(8 years, 5 months ago)
Lords ChamberMy Lords, I add my congratulations to the Minister on taking up her new role, which combines energy with her previous role of business. I declare an interest: as a civil servant I took part in the drafting of the Climate Change Act. I am delighted to see that these orders are tabled today.
The Climate Change Act is, I believe, a world leader. Its depoliticised structure gives it flexibility and strength; it can bend, so it does not need to break. The level of the fifth carbon budget was announced on 30 June, one of the most extraordinary days in one of the most extraordinary weeks in British politics. The reason is that the Climate Change Act creates a legal metronome, providing a long-time structure that rises above such short-term perturbations, even when they are so all-consuming.
In this context, the Government are to be praised for agreeing to the targets proposed by the Committee on Climate Change and on setting a budget that is on average 57% below 1990 for the period around 2030. However, there are many unresolved issues surrounding the carbon budgets and how they are accounted for.
During the recent Energy Bill, we had a long debate about the fact that, after 2020, there will no longer be any specific targets that require us to continue investing in low-carbon energy infrastructure. This is because the EU targets dictating the build-out of renewables will cease to apply. The noble Viscount, Lord Ridley, alluded to this in his speech, and indicated that we might be overcomplying with our renewable electricity target. I point out to the Minister that we are underdelivering on the two other portions of that target, so it is not right to say that we are going to be overcomplying with the EU legislation.
That aside, the fact that there are no renewables targets may not be a bad thing, but we need targets that will help to ensure that we see investment in low-carbon technology across the spectrum, including nuclear and carbon capture and storage, where I know there is more common ground between both sides of the House in supporting those technologies.
The noble Lord, Lord Teverson, also alluded to that issue and mentioned the EU emissions trading scheme, which will of course carry on. As things stand today, we will continue to use that trading mechanism to count towards our budgets—that is to say, we will use the overall allocation of EU emissions allowances as a measure of whether we have stayed within our budgets, rather than the actual emissions occurring here in the UK. We propose to fix that loophole by making clear that for the fifth carbon budget actual emissions will be counted, not offset emissions using EU allowances. A vote on this issue was won twice in this House but overturned in the Commons. I continue to believe that this is a necessary change of policy, and ask the Minister to seriously consider starting an immediate review of the current accounting rules so that early guidance can be given about how the fourth and fifth carbon budgets will be accounted for. That is even more critical, given the uncertainty that has been triggered by the recent referendum.
As things stand, we will not find out precisely how budgets can be met until a statutory instrument is passed after the start of the budget, so in 2029. This provides no clear guidance for those wishing to invest in UK infrastructure and is suboptimal, to say the least. I believe it will prevent actual investment in physical UK infrastructure from coming forward. The noble Viscount, Lord Ridley, has constantly referred to the cost of tackling climate change, but it is also true that one person’s cost is another person’s investment.
Although the Energy Bill sounds technical, and to a degree it is, I stress that this issue is not secondary to the search for a return to true economic growth; it is of central importance. If we find ourselves in a situation where future trade rules are set by the WTO, we will still be constrained in what we are able to do to stimulate economic growth. However, addressing environmental threats justifies government intervention under the WTO. Reinvesting in our energy systems and infrastructure provides one compelling WTO-proof way to rebalance the economy and stimulate real-world growth.
It is not just good economics to take action on climate change; it is also good politics. People care about climate change. Irrespective of what we have heard here today, they care, and it is not just the politicians who—the Minister referred to herself in this context—almost unanimously voted in favour of passing the law in 2008, it is not just the NGOs and it is not just progressive business voices; it is also the general voting public. We especially care when our homes and businesses are flooded or damaged by storms. We care when we cannot escape the stifling heat or unusually cold temperatures.
However, we also care on a deeper level. We want the next generation to have access to opportunities we did not have. We want to believe that we worked hard for a reason. If people believe their lives are going to be worse, their worries greater and their chances more limited by a world destabilised by an unstable climate, that will be a source of anger and frustration. The impacts of unchecked climate change will be felt widely by children alive today, with impacts growing, potentially exponentially, over time. It is our moral duty to act now, in full knowledge of the risks we are storing up, to reduce those risks as fast as possible.
I will briefly echo the words of the noble Baroness, Lady Featherstone, on the Paris agreement. The fifth carbon budget is our own version of the Paris agreement. It covers the same period and is in sync with the levels we would expect to take under that target. The noble Viscount, Lord Ridley, is looking at me quizzically, but his statements were full of errors, because it is not true to say that all EU member states were expected to take a 40% target. There is such a thing as redistribution of the effort across the member states. Therefore, it is not true to say that everyone would be on 40% and that we are necessarily going further than that.
I end with a question about the Paris ratification. Recent analysis has shown that we are tantalisingly close to seeing Paris become law this year, and the UK could make all the difference. Can the Minister say when her Government plan to initiate the legal process of ratification, and if it will not happen immediately, why not?
My Lords, I declare an interest as chairman of the Committee on Climate Change. I remind your Lordships that the committee has a statutory requirement to provide the most cost-effective way of reaching the statutory commitment of cutting our emissions by 80% by the year 2050. I also remind your Lordships that that is not as ambitious an end as the Paris climate change agreement demands. Therefore, far from being ahead of other people, we have a sensible programme to reach somewhat less than will have to be reached under the climate agreement.
My noble friends Lord Lawson and Lord Ridley do themselves a disservice when they suggest that, because Britain has so small an amount of emissions, we do not count. Yet in their arguments for Brexit, their whole point was that Britain counts on its own. I merely suggest that if we say, “Well, other people can get on with it, but we won’t”, we let down future generations in a way which I hope my noble friends will sometimes be concerned about. They are seeking to stop this generation protecting the next generation, which is why the Climate Change Act has been, and remains, supported by all parties. That is why it is so important to have a system of budgets, as we have, so that everyone understands where we are going and the speed with which we hope to go there.
I have no idea whether the new arrangements will be better than the last as regards Ministers, but I warn my noble friend Lord Lawson that he has underestimated the commitment of Greg Clark as Secretary of State. I do not think he has read what Greg Clark said about his commitment to climate change, or the commitment to oppose climate change which is clearly on the record from our new Prime Minister. As the independent chairman of the Committee on Climate Change, I shall keep both of them down to their words. However, I merely remark that there is no way of dealing with these situations unless business is part of it—so I am not instinctively opposed, particularly as infrastructure, too, has to deal with these issues. I am pleased to see that the chairman of the infrastructure commission has made it clear that he will seek to deal with infrastructure within the context of the carbon budget.
I remind the House that we have reduced our emissions significantly, largely in the power sector. These are not exported jobs going somewhere else; we have done it. Sometimes I wish that my noble friends would appear at the presentations from the Committee on Climate Change. They would find that many of the things they have said are just not true. We have shown that there is no offshoring and that the poor are much more damaged by climate change than any other section of the community.
When my noble friend Lord Lawson refers to the poor, I remind him—I have looked carefully at his Budgets—that the poor did not feature large in those Budgets. But those who care about the poor, and the people who talk about the poor because they work for the poor—all those international organisations, from Save the Children right the way through to CAFOD and Oxfam—are quite clear that climate change is the biggest danger to poor people that exists, and therefore we have to deal with it in a cost-effective way.
Of course there is some argument about whether we should have this little bit of flexibility. However, it is flexibility based on the principle that some of the forecasts may not be accurate, because it is a long way ahead, and in those terms the Committee on Climate Change has accepted that that should be so.
I could of course answer each of the points that my noble friend Lord Ridley has made, but I do not want to cut out my other noble friend who sits next to me, so I will finish by saying this. Brexit is important but not central. This is our Climate Change Act—the Act which leads the world and which makes Britain the sort of leader that my noble friends thought we ought to be when they talked in the Brexit debates. I think that Brexit is a terrible mistake, but I know that the Climate Change Act puts us in a position genuinely to make a proper contribution for the next generation, and it is there that the jobs will be.
I end with a very simple point. Economic self-harm would be not having the Climate Change Act. That is what you would do if you did not want new jobs and green jobs, if you did not want to sell abroad because you have green products and if you did not want to be the kind of country that leads the world. Self-harm is denying the Climate Change Act. I am proud that all-party support has today enabled the Government to implement the fifth carbon budget as proposed by the Committee on Climate Change.
(9 years, 2 months ago)
Grand CommitteeMy own view is that there is a significant argument as to whether that was “the promise”; it was the mechanism that was put forward. My concern now is about a perfectly reasonable assumption that the Government, in looking at the circumstances, have decided that the way in which the system works has to be severely altered. In doing that, I am concerned that we do not deal unfairly with companies that have entered into significant costs on the basis of what the law appeared to them to be. Why do I say that? I do not have a position to argue on behalf of the companies but I have a duty to argue on behalf of the future of our policies towards climate change. That means we have to ensure that the British Government are always seen as absolutely dependable. I warn that if we do not get that right, we will find ourselves in the position that some other Governments appear to be in. In general, the Government seem to have done precisely what they ought to in these amendments and I commend the Minister for putting them forward in this way. I speak in support of what he has done here.
However, during the course of the debate and discussions, the Minister will have heard a number of particular examples which sound as if they fall on the wrong side of the lines that have been drawn. My experience from many years as a Minister is that having one occasion which looks pretty unfair causes very considerable angst, not just to those people but much more widely, so that that one occasion begins to undermine the way in which the Government are seen. I want the Minister to look carefully just to make sure that where some of the examples which the noble and learned Lord, Lord Wallace, presented earlier are reasonable, we should find some way through.
Secondly, I do not know how much the Minister has to do with planning permission personally. I declare an interest in the sense that I help people to do planning permission for sustainable development—not anything to do with energy but on other things. Planners can take a very long time and when one is trying to work with them on a joint agreement, all these rules about having to provide an answer in four months can so easily end up as 14 months, and sometimes as 24 months. But you do that because you really want to get an answer which everyone is happy with. I therefore hope the Minister will recognise that if there are circumstances where it appears that another arm of government has made it impossible for people to meet the real and sensible restrictions which he is laying to achieve his ends, he will look particularly carefully at those circumstances. One area where people feel very unhappy is if they feel that one bit of government has made it impossible for them to meet the arrangements which another bit has perfectly properly put forward, so I hope he will look at that.
The third thing I hope the Minister will do is that when he talks about these things he will remind people of the enormous success of the policy, as I mentioned earlier. This policy has achieved a great deal. Britain was hugely at the bottom of the heap in the amount of renewable energy it had. We have done extremely well, which seems something to be very cheered about. I am pleased that my noble friend Lord Howell, as he always does, referred to this great industry. The renewables industry is a great industry and has emerged from circumstances in which it was rather laughed at by many people. It is now a serious industry with serious results and, importantly, providing for the absolute demand that we have to combat climate change—which, as I think almost all of us accept, is the biggest material threat to mankind.
As I have said on earlier occasions, these amendments—although they may not all be right—are important in order to emphasise that the Government have to follow what they have already done with their own amendments. They have to make sure that at no point does it look as though they have let people down, because it is very important for future policies that that does not happen. However, they are also important because they are testament to the fact that this Government have achieved so much, and I think that it is necessary for the wider community to become more interested in ends than in means.
I finish by saying that assessing Governments’ commitments on the basis of whether they happen to accept a particular way of doing something rather than on whether they are achieving the end that you want is a great mistake. We ought always to recognise that it is difficult to be government and it is easy to be opposition; it is easier to be green in opposition than it is in government. The judgment must be: have the Government achieved the end to which they have committed themselves? At the moment, the jury is out because we do not know the alternative ways of proceeding. However, it is perfectly reasonable for a Government to decide that it is no longer sensible to subsidise in one way rather than another or to subsidise in one way rather than have no subsidy. All that matters is that the Government can stand with their head held high and say, “We have met our obligations”. There are some examples here which I think it would be a mistake not to look at very carefully; otherwise, all the good intentions of these amendments might be much undermined.
My Lords, I am grateful to the Minister for introducing this session of the Committee. I should start by declaring an additional future relevant interest. I am in negotiations about taking up a position with an American charity that will be working on climate change and energy. I have not signed anything yet, but I think that it is material and that therefore I should declare a potential future interest.
I am grateful for all the contributions to this debate and, again, to the Minister for his introduction to these clauses. I am particularly grateful to the noble and learned Lord, Lord Wallace, for—as has been said before—his forensic description and critique of the amendments as we see them today. I say at the outset that we are, as I am sure are the Government, committed fully to decarbonising the UK energy system at least cost in a way that ensures that we maintain security of supply and, one hopes, engenders an industrial revolution that we can be proud of and export to the rest of the world. Within that, people will know that I have no particular love of any particular technology. I take a very broad view towards the groups of technologies that should be considered as we go forward in this endeavour.
In that spirit, I want to ask the Minister some specific questions relating to the amendments but also to a wider context. I am sure he appreciates that we are dealing with a somewhat febrile environment. There is now sufficient investor disquiet that people are watching very carefully for signals from the Government that this is not about the wholesale disruption of the renewables industry, and we must do everything that we can to reassure the industry that that is not the case.
I shall start with the more specific questions relating to the amendments. As was raised earlier, there are some anomalies. They may arise from the fact that it feels, in the words of the noble Lord, Lord Howell, as if we are in a liquid legislation situation, where we seem to be getting rather large chunks of detailed and complex legislation with relatively little time to assess it. I am therefore genuinely looking forward to the Minister’s responses because some of these anomalies seem to be substantial and we need a response.
The Government made this announcement on 18 June, in the first few weeks of government after the election, and then set about consulting. That is not normally the way around that we would expect a Government to behave, but there we are. We are where we are. Then, in the Minister’s own words, they consulted industry and hundreds of stakeholders. To my knowledge, however, although maybe I have missed it, we have not seen the synthesis of the results of that consultation. In normal proceedings, the Government would conduct a consultation and get the results back, and we would all be able to look at what everyone had said. As far as I am aware, we have not had that. That puts us at a great disadvantage. There is distinct informational asymmetry since the Government have been involved in all these conversations but Members of Parliament from other parties have not had that luxury. We have therefore found ourselves, in the past few days since these rather detailed amendments came forward, having to consult a large number of people to absorb their concerns, even though we have very little to go on in terms of being able to place them in context. Noble Lords will have noticed that we have not tabled any amendments to the amendments. This is because until this morning we have been receiving people’s feedback on these complex issues.
As the Minister said, this is a complex issue. Had the draftspeople who were writing the manifesto in April and May before the election realised quite the implication of those few words in the manifesto, would we have seen them appear? Regrettably, they have led to this huge amount of complexity and disquiet and a feeling among some investors that they have not been handled with due respect. They have seen what they thought were very sensible investment decisions being completely undermined by what to them was a very sudden and surprising announcement with very little signalling that it would take place.
The government amendments are intended to clarify, but unfortunately they just raise more anomalies. This has been raised already, but it might just be worth reiterating a couple of points. We have a situation now where the grace periods will apply to projects that have had a negative decision in planning overturned at appeal. That seems to fly in the face of Clause 65, which says that local people should have the final say. Here we have a situation where a project that clearly was not very popular has been appealed and is now going forward. Such projects will continue to be eligible. However, where we have the reverse—an approval by local planning but no written documents, so we have gone through the democratic process and had approval but have not yet received the written information—the guillotine comes down and you cannot go forward. That seems to be a very odd situation. Similarly, you may have got your approval, but if you have asked for a variation and are waiting for clarity on it, that too falls foul of this artificial 18 June deadline. I would like the Minister to respond to those concerns and explain why the guillotine is being interpreted in this way, which seems to conflict with the overall desire of the Government to keep local government and local decision-making at the heart of this.
Then we move on to the issue of whether investment has been frozen out by the uncertainty created by bringing forward this clause. Again, as a general point, this could have been so different had we not embarked on this endeavour, but there we are. We are where we are. I am repeating some of the technical questions that have already been asked so eloquently by the noble and learned Lord, Lord Wallace. We question why only lenders who have investor-grade credit ratings qualify. That seems quite restrictive and could freeze out very good potential creditworthy lenders who happen not to meet that particular criterion.
We would like to know exactly how the investment freezing will be interpreted. Do you have to prove that you have been frozen out for the entire time of the legislation from the start to Royal Assent, or just a part of that? How much of the delay counts and what does not count?
My final point has already been raised. Once you have proof that you have been frozen out, you have to show this by a certain date—I think it is March 31 2016. How long will it take before you get a reply? You have to have already built your project by December 2017. There is nothing in here to say that there must be a time limit by which any final decision is made. It could drag on. It has been said before that some of these things drag on for reasons outside government control. We need more clarity on how that will work practically. I know that it seems slightly odd to be arguing over and/or, but it is material about whether we are talking about a grace period for grid and radar delays or whether it is just grid as one category and radar as another. We need clarity on that.
(9 years, 3 months ago)
Lords ChamberMy Lords, it is not for the chairman of the Committee on Climate Change to comment much on the means whereby we reach the targets which have been set by the committee. That is not its role. The committee’s role is to set the targets and to insist that they are met. That is one of the difficulties of being the chairman because my instinct is to comment on all these things with enthusiasm and some pretty clear views, but that is not what I am statutorily allowed to do.
However, it might help the Minister if I say this. This may be a formulation that works; I am not sure. There are complications in it which might lead the Government not to want to do it. I want to say a word about a decarbonisation target, which the Committee on Climate Change has recommended. It has done so because a decarbonisation target would give security to those who are investing in low carbon technology, and above all in low carbon generation. One of the problems that all Governments have to face is that the timetable of private industry is very tight. First there is the timetable for how long a particular managing director will be in place and what is going to happen over the next two or three years—I am told that it is generally about three years. The second timetable is an important one, covering the length of time major investment takes between thinking about something and actually delivering it.
One difficulty—it is one which the Committee on Climate Change emphasised in its report to Parliament this year—is that most of the measures we have in place will fall off the cliff in 2020. We are now talking about “tomorrow” in the investment cycle because people often have an investment cycle which lasts certainly for five years and very often for seven or eight years. The committee sought to ask the Government to ensure that we knew where we were going to be in a progressive way after 2020. The Government have made it clear that certain things will continue, but not how much and how long. That security is important for investment.
The second point is that it is occasionally the belief of all politicians that if they promise something in 2050, everyone will believe it and proceed to get there. But I remember an embarrassing debate in this House when I pointed out that the previous Labour Government had an energy Bill from which they had removed every date except 2050, and I worked out that there was not a Member of the Government who was likely to be alive when the one promise that had been made would be delivered. That is a dangerous position because if we are to be taken seriously, we ought to make promises that will be delivered at least in our likely lifetimes.
What I want to put to the Minister is simply this: we need to have some sort of interim point between 2020 and 2050 towards which people can work with some confidence, and we have suggested a carbon intensity target for 2030 entirely on that basis. I hope that the party opposite will not be upset by this, but one of the reasons I want the target is because I am a capitalist and I do not want to judge what is going to be the best way of achieving it by 2030; in other words, I want to be as unrestrictive as I can. I just want to deliver the ends, and that is why I always talk about targets, not means. I do not know what mixture of means will enable us to reach the target, and that is why I am less enthusiastic about those who insist upon this proportion from renewables, that proportion from other low carbon technologies and this proportion from nuclear. I have always felt that a portfolio is what we want, and if possible I want an unprescriptive target because we do not know the ways in which we are going to achieve it. But we must give people the confidence that if they pursue those ways, there will be a proper return from the market on the investment that they have carried through. That is why a carbon intensity target is a valuable thing. I hope that the Government will wish to do that in 2016, for reasons we all now know. A carbon intensity target would be unprescriptive, but it would give real confidence.
This amendment, on the other hand, is much more precise. It gives a role to the Committee on Climate Change, for which I thank the noble Lord, and I am sure that if we were asked to carry through this role, we would do it to the best of our ability. But I wonder whether this particular mechanism is the best one. There are complications which the Government might want to think about, but I hope that in discussing it, the Government will not cast aside the need—I think it is that—for a decarbonisation target for 2030 to give people the confidence to plan. It is no good saying that they know that our emissions must be cut by 80% by 2050. Frankly, it is true and statutorily based, and we all think it is important, but it is not going to drive investment. That is why a decarbonisation target for 2030 is important. I doubt whether this is the right way forward, but I am pleased that it has been tabled as an amendment, not least in order to ask the Government to think hard about the needs of investment and confidence.
My Lords, I am grateful to my noble friend Lord Whitty for introducing this amendment and to the other noble Lords who have spoken in favour of it—or if not directly in favour, at least in favour of us having a debate about decarbonisation. I recall that a similar amendment was tabled by my noble friend Lord O’Neill of Clackmannan during the Committee stage of the Energy Bill in 2013. We had a good debate at the time, and the arguments which were put forward were important then and are even more important now. I say that because we all engaged with the Energy Bill in good faith. We raised our concerns and we went forward on the basis that we hoped that we had a system that may be a transition to something more market-based and slightly less interventionist in order to encourage us to decarbonise our electricity system.
I apologise for stating the obvious, but the reason electricity is so important is that once it is fully or substantively decarbonised, it can then be used to decarbonise transport and heat in an effective way. It is not the only way, but it is one way. It is the sector with possibly the most commercially available technologies and certainly the widest range of known technologies, certainly at this stage, to help us. That is why electricity is focused on and why we have a 30% target for renewable electricity as opposed to 10% or 12% in the heat and transport sectors. It is right to focus on electricity.
This idea is definitely worthy of merit and I do not disagree with the noble Lord, Lord Deben, when he says that we have in the past debated a broader definition of the decarbonisation obligation or decarbonisation target. In fact, that was rather exhaustively dealt with in the debates around the Energy Bill in 2013. The way it was left was that the Government may introduce a decarbonisation target for 2030 in line with the fifth carbon budget being set. I very much look forward to hearing some strong words from the Minister stating that that is still the Government’s intention: that a decarbonisation target will be set in 2016 once we have that fifth carbon budget in place.
For all the reasons given by the noble Lords, Lord Deben, Lord Teverson and Lord Whitty, we lack a moment of clarity to help shake people’s investment decisions beyond 2020. We have renewable targets to 2020, as part of the European renewables directive, but beyond 2020 there is big uncertainty as to what low-carbon technologies, if any, will be supported by the Government. Therefore, there needs to be a framework. Why I like the idea of a decarbonisation obligation on the Government and on suppliers is because it does exactly what the noble Lord, Lord Deben, said, which is to create a market-based system.
I often find myself wondering whether I am Alice who has stepped through the looking glass. Here we are in a world where the Government—a Conservative Government—are presiding over virtually the renationalisation of the energy system. There is no element of the energy system that is not now reliant on the Secretary of State to sign a contract of some sort or another, perhaps with the possible exception of some of the interconnectors, but even there it is quite highly regulated. Now any new clean capacity needs to be signed off by the Secretary of State with a contract for difference, and all the existing capacity receives capacity payments also through the Secretary of State’s gift. Here we are, very oddly, presiding over pretty much a state-run energy system, and here I am on the Labour Benches saying that we need a much more market-based system that allows more choice and for capital to flow to the most cost-effective ways.
It is an odd situation but that is where we are. So I press the Minister to help us to understand whether the Government share our objective, which is to move towards a slightly less interventionist system with more ability for a broader set of players to dictate how we meet our targets, which means the Government setting the framework, and being clear about our objectives, but allowing a wider pool of people to find those solutions for us at least cost.
Amendment 35A is an interesting idea which proposes that rather than the Government taking on the obligation and the target, they should be passed down to the supply companies. It has some merit. It is worth noting that suppliers have been obliged to report on the carbon intensity of their electricity supply for some years now. They have a fuel disclosure requirement and an infrastructure and reporting mechanism that enables them to do that with certificates of origin. That enables them to calculate the carbon intensity of their electricity annually and report to Ofgem. Those numbers then probably sit on a website or in a document. Very little attention is paid to them, which is a great shame because we are encouraging these data to be collected but doing very little with them. If we were to look at those numbers, sadly we would see that carbon intensity has remained stubbornly similar over the past decade. We did very well in decarbonising when we had the dash for gas and replaced a lot of our old coal, but since then carbon intensity has just moved around, largely dictated by commodity prices where gas prices are higher than coal or vice versa. So there has not really been a grip on carbon intensity.
An obligation such as this would address that problem and mean that the full range of decarbonisation options, including fuel switching and phasing out of coal, would be incentivised in the most logical way forward. I am very grateful to the noble Lord, Lord Teverson. He and I have worked previously on the phasing out of coal and the use of performance standards to make sure that our old coal, in particular, is phased out in an orderly and certain way so that we can make room for clean investment. A decarbonisation obligation would help us to ensure that that transition out of coal took place. It is not the only way it can be done, but it would be a market-friendly way to meet the obligation because there would be an incentive not to purchase the coal that would count against the target. It would help to make it harder to hit the targets. The other benefit is that it would help renewables to stand on their own two feet and compete alongside other technologies. We would genuinely see which are both affordable and able to be supported by the general public.