Energy BILL [ Lords ] (Sixth sitting)

Debate between Matthew Pennycook and Holly Lynch

Thursday 4th February 2016 Public Bill Committees

[Matthew Pennycook]

I know it is extremely unlikely. As we touched on at our previous sitting when discussing onshore wind, the Secretary of State has admitted that the Government do not have the right policies in place to meet their targets on heat and transport. From what I can see, they do not even have any institutions within Government to make it happen. We have been told there is an interministerial group on carbon growth but we do not know how many times it has met or what its terms of reference are to drive forward progress in this area. The implication of that, as I will come to, is that we will see greater costs down the line if we do not get serious about CCS.

We need a strategy. The Minister has explained why she believes the Oil and Gas Authority’s function should not be extended to incorporate the regulation of CCS activity. I disagree with the case she made, but I hope she does not dispute the need for more clarity in this area and for some kind of strategy. In the absence of an effective carbon price, we need to have a comprehensive strategy from the Government on CCS development and deployment. Such a strategy would be formed in consultation with a number of Departments, including the Treasury and the Department for Business, Innovation and Skills, the OGA and the CCS industry itself, as the clause makes clear.

The strategy would have to include some of the following elements, which I mention in the hope that the Minister will take them on board. It would need a strategy for maintaining those strategically important pieces of UK-critical infrastructure, such as Peterhead, that have been put at risk by the recent decision to withdraw CCS funding. It would need provisions for the development particularly of transport and storage, to incentivise what we know we need, which is large clusters of CCS, where multiple operations are linked into a single plant, because that is how to get the economies of scale. It would need a strategy to facilitate the industrial application of CCS, particularly in the iron and steel industry, cement production and petrochemicals. Those three sectors account for 45% of CO₂ emissions that need to be captured by 2050.

Above all, we need a strategy because the private sector needs some certainty about funding, so that it can build confidence, investment and support for CCS projects, importantly where the finances in such projects do not rely on carbon being reinjected to maintain reservoir pressure in producing oil and gas fields. That happens in a large majority of the CCS projects that are up and running, and is, I think, questionable in terms of its long-term impact on climate.

Why do we need to do this for funding, to touch on the point made by the hon. Member for Coatbridge, Chryston and Bellshill? If we do not get a strategy soon, not only will the UK lose direction, but it will cost us a great deal of money. As I said, a significant amount of UK taxpayer money has already been wasted as a result of the abrupt decision to withdraw the £1 billion CCS funding. That is why the National Audit Office is going to look into the matter, and why the companies involved are now seeking to recover the costs they have sunk into the projects. There are other greater and more significant long-term costs at stake: the costs of avoiding dangerous climate change if CCS does not come forward to scale.

Let me put on the record the assessment of the Energy Technologies Institute. According to the ETS, delays in deployment as a result of the CCS competition cancellation have

“a high chance of significantly increasing the cost of carbon abatement to the UK economy. Delay adds an estimated £1-2 billion per year throughout the 2020s to the otherwise best achievable cost for reducing carbon emissions.”

While delays in CCS infrastructure are still likely to mature, the legacy effect of the Government’s decision will in the decades ahead

“still result in an additional cost estimated to be around £2–3 billion per year”.

From a public interest perspective we have to get this right. We need a comprehensive strategy and now is the time to do it. I urge the Minister seriously to consider the new clauses.

[Holly Lynch (Halifax) (Lab)]

May I say what a pleasure it has been to serve under your chairmanship over the last couple of weeks, Mr Davies?

As the Opposition Whip in this Committee, I would not normally speak at any length, but I hope Members will forgive me for making an exception to speak in support of new clause 10. I do so as an MP from Yorkshire, where the decision to cancel the £1 billion CCS competition fund has been a real blow for the region, as I have no doubt it was for Peterhead and for other hopeful projects and their surrounding areas up and down the country.

Earlier in the week, we heard from the Minister, the hon. Member for Daventry and others about the tenacity with which this Government are committed to delivering an end to any public subsidy for onshore wind. I heard the Minister’s intervention earlier and perhaps that is the very crux of the issue. I hope that Members will not mind my quoting from a sitting earlier in the week, when that commitment to end subsidies for onshore wind was referred to as an absolute “manifesto commitment”—no ifs, no buts—and I think people might be forgiven for assuming that the commitment to end the £1 billion fund may have come with the same terms.