Hydrogen Production Revenue Support (Directions, Eligibility and Counterparty) Regulations 2023
Lord Teverson Excerpts(4 months, 2 weeks ago)
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Lord Naseby (Con)
My Lords, I very much welcome this statutory instrument and congratulate His Majesty’s Government on bringing it forward so speedily. I just wonder whether my noble friend has any idea of how many potential clients there are in the United Kingdom. That would be interesting in itself.
Regulation 2(4), on page 2, defining an
“eligible low carbon hydrogen producer”,
is very sensible and has thankfully been included. Of course, because of the publicity for the domestic trial in the north-east of England, hydrogen is getting a bit of an unfortunate image. I am not sure whether any incentive can be produced to help the local communities—which I would say are getting difficult, but let us say they are being very careful—to do those trials. If there is not, there is not, but this is a negative reaction and not one I welcome.
Finally, it is usual for most statutory instruments, certainly the ones on which I comment, to have a sunset clause for review. I do not see one, unless I have missed it, but that would have helped.
Lord Teverson (LD)
My Lords, as always, I thank the Minister for his excellent explanation of this secondary legislation and welcome how we are now moving forward at some pace on the hydrogen front. I also welcome the Government’s announcement that they are moving ahead with the carbon border adjustment mechanism, even though it is one year after the EU has done so. I do not know what has happened in the middle, as far as SME exports and that side is concerned. Their commitment to energy efficiency after the election perhaps raises some questions, but at least there is some intended movement there.
I also welcome the Government finally giving up on the hydrogen villages in England. This was clearly never going to happen or be real, and I am sure the Minister was at the forefront of those talking sense to his Secretary of State on that area, which is excellent.
As background, I read through the hydrogen standard. As it is Christmas, I was going to ask the Minister to explain the formula in there, because I could not understand it either. There is a training video on how to understand it, which I will watch on Boxing Day rather than before.
Baroness Blake of Leeds (Lab)
My goodness. I was not expecting that announcement and have not been party to that information. I am sorry: I was not clear from the noble Lord’s comments whether he meant the end of this year. Perhaps he has secret information about when this Parliament might come to an end.
Climate Change: Phasing Out Fossil Fuels
Lord Teverson Excerpts(5 months ago)
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Lord Callanan (Con)
It is our policy to phase out the unabated use of fossil fuels. On the second question, even with the granting of any new licences, UK oil and gas production will continue to decline at a faster rate than most other productive fields in the world.
Lord Teverson (LD)
My Lords, I very much welcome that the Government have sent a number of Ministers to COP 28. I am sorry that the noble Lord the Minister is not there to put the UK’s views forward. Does he realise that the good will we are building up there was undermined by the many announcements on climate change made a couple of months ago? They take away from our international leadership. When will Downing Street understand that its announcements on climate change made domestically for political purposes are heard internationally and undermine that reputation, not least with the industrial investors we need for the future?
Electricity Network Connection Action Plan
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Lord Callanan (Con)
Indeed, we are working with both the Scottish and Welsh Governments. There is tremendous public support for offshore wind; it has been our biggest expansion mechanism. But of course it requires a lot of onshore infrastructure as well, which is unpopular in the communities affected. There is a well-established planning process, looking at all these impacts, and we will continue to work with the devolved Administrations.
Lord Teverson (LD)
My Lords, since the Government have just dabbled with changing the planning conditions for onshore wind in England, there has been no action whatever from the industry, in that it still sees the planning restrictions as a major barrier. When does the Minister expect the next connection into the grid by onshore wind in England so that households can benefit from the cheapest form of energy we can produce in this country?
Green Gas Support Scheme (Amendment) Regulations 2023
Lord Teverson Excerpts(5 months, 2 weeks ago)
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Lord Teverson (LD)
My Lords, I congratulate the Minister on a hugely extensive explanation of the SI. Unless I have missed something, which the noble Lord, Lord Lennie, will soon uncover, I will give the Minister the full support of the Liberal Democrat Benches on this SI.
Greenhouse Gas Emissions Trading Scheme (Amendment) (No. 2) Order 2023
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The Parliamentary Under-Secretary of State, Department for Energy Security and Net Zero (Lord Callanan) (Con)
My Lords, this order was laid before the House on 19 September. The UK Emissions Trading Scheme—the ETS—was established under the Climate Change Act 2008 by the Greenhouse Gas Emissions Trading Scheme Order 2020 as a UK-wide greenhouse gas emissions trading scheme to encourage cost-effective emissions reductions, contributing to the UK’s emissions reduction target and, of course, ultimately our net-zero goal.
The scheme is run by the UK ETS authority, which is a joint body comprising the UK Government and the devolved Governments. Our aim is to be predictable and responsible guardians of the scheme and its markets. In doing so, we will ensure that the scheme remains a cornerstone of our ambitious climate policy.
We have brought forward this SI to implement a number of necessary changes and improvements to the scheme. The changes relating to aviation free allocation rules and to the treatment of electricity generators follow the announcements made by the UK ETS authority in July in our response to last year’s consultation on developing the UK ETS. The final change remedies an inconsistency around free allocation and carbon capture at UK ETS installations. On aviation, this SI will cap the total amount of aviation free allocation that operators are eligible to receive at 100% of their verified emissions.
This SI makes technical changes to free allocation rules regarding the electricity generator classification for industrial installations. It will amend the electricity generator classification to consider only electricity exports in the baseline period, instead of all electricity exports since 2005, allowing operators to change their installation’s electricity generator classification if they have put a stop to the export of electricity. Electricity exports represent no more than 5% of the total produced allowances and will also be excluded from consideration in this classification.
The SI will amend the electricity generator definition to exclude installations that have produced electricity for sale if that electricity was produced by means of a high-quality combined heat and power plant, operating as part of an operator’s industrial activity. This will limit reductions in free allocation entitlements and provide further encouragement for industrial operators to achieve improved efficiency for their combined heat and power plants.
The SI also makes an operational amendment to the electricity generator classification. The SI will allow electricity generators to be eligible for free allowances after the application date if they can demonstrate that they produced measurable heat by means of high-efficiency co-generation during the allocation period.
The SI also remedies an inconsistency in the legislation to make it clear that carbon capture and other types of regulated activity may be carried out on the site of the same installation. The SI will allow provision of free allowances to industrial installations at the same site as a carbon capture plant.
As the Northern Ireland Assembly is not sitting and cannot consider affirmative legislation, this statutory instrument therefore covers only Great Britain. Officials in Northern Ireland have agreed that that none of the provisions currently affects operators in Northern Ireland.
These changes deliver on commitments made by the UK ETS authority and improve the operation of the scheme. For aviation, the SI will ensure that aviation free allocation is distributed appropriately until full auctioning for the aviation sector in 2026. This follows the decision announced in July that aviation free allocation will be phased out by 2026.
On free allocation technical changes, the SI will ensure that installations classed as electricity generators, whose eligibility for free allocation is limited, are able to change their classification if they are no longer exporting electricity. The SI will also ensure that industrial installations with high-quality combined heat and power plants which export excess electricity to the grid are not classified as electricity generators so as to not limit eligibility for free allowances.
On the electricity generator operational amendment, the SI will ensure that electricity generators can become eligible for free allowances during an allocation period if they meet the eligibility criteria. On free allocation rules around carbon capture, the SI will prevent industrial installations being disqualified from receiving free allowances if they are on the same site as a carbon capture plant—a situation that could pose a risk of disincentivising the uptake of carbon capture technology.
These changes either follow appropriate and comprehensive consultation with stakeholders or did not require consultation. In developing the UK ETS consultation in 2022, the UK ETS authority considered what technical improvements can be made to the current aviation free allocation methodology until free allocation is phased out. The responses to the consultation called for an end to the overallocation of aviation free allocation. In addition, the policy intent of aviation free allocation is to mitigate the risk of carbon leakage, and the policy did not intend for aircraft operators to receive more allowances than their verified emissions. To that end, in July the UK ETS authority announced the decision to cap aviation free allocation at 100% of verified emissions.
In the consultation on developing the UK ETS, we considered technical changes to free allocation rules regarding the electricity generator classification. The majority of respondents agreed with our suggested amendments, and the UK ETS authority announced that it would proceed with changes to the electricity generator classification. A consultation was not carried out for the CCUS free allocation amendment as this is a clarification of existing policy intention and not a change in policy.
In conclusion, these alterations to the UK Emissions Trading Scheme will support its role as a key pillar of the UK’s climate policy. They show that we will take action to improve the scheme where necessary and continue our record of delivering on our commitments. I therefore commend this order to the Committee.
Lord Teverson (LD)
My Lords, perhaps I may make a few comments in front of the crowd here. I welcome the SI generally , obviously, and want to try to ensure that it works properly. I have a couple of specific questions.
I am interested in understanding how the free allocations were allocated or what the baseline was for the airlines. Also, in the scheme as a whole, what proportion of units are free issue these days? I would be very interested to hear that for the current period, which I think goes up to 2026.
The Minister referred to the UK ETS as the cornerstone of ambition in terms of net zero, but of course, that cornerstone is crumbling at the moment. I would be very interested to hear, more strategically, how the Minister sees the fall in the carbon price per tonne, which has moved this year from around £100 at one point down to under £50.
To me, that seems to be, in the words of Energy UK, a major disincentive to investment in the renewables sector. As I understand it, it has threatened the Treasury to the tune of £1 billion so far this year and will mean a hit of something like £3 billion on the Treasury per annum if that price continues. As we know, there is also a threat from the European Union’s move to a carbon border adjustment mechanism—particularly in 2026, when those measures will really start to bite. There is a feeling that UK industry’s exports to the European Union could be threatened by some £500 million per year if that price remains as it is. I want to know the Minister’s understanding of why the price has fallen so much. My economics A-level tells me that, with supply and demand, when demand stays roughly the same but the price goes down, there is an all-round surplus in the supply of those units. However, there is also a volatility there, perhaps through a lack of liquidity in the scheme as a whole.
Looking again at the trade and co-operation agreement, particularly the area of energy in 2025, I would be interested to understand whether this is an opportunity to bring those trading schemes more together again, which was a target that the Government sought to achieve when that agreement was first made. Clearly, the fall in price strongly affects the renewables and clean energy industries. It seems to me that, not just from a Treasury point of view but from an industry and net zero point of view, we need to get that price back up again. I would be interested to hear the Minister’s comments on how that can be achieved—or indeed whether the Government wish to achieve it.
Lord Lennie (Lab)
My Lords, when the UK ETS was established due to the UK’s participation in the EU ETS ending, the Opposition supported it. It is essential that the UK has a robust carbon price to help reduce emissions. So when the UK ETS was launched, we expressed a preference for a link with the EU ETS. Indeed, the EU-UK Trade and Cooperation Agreement states that both parties
“shall give serious consideration to linking”,
which would lower the cost of decarbonisation through more price efficiency discovery and easier trade. Most importantly, it would ensure that UK exports of high-carbon products to the EU are exempt from the EU’s carbon border adjustment mechanism. This remains our preference, to support UK businesses in remaining competitive and retaining trade access to critical markets. Can the Minister tell the Committee whether an update on any such consideration is still being considered? Can he also say whether the Government have made any projections on the impact that the CBAM will have on our exports? What is welcome is the seriousness with which the Government are treating this while we remain unliked.
I turn to the instrument itself, which amends the ETS in five areas; I will touch on each of them but do not oppose any of them. As these changes do not seem simply to be updates on the system, I am keen to hear from the Minister how foreseeable the situations that led to them were and what impact the delay in implementing them, from when the UK ETS was established, has had.
First, as we heard from the Minister, the instrument implements a cap on the maximum amount of free allocation that aircraft operators are eligible to receive at 100% of their verified emissions. Not only does this seem to be common sense but, for the next two years, by 2021’s figures, it will save around a fifth by putting an end to overallocations in the sector. That is welcome. Again, by 2021’s numbers, this will prevent around £100 million of potential profits from operators selling these overallocations. Do the Government have any projection for 2024-25 or are the figures on pounds and percentage of emissions expected to be roughly the same? Going back to the first question, could this not have been seen from the start, or was it by design?
Lord Callanan (Con)
I thank the noble Lords, Lord Teverson and Lord Lennie, for their contributions. As I said in opening, the SI will implement a number of necessary changes and improvements to the scheme. The UK ETS is a cornerstone of our climate policy and it sets a cap on emissions in the sectors covered—currently, about a quarter of the UK’s emissions. In doing so, it guarantees that these sectors will reduce their emissions in line with our overall net-zero target. The carbon price generated by the need to acquire allowances within this cap incentivises the investment in decarbonisation that is needed to make sure that we can build a thriving net-zero economy.
In July, the UK Government and the devolved Governments, who all comprise the joint UK ETS authority, set out a comprehensive package of reforms to the scheme. These reforms increase the ambition of the UK ETS, setting its cap on a path to net zero. As set out in that package of reforms in July, a wide range of changes is required to ensure that the ETS remains a key part of the UK’s approach to achieving net zero.
As part of the UK ETS authority, with the devolved Governments, we are determined to run and develop the scheme in the most effective way possible. Our aim is to be predictable and responsible guardians of the scheme and its markets. That is fundamentally why the changes in this SI are being brought forward: to deliver on our previous commitments and make essential improvements to the scheme. The alterations to the scheme that this SI brings about will support its role as a key pillar of the UK’s climate policy. They demonstrate the value of the detailed consultation that we have carried out with scheme participants. We are committed to listening to views and implementing changes where necessary to make the scheme run as efficiently as possible, so that it ultimately achieves its aims. The changes to aviation free allocation and technical changes to free allocation follow the comprehensive consultation on developing the UK ETS carried out last year. They deliver on commitments made in the response to that consultation in July.
I will now pick up on the points made in the debate, first in response to the noble Lord, Lord Teverson. We have decided to cap the total amount of aviation free allocation that operators are eligible to receive to ensure that aviation free allocation is distributed appropriately until full auctioning in 2026. In 2021, the level of aviation free allocation issued to operators surpassed the sector’s verified emissions, primarily due to the impacts of Covid-19 on aviation activity. However, even prior to the impacts of Covid-19, under the EU ETS, a number of operators received more free allocations than their verified emissions.
The current aviation free allocation methodology calculation is based on 2010 activity data, which is now of course inconsistent with current aviation activity and creates competitive distortions between participants. Not capping the amount aircraft operators are eligible to receive therefore effectively shields them from the price signal and provides an opportunity to benefit from the scheme, which, I am sure we would all agree, was not the intended aim of the policy. To answer the noble Lord’s question, in 2022, the proportion of UK ETS emissions covered by free allocations was approximately 36%.
On the noble Lord’s point on the fall of the UK ETS price, it is of course a market mechanism, and the price of carbon allowances in the emissions trading scheme is ultimately set by that market. However, in line with the net-zero cap that we announced in July, the supply of emissions allowances entering the market will fall significantly every year from 2024. Using the noble Lord’s supply and demand analogy, we can probably predict—without saying it—what will happen to the price in such circumstances.
Lord Callanan (Con)
As it is a market mechanism, I have some sympathy with the noble Lord’s point of view, but it would probably not be wise for me to comment on the overall price. I will let the market determine what it should be. If I say what I think the ideal target price should be, that would clearly be interfering in the market, which the noble Lord can understand I should not do.
We are committed to continuing to deliver these changes, as shown by our legislating to amend the supply of allowances over the coming years and the publication of the auction calendar for 2024. The authority has also committed to exploring measures for the future of the UK ETS market, including examining the merits of the supply adjustment mechanism, which would be a means of amending the supply of carbon allowances in response to market conditions.
The noble Lord, Lord Teverson, asked about the impact of the EU CBAM. We are of course following developments closely and engaging with the Commission to discuss the technical considerations relevant to UK manufacturing because, even though EU CBAM charging does not start until 2026, companies will have to report on their emissions from 2024 to 2026, prior to charging. We will see whether the EU proceeds with charging, but it will clearly have a significant effect on many UK companies supplying into the EU market, given the additional bureaucracy they will have to go through. Noble Lords should watch this space: I am sure the Government will have more to say on this shortly.
As I said, UK ETS prices are set by the market, as it is ultimately a market mechanism. The UK market is clearly separate from the EU market. It is therefore possible that prices will fluctuate and differ, although it is worth saying that both have similar levels of ambition. We will continue to work domestically and internationally to find solutions to any risk of carbon leakage and our ambitious climate commitments rightly require our industries to decarbonise. This includes our running a consultation earlier this year on domestic measures to mitigate carbon leakage, including a potential UK CBAM and mandatory product standards. We are looking at all these issues holistically to see which is the most appropriate carbon leakage mitigation across a number of policy designs. The response to that consultation will be published—to use the phraseology—in due course, and a further consultation on free allocation policy is due later this year.
On the point of the noble Lord, Lord Lennie, on linking the UK ETS and the EU ETS, as he correctly pointed out, under the terms of the TCA, the UK and the EU agreed to consider linking our respective carbon pricing schemes and to co-operate on carbon pricing. We are open to the possibility of discussing linking the UK ETS internationally with other schemes—it is not just the EU’s; there are a number of other schemes across the world—and we will continue to work collaboratively with other jurisdictions to tackle shared challenges and learn from the experience of others as we continue to develop the UK ETS. Indeed, I attended a meeting with a number of other jurisdictions only last week to discuss that very topic.
On the point raised by the noble Lord, Lord Lennie, on carbon capture and storage, there is currently an inconsistency in how capture activities and installations are dealt with in the ETS legislation, and that does not currently reflect the department’s policy. Some areas of the legislation recognise that capture and other regulated activities might occur at the same installation, but in other areas it is assumed that capture activities will be self-contained. The amendments clarify that carbon capture may take place on the same site as other UK ETS installations or regulated activities without the loss of free allocation in respect, of course, of non-capture activities. There has been no negative impact to date, as this technology is still very new and CCUS activity is not yet taking place, but the amendment will help incentivise the uptake of CCUS technology in the future and ensure that no negative impacts occur as it continues to develop.
On the electricity generator amendments and the impact of the previous baseline period, these rules were simply carried over from the existing EU ETS for consistency and we are now amending them to tailor them to the UK system. I hope I have answered all the points I was asked about and commend the order to the House.
Energy Bill [HL]
Lord Teverson ExcerptsTuesday 24th October 2023
(6 months, 2 weeks ago)
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Baroness Bennett of Manor Castle (GP)
My Lords, I rise very briefly and with great pleasure following the noble Baroness, Lady Boycott, who has done such an enormous amount of work on this issue—I pay tribute to that.
I was the person who started these amendments on their way back in December 2022, after we started work on this Bill last July. A consultation is something but what we really need is action, so I have a simple question for the Minister. As he said, this consultation has already started this month; if the Government see or identify through that consultation some simple, easy-to-remove barriers, will they act on them immediately rather than waiting for the end of the formal process? Surely, if action can be taken then projects, such as the one in Kensington to which the Minister referred, can go forward.
Lord Teverson (LD)
My Lords, I too congratulate the noble Baroness, Lady Boycott, on her persistence in this area. One of the strong messages that came out between Committee and Report in this House was the slow progress, and lack of progress, on community schemes. I very much hope that this consultation will reverse that trend. It seems slightly ironic, though typical, that the objection from the Commons is on there being a timetable, whereas we all know that for anything to happen, you need a timetable to focus.
On these Benches we are now keen to get this Bill on the statute book and that it becomes an Act. It has been delayed a number of times, mainly from the government side, as it has progressed through both Houses. There are a lot of important parts of this Bill that need to happen. I very much hope that the future systems operator will be quickly nominated and can move into action, so that a number of the strategic bottlenecks that we have in our energy sector can be swept away and solved. Again, I thank the noble Baroness for her persistence in this area, and I hope that consultation will move to action very quickly.
Lord Lennie (Lab)
My Lords, I thank the noble Baroness, Lady Boycott, for her persistence on this. I agree with what she is trying to achieve. The Minister came dangerously close to Rumsfeld-speak when he effectively said that we cannot know the unknowables. All that we and the amendment were suggesting was that a report needs to come forward and then we can determine how we need to act, which seems entirely sensible.
I agree with the noble Lord, Lord Teverson: it is time that the Bill got on to the statute book. The Bill has been far too long in digestion. Let us hope we can now eat it all and enjoy its flavour.
Climate Financing
Lord Teverson Excerpts(6 months, 3 weeks ago)
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Lord Callanan (Con)
I must disagree with the noble Baroness. There has not been any rollback on the Government’s targets. There is a legally binding commitment, which we will maintain, and of course we have a number of legally binding carbon budgets, which we will also maintain. We are adamant that we are on track to meet all of them.
Lord Teverson (LD)
My Lords, I very much welcome the Minister’s confirmation of the UK’s role in international finance on climate change, but money is not the only thing. Technological transfer and transfer of expertise are equally important. Will the Minister tell us what the UK Government are doing to ensure the transfer of expertise and technology that we have in the UK, particularly in areas where we lead, such as offshore wind and other technologies? Are we working strongly to transfer that to economies in the south who can use it even more than we can?
Lord Callanan (Con)
The noble Lord is absolutely right. We are world leaders in many technological developments. Offshore wind is one example, floating offshore wind would be another, and a third would be the deployment of solar technology, which could be immensely valuable in many parts of the developing world. We share expertise through the good offices of the Foreign Office as much as we possibly can.
Net Zero (Economic Affairs Committee Report)
Lord Teverson Excerpts(6 months, 3 weeks ago)
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Lord Teverson (LD)
My Lords, I also declare my interest: it is in a company called Aldustria Ltd, which is into energy storage. I absolutely agree with the noble Lord, Lord Frost, that there are many issues around energy storage, particularly in the long term, on which I know the Government have done a number of consultations.
I congratulate my noble friend Lady Kramer on her introduction to this report. She is absolutely right: it has taken far too long to get it to the Floor of the House. As the noble Viscount, Lord Chandos, said, there have been three Prime Ministers since the report came out. The only thing that I would say is that it has actually managed to get to the end of its process slightly quicker than the Government’s Energy Bill, which started in the same month that this report was published but has still to be completed. I hope that that will happen before the end of this month. That shows the urgency that the Government wanted to put into their energy strategy but did not, particularly on electricity and carbon capture and storage.
I shall come back on energy costs for a minute, in response to the noble Lord, Lord Frost. The noble Viscount, Lord Chandos, is absolutely right about 2050. It is not about reaching net zero that year—you have to get it all the way through. I do not think that methane was mentioned in the report—I may be wrong—but that is one area where there may be some quicker wins.
I absolutely agree with the noble Lord, Lord Turnbull, about Rough storage, although I think that only a small amount of that facility is contracted to the Government. Centrica is hanging on to the rest of it, and there is no guarantee that it will be there long term. That is a real vulnerability.
As for new gas and oil and, particularly, coal facilities, I do not see any UK Government banning exports of those products. I do not see that ever happening, which is why I do not think that there is any effect on our energy security or, indeed, on global pricing for those new openings.
I shall come back on demand reduction in a minute in response to the noble Baroness, Lady Bennett, as it is an important area. But I just say to the noble Baroness, Lady Noakes, that I came up as a traditional economist, and it always seemed to me that it was really important to cost the idea of externalities into actual pricing systems. With carbon emissions we have huge externalities that are not priced into market competition—and that is why there have to be differences.
I also say to the noble Baroness that, of course, there is a huge kickback at the moment to the Government on contracts for difference through the Low Carbon Contracts Company, whereby at the moment actual market prices are hugely higher than strike prices. I would be interested to understand from the Minister—
The Parliamentary Under-Secretary of State, Department for Energy Security and Net Zero (Lord Callanan) (Con)
It is not a kickback to the Government—it is a kickback to the consumer.
Lord Teverson (LD)
Yes, exactly. The Minister corrects me. That is even more to the point. I think it has got to several billion pounds in terms of coming back into that sector working the other way, which probably exceeds now the green costs that there were. That is quite an optimistic look at that.
It seems to me that one real problem in this area—because the world has moved on since last July—is with those recent announcements that my noble friend went through from the Prime Minister. They probably did not have as big an effect as some people said, but they did drive a horse and carriage through our international reputation, as indeed did the coal decision in Cumbria. Our being seen as a global leader in this area, which the report was keen to emphasise, has been trashed to a large degree, and has been seen as such by allies such as America and the European Union.
I want to come back to those announcements, one of which was to abolish the Energy Efficiency Taskforce. The Minister was chair of that, and I understand that four meetings took place. Whether you look at security or at cost, the most secure energy is the energy that you do not need. The energy-efficiency side is important in that area, as well as cost. I would be interested to understand from the Minister why he was made redundant by the abolition of that committee. The UK should be a real leader, and really move in this area. The report asks for an energy demand reduction strategy, and that is really called for. It is not just around buildings, as the Government’s response said that it was; it is around a much broader area, including appliances and other interests.
One thing that has been emphasised during this debate is private investment, which it is clear is absolutely essential to deliver net zero. I am not pessimistic about this. Most private investment takes place to reduce costs, not to increase them. Companies do not invest to increase prices; they invest to reduce prices, and that is what we should aim for with the net-zero strategy.
One problem with the Prime Minister’s announcement, and all the other issues that have happened, is that we have a wobble with investor confidence—absolutely we do. Those messages that go out to industry and the investment sector say that we are no longer reliable on our government policy or on the foundation of confidence going forward. That has an even bigger effect when we have the Inflation Reduction Act in the United States and the EU green deal industrial plan on the other side of the channel. I would be interested to understand from the Minister when the Government will really respond to that huge financial challenge, which really prejudices how we can deliver net zero through the private sector in future.
I will make one or two further points, as I am sure the House will want to move on. The noble Baroness mentioned the UK Emissions Trading Scheme. I have been very hopeful—not because I am pro-European but because of liquidity and various other areas—that there should be a tie-up between the UK Emissions Trading Scheme and the EU equivalent. I understood that that was a government objective, but now we have a huge divergence in prices. The UK ETS a year ago was about £100 per carbon tonne; it is now down below £40. In the EU, it was around €100 per tonne a year ago but is now down to about €80. A huge difference has opened up. I would be interested to hear the Minister’s reaction on how the carbon border adjustment mechanism will affect that, as Europe starts to develop it over the next few years. That price signal is so important in terms of taxation and disappearing incentives for investment in our economy.
I am glad to see the noble Lord, Lord West, is here, because one of the key issues in energy security at the moment is defence, which has not been mentioned in this debate. In Finland, we have seen potential interference with the explosion of one of its energy pipelines and we have seen Nord Stream 1 and 2 destroyed. We know from our intelligence that the Russian Federation is keeping a very close eye on our undersea energy and communication networks. The Minister may not have an answer to this, but it is one of our major concerns in energy security as we move forward and have more interconnectors offshore. I am sure he agrees that this is a major thing we must look at.
Finally, coming back to consumers, the energy companies and Ofgem estimate that, as we reach the end of summer and enter winter and higher bills, the outstanding energy bills from consumers will be about £2.6 billion. Are the Government happy with that? Do they think it is sustainable for low-income families? Do they intend to do anything about it? This is probably the biggest challenge of all. Although the noble Lord, Lord Frost, talked about the importance of gas, which will be important for many years, the gas price has driven inflation and the high costs to families of keeping warm. It has led to inflation, which has led to the failure of those offshore wind projects. It is important that we restart that, but the problem is not the technology and the price coming down in real terms; the problem is inflation. What will happen to families over this winter?
Climate Change Policies
Lord Teverson Excerpts(7 months, 2 weeks ago)
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Lord Callanan (Con)
The noble Baroness makes a number of statements before she has even heard what the Prime Minister has to say later; perhaps she might want to read what the Prime Minister actually announces and revise her statements in light of that.
Lord Teverson (LD)
My Lords, the Minister has provided a list of things that all of us have been proud of in the past, but the point is that is the past. This announcement is a tragedy for this nation because that leadership that we had globally, of which we all were proud, is about to disappear. The Prime Minister is likely to say that the target of net zero still exists, which is a fabrication. We know from the Climate Change Committee, the Government’s own adviser, that we are already behind that in terms of policy. This will kill that objective.
We have the IRA in the United States and the green investment plan in the EU. We are now retreating from international investment. The question I ask the Minister is where the investment will come from to get us to net zero, but the question I really want to ask is how come any Ministers are still in the department for net zero. They should have all resigned this morning.
Lord Callanan (Con)
As the noble Lord knows, net zero is a legal commitment imposed on us by Parliament; it is the duty of Ministers to meet that commitment, and we will do so. As I have said, we are currently overachieving on carbon budgets 4 and 5; carbon budget six does not start until 2033. I have sat down with policy officials, and we are confident that we are on track to meet that as well. We are attracting record amounts of inward investment into this country. I talked earlier about the windfarm industry; we could talk about hydrogen or CCUS—the UK is world-leading on all those policies and many global companies are rushing to invest in the UK. Our difficulty is prioritising some of that investment.
Energy Bill [HL]
Lord Teverson ExcerptsTuesday 12th September 2023
(7 months, 3 weeks ago)
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Lord Teverson (LD)
My Lords, first, I congratulate the Minister—he knows that I like to praise his work—particularly on the change in the Ofgem amendment, in that our major regulator will now have a net-zero objective. To me, that is absolutely stark staringly obvious, and the fact that there has been government resistance to it while the Bill has been in this House I find strange, so that is a real move forward. The other thing that is to me stark staringly stupid is that we are talking about opening a coal mine in 2023. That makes no sense at all, and I will go through the reasons why.
It is not just we on these Benches or the Opposition who have that view. Let me quote from the Commons at Report. The then Energy Minister, Chris Skidmore—highly respected in this area and highly respected by the Government, in that he wrote their independent net zero review—said:
“Legislating to prevent the opening of new coal mines simply maintains the commitment that the UK sought to make to the rest of the world at COP26”—[Official Report, Commons, 5/9/23; col. 303.]
That was Chris Skidmore, former Energy Minister, valued by the Government for his net zero review, and by all of us for that great piece of work.
At COP 26 in Glasgow a couple of years ago, which we chaired very successfully under Sir Alok Sharma, we nailed our colours to the mast and led a coalition of countries—I think the government press release says 190—and celebrated the fact that we would phase out coal. What motivates me most to put Amendment 272A forward again is that our international reputation is being shredded by the fact that we are moving ahead on this basis. Let us not pretend that it is not noticed internationally, because it is. Even the White House, under John Kerry, the climate envoy, has remarked on this piece of government policy planning and Michael Gove’s proposal to open the coal mine. So, our international reputation for climate leadership, which all of us on all sides of this House have been particularly proud of over the years, is being literally trashed by this decision.
That has other effects as well. During a Private Notice Question yesterday, we debated the fact that we had no investor take for offshore wind on the CfD pitch when it concluded last week. That shows that we need rock-solid commitment to net zero in order to attract investment into this country. To me, our saying internationally that we are starting to open coal mines absolutely goes against what we are saying to bring in investment. It questions UK government policy, which is competing with the Inflation Reduction Act in the United States and a green deal industrial plan in the EU. We are trying to get a slice of that global investment, yet our environmental and climate focus is wobbling. That is absolutely wrong.
This amendment would apply to any sort of coal mine, but the Minister mentioned the Cumbrian coal mine, which is what that decision is all about. Let us be clear about that proposition and the company West Cumbria Mining. As the noble Baroness, Lady Bennett, has said already, that industry is moving—indeed, must move—competitively towards a much greener stance; for the UK steel industry to remain competitive, it must do so as well. As I understand it, scientists have questions about West Cumbrian coal, including whether its sulphur content is even sufficient for the steel industry. However, the main facts are these: first, the steel industry generally is not that interested in that coal; and, secondly, the company itself says that some four-fifths of the coal will not be used by the UK steel industry, which means that it needs to be exported. Once coal is exported, we have no control over how that substance is used.
That brings me to transport. The argument is that it is better to provide our own coking coal than to import it. However, if we export 80% of this coal, that will put transport costs up because we will have the cost of transporting it to other, international markets.
The one argument that I do have sympathy with concerns jobs. We all know that the region of Cumbria is hugely challenged in terms of levelling up, jobs and income. However, it is completely obvious to me that, as the noble Baroness, Lady Blake, just talked about with regard to Labour’s amendment, we have the ability to provide green jobs and proper energy efficiency. It is clear to me that this coal mine will not be there for a particularly long time, so those jobs will be transient.
I will leave it at that but let me come back to the United Kingdom’s international reputation and our important share in global investment in the green sector. I quote the Government’s own website, which said this after COP 26:
“The end of coal—the single biggest contributor to climate change—is in sight thanks to the UK securing a 190-strong coalition of countries and organisations at COP26”.
That was a proud moment for not just Alok Sharma but the Government. It is being trashed.
Baroness Boycott (CB)
My Lords, I rise to speak to Amendment 274B in my name. I draw attention to my interests in the register.
I will speak briefly about community energy but let me just say that I absolutely support the amendments in the names of the noble Baroness, Lady Blake, and the noble Lord, Lord Teverson. I also very much support the noble Lord’s words, especially about what this measure is going to do to Britain’s reputation, and his reminding us of where this country was just a couple of short years ago as the leaders of COP, playing a proud role on the world stage; that seems to be in tatters right now.
Community energy is wildly popular in the country—it is extremely popular with all sorts of people. I find it puzzling why the Government are not bending over backwards to make this easier and simpler for people. I do not want to get into the arguments about onshore wind, but surely one way to mitigate communities’ concerns about renewable energy is to give people a stake in it so that it is about not just a bit of money but owning something. My sister has lived on a small island in Denmark for 60 years. The people there are completely energy independent. It was the first place I knew of that had wind farms everywhere. Everyone knows how much electricity is coming in and what it is doing. They have ownership and share prices—that is just the way it has been done, and it is kind of brilliant. Why can we not say, “The local energy we produce off that hill heats my towel rail all year round”? They can report, “I co-own it”, “It has paid to put solar panels on the roof of the community hall”, or “It has paid for energy efficiency advice and deals for the other homes in our village”.
In fairness to the Government, they have acknowledged this, but we seem to have spent an incredible amount of time hand-wringing about the difficulties rather than finding the easy, appropriate ways of supporting it. All that the sector wants is a deal comparable with all the other renewable energy that we have in this country, via a guaranteed minimum price. This gives communities the certainty that they need to raise the funds to go ahead. This is true across so much of the alternative energy sector.
I supported the establishment of the £10 million community energy fund but, quite honestly, that is not very much. If you look in the Evening Standard, you find that you can buy a flat for £10 million within about 100 yards of here. It is not going to go far enough. We need real reform, so the commitment made by Andrew Bowie in the other place
“to consulting on the barriers the sector faces when developing projects”—[Official Report, Commons, 5/9/23; col. 281.]
was particularly welcome.
That is why I have come up with this compromise amendment, which I hope that the Minister feels able to accept. It would give the industry a boost to know that there was something coming down the tracks on an agreed timeframe. A problem that we have seen before is consultations which do not receive a response—or do but with serious delays. That is all that I am trying to avoid with this amendment in lieu, which sets a generous timescale of 18 months for a consultation and a further six months for bringing forward proposals to remove the barriers to community energy schemes. This times nicely with the end of the two-year community energy fund and would avoid a potential cliff edge.
I believe that the Minister will appreciate the need for clarity for the sector and the need to reassure over 300 MPs, including 147 Conservative MPs, who backed the original Local Electricity Bill, which recognised the barriers to community energy and proposed remedies. I therefore ask him to give this house more clarity on timescales, or I may be required to test the opinion of the House.
Lord Teverson (LD)
My Lords, for the reputation of the UK internationally and for the health of the planet, I wish to test the opinion of the House on this amendment.