Carbon Budget Order 2021

Lord Moynihan Excerpts

Thursday 10th June 2021 Grand Committee

[Lord Moynihan (Con)]

My Lords, it is a pleasure to follow my noble friend Lord Lansley, 30 years on from when we were both working for Margaret Thatcher. I was Minister for Energy, making a series of energy transition speeches, launching the first non-fossil fuel obligation order. Indeed, this issue has been about for many decades.

There are three issues relating to this order that I would like to draw to the attention of the Grand Committee and the Minister. The first, covered in the outstanding report from the Secondary Legislation Scrutiny Committee, focuses not on the carbon budget which, as has been noted, brings a welcome addition in the form of the inclusion of emissions from international aviation and shipping; instead, it emphasises the need for a much clearer policy framework to clarify government thinking on the policies that will be needed to deliver this and other carbon budgets.

I would be grateful if my noble friend the Minister could confirm when the Government intend to publish the net-zero strategy and say whether it will cover cross-departmental policies to include a significant electrification of sectors such as transport, heating and industry; the continued decarbonisation of the power grid; substantial improvement to energy-efficiency measures in all sectors; large-scale deployment of low-carbon hydrogen carbon capture and storage and GHG removal technologies; increased switching to low-carbon fuels, such as hydrogen or biomass in sectors that are hard to electrify, such as industry, heavy transport, aviation and shipping—to which he referred—and implementation of available abatement options across all sectors that deal with natural resources, for example through afforestation and low-carbon farming practices.

Without such policies—and I appreciate that a number of them have already been touched upon and announced, but not comprehensively, in advance of Glasgow—we will not be able to reach net-zero emissions by 2050. I am sure that my noble friend the Minister will appreciate that for the Committee to agree to this order it is always preferable to be able to review and analyse the mechanisms to be deployed to meet its admirable objectives. In a sense, without that, the order is exposed as a worthy objective but of no further consequence.

As part of that analysis, the second issue that I wish to raise with the Minister is exploratory in nature and follows on from the comments made by my noble friend Lord Lansley. There is no doubt that the increase in atmospheric CO₂ and other greenhouse gases is the greatest challenge that the world faces and it is truly global. CO₂ respects no boundaries. The CO₂ emitted in the UK will have exactly the same impact in, say, India as that produced locally and vice versa.

Many informed experts, including Sir Dick Olver and Simon Ayers, propose that a collection of leading nations promote a global scheme of capped production allowances, co-ordinated not at the level of emitters, which burn fossil fuels for their specific processes, but at the levels of producers of fossil fuels by reference to GWP content. The production allowance is to be progressively auctioned or levied by a periodically updated fee so as to deliver the cap. As has been very clearly stated by my noble friend Lord Lansley, to succeed this has to include the US, China and the European Union. Whichever form of policy we implement, it has to be global.

I believe that producer-level action has a number of clear and significant advantages and think we should still closely study them. One advantage is that the constituency is relatively constrained. There are some 100 global dominant producers; emitters number orders of magnitude higher. Another advantage is that producers are predominantly global and this would therefore facilitate global adoption. They or their customer chains are inescapably engaged with global trading and financial, consumer and political networks, which provide leverage to secure universal producer participation without the contravention of Paris sovereignty principles.

The advantage is the realisation of substantial production allowance proceeds at the international level whose allocation can incentivise participation in a scheme for the developed world as the least-cost route to securing our future and proceeds to selectively mitigate the impact of the carbon price. The developing world would see significant net inflows under such a scheme as proceeds are eventually allocated likely by population. Finally, producer nations would assist with the inevitable social and economic cost of economy adaptation. The production-level cap on carbon pricing ensures comprehensive, uniform application and no leakage for hard-to-monitor emissions. It is still worthy of consideration while we move forward with the revised European scheme and our response to it. I would appreciate hearing today from my noble friend the Minister whether there is an appetite for a production-level cap on carbon pricing.

Finally, and in raising this issue I declare an interest as chairman and partner of Buckthorn Partners LLP, which invests in the energy transition space, there is real concern that with the impending ban on gas-fired boilers in new-build properties from 2025—which is, as we always counted in the run up to the Olympics Games, only a matter of 180 Mondays away—an important requirement is to move to heat pumps.

Yet if you run a spell-check on Taylor Wimpey’s latest annual report, there is not a single reference to heat pumps in the document. That is not a criticism of Taylor Wimpey; it applies across the board to many of our leading housebuilders. Even the Department for Business, Energy and Industrial Strategy states that

“in many cases the up-front costs of low carbon technologies, such as heat pumps, are currently higher than the technologies they replace.”

So if we are going to end gas in new builds, what are the alternatives that are cost-competitive and practical, overcoming a broad range of barriers, including technical, market-pricing, behavioural, regulatory and socio-political? I would very much appreciate it if the Minister has any observations on this and can cast light on these questions because they will be critical to any new home standard guidance that the Government are looking to work on and will no doubt publish in the near future.