Energy BILL [ Lords ] (Sixth sitting)

Debate between Clive Lewis and Andrea Leadsom

Thursday 4th February 2016 Public Bill Committees

[Andrea Leadsom]

No, it does not.

The Government continue to invest in the development of CCS. This includes investing more than £130 million in CCS research and development since 2011. For example, in October last year we invested £1.7 million to support three innovative CCS technologies—Carbon Clean Solutions, C-Capture Ltd, and FET Engineering Ltd—and there is the potential to reduce costs. We have continued to support, jointly with the Scottish Government, the CCS developer, Summit Power, with £4.2 million in funding to undertake industrial research and development at its proposed CCS Caledonia clean energy plant in Grangemouth in Scotland.

We have invested £2.5 million in a project to investigate a suite of five stores for the storage of carbon dioxide in the North and Irish seas. We have continued to invest in the development of industrial CCS, providing £1 million to Tees Valley for a feasibility study on an industrial CCS cluster in Teesside. We remain committed to exploring with Teesside how to progress its industrial CCS proposals as set out in the area’s devolution deal, published last October, and in the context of the Lord Heseltine-led taskforce on Teesside.

Through our international climate fund, we have invested £60 million in developing CCS capacity and action in priority countries, including Indonesia, South Africa, Mexico and China, and we work with CCS partners, including the United States and Canada, through the international carbon sequestration leadership forum.

[Clive Lewis (Norwich South) (Lab)]

I do not think anyone would argue that the Government have not made financial commitments to the specific technologies. I am looking at the manifesto again—I know we are obsessing about this—but it says,

“We will protect our planet for our children”,

and it mentions

“committing £1 billion for carbon capture and storage.”

Most members of the public would see that as a straightforward commitment of £1 billion, and yet it has been taken away. The point is that a thread seems to be running through the Bill and the rest of the Government’s actions, whether on community energy, on the subsidies and tax exemptions for solar tariffs, on ending the renewables obligation a year early, or on carbon capture and storage. They are making it more difficult and more expensive for investment to come into renewables by pulling the rug from under the feet of these nascent industries. The important thing is that the Government are making investment in this country’s renewables sector less attractive and forcing up the price of low-carbon technologies.

[Andrea Leadsom]

Only yesterday, in a debate in Westminster Hall, the hon. Gentleman and I were discussing the very real issue of fuel poverty in this country. We were discussing the plight of people who cannot afford to heat their homes, yet today he is advocating more subsidies and more billpayer investment in technologies when I have already made it very clear that we have not gone ahead with the competition project because of the relative value for money versus other infrastructure projects. This is about protecting consumers. The hon. Gentleman cannot have it both ways.

Similarly, the hon. Gentleman talks about cutting subsidies, but although we continue to support the renewables sector, which is absolutely amazing and I pay tribute to it for its enormous success, he must see that as its costs come down so should the subsidies that are paid for by people who cannot afford to heat their homes. He must agree with that. I just cannot understand why yesterday he was arguing that we should be cutting costs and today he is arguing that we should be increasing them.

[Clive Lewis]

I can answer that. Ending the renewables obligation a year early has saved the average consumer 30p a year off their bill, yet we know that the Carbon Capture & Storage Association has concluded that CCS could save the average consumer £82 a year off their bill by 2030. It is a false economy. The Government are either going to be saying in a few years’ time, “We’re not going to meet our carbon targets,” or they will have to go for a more costly way of bringing carbon down and out of our economy. That is the reality. Ultimately, this is about taking a long-term view, not a short-term one.

[Andrea Leadsom]

The hon. Gentleman hangs himself with those remarks. He is saying, “Don’t save 30p today; save £82 by 2030.” Yesterday, we were discussing fuel poverty. The Government do see a role for CCS in our long-term decarbonisation efforts, but the point is that people are unable to heat their homes today. He derides 30p off people’s energy bills, but the central case is that it is £30 million saved over a one-year period or, at the most, if we had greater than expected deployment, up to £270 million. Why does he not write the cheque? If he thinks it is a trivial amount of money, I am very happy to accept his cheque and we can see whether we should continue with these things. It is simply unconscionable to try to equate something that you might achieve by 2030, according to some think-tank, with the very real issues today, including the state of our economy and a very difficult spending review, and the reality of people who simply cannot afford to heat their homes.

[Clive Lewis]

rose—

[Andrea Leadsom]

I will give way to the hon. Gentleman one last time, but then I will continue.

[Clive Lewis]

Thank you, Minister; you are being very generous with your time. On fuel poverty, I will say what I think your fellow Conservative Members were saying yesterday, which is that the key thing for them was that energy efficiency has fallen through the floor. The green deal is finished and the energy company obligation has no funding beyond 2017. That leaves a big gap by 2018. On your own estimates, you are not going to achieve your own targets for warming and insulating people’s homes for another century, so I will take no lessons from the Minister or Government Members on energy efficiency and fuel poverty.

Energy BILL [ Lords ] (Fourth sitting)

Debate between Clive Lewis and Andrea Leadsom

Tuesday 2nd February 2016 Public Bill Committees

[Andrea Leadsom]

Clause 80 was inserted into the Bill by the Opposition in the other place and intends to restrict the carbon accounting rules that are permissible under the Climate Change Act from 2028, which is the start of the fifth carbon budget period. This is quite a technical area and to aid Committee members’ understanding, I thought it would be helpful to explain briefly how carbon budgets and carbon accounting work at the moment. I hope hon. Members will bear with me as I explain that before I come to set out our reason for seeking to remove the clause from the Bill.

The Climate Change Act sets a target for the UK to reduce emissions by 80% from 1990 levels by 2050. It also requires us to set intermediate targets called carbon budgets to reduce emissions along the way. Carbon budgets are a cap on the emissions allowed over successive five-year periods. For example, the first carbon budget covered the period from 2008 to 2012, and we met that budget with 36 million tonnes of carbon dioxide equivalent to spare. We set carbon budgets 12 years in advance, so by 30 June this year we will be setting the fifth carbon budget to cover the period from 2028 to 2032. As well as setting each carbon budget, we make regulations that set carbon accounting rules for each budget period. The rules, in addition to what is set out in the Climate Change Act, tell us how to calculate the budgets and therefore whether we have met them.

I will now briefly explain how the current carbon accounting rules work before setting out the intended effect of clause 80 to the Committee. Under the current rules, we count the UK’s actual emissions for some sectors and for other sectors we reflect how the EU emissions trading system works instead of counting actual emissions. For transport, buildings, agriculture, light manufacturing and some other areas, we count the UK’s actual CO₂ emissions. For the power sector and heavy industry, we effectively reflect how the EU ETS works instead of counting the UK’s actual emissions. The EU ETS is a scheme in which emissions from power and heavy industry are capped and reduced at an EU level. Emissions are reduced by issuing a declining number of emissions allowances to member states. The emissions allowances are then traded by power stations and industrial sites across the EU. Our current carbon accounting rules tell us to count the UK share of the EU ETS emissions cap for the purpose of carbon budgets. In that way, carbon budgets reflect how the EU ETS works.

Clause 80 is intended to stop us reflecting how the EU ETS works in our accounting for carbon budgets. It amends the Climate Change Act to say that EU ETS units cannot be debited or credited from the UK net carbon account. I clarify that, even with that change, we will still participate in the EU ETS; we would just not reflect how it works in our carbon budgets.

There are positives and negatives in different accounting methods. Weighing them up needs careful consideration of a number of factors, such as the potential impact on consumers, on businesses, on industry and, of course, on cutting emissions at the lowest cost. It is absolutely right that we keep our accounting practices under review. However, I make it clear to all hon. Members that now is not the right time to make this change. The Government are totally focused on setting the fifth carbon budget by 30 June, and we have already been working on it for upwards of a year, as required by the Climate Change Act. That 30 June deadline is less than six months away.

We have been working on the basis that it will be permissible to use the current accounting framework, which is also the basis on which the Committee on Climate Change has produced its advice on the level of the budget. Accepting clause 80 would threaten serious delay in setting the fifth carbon budget, putting us at risk of not complying with the Climate Change Act at a time when the UK should be showing clear, decisive leadership following Paris. It is therefore my strong desire to see clause 80 removed from the Bill.

[Clive Lewis (Norwich South) (Lab)]

It is a pleasure to serve under your chairmanship, Mr Bailey. I thank the Minister for her pre-emptive argument against the proposal I am about to make seeking the retention of this extremely important clause.

Having repeatedly listened to the Minister and her colleague, the Secretary of State, I am convinced that they both personally share the Opposition’s genuine desire to make a success of our Paris COP 21 commitments. We all understand the urgent necessity to reduce our carbon output in the most cost-effective way possible. Ultimately, we all want to stave off the worst effects of climate change in a way that bolsters rather than undermines our economy.

To that end, I will break down our arguments in support of the clause into four key parts: first, how the clause will ensure investor confidence in renewables and the Government’s approach to them; secondly, why the over-complex accounting of our current carbon budgets risks our failing to meet our reduced emission commitments, both nationally and internationally; thirdly, how the clause will ensure lower costs for taxpayers, consumers and businesses as we strive to decarbonise; and fourthly, why the clause is necessary to live up to both our European and international commitments.

So far, Ministers have cut the solar subsidy by 64%, costing up to 18,000 jobs. They have cut the biomass subsidy and the biogas subsidy. They have scrapped the green deal without replacing it with something more effective, and they have slashed investment in home insulation and reducing fuel poverty. They have imposed a carbon tax on renewables by scrapping their exemption from the climate change levy, which is akin to extending an alcohol tax to apple juice. They are about to try their best this week to block further onshore wind generation, even where projects enjoy popular local support. They have slashed support for community renewable energy projects, and they have announced the sell-off of the UK Green Investment Bank without protecting its special green status. They have handed out generous 15-year subsidy contracts to diesel generators, which are one of the most polluting energy sources available. They have failed to incentivise a single new gas-fired power station, and they have cancelled a £1 billion manifesto commitment to carbon capture and storage—going back on a decade of promises from the Prime Minister himself.

Do not take my word for how damaging all that has been to investor confidence in our energy system. In a letter to the Secretary of State last week, the CBI and some of Britain’s biggest companies pleaded for

“clear leadership and stable policy”

for low carbon and energy investment generally. A separate report was published last week by the Institution of Mechanical Engineers. It stated that under existing Government policy,

“it is almost impossible for UK electricity demand to be met by 2025.”

In one fell swoop, this amendment would help to give investors and the industry the clarity that they need.

--- Later in debate ---

[Clive Lewis]

I thank the hon. Gentleman for his point. I think that he will know that the National Infrastructure Commission—I spoke to Lord Adonis himself—is going to put a lot of emphasis on spending on interconnectivity, which will increase; and ultimately somewhere in Europe the wind will be blowing and somewhere the tide will be coming in and going out. I think that the demand-side technology will make an increasingly big impact.

[Andrea Leadsom]

I have to correct the record. There is an interesting app on real-time power generation, and there are frequent occasions when there is no wind contribution whatever. It is simply not correct to say that the wind will always be blowing somewhere in terms of the UK’s power generation. The point made by my hon. Friend the Member for Daventry about intermittency is a very real one, which we deal with every day.

[Clive Lewis]

I thank the Minister for her input. We are not saying that we will rely entirely on renewables. They are part of a balanced mix. However, as the Government have already made clear, they are not committed to that. Carbon capture and storage is one of the key ways, one of the most cost-effective ways, in which we can begin to use, yes, gas and coal to produce energy and also meet our carbon targets, and the Government have backtracked on that. We are not saying—[Interruption.] I will press ahead, because we have been on this point long enough.

By supporting the amendment, the Government would send the industry a clear signal about the direction of travel of our power sector, giving businesses clarity, transparency and long-term assurances as to what decarbonisation investment will be needed and by when. In other words, they would be providing certainty—something that is now in short supply. Part of that certainty will come from clear, unambiguous accounting of carbon budgets. This goes to the heart of the clause. It means that by 2028 the power sector in particular should be using cleaner technologies, not simply buying in credits from other parts of Europe. Opposition Members are not opposed to the EU ETS scheme in itself. If reformed, it still has the potential to be a key part of Europe’s strategy for reducing pollution levels, but permission to use ETS credits in the carbon budget accounting process indefinitely is wrong, because it distorts the clear market signals that business needs to invest in new cleaner power stations here in the UK.

As the former coalition peer, Lord Teverson, explained in the other place, when talking about getting rid of the ETS allowances in the budget for the post-2027 period, the allowances would then

“mean what everybody would understand them to mean—that is, what the emissions of UK plc are. It would get rid of all those strange accounting distortions and bring us back to common-sense accounting and what people would understand carbon budgets and our own carbon emissions to be.”—[Official Report, House of Lords, 21 October 2015; Vol. 765, c. 719.]

Meanwhile, ClientEarth, a non-governmental organisation that lists DEFRA as an official supporter, said:

“If the UK is to continue to be at the forefront of global efforts to reduce greenhouse gas emissions following the historic agreement in Paris, we need carbon budgets which are clear, certain, and which drive emissions reductions in all sectors of our economy…This new clause, if implemented, would remedy these weaknesses and mean the Climate Change Act for the first time doing what it must do: set genuinely clear and certain emissions targets that are binding across the board.”

--- Later in debate ---

[Andrea Leadsom]

I am disappointed that Opposition Members think that clause 80 is the answer—to what question, I am not entirely sure. The hon. Member for Norwich South suggested that there were four reasons—investor confidence, complexity, getting costs down and helping us to meet climate change commitments. I put it to him very courteously that clause 80 would not achieve those things of itself. It is absolutely not the case that simply changing the accounting method in the power generation sector as currently covered by the ETS would improve investor confidence.

What is vital in improving investor confidence is the very good speech made by my right hon. Friend the Secretary of State for Energy and Climate Change last November, in which she made it absolutely clear that the priorities for the UK Government were first, far and above all else, energy security, and, secondly, that no responsible Government should take a risk on climate change. Those two absolute abiding principles underline everything that we do.

Throughout this Parliament, we will be seeking to meet our objectives, which are energy security while decarbonising at the lowest cost to consumers. The Secretary of State talked about our commitment to new offshore wind, getting the costs down and deploying up to 10 GW; to new nuclear, which, as the hon. Member for Norwich South must concede, is a very low carbon form of power generation; and to new gas, which again I think the hon. Gentleman will accept is the bridge. Consulting on taking coal off the power generation side of things and using instead new gas as a bridge to a low carbon future is possibly the biggest thing we could do to decarbonise quickly and securely and at the lowest cost to consumers.

It is simply not the case that by changing the way we account for carbon in the power generation sector we would achieve any of the investor confidence and assurance of meeting targets for reducing costs to consumers or helping us to meet our climate change commitments.

[Clive Lewis]

Energy security is a really important point. I will just pass on a fact. Ten years ago the UK imported no gas at all from Russia. By 2013, in the whole of the EU, only Italy and Germany imported more gas from Russia. Energy security has actually gone backwards, not forwards, because now we are relying more on Putin’s Russia for our energy supplies and gas than we were under the last Labour Government.

[Andrea Leadsom]

That is an extraordinary thing to say. The hon. Gentleman’s party is doing everything possible to try to ensure that the Government are not able to improve our own access to home-grown gas. I am glad that his party has come out in favour of supporting the oil and gas sector in the North sea—that is something to be welcomed—but 40% of the UK’s gas supply still comes from the North sea. The hon. Gentleman is right to point out that that is a reducing amount—by 2035 it is expected to be only about 25%. The issue of energy security and where we get our gas supplies is a very important one.

I am pleased to tell the hon. Gentleman that, since it is a global market, supplies as things stand are very good. Our biggest partners are Norway and, for liquid natural gas, the middle east. It is not true to say that we have a big dependency on Russia by any means. Nevertheless, energy policy is vital for this country’s future energy security. Of course, 80% of us in the UK use gas for heating and cooking. Members who are rightly enthusiastic about renewables, as am I, must bear it in mind that this country will continue to need gas for a long time.

--- Later in debate ---

[Andrea Leadsom]

Again, the hon. Gentleman highlights the need for diverse sources of energy and for an absolute focus on ensuring that we have a proper mix of sources, and not a focus on having all our eggs in one basket. Specifically on EDF, we expect announcements any day. We fully expect to have that deal done within the next short period of time. These are commercial deals, and it is a big transaction, as we know. Such things take time. Nevertheless, a comprehensive energy policy that includes new gas, new offshore wind and new nuclear is important so that we can be the first country in the developed world to take coal out of power generation. Of course, we are continuing to support renewables.

I make it clear that, in our feed-in tariffs review and in all our work on renewables, we have trodden a fine line between what is right for renewables generation and what is right for the bill payers who pay for it. We have had a lot of debates in this House, and in the other House, on fuel poverty, which is a big issue. New technologies should stand on their own two feet when they are able to do so. As the costs of deploying new renewables come down, so should the subsidies. We should not continue with subsidies that create an overly generous return when, at the other end of the spectrum, we still have many people who cannot afford to heat themselves or to keep their lights on. That is an important balance. As I have said time and again, the Government are absolutely committed to energy security but, secondly, we are committed to decarbonising at the lowest cost to consumers, which underpins everything that we do.

The hon. Member for Norwich South asserted that effectively removing ETS from the calculation of carbon budgets would somehow make decarbonisation cheaper. I am sorry, but I just do not find any evidence for that. We will keep our accounting under review, and it is right that we do so, but he has not provided any evidence that decarbonisation would be cheaper or that investor confidence would be greater. He has failed to answer why, with only a few months to go before, according to our legally binding commitment under the Climate Change Act 2008, we must set out our policies to meet the fifth carbon budget, which is being proposed, we should suddenly turn everything on its head and change how we account for carbon.

The hon. Gentleman and all Opposition Members must appreciate and realise that although what they are proposing has some merit—it is certainly an interesting idea that the Government will keep under review—it is just not realistic at this late stage to start to turn on its head the way in which the Committee on Climate Change or the Government make their calculations. The work has been going on for up to a year already and is now stepping up apace so that we can meet our legally binding commitment to publish our report by the end of June this year.

The hon. Gentleman quoted the Committee on Climate Change’s recent letter, which I can quote back to him. On whether the fifth carbon budget should be tighter, it said a few days ago, in January, that its

“judgement is that our existing recommendation is sufficient at this time, although a tighter budget may be needed in future”.

Let us be clear that the committee is not calling for what is in the clause. All its recommendations and assessments have been done on the assumption that we continue to use the European ETS scheme to account for carbon in the power generation and other sectors. Were we to go ahead and agree to the clause, it would be extremely difficult, if not impossible, to meet our commitments under the 2008 Act.

[Clive Lewis]

The Committee on Climate Change also said that it expects the ETS sector, which is exempt from the current carbon budget proposals, as we have been discussing, to use only ETS credits, not debits, by the fifth carbon budget. That is my understanding. If we are to achieve the most cost-effective route to decarbonising the economy, we have to make this change. Yes, what the Minister says is correct, but there are other components to what the Committee on Climate Change has said that imply to me that the clause would simply make the whole process clearer and more transparent. The Minister says that there is no evidence, but I do not think anyone present would disagree that markets like clear signals. They want to be able to see what is coming in future. They do not like surprises and want to know what the investment scenario is. By making that clear and having a clear accounting process, the market signals will be far clearer.

[Andrea Leadsom]

I have to disagree. The hon. Gentleman talks about clarity, but, having worked on one basis for a year and with the Committee on Climate Change having proposed that we work on that basis in its recommendations, there is nothing clear about suddenly deciding to change it six months ahead of putting out a legally binding commitment to a legally binding piece of legislation. What is clear about that? Absolutely nothing. I am sorry, but I just do not agree.

On the hon. Gentleman’s point about the budget, the Committee on Climate Change says that it

“should be met without the use of international carbon units (i.e. credits) outside the EU Emissions Trading System.”

The committee goes on:

“If unexpected circumstances mean the budget cannot be met cost-effectively without recourse to purchase of credits, the Committee would revisit this advice, including an assessment of the strength and validity of the credit market at that time.”

The clause simply introduces a massive amount of uncertainty, not certainty, so I just do not agree with the hon. Gentleman’s assertion that it would somehow create greater certainty.

We are where we are. I have already said to the hon. Gentleman that it is right that we keep our accounting policies under review, and I have told him that we will do and are doing that, but now is not the right time to make this change. It would be very destabilising and would certainly give us a problem in meeting our legally binding commitment. Hot on the heels of what I think all Members would agree was the significant leadership role played by the UK in the Paris agreement, it would not be the right thing to do. We would be throwing the balls in the air, which would lead to a great deal of uncertainty. I therefore hope that clause 80 will be removed from the Bill.

Energy BILL [ Lords ] (First sitting)

Debate between Clive Lewis and Andrea Leadsom

Tuesday 26th January 2016 Public Bill Committees

[Andrea Leadsom]

The clause, which was added to the Bill by the Opposition in the other place, rewrites the OGA’s principal objective to maximise the economic recovery of UK petroleum, as originally introduced by the Government, in three significant ways. First, it removes the Wood review’s central premise to maximise the economic recovery of UK petroleum within part 1A of the Petroleum Act 1998, replacing it with an objective to maximise the economic return of UK petroleum. Secondly, it imposes on the OGA an obligation to retain oversight of the decommissioning of oil and gas infrastructure. Thirdly, it imposes an obligation on the OGA to secure oil and gas infrastructure for reuse for the transportation and storage of greenhouse gases.

As we have discussed, the OGA has important functions in respect of decommissioning and the storage of carbon dioxide. However, the change to the principal objective that was advanced by the Opposition in the other place is damaging, self-defeating and unnecessary. It is damaging because not only does it introduce significant uncertainty about the principal objective, but it could also be interpreted as requiring industry to meet substantial and uncapped capital expenditure to secure and maintain infrastructure—potentially indefinitely—prior to decommissioning and until such time as a carbon capture and storage project is ready to use it. Our oil industry is understandably concerned about the significant liabilities and costs that that would impose at a time when it is already facing profound challenges.

The clause is also self-defeating, because it would be likely to damage the prospects of carbon storage facilities being developed in the North sea. By removing the OGA’s focus on maximising economic recovery, we risk degrading its ability to provide the support to industry that is so urgently needed, and that in turn risks the premature decommissioning of the UK continental shelf, which would result in a loss of assets, infrastructure and skills, including those that could help to promote the longevity of the industry through carbon storage projects.

The clause is unnecessary because the Government tabled substantive, meaningful amendments in the other place to reflect the OGA’s important functions in respect of decommissioning and CCS. Measures in the Bill will ensure that the OGA will have a strong role on decommissioning to ensure that costs are controlled, and that the reuse of assets, including for CCS development, is given full consideration before decommissioning is decided upon or takes place. The Government have also brought forward amendments to ensure that the OGA must have regard to the storage of carbon dioxide and how that may assist delivery against climate change targets when carrying out its functions. The Government have also made it clear that the petroleum-related information that the OGA will have powers to acquire includes that which is relevant to the storage of carbon dioxide.

Crucially, this approach is sensitive to the current economic landscape of the North sea. It strikes the right balance and does not dilute the OGA’s focus on maximising economic recovery. It is worth underlining to hon. Members that the Carbon Capture and Storage Association has strongly welcomed the Government’s amendments to ensure that the CCS industry is given due consideration and that it can access the information that it needs.

It is essential that we restore the OGA’s focus on maximising the economic recovery of oil and gas from UK waters at a time when the industry urgently needs a regulator with a laser-like focus on that objective. The OGA is already working closely with the Government and industry to do all that it can to support the North sea. It is focused on delivering key pieces of work in 2016 with the aim of making the basin more attractive to investment, including stimulating exploration in both frontier and mature areas, making new seismic data freely available, introducing regional development plans to protect key hubs and infrastructure, and progressing a technology strategy to make new fields more viable. We must support the OGA’s crucial mission to protect our domestic energy mix and support hundreds of thousands of jobs, but that can be achieved only by supporting and restoring to the Bill the OGA’s principal objective to maximise economic recovery. I hope that I have provided hon. Members with a logical reason why the clause should not stand part of the Bill and that they understand why I will vote against it. It is my strong desire to see clause 8 removed from the Bill.

[Clive Lewis (Norwich South) (Lab)]

It is a pleasure to serve under your chairmanship, Mr Bailey. This is my first time as a member of such a Committee and as a shadow Front Bencher.

I thank the Minister for her statement on clause 8. Since the clause deals with the question of maximum economic recovery, I need to start by opening up the question of what that actually means. The term “maximum economic recovery” was introduced by the Wood review in 2014. The first full statutory stage of implementing that review was carried out via the Infrastructure Act 2015, which inserted a new part 1A into the Petroleum Act 1998. Section 9A(1) of part 1A defines the “principal objective” as “maximising the economic recovery”, but it does not actually set out what MER means. Section 9A(2) requires the Secretary of State to formulate a strategy for maximum economic recovery. Offshore licensees are obliged to act in accordance with the strategy. For licensed operators, acting in accordance with maximum economic recovery is easy: they simply follow the strategy as opposed to the underlying principal objective.

To know how “maximum economic recovery” will be defined, we need to look at the Secretary of State’s strategy, but we do not know exactly what the strategy is, since as yet it is only a draft. It is called, “Maximising Economic Recovery of Offshore UK Petroleum: Draft Strategy for Consultation”. The final strategy is not due to be published until April, so to understand what “maximum economic recovery” is, all we have is that draft strategy, which sets out a series of conditions for operators that, taken together, can be understood to express “maximum economic recovery”. In the draft strategy, the Secretary of State describes the OGA as

“an independent, expert regulator and asset steward, empowered and equipped to bring industry together to drive common purpose and good outcomes for all”.

Who exactly is “all”? It also states:

“All of this will deliver a regulator and asset steward with a clear focus, real expertise of the sector and the remit to work collaboratively with companies to deliver the best outcomes for both the industry and the UK tax payer.”

The Bill and the Acts that go with it—including the Petroleum Act 1998, as amended by the Infrastructure Act 2015—seek to make the principal objective a best overall outcome for everyone, and that will be achieved via the OGA. As the UK continental shelf is on the downhill slope of its productive life, the interdependence of different installations and infrastructure in the UK upstream oil and gas industry is such that if each relevant person seeks only to optimise their financial position, the performance of the industry as a whole—its ability to extract the most of what is realistically possible from the basin—is likely to be sub-optimal.

The key question for the draft strategy to answer is how and to what extent businesses are to be induced to compromise their interests for the greater good. We all understand that there is a need for a body like the OGA—that is why there has been broad support for it and for the Wood review—but I return to the draft strategy, which describes the OGA as an “expert regulator and asset steward”. It is an unusual hybrid. Its job is far more than that of a mere regulator overseeing industry that can be broadly left to make its own decisions. Will it have to intervene deeply in some of those decisions? It will be empowered to sit in meetings between companies that are usually commercial rivals.

In fact, the OGA is much more like an asset steward, seeking a highly proactive role in the management of the UKCS. One quote from the Wood review is especially illustrative, because it states that a licence holder will be

“required to act in a manner best calculated to give rise to the recovery of the maximum amount of petroleum from UK waters as a whole, not just that recoverable under their own licences.”

That is a long way beyond mere regulation.

In light of the collapse of the oil price, the OGA is in some ways more like an insolvency practitioner that has come to extract the last bits of value from the UKCS and manage the process as effectively as possible, and that is the context of clause 8. It is clear that the OGA’s stewardship role is its critical function, with its regulatory role very much secondary to that. In fact, the OGA bears no resemblance at all to any other regulator, which is why we want to include carbon capture and storage as part of its principal objective. CCS is a crucial element of the long-term value that can be yielded from the UKCS.

The UK has the opportunity to become a leading global player in the CCS sector. We have abundant offshore CO₂ storage capacity in depleted oil and gas fields, and that is in combination with enhanced oil recovery and storage in deep saline rock formations beneath the North sea and the eastern Irish sea. Experts estimate that geological formations beneath the UK section of the North sea can store almost 80 billion tonnes of carbon dioxide, which is more than enough to meet the needs of UK CCS projects for the next century. That advantage is made even greater when coupled with the fact that many of the UK’s largest carbon emitters—power and industrial facilities—are already clustered together around major estuaries, such as at the Humber, Teesside and Merseyside, which are close to offshore storage capacity in the North sea and the eastern Irish sea. Many of those very energy-intensive industries have no long-term viability without CCS if the UK is to have a chance of reducing its greenhouse gas emissions.

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[Andrea Leadsom]

I am grateful to the hon. Members for Norwich South and for Aberdeen South. Like the hon. Member for Aberdeen South, I reject the suggestion by the hon. Member for Norwich South that somehow the OGA will be an insolvency practitioner. That is absolutely not the case. Sir Ian Wood’s proposal is based on maximising the economic recovery, which is what we want to do. We see the industry as an ongoing success story for the United Kingdom, with more than 350,000 jobs throughout the supply chain. It creates enormous benefit to the economy and we hope that it will continue to do so for decades to come. The OGA is absolutely not an insolvency practitioner.

I also agree with the hon. Member for Aberdeen South that, given that more than 20 billion barrels of oil and gas are potentially left in the North sea, it is not a sunset industry. We need to be clear about that. The OGA is both the regulator of an ongoing success story—we want to get the costs of production down and to encourage new exploration and we want the sector to continue to thrive—and an asset steward, as the hon. Member for Norwich South rightly pointed out, with an important role in the strategy for maximising economic recovery.

The strategy is out for consultation. We have worked closely with industry, through industry workshops and close co-operation between the OGA, industry and the Government, to define maximising economic recovery. We hope to provide the Government response to the consultation as soon as possible. It is important to be clear that the OGA is the asset steward and the regulator for an ongoing success story.

I will try to reassure the hon. Member for Norwich South about the OGA’s role in CCS. The OGA will be responsible for issuing carbon dioxide storage site licences and for approving carbon dioxide storage permit applications. We expect the OGA to have subsequent involvement in monitoring, review and possibly enforcement activities as set out in the regulations, which are transposed from the requirements in the EC directive on geological storage of CO₂. The OGA is proactively considering the role of CCS in the technology and decommissioning strategies that it is developing. The Wood review acknowledged the potential benefit of CCS to the UK continental shelf and, as recommended, the OGA will work closely with DECC to examine the business case for using depleted reservoirs for carbon storage.

Under MER UK, CO₂-enhanced oil recovery is being considered by the OGA as part of its wider enhanced oil recovery work. CO₂-EOR could make a substantial contribution to lowering the cost of CCS projects as well as benefiting North sea revenues and jobs. However, more analysis is needed on the timing of future CCS projects and how that could affect CO₂-EOR development, and on the viability of redeveloping abandoned fields as CO₂-EOR projects. The OGA will collaborate with the CCS industry to foster innovation in EOR technologies.

As the hon. Gentleman may know, the OGA’s planned work includes advancing the next tranche of EOR technologies, developing a framework for their economic implementation and developing a CO₂-EOR strategy and five-year plan this year. I hope that that gives him some reassurance, but, again, I urge Members to vote against the clause

[Clive Lewis]

I thank the Minister and my hon. Friend the Member for Aberdeen South for their input. I emphasise that I meant no insensitivity to the industry or to the people of Scotland—or to the people of the UK. It was just a frank, realistic assessment of the economic and industrial situation.

We support the clause because, instead of having a strategy whose primary goal is to maximise the quantity of petroleum profitably extracted from the North sea, we should have one that maximises the return on investment—investment in infrastructure, for example—in the North sea. If and when activity such as CCS can be carried on economically in the North sea, the OGA should be given the job of promoting that as well. The OGA’s powers to push the industry to collaborate are extensive and we applaud some of the points that the Minister made previously. However, it clearly makes sense for the OGA also to think about the wider uses and potential reuses of the infrastructure, information and skills that are there, which other industries could deploy on the UKCS later, and CCS is a clear example of that.

The clause would, first, simply ensure that the OGA keeps its eye firmly on CCS and builds into that policy. Secondly, it is clear that some of the biggest players on the UKCS are still making profits and paying out dividends—Royal Dutch Shell and Total certainly are. Fluctuations in the price of oil are normal, and it is likely that the price will go back up at some point, although it is not wise to make predictions as to when.

Thirdly, the industry has yielded huge profits in the past to companies and individuals—Sir Ian Wood, of Wood review fame, is reportedly a sterling billionaire. As we know, there was no long-term state investment in a sovereign wealth fund that would have helped us achieve the kind of energy transition we now need. To borrow a phrase, we did not fix the roof while the sun was shining, and it could be argued that Governments of all political stripes are guilty. However, the OGA’s creation is an opportunity to think long term and to escape from the short-termist, cash-in mentality of the past. The Opposition therefore seek to defend the clause.

Question put, That the clause stand part of the Bill.

Oral Answers to Questions

Debate between Clive Lewis and Andrea Leadsom

Thursday 7th January 2016 Commons Chamber

[Andrea Leadsom]

I certainly agree with my hon. Friend that the MIP is an unwelcome drain on the UK solar industry. My right hon. Friend the Secretary of State made that point in her letter to the Trade Commissioner in November. I also agree that it would be fairer and simpler to remove the MIP while the current expiry review is under way. Unfortunately, however, the decision to launch an expiry review is one for the Commission, not for member states. Anti-dumping and anti-subsidy regulations require the Commission to maintain existing trade defence measures while the expiry review takes place, so it could be some months yet.

[Clive Lewis (Norwich South) (Lab)]

Last year, the Solar Trade Association estimated that 27,000 workers would lose their jobs as a result of the Government’s proposed 87% cut to the feed-in tariff. Following a public outcry, including from Members on both sides of this House, the Department reduced the cut to 64%, saving about 8,000 jobs. I am sure the Minister would like to take the credit for that, but what is her message to the remaining 19,000 solar workers who face redundancy this coming year as a result of the tariff cut?

[Andrea Leadsom]

UK solar is a huge success story. It has grown rapidly since 2010, with enormous support from energy consumers in the UK. As we have said time and again, there is a balance. We absolutely welcome the jobs and growth that have been provided in the sector, but we cannot continue to support jobs just through bill payer subsidies. That would not be fair. Our measures will ensure that there is good potential for the industry to continue to grow and for jobs to continue to be supported, while at the same time making sure bills remain affordable.

Oral Answers to Questions

Debate between Clive Lewis and Andrea Leadsom

Thursday 19th November 2015 Commons Chamber

[Clive Lewis (Norwich South) (Lab)]

Let us get to the crux of this issue. The Department’s stated goal is for as many fuel-poor homes as is reasonably practicable to be rated at least at band C for energy efficiency by 2030. However, between 2010 and 2013 that was achieved for only 70,000 fuel-poor households, leaving 95% still to be improved. Does the Minister accept that at that rate of progress, her Department will miss its 2030 target by 100 years?

[Andrea Leadsom]

I do not agree with that. The key point is that an enormous number of homes do not currently reach the band C efficiency level, and we are determined to improve that as far as possible. That is why my right hon. Friend the Secretary of State announced yesterday that we will focus all our energy efficiency and fuel poverty budgets on the most needy. That is vital.

Oral Answers to Questions

Debate between Clive Lewis and Andrea Leadsom

Thursday 17th September 2015 Commons Chamber

[Andrea Leadsom]

I am grateful, Mr Speaker. As my hon. Friend the Member for Bury St Edmunds (Jo Churchill) will be aware, the feed-in tariff has been hugely successful in encouraging the generation of low-carbon energy for homes and businesses. We appreciate that pre-accreditation was widely supported as it enabled people to book their tariff, but the problem is that there is a tension between the cost to consumers and the value of the subsidies. We need to get that balance right.

[Clive Lewis (Norwich South) (Lab)]

Is the Minister aware of the concern among staff at the Nuclear Decommissioning Authority about changes to their pensions and will she agree to meet the relevant trade unions to discuss that?

[Andrea Leadsom]

The hon. Gentleman’s right hon. Friend Lord Hutton’s report on public service pensions was adopted by the Government in 2013 and set out the direction of travel for all public sector pensions. We are in close discussion with the NDA on how we can implement that, bearing in mind the particular sensitivities of Sellafield and other nuclear sites. I am very happy to meet the unions to talk about it, as I have previously.