown in the development of new civil reactors for the future?

[Baroness Fairhead]

I can confirm that it is. I think the civil nuclear capability target is around 20%. There are major projects, but there are also opportunities in small modular nuclear reactors. On renewables, it is important that we are building up capability in a number of renewable sectors. The challenge for this country is that we have very few prime contractors in offshore wind, although we have many in the supply train. We are trying to make sure that the supply train goes through.

[Lord Krebs (CB)]

My Lords, the Minister referred to the latest IPCC report, published in October last year, which recommended that global carbon dioxide emissions should be reduced by 45% by 2030 and that by 2050 the world should be carbon neutral if we are to avoid dangerous climate change. Can the Minister reassure the House that the investments to which she referred in answer to the noble Baroness, Lady Sheehan, are consistent with the IPCC’s recommended targets?

[Baroness Fairhead]

I can confirm that we reply to demand from these sectors and that we focus on renewables. We have hired renewables experts. We are trying to move towards cleaner forms of fossil fuels, for example, in the $400 million project in Ghana to reduce the dependency on oil. That is a key part of achieving those objectives.

[Lord Howell of Guildford (Con)]

Given the unwelcome fact of the continuing preponderance of coal burning for electricity throughout Asia, with new coal plants being built all the time, should not the most useful export finance support go to encouraging clean coal technology and carbon capture and storage if we are really serious about reducing emissions rather than just feeling good?

[Baroness Fairhead]

I agree with my noble friend. We have taken the lead on coal-fired power stations. As the House will be aware, we have agreed, on a multilateral basis, only the most extreme exceptional circumstances for any new coal-fired power stations. We have taken the lead on that. We have asked UKEF to be part of the Steering Committee of the Equator Principles. The last time we supported a new coal-fired power station overseas was in 2002.

[Lord Grantchester (Lab)]

My Lords, in terms of taking leadership on energy production, does the Minister agree that it is now time to recognise that underwriting exports on a return-on-capital basis is no longer sufficient and that consideration should be given to social and environmental effects and benefits?

[Baroness Fairhead]

My Lords, we absolutely have regard to those things. All our projects are rigorously assessed according to the common approaches of the OECD and the Equator Principles—the environmental, social and human rights aspects. We rigorously follow all the international guidelines, which include making sure that people stay safe in those nations, as well as having regard to human rights.

[Lord Teverson (LD)]

My Lords, is it not the case that things work really well for developing countries when there is not high infrastructure investment? Moving straight to mobile phones was a good example of that. Fossil fuels generally require high levels of infrastructure and networks, whereas clean energy is distributed and works far better for developing countries and economies. Should that not be another reason for concentrating more on clean rather than fossil fuel technologies?

[Baroness Fairhead]

My Lords, this Government are concentrating on building growth based on clean technologies, and our support for offshore wind is one obvious example. In terms of what is appropriate for each country, it is for them to decide how they meet their Paris commitments—for example, the trans- formational project in Ghana, in which we were involved, reduced its dependency on oil. In this transformational part of our journey towards the climate change agenda, we need as far as possible to move to cleaner forms of energy production, and, as the noble Lord will be aware, gas is significantly cleaner than oil.