Energy: Climate Change
Debate between Lord Whitty and Lord Lawson of Blaby
Lord Whitty
My Lords, I, too, am all in favour of Anglo-French co-operation and I should like to see some on the climate change agenda, so perhaps we can revert to that. I should be grateful for the break in the debate, otherwise I might have been tempted to respond in detail to the tour de force by the noble Lord, Lord Lawson, and the last time I did that I got completely slaughtered. However, the House should recognise that the difference between the noble Lord and most of us here is that he does not accept, even with the usual caveats, the burden of evidence of man’s contribution to global warming. I do and I am glad to say that the Government do. I therefore thank the noble Lord, Lord Lawson, for differentiating himself so clearly from the Government and I congratulate the Government on differentiating themselves so clearly from the noble Lord on this matter.
Lord Lawson of Blaby
I accept that there is a possibility and a probability that manmade carbon dioxide emissions have had some impact on the very slight rise in the temperature in the 20th century. I do not deny that. I keep an open mind on the science. Even if that is accepted, the policy decisions do not follow; they do not add up. That was my point.
Lord Whitty
I thank the noble Lord for that clarification. Behind his scepticism about the policy, however, there is a doubt about the science. The noble Lord often makes good political and economic points but essentially his assessment of the science and the challenge that the science presents us with is different from the view taken by both the previous Government and this one.
Despite the climate sceptics’ view, there is largely cross-party consensus on the importance of climate change and the present Government’s commitment on the road to 2050 via 2020. There is largely consensus that we need a mix of energy sources from nuclear to renewables, which means nuclear and renewables, not nuclear or renewables. That is a positive sign for this country at a time when, as has been said, there is a danger that in the United States a political veto will shortly be handed to the climate change deniers and when China insists on playing such a dangerous geopolitical game on this most serious of subjects. As a result, any progress at Cancun is seriously in doubt. The fact that I am on the same page as the Government on this does not necessarily mean that I agree with everything that they are attempting to do.
Before getting on to that, I should probably declare a few interests. I am the chair—shortly to retire—of Consumer Focus, which, along with our predecessor organisation Energywatch, has often expressed consumer interests in energy policy. Even a few weeks ago, we managed to gain for consumers about £70 million from one of the major energy companies, only to find out two weeks later that we were about to be abolished. It is important that the consumer interest in this debate should be reflected. I also declare an interest as honorary president of CHPA and chair of a CHP company. As we will refer to Warm Front in a moment, I should say that I have a past interest as an adviser to Eaga, but that is no longer so. I am a member of the Environment Agency board, which reminds me that some departments did not do quite as well as the noble Lord’s department out of the CSR settlement. Measures to adapt to climate change—principally flood defences—failed to get adequate resources in the outcome of the CSR. The noble Lord and his colleagues in DECC are to be congratulated to an extent.
My main concerns in this debate are threefold. Like the noble Lord, Lord Teverson, I think that the drive on energy efficiency is still insufficient, not just in the household sense but more broadly. Secondly, there is a serious social and distributional dimension about the issue of who pays for the cost of adapting and mitigating climate change. Thirdly, there is not yet any clarity on the Government’s review of the role of Ofgem.
Energy efficiency applies not only to end use but in the generation system. We have some pretty inefficient generators in the distribution system, in which there is major leakage, and, of course, in homes, factories and offices. I was grateful, I think, to see a commitment by the new Government to increase decentralised energy, which helps to bring energy nearer to its point of use, but in general there has not been a lot of emphasis on the totality of the system and on the improvements in energy efficiency that we should be able to see.
At the household end, the Government are committed to the green deal. I welcome the concept of the green deal, but we need a lot more detail. Who will deliver it? How will householders be persuaded to go for it? Are supply companies to be involved in the delivery? Unfortunately, they are not the most trusted by householders and consumers. The banks clearly have to be involved, but I do not think that they should be the major agent either. There has been talk of Tesco and the other major supermarkets delivering. I am not sure whether that is on the Government’s agenda. There could be specialist managers—indeed, the installers and manufacturers of improved energy-efficiency and insulation materials and gadgets could be the actual deliverers.
The key thing to remember is that the whole concept of the green deal is for an individual householder voluntarily to enter into a deal to make some expenditure on the basis of a loan that will be paid back through lower energy bills. That is key, but it requires trust—trust in the initial audit of the energy efficiency or otherwise of the house; trust in the terms of payback; and trust in how the customer service to that householder is carried out, because it can all be spoilt if a wall is unnecessarily knocked down or even if a carpet is messed up and the installer fails to recognise the interests of the consumer in the household.
There is also a lack of clarity about who potentially benefits from the green deal. Owner-occupiers, in one sense, clearly would if they were in the building for a significant time. Theoretically, at least, they could benefit if they sold the building, because the value of the house should at least reflect its future energy consumption bills. It is not so clear when it comes to tenants and landlords. The question of who benefits depends on who pays the bill and it is not at all clear how this will apply in social housing in local government and housing association properties.
That brings me to the nub of the problem so far as the distributional aspects are concerned. There is an increase in fuel poverty. I was once the Minister who set the targets for fuel poverty and for the first few years we made significant progress on that front. We are now miles off achieving those targets and I think that a realistic reassessment of the targets is necessary. However, we must reiterate and back up a commitment to eliminating, so far as possible, fuel poverty from our society. The Government’s major move on this front has been effectively to run down and abolish Warm Front. There was some criticism of Warm Front and no doubt its delivery and scope could have been improved, but it was a major contributor not only to reducing fuel poverty but also to improving the energy efficiency of some of our least energy-efficient buildings. It is not replaced by the green deal. It is not clear how the green deal applies to those who are fuel poor and would not wish to take out that loan or do not own the property in which they live. Nor is it replaced by the price support system that the Government say will operate within the tariff structure—in other words, there will in effect be some subsidy to the supply companies, bringing on what we might previously have called a social tariff, although I do not think that that terminology is of interest to the Government. That helps—it helps to lower the current price—but it does nothing to improve the energy efficiency of the building and therefore the future bills.
Fuel poverty is growing. In the medium term, it is almost certain that energy prices will rise. They will rise because of world market conditions and they will rise because of government policy in, effectively, placing the cost of greening and decarbonising our energy supply on the consumer. On one level, I do not dissent from that policy, but it has consequences. In particular, it has distributional consequences on the very poor. It is not clear whether the green deal will do anything significant on that front.
The central problem is that this is a regulated industry—a very heavily regulated industry, according to some—and the net effect of the regulation is counterproductive. I would be interested to hear from the Minister what the Government expect from the current review of Ofgem. I have often been critical of Ofgem. The noble Lord, Lord Mogg, who is not in his place, sometimes gets very sensitive about it. However, I am not in favour of the abolition of Ofgem, nor am I in favour of limiting its remit. It has been improving on both the social and the environmental fronts. However, there needs to be a radical if not revolutionary approach to the way in which tariffs are structured in this country. It remains the case that the more energy you use, the lower the unit cost of energy. It also remains the case, either because of the tariff or because of the way in which you pay, that, by and large, poorer households pay more per unit of energy than better-off households. Both on social and environmental grounds, that is counterproductive.
The objectives of energy policy—on security, decarbonisation and affordability, including reducing fuel poverty—must depend on us delivering a step increase in energy efficiency. Unless the Government and Ofgem and the remit that this Government give to Ofgem are directed at producing a tariff structure that encourages energy conservation and energy efficiency and removes the disproportionate burden of energy costs on the poorer households in our society, we will not achieve any of those objectives. I hope that, in the review of Ofgem, the Government will bear in mind that the combination of the noble Lord’s department and Ofgem can deliver a radical change of strategy for us. I hope that they do deliver it.