Energy BILL [ Lords ] (Fourth sitting)

Callum McCaig Excerpts

Tuesday 2nd February 2016 Public Bill Committees

[Clive Lewis]

I thank the hon. Gentleman for that intervention. On divestment, I think he will find that even the Governor of the Bank of England, Mark Carney, has advised businesses to look at where their investments are made on that particular issue. On the point that the hon. Gentleman made, the fifth carbon budget is not until 2028—we are not talking about immediate carbon budgets coming up, but about the fifth carbon budget. That gives organisations and businesses plenty of time to prepare and get their houses in order, especially in the sectors that will be affected. This is not an immediate change; it is for the fifth carbon budget, so there is ample time for that to take place.

Without the amendment, there is a risk that pollution levels in the UK could grow, investment in clean energy could shrink, and yet, on paper, it would look as though we had achieved carbon targets. We need to stop any Government from cooking the books. As such, we seek an assurance from the Minister that the Government still believe in building a low-carbon economy here and will not use such accounting tricks to hide their failures on clean energy.

However, let us put all that aside for just a second and deal simply with the cost of meeting our international commitments and getting value for taxpayers’ money—something that I am sure all Members here would agree is worthy of our attention. The Government’s advisers, the Committee on Climate Change, said that we should be a net seller of ETS credits if we are to pursue the lowest-cost option to go green and meet our climate targets. Therefore, there is a real risk that by putting off emission reductions to future years, as current accounting practices inevitably encourage, taxpayers and consumers would be at risk of higher costs.

Baroness Worthington summed it perfectly when she spoke on this amendment in the other place, saying that

“the way the budgets work is that, essentially, we pay other people to decarbonise and then we import the certificates. That can be done for a while, and it makes economic sense to do so. In fact, for the first three carbon budgets, while the system has been bedding down, it probably made sense to use a traded system—the rules and the allocations from Europe were clearer”—

or less clear—

“and we were all finding our way to see whether the EU ETS would deliver. The closer that we get to our 2050 target, the more that that approach starts to be a false economy. We find then that, potentially, we are repeatedly paying other countries to decarbonise and not investing in our own country.”—[Official Report, House of Lords, 21 October 2015; Vol. 765, c. 722.]

The cheapest route to climate safety is to get investment flowing now into clean energy industries such as solar, CCS, nuclear and wind. Yet, as I have explained, the Government are pulling the rug from underneath the lowest-cost options, such as onshore wind and solar. Only last week, the Government were warned that the cost of achieving climate targets could double without CCS, yet they have pulled support away from that in the UK as well. Let me be clear: the amendment would not prevent the Government from taking measures to protect our important strategic manufacturing industries from higher costs, whether through exemptions or other devices. Instead, it would ensure that the UK stayed on the cheapest pathway to a clean energy future.

Ultimately, though, the amendment is necessary to ensure that we live up to our European and international commitments. The proposed fifth carbon budget for the period in question is aligned with EU ambition—no more, no less. Nothing in the amendment would mean that we were going further than the rest of Europe, nor is it a decarbonisation target for the power sector of the type that the Conservatives ruled out in their manifesto. What we propose is new, but it is not a target. It is about clarity of carbon budget accounting. The amendment would complement European efforts in the same way as the Chancellor’s own carbon floor price and the UK’s contracts for difference. Those initiatives were taken with the stated intention of driving investment into cleaner energy sources here in the UK. The amendment would bolster those efforts without undermining the European ETS.

In Paris, the UK signed up to achieving a carbon-neutral global economy. The amendment would ensure that we played our part in achieving that, rather than offloading our responsibilities through tricks on a spreadsheet. I therefore conclude by asking the Minister to see that in the absence of a clear strategy to build a low-carbon British economy, and given the roll-back of key policies on solar, wind and CCS, there is a need to send an unqualified signal to the investment community and the world at large—a clarion call that Britain remains committed to achieving the goals to which we signed up in the historic Paris agreement. The amendment would do that job, and I urge Committee members to support it.

[Callum McCaig (Aberdeen South) (SNP)]

The hon. Member for Norwich South has made an interesting contribution to this debate, particularly in his last comment about the investment climate surrounding the issue, which is of huge importance. On Second Reading, I said that I was not convinced by the amendment. I have since read into it quite a lot, and the more I read, the more complicated it becomes. The accounting rules are fiendishly complicated, as are the rules surrounding the ETS cap and how it is dealt with.

What I would like to see, as I think would all of us when dealing with the Climate Change Act 2008 and the carbon budget, is no cooking of the books, to borrow a phrase from the hon. Gentleman. I am not suggesting that anyone would do that deliberately, but the mechanism allows for it almost by default because of the lack of clarity and of proper accounting for the major sectors of energy production and large-scale manufacturing.

The proposal is not short-term. We are dealing with the carbon budget for 12 years hence, which provides ample opportunity for the Government to establish, through their work with the Committee on Climate Change, how it can be achieved. That will not necessarily be easy, but given the changes that have come through the Paris agreement and the fact that we as a country led the high ambition coalition at the discussions in Paris, we need the same high level of ambition here at home. We cannot have high ambition or high achievement unless we have appropriate accounting.

The Committee on Climate Change’s November report contains a section on maintaining the integrity of the carbon budget process, which recommends that the budget not account for the ETS cap and that we account for what we actually deal with and emit here. That is what the general public and our constituents would expect, and, to return to a point, the people who will make the transition work are the businesses that will invest the money. They need clarity on how the accounting process would work, how the Government would be held to account, and how that will shape Government policy over the next 12 to 19 years. Clause 80 would provide greater clarity on that and a much stronger focus in shaping Government policy, and I look to see it retained.

--- Later in debate ---

[Andrea Leadsom]

My hon. Friend makes an important point about gas energy security. The UK has made great efforts to diversify its sources of imported gas. The UK Energy Research Centre recently recognised that we have significantly diversified the sources and the means of bringing gas into the country. We have liquid natural gas terminals, and we have pipelines, as my hon. Friend mentioned. Each of those sources is important, but support for home-grown gas in the North sea and through other sources is vital.

[Callum McCaig]

A while back in our back-and-forth, the Minister said that she does not feel that this will do anything to strengthen investor confidence. Where does she feel investor confidence is? We discussed investor confidence in relation to renewables, but there have been reports in the press about EDF and its commitment to Hinkley Point C due to its French shareholders. Where does she see those deals going forward? We could be in severe difficulties without them.

[Andrea Leadsom]

Again, the hon. Gentleman highlights the need for diverse sources of energy and for an absolute focus on ensuring that we have a proper mix of sources, and not a focus on having all our eggs in one basket. Specifically on EDF, we expect announcements any day. We fully expect to have that deal done within the next short period of time. These are commercial deals, and it is a big transaction, as we know. Such things take time. Nevertheless, a comprehensive energy policy that includes new gas, new offshore wind and new nuclear is important so that we can be the first country in the developed world to take coal out of power generation. Of course, we are continuing to support renewables.

I make it clear that, in our feed-in tariffs review and in all our work on renewables, we have trodden a fine line between what is right for renewables generation and what is right for the bill payers who pay for it. We have had a lot of debates in this House, and in the other House, on fuel poverty, which is a big issue. New technologies should stand on their own two feet when they are able to do so. As the costs of deploying new renewables come down, so should the subsidies. We should not continue with subsidies that create an overly generous return when, at the other end of the spectrum, we still have many people who cannot afford to heat themselves or to keep their lights on. That is an important balance. As I have said time and again, the Government are absolutely committed to energy security but, secondly, we are committed to decarbonising at the lowest cost to consumers, which underpins everything that we do.

The hon. Member for Norwich South asserted that effectively removing ETS from the calculation of carbon budgets would somehow make decarbonisation cheaper. I am sorry, but I just do not find any evidence for that. We will keep our accounting under review, and it is right that we do so, but he has not provided any evidence that decarbonisation would be cheaper or that investor confidence would be greater. He has failed to answer why, with only a few months to go before, according to our legally binding commitment under the Climate Change Act 2008, we must set out our policies to meet the fifth carbon budget, which is being proposed, we should suddenly turn everything on its head and change how we account for carbon.

The hon. Gentleman and all Opposition Members must appreciate and realise that although what they are proposing has some merit—it is certainly an interesting idea that the Government will keep under review—it is just not realistic at this late stage to start to turn on its head the way in which the Committee on Climate Change or the Government make their calculations. The work has been going on for up to a year already and is now stepping up apace so that we can meet our legally binding commitment to publish our report by the end of June this year.

The hon. Gentleman quoted the Committee on Climate Change’s recent letter, which I can quote back to him. On whether the fifth carbon budget should be tighter, it said a few days ago, in January, that its

“judgement is that our existing recommendation is sufficient at this time, although a tighter budget may be needed in future”.

Let us be clear that the committee is not calling for what is in the clause. All its recommendations and assessments have been done on the assumption that we continue to use the European ETS scheme to account for carbon in the power generation and other sectors. Were we to go ahead and agree to the clause, it would be extremely difficult, if not impossible, to meet our commitments under the 2008 Act.