UN Framework Convention on Climate Change

Alan Whitehead Excerpts

Thursday 18th April 2013 Westminster Hall

[Mr Yeo]

My hon. Friend is right about the difference between new and old nuclear, and I take his point. I reiterate that my Committee and I are wholly opposed to the floor price for carbon, which is a tax. It is not a green measure, although it was introduced as one, and it was never going to have that effect. I am a great supporter of the concept of emissions trading and a great advocate of more urgent action to accelerate the introduction of low-carbon technology. The floor price for carbon will not do anything to achieve those objectives.

[Dr Alan Whitehead (Southampton, Test) (Lab)]

Will the Chairman of the Committee reflect on the fact that not only was a substantial floor price escalator effectively announced in the Finance Bill, but that escalator was £1 above EU ETS prices with respect to what was originally proposed in the consultative document on which the new rates are based; was put into place at £5 above EU ETS prices; and now, with the projections to 2015-16, is £12 above EU ETS prices? Does he have any thoughts on that trajectory and the way it was laid out?

[Mr Yeo]

The hon. Gentleman makes a telling point. It is clear that, even in the Treasury, the floor price is simply seen as a way to extract revenue, but it has chosen to do that in a way that is particularly damaging to some sections of British business. Incidentally, his thoughtful intervention has given me time to remember that, in opening, I should have drawn attention to my entry in the Register of Members’ Financial Interests and declared an interest in a number of energy businesses. I reiterate, as I have on previous occasions, that those interests were acquired long after my views on these subjects were formed 20 years ago, when I had some ministerial responsibility for the matter.

I shall touch briefly on one or two other recommendations. The Government agree with the Committee that we should work with industrial sectors and stakeholders to develop a sectoral trading scheme between developed and developing nations. The Government also accepted the Committee’s recommendation that the second commitment period of the Kyoto protocol should last eight years and include a review clause to allow for more ambitious emissions targets, if necessary. They also agree that efforts should be focused on developing the Durban platform, because countries such as Canada, Russia and Japan were unlikely to sign up to a second Kyoto period.

I share the concern of some commentators that more progress has not been made towards closing the emissions gap. Without wishing to provoke my right hon. Friend the Member for Hitchin and Harpenden (Mr Lilley) into too much anger, I will quote Lord Stern, whose comments on it were apt. He said that

“there has been, yet again, a very big mismatch between the scale and urgency of action required to effectively manage the huge risks of climate change, and the political will and ambition that has been displayed in Doha. Current commitments and pledges by countries to reduce emissions by 2020 are clearly not consistent with the goal of giving the world a reasonable chance of avoiding global warming of more than 2 centigrade degrees. We are headed on current plans for likely increases of 3 centigrade degrees or more”.

He has more to say, but I think I have perhaps said enough on that point.

The Government also supported the Committee’s view that a target of a 30% emissions reduction by 2020 should be set at EU level, and the view that that would be in the UK’s long-term economic, as well as environmental, interest.

I will leave other members of the Committee to address some of the report’s other recommendations, because I want to allow a little more time, if possible, for the second debate, which is on low-carbon links with China. The process that we consider in the report and are debating this afternoon remains important and, frustrating though it is, I am glad that the Government continue to participate fully and constructively in it.

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[Mr Yeo]

I do not want to get too distracted by that, but the terms of trade in the debate have clearly shifted a lot in the past year or so. The two big factors are, first, that the recession seems to be longer and worse that we had thought—not just in this country, but across the EU, although perhaps for slightly different reasons, and, secondly, the extent of the competitive advantage that shale gas now gives the US. Despite all that, if we say, “Okay, that’s fine. Let’s not bother with nuclear or low-carbon renewables, it’s all going to be gas,” we might find that we are buying gas expensively from a variety of places, which might even include America.

We would not have done much for our competitive position if we landed up completely dependent on fossil fuel imports, the price of which would be completely outside our control, and even the supply of which might not be wholly reliable. I point to the views of all sorts of businesses that are not green-dreaming tree huggers—some are not even connected with the energy industry—but which clearly feel that an energy mix involving a variety of technologies is a better bet than complete reliance on fossil fuels.

[Dr Whitehead]

Might the Chairman of the Committee wish to consider a distinction between internal domestic prices in the US and its export prices? Might he also reflect on the price of the most recent cargo of liquefied natural gas from the US, and the extent to which it was or was not related to the overriding price of shale gas within the US? The extent to which the competitive advantage of the UK may be exported is very much in doubt, and it is likely that world prices, not US domestic prices, will prevail.

[Mr Andrew Turner (in the Chair)]

Order. Will Members on both sides of the Chamber ensure that interventions are brief?

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[Gregory Barker]

rose—

[Dr Whitehead]

rose—

[Mr Andrew Turner (in the Chair)]

Mr Lilley, it is your choice as to who is to speak. Who do you wish to speak?

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[Mr Lilley]

I am grateful to hear that there is another voice of common sense in this Chamber. Where do I see nuclear? Unfortunately, it has become extremely expensive but it is, none the less, a source of major power that is not dependent on the vagaries of the weather or the fact that the sun goes in at night.

[Dr Whitehead]

For completeness, will the right hon. Gentleman put on the record the extent to which he accepts any externalities in the extraction, transportation and use of fossil fuels, or does he think that they could be made even cheaper by having 12-year-olds dig them out of the ground with no safety rules whatever, no transportation and no concerns? What are his particular parameters in terms of the comparisons he is making?

[Mr Andrew Turner (in the Chair)]

Order. I am sorry but we must have brief interventions. That will get us back on to a swifter speech.

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[Mr Lilley]

My hon. Friend is absolutely right. Of course, Germany is moving away from renewables, if one counts nuclear as a renewable. It is moving away from nuclear. It is planning to close down all its nuclear plants, and by and large that will mean replacing them with fossil fuel plants instead. [Interruption.] Does the hon. Member for Southampton, Test (Dr Whitehead) want to intervene?

[Dr Whitehead]

I was just pointing out that the right hon. Gentleman said that nuclear is a renewable. I recall the process of getting uranium out of the ground in order to fuel nuclear reactors, and once it is out of the ground it cannot be put back in again. Nuclear is not a renewable.

[Mr Lilley]

Okay. I take the hon. Gentleman’s pedantry in good heart, since I am a pedant myself. I should not have said “renewable”; I should have said “non-fossil fuel”. Nevertheless, Germany is moving away from its dependence on nuclear, which is a non-fossil fuel, and it will rely more on fossil fuels, despite its already large commitment to solar and wind.

At this point, Mr Turner, to avoid yet more interventions, which might incur your wrath, and further replies to them from me, which might be too long, I will leave Westminster Hall to those who wish to indulge their fantasies in public, so that they can have their say.

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[Dr Alan Whitehead (Southampton, Test) (Lab)]

I, too, will try to be brief, because I know that an important debate on China and the low-carbon economy will follow. That debate may shed light on some of our interesting diversions in this debate.

Fundamentally, we have been invited this afternoon to justify why the COP process is important. There are those who say that it is all a complete waste of time—we will burn all the fossil fuel that we can get our hands on—and ask why we are concerning ourselves with the process. Most simply, the Earth is very good at storing stuff and does not need over million of years to balance how it works as a planet. Humans, with the great gift of consciousness, are also very good at finding all that stuff, digging it up and burning it within a few hundred years, compared with the millions of years that the Earth has taken to store and balance it in the first place. I assume that the right hon. Member for Hitchin and Harpenden (Mr Lilley) also agrees with this, but if, over the next 100 years or so, clever humans find and burn all the fossil fuel, the outlook for the world would be very poor indeed.

The world simply cannot do that over the next 100 or 150 years. That seems to me to be a fairly self-evident fact, assuming that people agree that there is some relation between what we do—burning fossil fuels in particular, and human activity in general—and the state of the world’s atmosphere and the extent to which the Earth will warm up as result. Someone who thinks that there is no connection whatever would presumably not be concerned about finding all the fossil fuel in the world and burning it all. Someone who thinks that there is a connection, and an urgent one, would presumably wish to do something about it fairly urgently. Since climate change and, in particular, the results of the burning of fossil fuels know no boundaries, the only way that we can do something about the situation over the medium term is through interaction and discussion between states throughout the world about achieving an outcome that is not as disastrous as it would be if every country went its own way individually.

That seems to be the basic point about the COP process, and although I shall come to a caveat in a moment, that cannot be replicated by people doing what they feel like individually in different countries around the world, partly for the reasons that have been rehearsed this afternoon: people want to go their own way in how to develop their economies. Realising the extent to which that is not an option for any of us over the next 100 years or so is part of the process of recognition that international agreements are important. Indeed, under certain circumstances some consequences have been turned back by international agreements. The Montreal protocol and the action on chlorofluorocarbons was a global agreement to the disadvantage of certain places resulting in a substantial change; what would otherwise have been a difficult outcome for at least parts of our climate has apparently been substantially mitigated and possibly reversed. The COP process is important in that respect.

For the record, one of the immediate consequences of deciding to go off in a different direction can be seen in the 2013 Budget: the carbon floor price is a unilateral tax introduced in the UK, the operation of which does not directly save a single tonne of carbon. It was supposed to be introduced on the basis of a £1 rider on the EU ETS—an inter-country co-operation on carbon cap and trade—but that turned into a £4.94 rider on the ETS when it comes in this year. From next year, it will be £9.55 on top and, in 2015, £18.08 on top, compared with what would have been £7.28 and £9.86, respectively, under the original proposals. That is not mission creep but mission gallop, and often in an entirely different direction. The result is an £18 differential between a power station introducing energy to the UK from the Netherlands and a power station producing energy within the UK. A power station developer might now think, “I will go and put one up in The Hague now because, for my power station developments, that will save me £18 per tonne of CO₂ over the next few years.”

As my hon. Friend the Member for Brent North (Barry Gardiner) outlined, the free money—not for new nuclear, but for existing nuclear—turns out to be not only for all the nuclear power stations in place, but for the two extensions agreed last year and this year. Calculations based on what the carbon floor price would have been when it was first introduced make that £44 billion over the life of the extensions for the four power stations; the new figures are about 30% more. Frankly, I will be surprised if EDF does not go ahead with a new power station on the back of that free money, although I know those are two slightly different things. My point is about the distorting effects of a one-country go at such a scheme, even if that was the intention, rather than its being a dash for money by the Treasury. That illustrates, as other things might not immediately, how important it is to go ahead with international negotiations and to get collective action. Everyone would then be in the same place and on the same level playing field.

[David Mowat]

The hon. Gentleman makes the argument for the money being used as a cross-subsidy. Unfortunately, EDF will not look at it that way; I would be happier if it did, because that would mean getting Hinkley Point, but I am concerned that that will not happen.

[Dr Whitehead]

The hon. Gentleman is absolutely right. EDF will probably use the money to shore up its dodgy international finances, rather than to develop new nuclear power stations. Nevertheless, the effect is there: a substantial subsidy, merely for continuing to do what it did, as a result of an instrument in one country alone. That is my point, not how EDF will use the money.

That is why the international COP process and, contributing to it, joint targets backed up by individual country targets are important. My hon. Friend the Member for Brent North mentioned the extent to which, almost under the radar internationally, countries are beginning to take the sort of action that we in this country have already taken with climate change legislation. One of the ongoing processes recorded in the Select Committee report is that countries, even those that might be advantaged by global warming, are undertaking their own climate change legislation.

It is vital the UK does everything that it can over the next few years to support countries to develop their own climate change targets and to join us in ours, so that progress towards a level playing field can be considerably advantaged as the negotiations take place. One thing that we should resolve today not to do is to indulge in any tinkering with our climate change targets, as we try to move towards international agreement on other people’s climate change targets, given that that would send a very bad signal indeed to other countries, some of which are beginning to take their climate change legislation directly from what we have done in the UK.

That is a call not for action, but for us to defend what this country has done. Our actions have not just made a contribution to what will subsequently be the international level playing field, but are a beacon that shows how these things can be done. Our duty now is not just to say, “We’ve done it, so you should do it, too,” but to stick with what we have done and to ensure that the process that we are working to is not revised away, wished away, downgraded or put in a cupboard by others, while some take what we consider a more appropriate direction on international agreements.

Of course, there is a whole range of other issues regarding COP 18 and beyond, but what I have just described is among the important emerging issues; indeed, it featured substantially at the Doha discussions. It may be a mark of our contribution over future years that the steps that I have described are among those that we take to move discussions forward in a way that produces international agreements, which are vital to any hope of ensuring that our planet lasts in a fit state for the next few hundred years. Of course, it will last, but perhaps not in a fit state for us, although it might be in a fit state for somebody else. Whether our planet will be in a fit state for us over the next few hundred years, however, will be very much determined by whether people from around the world gather to discuss these issues. The issue is whether we make the planet fit for purpose, fit for us and fit for the future; that is what we have to concentrate our minds on.