EU Referendum: Energy and Environment

Amber Rudd Excerpts

Tuesday 12th July 2016 Commons Chamber

[Barry Gardiner]

I understand that there is a need to move on, and the hon. Gentleman is right to say that we must now look to the future, but I think that if he bears with me, he will find that that is what I am trying to do. Yes, I am critical of where we are, but the criticisms that I have adumbrated so far are not my own. They are criticisms made by the Government’s own advisers, they are criticisms made by industry itself, and, indeed, they are criticisms made by the Secretary of State. I am not talking the UK economy down; I am trying to set out the present situation with clarity, and then see whether we can move on from it.

Perhaps the Secretary of State could do the same as Bloomberg in telling the unvarnished truth, and inform the House what assessment her Department has made of the increased price of imported energy as a result of the falling pound. I will happily give way to her if she wishes to do so.

[The Secretary of State for Energy and Climate Change (Amber Rudd)]

indicated dissent.

[Barry Gardiner]

Perhaps, then, the Secretary of State could tell us what assessment her Department has made of the price premiums on loans that will be demanded by investors in energy infrastructure to cover the cost of political uncertainty. Is it 1%? Is it 2%? Again, I will happily give way to the Secretary of State if she wishes to inform the House what assessment her Department has made of those matters. No? In that case, I will give way to the spokesman for the Scottish National party.

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[The Secretary of State for Energy and Climate Change (Amber Rudd)]

I thank the Opposition and the hon. Member for Brent North (Barry Gardiner) for giving the Government the opportunity to address some of these important questions which I know are high in people’s minds, particularly among stakeholders. I also want to respond to the point made by my hon. Friend the Member for South West Wiltshire (Dr Murrison): it may have escaped some people’s notice, but I did campaign on the other side of the EU referendum. I do agree with him, however, that we must move on: Brexit means Brexit and, as my right hon. Friend the Member for Maidenhead (Mrs May) said, we will make a success of it.

It is true that the decision the country made on 23 June is of historic importance and it is true that the key challenge facing us now is to work towards a settlement that is in the best interests of Britain. But it is not true that, as the hon. Member for Brent North has been suggesting, our commitment to protect the environment, tackle climate change and provide homes and businesses across the country with secure and clean energy has faltered in any way. Our commitment to these tasks has not changed and will not change.

I have made it my priority to reiterate these points over the past fortnight. I have said that security of supply would be our first priority, and it remains so. My Department announced last week how much electricity capacity we intend to buy in the forthcoming capacity market auctions. This commitment is the backbone of our energy policy. I announced that the Government would accept the Committee on Climate Change’s recommendation for the level of the fifth carbon budget, a long-term commitment taking us way beyond this Parliament to 2032. I have also made it clear that we remain committed to holding a competitive contracts for difference allocation round later this year.

While much remains the same, there is no point pretending that the vote to leave the EU is not of huge significance. There are risks for us to overcome, but this Government will continue to do our part to deliver on the energy and environmental challenges our country faces.

[Geraint Davies]

Will the Secretary of State confirm that the Government intend to honour their commitments to the environment as set out in EU directives in the past, so that standards do not slip from the current standards, whether on air quality, flooding or climate change, and does she agree that there should be legislation to say that these should become minimum standards?

[Amber Rudd]

What I can say is that this Government’s commitment to a clean environment and our climate change commitments remains unchanged. I will address in my remarks climate change and energy issues, and I will allow the Under-Secretary of State for Environment, Food and Rural Affairs, my hon. Friend the Member for Penrith and The Border (Rory Stewart), to address the environmental ones in his remarks, no doubt dealing with the exact points that have been raised.

[Dr Murrison]

Does my right hon. Friend agree that it is a pity that Opposition Members seem to be suggesting that the EU has dragged the UK from darkness into enlightenment? Does she also agree that Britain has traditionally led the way in environmental legislation? I would cite particularly the Clean Air Act 1956, which the hon. Member for Brent North (Barry Gardiner) cited without a hint of irony.

[Amber Rudd]

I thank my hon. Friend and, as he rightly said earlier, we must move on. There are benefits to what we have already proposed and there have been benefits from the EU directives as well. They have raised standards in some areas, and I believe we will now maintain them and not allow them to slip at all.

[Caroline Lucas]

We were speaking earlier about investment and how, unfortunately, investors are getting increasingly cautious. Will the Secretary of State do all she can to persuade her colleagues that we must remain part of the European Investment Bank, at least as long as the negotiations are going on, because if we withdraw right now there will be another huge amount of potential investment not coming into this country when we need it most?

[Amber Rudd]

I thank the hon. Lady for her question; I was going to talk about investment anyway. She is absolutely right to mention the importance of investment in securing our clean energy. Like her, I appreciate the impact that the European Investment Bank has had on supporting clean energy in this country and I would hope that our membership of it will continue. I cannot give her any commitments, however. I shall wait to see how this emerges as part of the negotiations, but I share her view on how important it is.

[Mary Creagh (Wakefield) (Lab)]

I commend the Secretary of State’s decision, in the midst of the post-Brexit turmoil, to publish the fifth carbon budget. I congratulate her on that. The Environmental Audit Committee has heard this morning from the National Audit Office that a 10% achievement gap has already opened up in the fourth carbon budget between 2023 and 2027. Will she acknowledge that the Treasury’s decision in the last spending review to cancel the carbon capture and storage competition will do little to encourage investor confidence in that area?

[Amber Rudd]

The hon. Lady is right: we have always known that we had an issue with the fourth carbon budget, and there is more work to be done. That is why it was a reasonable achievement to get cross-Government approval for the fifth carbon budget, and I thank her for her comment on that. There is still a lot of work to be done. There are policies to be decided on, and we will bring forward the emissions proposals by the end of this year in order to address those policies that are going to be needed in the 2020s.

[Chris Heaton-Harris (Daventry) (Con)]

In a former life, I was the rapporteur in the European Parliament for the European Investment Bank. We are not only a stakeholder in the bank; we are a shareholder and one of its biggest funders. It funds projects across the planet, not just within the European Union. Surely there is no risk to investment in the United Kingdom while those factors remain the same.

[Amber Rudd]

I thank my hon. Friend for clarifying that position, which will no doubt give the hon. Member for Brighton, Pavilion (Caroline Lucas) as much comfort as it has given me.

I want to make some more comments on investor confidence, which is central to this afternoon’s debate. Since the referendum, I have met investors from across the energy spectrum: nuclear, renewables, energy efficiency—all areas in which we need investment. Yesterday, I spoke to members of the managing board of Siemens to reassure them of the commitments that I am setting out here today. Officials across my Department have regularly kept in contact with investors and energy companies to reiterate that message.

The message from business is clear. It still sees the UK is a great place to invest in. Britain remains one of the best places in the world in which to live and to do business. We have the rule of law, low taxes, a strong finance sector and a talented, creative and determined workforce. We have to build on those strengths, not turn away from them. Those factors combine with a clear energy policy framework and a strong investment-friendly economy to make the UK an ideal place to attract much-needed energy investment. The UK has been the fourth highest investor in clean energy globally for the past five years. This is investment in the energy infrastructure that we need to underpin a strong competitive economy, and this Government will do all we can to ensure that the UK remains an attractive place for investment. Whatever settlement we decide on in the coming months, those fundamentals will remain unchanged.

I want to underline our commitment to addressing climate change. Climate change has not been downgraded as a threat. It remains one of the most serious long-term risks to our economic and national security. I attended the world-class team of British diplomats at last year’s Paris climate talks. Our efforts were central to delivering that historic deal, and the UK will not step back from that international leadership. We must not turn our back on Europe or the world. Our relationships with the United States, China, India and Japan and with other European countries will stand us in strong stead as we deliver on the promises made in Paris. At the heart of that commitment is our own Climate Change Act 2008. The Act was not imposed on us by the EU; it was entirely home grown. It was also a world first and a prime example of the UK setting the agenda that others are now following. And let us not forget that it was delivered with unanimous support from right across the House.

[David Mowat (Warrington South) (Con)]

The Secretary of the State will be aware that the fifth carbon budget means that the UK is reducing carbon at a faster rate than any country in the EU and significantly faster than the EU’s intended nationally determined contribution put forward in Paris. Is the risk of Brexit not that we might go back on our climate change objectives, but that we will not bring the rest of Europe with us, given the leadership position that we have taken and the fact that we are moving so much more quickly than they are?

[Amber Rudd]

My hon. Friend, who knows this area so well, has raised an important point. I hope to be able to reassure him that we will be able to continue to use our influence to encourage the European Union to raise its game and to reach the high standards that we do, but I agree with him that this will be an additional concern, on which we will have to work to try to deliver.

It is true that we had to make tough decisions on renewable energy when we came into office last year, reflecting the need to cut costs and the need for technologies to stand on their own two feet. I will not shy away from taking tough decisions. We need technologies that are low cost and clean, to protect bill payers.

[Philip Boswell (Coatbridge, Chryston and Bellshill) (SNP)]

The Secretary of State mentioned India as being among the countries standing by us in respect of investment. Given that about 2,400 coal-fired power stations are planned or under construction around the world, including in India and China, does she agree that cancelling the carbon capture and storage project represents a massive missed opportunity for this country?

[Amber Rudd]

The hon. Gentleman will be aware that we have been through the issue of CCS many times. We would like to have a CCS programme and we are working on an industrial strategy to address having such a programme. I know that he has played an important part, working with Lord Oxburgh in the other place, in ensuring that we put together a clear plan. At the time, we could not go ahead with the £1 billion that had been planned for the CCS proposal, but it is not off the table at all. We are still working towards having some sort of CCS proposals.

Our commitment to decarbonisation is clear, with £13 billion of investment in renewable electricity in 2015 alone and with investment in renewables increasing by 42% since 2010. We have already set out funding to be provided through auctions during this Parliament to support up to 4 GW of new offshore wind and other renewable technologies, and with the potential for deployment of up to 10 GW in total between 2020 and 2030 if the costs continue to come down. We are also making real progress to deliver new nuclear power in the UK, addressing a legacy of underinvestment. We have announced record investment in new heat networks to enable innovative ways of heating our homes and businesses. And we will lead the world by consulting on closing unabated coal-fired power stations. That commitment has been praised across the world, and we will be setting out further details of it soon.

All those commitments remain in place. They will help us to dramatically rebuild our energy infrastructure and they are underpinned by our commitment to carbon budgets, which is why the CBI, the EEF, businesses and investors from a wide range of sectors were all so supportive of our decision to set the fifth carbon budget.

We have a proud history of energy innovation. The world’s first coal-fired power station was built on the banks of the Thames in the late 1800s. The world’s first nuclear power station was opened by Her Majesty the Queen in Cumbria in 1956. And well before the EU referendum had begun in earnest, my Department was making sure that this country would remain at the forefront of energy and climate change innovation. That is why, as a Government, we have committed more than £500 million over this spending review to supporting new energy technologies. That means supporting entrepreneurs as they look to develop the innovations of the future—in storage, in energy efficiency and in renewables. As part of that programme, we will build on the UK’s expertise in nuclear innovation. At least half our innovation spending will go towards nuclear research and development. That will support our centres of excellence in Cumbria, Manchester, Sheffield and Preston. Our nuclear programme will include a competition to develop a small modular nuclear reactor—potentially one of the most exciting innovations in the energy sector.

Although I have focused primarily on energy and climate change, we must not forget the trade and businesses surrounding the environment and agricultural sectors, which are so profoundly affected by our decisions on tackling rising global temperatures. The Department for Environment, Food and Rural Affairs continues to engage with farmers, businesses and environmental groups to ensure that their voices are heard. It has been made clear to them that there will be no immediate changes and my hon. Friend the Under-Secretary of State will address the environmental issues later.

Trading energy within Europe and being an entry point into Europe for the rest of the world has provided significant advantages. Europe has led the world on acting to address climate change. The economic imperative that drove those relationships has not changed and openness to trade remains central to who we are as a country. As the Prime Minister has repeatedly said, we will work towards the best deal for Britain. As I have said, our challenges remain the same: securing our energy supply, keeping bills low, building a low-carbon energy infrastructure, and protecting the environment and farming. Our commitment to them is unbowed.

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[Callum McCaig]

I thank the hon. Lady for that intervention. The costs are eye-watering. Given the extent to which Hinkley is an international project, the costs could rise even further still. It is time to have a sincere look at the plans and to decide whether the project is possible, but I strongly assume that it is not, so we require a back-up plan. If we do not address the huge strains on our energy system, the bread and butter of keeping the lights on will be put in jeopardy—perhaps not today but in the decades to come. It is incumbent upon the Government and the Department of Energy and Climate Change to act now.

We also need clarity from the Government on the position of the internal energy market in the European Union. The Vivid Economics report that was cited last week and again today about the potential of being outwith the system adding £500 million per annum to the costs of our energy system is sobering. When DECC and the Government as a whole are engaged in their summer homework of working out how to get out of this particular pickle, I suggest that ensuring that we keep the co-operation of the IEM should be high up the agenda because it delivers for us here and for folks abroad. It will help us to meet the trilemma of energy costs and should not be sold down the river lightly.

To maintain security of supply, the time has come to scrap Hinkley and to invest in viable and cheaper forms of domestic energy, including onshore wind, on which we need to lift the embargo. We need the contract for difference auctions that the Secretary of State has mentioned. They should be as wide as possible, technology neutral—as they are supposed to be—and no one should be excluded from bidding. We need to get serious about building the suggested new gas plants, and I will make the case for Scotland again: if we can get the anomaly of transmission charging sorted, we are ready to go with gas plants in Scotland that will contribute significantly to reducing the forthcoming hole in energy production.

Above all, we need to invest in energy efficiency. The Scottish Government are doing strong work and that needs to be replicated right across these islands. If we are to deal with an ever more challenging set of energy circumstances, including where we get it from, the best way is to use less of it. The benefits for everyone are substantial in the long term.

On climate change, I agree with the hon. Member for Warrington South (David Mowat), who is no longer present, that it is regrettable that the UK will not be a member of the European Union. I pay tribute to the Secretary of State for her role in the Paris talks, where the UK played a strong hand—perhaps not as strong as I and others would have liked, but it was played well and resulted in a pretty good deal. The fact we are no longer going to be at the heart of the decision-making process is regrettable, because the UK can be proud of what it has done on tackling climate change and has more it could offer the EU. We need to work out how that will happen in a renewed relationship with the EU, but there will be an absence and that is regrettable.

I have some specific questions to ask about what the process will be and what the impact of Brexit is on our commitments from the Paris talks, which have been touched upon. Our nationally defined contribution was the European Union’s NDC, and I am not clear whether that still applies to us. I assume it does, as we are still a member, but we can and should do more. I am also unclear about some issues on the ratification of the deal. Do we have to ratify this before the Brexit deal is concluded? Is there an impact on the EU as a whole? I understand that the EU ratification process requires all member states to ratify before the EU can ratify it as a whole. Ultimately, the UN requires ratification by the 55 countries that account for 55% of the emissions. So are there implications for us? Are there implications for ratification by the EU? Are there implications for the whole deal if we are not able to do that?

[Amber Rudd]

I may not answer all the hon. Gentleman’s questions in this intervention, but let me say, as I did not pick this up from the questions put by the hon. Member for Brent North (Barry Gardiner) either, that we are pushing for early ratification of the Paris treaty on behalf of the United Kingdom.