Energy Bill [HL]

Baroness Worthington Excerpts

Monday 19th October 2015 Lords Chamber

[Lord Teverson (LD)]

My Lords, I echo the comments by the noble Lords, Lord O’Neill and Lord Foulkes, surrounding the tsunami of amendments that we have had to the Bill so far, with more to come on Wednesday, with very little notice indeed. That makes it very difficult for this House to do what it sees as its core activity in this sort of legislation.

I have no issue at all with the managerial nature of the amendments, but I echo the comments by the noble Baroness, Lady Liddell. While I agree wholeheartedly with the Minister that the key factor here is that we should be able to continue to benefit from our own oil rather than import it, which is important with regard to both energy security and the environment, I hesitate more and more as we go through these energy conversations when it comes to the Minister’s and the Government’s confidence about our ability to meet our own climate change targets, which we all passed into law with the Climate Change Act with cross-party agreement in this House and the other place, and which we all still say we support. We are far from being able to be confident about achieving those targets a few years hence, let alone by 2050. We have to look at all these debates on Report as part of that challenge, whether it is from the United Nations special scientific advisers or from our own Committee on Climate Change. The writing is on the wall that we are moving in the wrong direction, and I think that we should take this concern very seriously.

[Baroness Worthington (Lab)]

My Lords, I am grateful to the Minister for his introductory comments. As we start the first day of Report on the Bill, it is welcome to hear from the Government a reiteration of their commitment to action on climate change and to decarbonising the UK economy.

I add my voice to those of noble Lords who have spoken ahead of me in reflecting on the way in which the Bill has been conducted. I am probably not alone in not having had much of a weekend; I am sure that the Minister has had similar issues to deal with. I take these issues incredibly seriously, as people know, and it makes me genuinely unsettled and discomfited to know that I am not able to do the best job that I can because of the timescales that we are working under. I think that many noble Lords share that feeling. As I have said before at the Dispatch Box, we are where we are—but it could have been so different.

In these opening comments on Report, I want to reflect on the question of why we are making such haste. Why is such an important body as the OGA being created in such a piecemeal way, with amendments coming forward and new issues arising in a very febrile and fast-changing environment? There seems to be no time for the Government to take stock and review. It is because the timing of the Bill is not about the major portion of it, which is the OGA, but Clause 66 which closes the RO a year early. It was closing anyway in 2017, so we are in rather a rush to make that deadline in order for this not to be a complete waste of our parliamentary time. That is why we are racing through. That is why we have not had enough pre-legislative scrutiny and why there are so many fundamental issues that have not been properly addressed in Committee. That is why we are facing an inundation of amendments now. It is a very regrettable situation and one that I personally take very seriously, as I am sure the Minister does, too. I only wish that perhaps people in other parts of the Government took this issue as seriously as those who are represented here today, because it is not good enough.

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[Lord Bourne of Aberystwyth]

My Lords, I thank noble Lords for their contributions. I will try to deal with the issues that have been raised. First, it is true that the Government have tabled many of the amendments before us, but I would argue that the most of them, certainly in this group, are technical. The nature of business means that some House of Lords legislation has to start in this place, and we should rejoice in that rather than think it should not happen. The noble Lord, Lord Foulkes, seemed to suggest that a lot of what we are looking at today regarding the Oil and Gas Authority is controversial. I do not agree, but I accept that some of the stuff we will look at on Wednesday is more controversial.

I take the points made by the noble Lords, Lord O’Neill, Lord Foulkes and Lord Teverson, and the noble Baroness, Lady Liddell. It is true that we have brought forward amendments, but it has to be said that this is a complex area and we are setting up a pretty substantial body. In seeking to allay the fears of the noble Baroness, Lady Worthington, I hope she will accept that I have no part in any conspiracy, and if this were not setting up a regulator, I would be very concerned. The first time I heard the word “privatisation” mentioned was by the noble Baroness, so I hope that she will accept that there is no such intention at all.

[Baroness Worthington]

The last time this legal form was used to create an agency was when the Highways Agency was created, and at the time numerous articles stated that this was a very convenient way to allow a future Government to privatise it. Therefore, there has been a previous discussion about this form of legal construct and this issue has been raised in that context. In addition, it is true that in the current form there would be nothing to stop the Government privatising without returning to Parliament to seek its approval.

[Lord Bourne of Aberystwyth]

I hope the noble Baroness will accept that that is not the intention. She also asked if there were other precedents. There are: the Prudential Regulation Authority is an example of a limited company that is a regulator.

Let me deal with some of the specific points that were raised. First, I reassure the noble Lord, Lord Foulkes, that I certainly did not take umbrage last week. I pointed out that, as was the case, I had been asked to seek an extra day in Committee and had been unable to get another day in Committee in the House. I offered a recommittal in the Moses Room to opposition parties, Cross-Bench Peers and Peers on my own side and had only one objection, from the noble Lord. I hope he will accept that. However, I certainly did not take umbrage.

My noble friend Lord Howell mentioned the immense pressure and the changing position. That is certainly true, but it underlines the importance of managing to secure this legislation, and the prime objective of maximising economic returns from the North Sea is very much in the interests of all parts of the United Kingdom and in the interests of decarbonisation. Therefore, I am not sure that I accept the underlying thesis of one or two contributions from noble Lords—that there is no urgency about this legislation. It is important, and there is an urgency attached to it. I accept the point about investment certainty and we have that very much in mind, as well as the need to ensure that we have a consensus at least on this part of the legislation. That would be of great importance for the industry, for our decarbonisation plans and for securing the best economic return from the North Sea.

I was asked about issues relating to the contracts of employment and whether these people would be civil servants. To address some points made by the noble Baroness, Lady Worthington, and the noble Lord, Lord Foulkes, many people will be transferred from the government service and it is entirely right that they can expect to see their conditions of employment continue in the same way as previously. It is obviously the desire to ensure that we have a scheme analogous to TUPE. I believe that they are also entitled to the same pension arrangements, and that is why these pension arrangements are in place. I do not know of any cases of employees who will be required to move. I think it is unlikely because the people who will be transferred will be in London and Aberdeen—the great bulk of them in Aberdeen. If any are to be moved, I will ensure that the noble Lord gets a response, copied to other Peers, but I suspect that it will be on the existing terms, because that is the aim with the transfer of staff.

On future staff, we felt it right that there should be only one set of pension arrangements, which is why the current arrangements will continue. Of course, there will be the freedom to operate them so that the OGA can recruit as it sees fit in the future. However, as I say, the current pension arrangements will continue so that there is not, as it were, a two-tier system going forward.

[Baroness Worthington]

So the Minister is happy to have a two-tier system for remuneration but not for pensions. It seems rather odd to insert a clause that carries forward many of the benefits of Civil Service remuneration packages for all employees—the Minister said that it could be for new employees, too—yet we are going to unlock the salary levels at the same time. This seems very imprudent.

[Lord Bourne of Aberystwyth]

We are setting up a separate body. The analogy the noble Baroness is pursuing is not perfect. Obviously, there are variations in salary at the moment, as there would be going into the future. The OGA will be given some operational freedom because we have set up a separate entity, which I think is entirely sensible. As I understand it, since the pension scheme operates on a percentage basis, that, too, would be variable. Essentially, it will be the existing one, and I think that is wholly defensible.

I believe that I have dealt with the relevant points. If I have missed any, I apologise, and I will pick them up after I have looked at the record. With that, I commend these amendments to the House.

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[Lord Bourne of Aberystwyth]

My Lords, I now turn to Amendments 7 and 22, which relate to further functions to be transferred to the Oil and Gas Authority.

The Energy Act 1976 contains important provisions relating to the giving of a consent for the flaring and venting of gas. Consent will be given by the OGA, rather than the Secretary of State for Energy and Climate Change, for the flaring or venting of gas by a relevant oil or gas processing facility within the meaning of Section 82(1) of the Energy Act 2011. The holder of a petroleum production licence will have to obtain the consent of the OGA rather than the Secretary of State to vent gas. Consent to the flaring of gas under a petroleum production licence is not covered by that provision, as it will be sought under the licence from the relevant licensing authority. The matters for which consent must be sought from the OGA are set out in proposed new Section 12A of the Energy Act 1976, which is introduced by Amendment 7.

In bringing these functions within the regulatory remit of the OGA, the amendments make provision to ensure that the OGA can issue a financial penalty notice for a failure to comply with requirements to seek consent before disposing of natural gas by flaring and venting. A financial penalty notice may also be issued where a person has failed to inform the OGA of the disposal of natural gas by flaring or venting where it was not possible to obtain the consent of the OGA because there was a risk of injury to a person and the relevant criteria were satisfied.

Amendment 22 would allow the OGA to charge fees for the issuing of consents in relation to the disposal of natural gas by flaring and venting. This is consistent with the “user pays” principle and is in line with Her Majesty’s Treasury’s Managing Public Money guidance. I beg to move.

[Baroness Worthington]

My Lords, I am grateful to the Minister for introducing these amendments. The extent to which operations across the UK can conduct flaring or venting is important, and it is clearly right that there should be an ability to issue a financial penalty if there is a failure to comply. Therefore, many of the provisions introduced here appear to make sense.

I have one question. Venting and flaring would require careful correspondence with the environmental aspects of the regulation of the North Sea, in particular, and indeed of onshore oil and gas operations. Has the Environment Agency been involved in and consulted on these amendments? How would the proposed arrangements work in relation to the requirement to include the venting and flaring of gases under the European Emissions Trading Scheme, which is administered by the Environment Agency?

[Lord Bourne of Aberystwyth]

My Lords, I thank the noble Baroness for her comments on these amendments, which, like me, she accepts are important in relation to fee-charging. I will have to write to her on the specific issue of whether the Environment Agency has been consulted—I would anticipate that it has—and on the related point about the European Emissions Trading Scheme. Of course, the Oil and Gas Authority would be bound, as are other institutions, by environmental law, and I anticipate that the proper liaison would therefore take place. However, as I said, perhaps I may write to her on the specific issues she raises.

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[Lord Foulkes of Cumnock]

My Lords, I confess that I do not have an exact understanding of all the details in relation to this issue—I hope I will be forgiven by any Members who do, if there are any—especially in relation to the devolved Administrations which inevitably seem to complicate matters. Can the Minister answer one question in relation to fracking? What is the position of the Scottish Government in terms of permissions for and control over fracking now, and how will it change if we pass this Bill?

[Baroness Worthington]

My Lords, I am grateful to the Minister for presenting these amendments. I have no real questions on their detail, but I suspect that this is not the part of the Bill which has the most controversy in relation to devolution, and it is not Wales and Scotland that will be the most contentious aspects. However, I reiterate the question of my noble friend Lord Foulkes about fracking. If we could have an answer from the Minister, that would be welcome.

[Lord Bourne of Aberystwyth]

My Lords, I thank the noble Lord and the noble Baroness for their comments. On the specific question about fracking, I have to confess that I am not certain about the position, but I am endeavouring to find an answer, and perhaps I may come back to it during the course of the debate.

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Moved by

[Baroness Worthington]

11: After Clause 3, insert the following new Clause—
“Transportation and storage of greenhouse gases
In section 9A(1) of the Petroleum Act 1998 (the principal objective and the strategy), for “recovery of UK petroleum” substitute “return of UK petroleum, while retaining oversight of the decommissioning of oil and gas infrastructure, and securing its re-use for transportation and storage of greenhouse gases”.”

[Baroness Worthington]

My Lords, in moving Amendment 11 I shall speak also to Amendments 27 and 28 and to government Amendment 26, which is in this group. The Government’s Amendment 26 is a welcome concession. It is obviously a response to the debate held during the passage of the Bill where a number of noble Lords from different sides of the House raised the very important issue of whether the OGA’s powers, and indeed from my perspective its principal objectives, were fit for purpose. There was a strong sense that a review ought to be provided for in the Bill which the Government would undertake and then report back to Parliament. We are pleased to see that an amendment which would at least introduce a review has been tabled. I would say, however, that the review is of performance alone and not of purpose, and certainly makes no mention of a review of the primary objectives of the Bill. It is those primary objectives which are causing me the most concern. If noble Lords will bear with me, I should like to spend a little time articulating why that is, which will explain why we have brought forward Amendment 11 to change the principal objective of the OGA.

Noble Lords will be aware that the OGA was first created as a temporary executive agency under the Infrastructure Act 2015, and the intention was to implement the recommendations made by Sir Ian Wood as set out in the Wood review, which coined the phrase, “maximising economic recovery”. The eagle-eared among us will note that often when the Minister refers to MER, he actually describes it as “maximising economic return”, which is quite a significant difference. It may just be one word, but it indicates a subtle shift in focus that has happened since we received the Wood review in 2013. It has been eloquently alluded to on many occasions by the noble Lord, Lord Howell, and my noble friends Lady Liddell and Lord O’Neill, and others. There has been a significant change in the North Sea in particular since the Wood review was published and now, when we find ourselves looking at the detail of the OGA and how it will go about meeting the objectives of MER.

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An arm’s-length body charged with the effective stewardship and regulation of the United Kingdom continental shelf was a central recommendation of the review. I believe that these amendments would conflict with that recommendation by subjecting the OGA to an onerous and almost continuous process. I hope that this explanation will satisfy the noble Baroness and that she is content to withdraw the amendment.

[Baroness Worthington]

My Lords, I am grateful for that very thorough response from the Minister and for the contributions from noble Lords in this debate. I am afraid I am not reassured. Perhaps I did not make myself sufficiently clear in my introduction of Amendment 11 about the root of my concern. This is not to do with whether we can review the functions of the OGA or whether the performance of the OGA as set out in the Energy Bill is sufficient. I am referring to the primary objectives of the OGA as set in the Petroleum Act as amended by the Infrastructure Act. As I read out, those primary objectives are very odd for a regulator, for a body that is meant to be providing stewardship and oversight to an industry in the private sector part of the economy. It is that which causes me the greatest concern about this aspect of the Bill.

I am not reassured by the Minister’s references. In fact, I found myself questioning: which is it? Is it the case that this is not needed and that Amendment 11 is simply unnecessary? All these decommissioning references and CCS references were concessions we won from the Government in Committee. When the Bill appeared before us, there was no explicit mention of CCS or decommissioning. We had to extract that from the Government in Committee. Having done so, I contend that the primary objectives of this organisation do not fit those new powers.

[Lord Bourne of Aberystwyth]

I hope the noble Baroness accepts that the acceptance at Second Reading of the importance of CCS was not grudging. It was readily acknowledged, so there was nothing grudging about the concession, as she terms it. I hope she accepts that we have moved forward together on that.

[Baroness Worthington]

Absolutely. I pay tribute to the Minister for the manner in which he has conducted those discussions. However, it is true that the Bill that appeared before us read like something from a time gone by. There was no reference to future challenges or, indeed, present-day challenges. We have improved the Bill through the process of collaboration. We need to continue that process and look at the primary objectives.

Earlier today, the Minister was kind enough to give me an example of another regulator which is a private company with a single shareholder. It was the Prudential Regulation Authority. My understanding is that that is merely a temporary measure and that the Bank of England and Financial Services Bill, which will come before this House very soon, changes that temporary arrangement. It is therefore clear that regulators are not commonly private companies with very loosely defined objectives that do not refer to any kind of stewardship or regulatory function but merely refer to conducting, developing and investing in equipment and bringing people together to collaborate. Those are not the primary objectives I wish to see for a regulator of this size and complexity. It is for that reason that I am minded to test the opinion of the House.

The noble Lord, Lord Howell, agrees that decommissioning should be included in the primary objectives—it is not at the moment—but disagrees on CCS, so we are halfway to accepting that these primary objectives are not fit for purpose. The Government seem to be saying that the amendments are not needed and, at the same time, that to put them in the Bill would cause huge amounts of change. Those two things cannot be true. This is merely a way of making sure that the objectives match the functions we expect the OGA to undertake. This is such a significant issue for this aspect of the Bill that I wish to test the opinion of the House.

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The noble Lord, Lord Howell, mentioned not picking winners. I agree with that in principle. Indeed, contracts for difference were set up in that way. However, the whole area of decarbonisation and decarbonisation targets is technology neutral. That is why I am particularly disappointed that we were given to understand in Committee that the Government would not seek to implement the decarbonisation targets set under a previous Energy Act. That provided an opportunity to adopt technology neutrality and I regret very much that another part of the jigsaw of moving towards our climate change targets has been taken away.

[Baroness Worthington]

My Lords, I am grateful to the noble Lord, Lord Oxburgh, for introducing his amendment, to the other noble Lords who have spoken in this debate, and to the Minister for introducing the government amendments starting with Amendment 12.

I do not wish anything that has happened today to undermine our great welcome for the way in which the Minister responded to our debate on CCS. The amendments that we are debating are testimony to how much the Minister has listened and taken on board the comments that were made. We very much welcome the measures, specifically the changes on making explicit the use of sampling and on the sharing of information and, indeed, the addition of government Amendment 12 to Clause 4, which sets out the matters to which the OGA must have regard. The amendment has both an explicit reference to carbon dioxide and the meeting of climate change targets. This is indeed very welcome and I certainly support the amendment being added to the Bill.

Because the Government’s amendment is comprehensive, we will not pursue Amendments 13 and 14 any further. We are delighted that those measures will now be included. I wish to speak also to Amendment 72, which the noble Lord, Lord Oxburgh, tabled and to which I was very pleased to add my name; and to what was my own Amendment 78, to which the noble Lords, Lord Oxburgh and Lord Teverson, have added their names, which is replaced by a manuscript amendment. I apologise for that but we felt that it was important to clarify a change of wording for that amendment. I shall come on to that.

As we are considering in more detail the environmental and climate change aspects of the Bill, I should declare a potential future interest, as I did in Committee. As many noble Lords may be aware, I shall be stepping down from the Front Bench in a matter of weeks. I am in negotiation with a charity that works on climate change issues, so I felt that I should declare that potential future interest.

Amendment 72, in the name of the noble Lord, Lord Oxburgh, would require the Government to undertake and develop a national strategy for carbon capture and storage. This amendment has a great deal of merit. It was excellent to meet the Minister and officials from his department. As has been mentioned, Stuart Haszeldine from Edinburgh University was present. It was a very good meeting and it became clear in the debate that there is an awful lot to do in the world of carbon capture and storage. However, “carbon capture and storage utilisation” is possibly the phrase we need to start using. That addresses some of the points made by the noble Lord, Lord Howell, about the fact that there is not just one version of carbon capture and storage but potentially many with different attributes, in the same way that there are many renewables technologies with very different attributes.

Carbon capture and storage is a grouping of technologies with different aspects, technologies and uses and different storage end points, some of which are stored underground, some of which might be onshore and some of which might be offshore in disused oilfields or, indeed, in oilfields that continue to be used through enhanced oil recovery. However, there may be other forms of storage, including in mineralised aggregate and as a chemical feed into various other processes. I sense a mood change within industry towards wanting to have a much more in-depth discussion about the use of CCS going forward.

As we face our climate change targets going forward, and in particular the embodiment of those targets in the emissions trading scheme, which creates a hard cap on our industrial sectors that declines over time, we will have to develop a technology to enable us to maintain primary production in this country to keep a thriving and, we hope, growing industrial base. It is going through some difficult times at the moment, but we need to find a policy that will enable us to attract inward investment into industry to help it decarbonise, in the same way as we have done for renewables in the power sector. A strategy is definitely needed, particularly for those industrial players. Although it is welcome that we hope to have two demonstration projects proceeding in the power sector, which will potentially open up useful infrastructure that can be reused, there is very little in the way of policy for industrial players that helps them to decarbonise. They have an incentive to decarbonise in the shape of the carbon price but that is often softened by receiving compensation payments. However, there is no carrot. There is a stick and then there is compensation but there is no bankable, investable policy that would cause them to make a positive investment.

That is an urgent challenge for the UK to get its head around; otherwise, my fear is that we will see more closures, as we have seen at Redcar with SSI, which was meant to be a big element of the Teesside decarbonisation cluster. That closure removes one of the elements of that strategy, which would have led to a carbon capture and storage hub, which would have decarbonised our industrial bases there and, I am certain, would have attracted investment from Europe and elsewhere because it would have been future-proofed. You could locate there, reinvest in industrial manufacturing and production, and be confident that you had a place to store your CO₂ and therefore not just be compensated but actually avoid the need to pay carbon prices. So a strategy is definitely needed for industrial sectors.

Some ideas have been floated. One is that, just as we have a contract for difference in the power sector, it would be possible to have a contract for difference in the industrial sectors. You would not be able to do it off the power price, clearly, but you could do it off the carbon price. You could give some investor certainty that you will be compensating for the fluctuating carbon price and give a degree of confidence so that an investor could go to the bank and say, “On the back of this I am going to receive compensation from these contracts and we should go ahead and invest”. Those are the sorts of things we need to see in this strategy as we go forward.

Our strategy on the capped sectors—those subject to the EU ETS cap; that is, power and industrial—still leaves more than half the economy’s emissions uncapped and very little in the way of a wholesale comprehensive policy to decarbonise those sectors. Those uncapped sectors are largely serviced by the oil and gas industry; that is, the transport and heating sectors, in so far as heating is used in buildings, as opposed to primary manufacture and production. Those uncapped sectors, which affect the oil and gas industry, are a very important part of what we need to get our heads around and what we need to address as we look at our targets, because clearly our targets are economy-wide. They are set out in the carbon budgets we have set ourselves to meet our requirements under the Climate Change Act.

In the way we currently treat the carbon budgets, the uncapped sectors actually cause us the greatest difficulty because we do not have an EU-wide emissions trading scheme or low-carbon incentives in the form of CFDs, and we have fewer levers. We have the renewable transport fuel obligation and the renewable heat incentive, both of which, as the names suggest, incentivise investment only into renewables. They do not do anything for carbon capture and storage in those transport and heat sectors, and nor would they for nuclear. I happen to believe that in the future, we will probably be able to deliver nuclear into those sectors. We are not there yet, but we are close to being able to see how CCS could contribute in those sectors. I should say again that CCS is the broad technology that includes CCU, which would give us a number of technologies to work from.

We have a curious situation where we have a relatively challenging target on the uncapped sectors but almost no comprehensive policies to incentivise decarbonisation. This is where Amendment 78A comes in. This idea was discussed in Committee. It may be ahead of its time and we may need some more discussions. I very much look forward to the department facilitating such discussions after the Bill leaves this House. The fundamental question is: how can we get to a more market-based form of incentive to help decarbonise heat and transport? I do not think we can rely on renewable heat incentives paid for by taxpayers, and nor is the renewable transport fuel obligation the answer. There has to be something much more technology-neutral and market-friendly, whereby industries and the private sector can find and select the best projects to help with that task.

The idea we debated in Committee was that we would ask providers and importers of fossil fuels into the UK—whether they are extracting here from the North Sea or onshore, or importing from overseas—to invest in projects which permanently stored and reduced emissions. We have come back with Amendment 78A as a reworked version of that. It is not the perfect wording by any means—it is still a probing amendment—but we felt it important to re-table it because there is the germ of an idea here which will help the Government, and the UK in its move towards economic growth, to harness the power and ingenuity of the private sector in delivering us least-cost decarbonisation.

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[Baroness Worthington]

Thereby hangs the problem—it is put back into the atmosphere. These carbon-negative technologies would have to be permanently stored and would have to be over geological timescales, or at least decadal timescales, in order to help in tackling climate change. Of course, CO₂ is part of the biosphere but we are talking here about fossilised CO₂ that built up over millennia and is being released over a much shortened timescale—a massive chemical experiment that we do not yet know the consequences of.

This could be a rich seam for policymakers and the department, which has already moved a long way in improving the Bill. I certainly hope that if we carry on in this spirit, we will resolve these issues of how to get CCS and CCU deployed so that we can save our industries, attract inward investment and reuse infrastructure sensibly. We could do that through a strategy or the creation of a group—there must be many ways in which this can be done. An Energy Bill should be addressing these issues. They are urgent—we are losing our industrial players—but on the plus side many innovative engineers around the country are coming forward with great ideas. We need to capture that, turn it into something tangible, use it to comply with our obligations and show that we can do decarbonisation at least cost while preserving our industrial might. If we can do that, we shall have an example to show the Premier of China, whom I am sure is grappling with this too.

There is not a single industrialised country that does not now have in its mind how it is going to create steel in a low carbon environment. How is cement going to be produced? What about plastics? We cannot simply ignore that aspect of the decarbonisation challenge. I am not saying that the Government are ignoring it, but we do seriously need to get going now in thinking this through—sooner rather than later—so that we do not see any more unfortunate examples of employers in our heavy industries leaving these shores. We need to keep them here and we need to set incentives for reinvestment. CCSU is one of the few groups of technologies that enables us to do that successfully. We must press on.

[Lord Bourne of Aberystwyth]

My Lords, I thank noble Lords for their contributions. I shall try to deal with these and then come back to the amendments that I believe were addressed, namely Amendments 71, 72 and the manuscript amendment, 78A.

I thank the noble Lord, Lord Oxburgh, for his kind comments and reiterate the point about £1 billion being committed to CCS projects. His points on carbon negativity—also mentioned by the noble Baroness, Lady Worthington, and my noble friend, Lord Howell—are well made. I shall come on to those in a broader context later.

My noble friend Lord Howell asked about the need for the government amendment in the light of the item under Clause 4(1) which already refers to innovation and working practices in general terms. The point here is the need for specificity. Clearly in the context of the North Sea there is a particular point about CCS, hence the government amendments. These strike the right balance. Without picking winners, we need to recognise that there is a particular opportunity in relation to the North Sea and particularly in relation to decommissioning—an almost unique opportunity for the United Kingdom to ensure that we focus on CCS. That is something that the OGA and its director, Andy Samuel, recognise, too.

The noble Lord, Lord Foulkes, was at his disarming best. I find that that is when he is at his most dangerous, so I have to be careful. I thank him for his kind comments, share his upset about both rugby matches and recognise the particular point about Scotland being robbed. That is absolutely right.

The noble Lord asked about China and the meetings that the Secretary of State would be having during the course of the next couple of days. She already has met with the Minister for Energy to discuss particular issues. From what I can gather, that process will be going on over the next couple of days. Additionally, it is important to note that this contact with China is not isolated. Members of its rough equivalent of our Committee on Climate Change were here recently. The Secretary of State met with them, as did I and my noble friend Lord Deben. Clearly China is a massive player in relation to energy so it is important that we have this continuing dialogue. It is certainly happening. If I have any more specific points about the Green Grid alliance I shall write to the noble Lord.

The noble Lord, Lord Teverson, agreed with the thrust of the non-government amendments and the broader environmental considerations. As I have said, we have done our best. I shall deal with these more specifically to ensure, as I believe is already the case, that environmental considerations are covered. I shall touch on that shortly.

As I said previously, I wish the noble Baroness, Lady Worthington, well in her new role, as I am sure the whole House would want to do. I could sit and listen to her for a long while on energy because I think that she knows far more than any of us in this House. I am sure that her commitment and her knowledge will be a massive plus to the organisation to which she is going. I know that she will have a continuing important role in this House so that we will not lose her considerable, massive expertise in this area.

The noble Baroness referred to the steel issue. I was at the summit in Rotherham that the Government held on Friday. The steel issue in relation to the United Kingdom is very complex. At its root, perhaps, is overproduction in China, which is more than twice total EU production. That sums up the problem. There are many aspects to it, and one is procurement. The procurement rules in Europe have been relaxed considerably in our favour. We are the first country to sign up to those new rules, so I hope that we shall be in a position to benefit from that. However, I do not pretend that that is a silver bullet. It is not. There are clearly many issues there. I agree with many of the points that she was making.

The noble Baroness asked about decarbonising industry and particularly mentioned Teesside. We are currently reviewing the findings from the Teesside feasibility study that was published in July and will work with industry on the policy framework on that.

Let me turn to some specifics on Amendments 72 and 78A. I thank the noble Lord, Lord Oxburgh, for speaking to Amendment 72, which seeks to place a duty on the Secretary of State to produce and implement a CCS strategy. As the Government have set out, and as the noble Lord rightly underlines, CCS has the potential to play a vital role in decarbonising our power and industrial sectors. The Energy Technologies Institute estimates that CCS could halve the cost of meeting our 2050 emissions reduction target from £60 billion to £30 billion.

Plants fitted with CCS technology could reduce CO₂ emissions from coal and gas power stations by around 90%, enabling clean, dispatchable power powered by coal or gas to play a role in a decarbonised UK economy. This would contribute to secure, resilient energy supplies for consumers. That is why the Government have in place one of the most comprehensive CCS programmes in the world, as recently recognised by the independent Global CCS Institute and to which allusion has been made. Our commitment to supporting CCS is clear. The CCS road map published in 2012 set out the long-term plan to support CCS through the CCS Commercialisation Programme, research, development and innovation, electricity market reform, a strong regulatory environment and international collaboration. Our CCS competition is potentially providing up to £1 billion support, as has been acknowledged.

We have invested over £130 million since 2011 to support research, development and innovation to foster the next generation of CCS technologies, including £2.5 million in a recent project to scope promising CO₂ storage sites—key to developing a viable CCS industry here in the United Kingdom. We also recognise the real potential offered by CCS as a long-term route to help United Kingdom industries such as iron, steel and cement to decarbonise. We invested £1 million to explore the business case for industrial CCS on Teesside. We are also looking ahead. The CCS policy scoping document published last year set out the key issues for the medium-term development of CCS in the UK. We are actively engaging industry on the challenges facing future projects and how Government can best design a framework to overcome them.

I understand that noble Lords are keen to support the deployment of CCS in the United Kingdom. The noble Lord, Lord Foulkes, expressly mentioned the need for a government response. That is why, in one of the meetings that we held looking at CCS, I suggested setting up a CCS Peers’ group as a sort of ginger group. I have asked the noble Lord, Lord Oxburgh, to chair that group. That would be a good way forward. I should be happy to look at advice, obviously without commitment. It would be a way of feeding in the expert advice which the noble Lord, Lord Foulkes, has quite rightly said exists in this House. It would help to shape what is, as I think that we all agree, an important area of policy.

I hope I have reassured the House that we are serious about realising the potential of CCS in the United Kingdom and that we have in place a robust support framework. Our proposed amendments on the role of the OGA with regard to CCS underline this.

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Were Amendment 78A to be accepted, a consultation would need to take place on measures the industry would be required to take to contribute to an as-yet unquantified and uncosted obligation. To be fair, I accept that the noble Baroness set out that this was a rough-hewn amendment. However, it would, as framed, involve additional burdens on industry at a time when it faces unprecedented challenges and would risk diluting the objective of maximising the economic recovery of offshore United Kingdom petroleum. It is vital for the UK economy and our energy supplies that the continental shelf remain competitive in a global market. Introducing additional costs to the industry would reduce the attractiveness of the continental shelf and would pose a significant threat to all of the positive work that is being done.

[Baroness Worthington]

By way of clarification, I do not think that I stressed enough that this would apply not just to UK operations but, significantly, to the increased importation of fuels in the oil and gas sector. Obviously, it would be excellent if the Treasury could use the funding that would flow from that to invest in UK infrastructure for decarbonisation. This is not intended as a punitive measure for UK operators but as a way of addressing the fact that an entire half of our economy—fuels that we use for heat and transport—is uncapped, with no explicit carbon price. This would be a way of dealing with that and having that money flow from the ultimate sources of these imported fuels, which are overseas, into UK infrastructure.

[Lord Bourne of Aberystwyth]

I thank the noble Baroness for the clarification. She identifies a problem that does exist. We are looking, as I think I indicated previously, at regulation in relation to the transport sector, which is probably more realistic and a more likely runner at the moment. I accept the spirit in which she has tabled the amendment, but I do not think that we are in a position where we can accept what I would see as additional cost burdens on industry at this stage. That said, I believe that the offer to the noble Lord, Lord Oxburgh, has been accepted, subject to his busy diary, and I hope that we can move forward with that. Perhaps in that context we can look at proposals like this and at possible developments in the industry. I urge noble Lords not to press these amendments.