UK Decarbonisation and Carbon Capture and Storage

Callum McCaig Excerpts

Tuesday 24th January 2017 Westminster Hall

[Callum McCaig (Aberdeen South) (SNP)]

It is a pleasure to serve under your chairmanship, Mr Betts. I congratulate my hon. Friend the Member for Coatbridge, Chryston and Bellshill (Philip Boswell) on both securing the debate and leading it in such an informed and passionate way. He set out the key issues around CCS, the history and, more importantly, the way forward.

I will also focus more on the way forward, but it is beholden upon us to look back slightly. The cancellation of the £1 billion competition that would have benefited the White Rose project and the project at Peterhead was deeply regrettable, in respect of both the way it was done—the announcement was snuck out after the autumn statement with little or no forewarning to the companies involved—and, as the National Audit Office report shows, the colossal waste of money.

At the time, I said it was clear that the Government knew the cost of everything but the value of nothing: the cost was £100 million to save £1 billion or £900 million. However, as we have heard multiple sources suggest, delays to the project could cost consumers £1 billion to £2 billion per year in the 2020s, and up to £4 billion to £5 billion per year in the 2040s. Colossal amounts of money could have been saved; if we do not act now, that will be lost through the additional costs that consumers will have to bear.

With the honourable exception of the hon. Member for East Antrim (Sammy Wilson), most of us accept, although not unquestioningly, the requirement to decarbonise our energy system—that is, “energy” in its widest sense. We often focus purely on electricity, but as some hon. Members have mentioned, there are many cross-synergies among the different forms of energy. That is why carbon capture should be considered.

May I place on the record my commendation for the Oxburgh committee report—those who served on the committee and the chair in particular? It is an excellent report and, as we have heard from those who did serve, the work was done in a way that did not prejudge the outcome. The report was an open, honest and thorough analysis of the costs and benefits that CCS could bring, but it also left on the table the option of not progressing. It was produced in September 2016. As far as I am aware, the Government have yet to offer much in the way of a response. I hope that we will hear from the Minister his considerations and those of his Department on the report and how they are seeking to take it forward.

As has been mentioned, there are clear synergies with the Government’s industrial strategy. I am talking about the ability to tie in research and development and have a world-leading technology that we can develop here on these shores. As the hon. Members for Waveney (Peter Aldous) and for Middlesbrough South and East Cleveland (Tom Blenkinsop) mentioned, this technology feeds into the Government’s honest appraisal that they need to do more to boost economic growth outwith this city of London and the surrounding environments.

Carbon capture does that very well. It ties in neatly with existing and former industrial heartlands, as the hon. Member for Middlesbrough South and East Cleveland suggested. It provides the potential for existing industrial producers, which in many cases are venting pure CO₂—that should not be happening in this day and age, but there is no mechanism for them to cease doing it—to maintain their competitive advantage. That is how we anchor these companies in constituencies such as the hon. Gentleman’s and in places such as Grangemouth in Scotland, where we have strong industrial hubs that can have a very bright future. They can continue to do what they are doing well now, but they can also develop new technologies into the future that the planet as a whole is going to need.

We had a degree of discussion about the clarity that will be required in terms of the process of leaving the EU. There are optimists and pessimists among us, and clarity will indeed be required. The plan of action has previously centred on European co-operation, be it the energy union, the emissions trading scheme or the united approach to the Paris talks. Whether that means that a singular approach by the UK could produce better results will probably depend on whether someone is a “glass half full” or a “glass half empty” sort of guy. I will err on the side of optimism. There is probably a degree more optimism in me following yesterday’s announcement on the industrial strategy that the Government understand and will take this issue seriously.

The key point is that, as the hon. Member for Waveney said, this features across all the key aspects of the industrial strategy and all the areas where we are struggling or perhaps are not doing as much as we can in terms of decarbonisation. We can look at heat, transport or electricity in isolation. We can look in isolation at what we do with energy-intensive industrial producers. Alternatively, we can look at those things in the round. If we look at them in the round and see how we can apply carbon capture to those technologies, we will find a much more affordable and viable way of decarbonising. Finding those synergies, finding the areas of expertise and developing the companies that have the knowledge to do this provides us with a real opportunity.

How do we go about doing that? The Oxburgh report and its various recommendations are the blueprint. The key take-away from that for me was that what we are discussing can be done and can be done affordably. It highlighted some of the failings of the previous approaches in basically outsourcing the risk entirely to those bidding into the competition. Breaking it up and allowing different companies, with different expertise, to join in the process in the area to which they are best suited will allow costs to be reduced, to an extent where we could see a contract for difference price of £85 per MWh, which is competitive with other forms of production.

In some ways, as my hon. Friend the Member for Kilmarnock and Loudoun (Alan Brown) suggested, CCS could be more established and cheaper than what we are pursuing at Hinkley. That shows the urgent requirement for the technology to be included in the Government’s industrial strategy and emissions reduction plan; if we do not do that now, it will, as we have heard, get more expensive.

I have been in many a debate with the hon. Member for East Antrim in which his views on this issue have been expressed. I disagree with him from an ideological point of view, but also from a practical point of view. Yes, there are costs in relation to the infrastructure that will be required to decarbonise our power system, but to suggest that there are not costs from continuing to do what we are doing is simply not correct.

[Dr Poulter]

Is not there also a case in respect of fuel poverty? Improving insulation and taking other demand-side measures to reduce the demand for electricity is a very good thing in which to invest. It decarbonises, but it also saves people, particularly those on fixed incomes, money on their heating bills.

[Callum McCaig]

The hon. Gentleman is absolutely correct: the cheapest fuel that we will ever use is the fuel that we do not use at all. Investing in such measures will save money and reduce fuel poverty. The coal-fired power stations to which the hon. Member for East Antrim made reference will be coming off the system anyway. They will have to be replaced, and they will be replaced by something that will not come free. It will be expensive, but it can be expensive in a way that is good for the environment and good for our industrial base, or it can be expensive in terms of its fuel and its production and the cost to the environment.

There are two ways to go about this. We can be at the front of the queue; we can be a leader and we can have first-mover advantage. That protects our business, allows us to export and allows us to save money for our consumers and industrial producers. I hope that the Minister and the Government will take that course and back CCS for the long-term future of the UK and our energy industries.

--- Later in debate ---

[The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Jesse Norman)]

It is a delight to serve under your chairmanship, Mr Betts. I absolutely welcome this debate and congratulate the hon. Member for Coatbridge, Chryston and Bellshill (Philip Boswell) on securing it and on his very interesting opening remarks. The hon. Gentleman is a strong proponent of carbon capture and storage—he has professional experience and expertise—and this has been a valuable discussion.

I will make some general statements before responding specifically to the concerns raised. We have not got much time, so I will have to move relatively quickly. As I am sure the House understands, the Government remain very committed to tackling climate change, and remain very committed to the Climate Change Act 2008 and the implications it has and will have for the coming decades. Climate change remains one of the most serious long-term risks to our economic and national security.

As a country, we have made great progress towards our goal. Indications are that UK emissions in 2015 were 38% lower than in 1990, and 4% below those in the year before. It is appropriate to recognise that, as well as to look ahead to the future to the emissions reduction plan, which we will publish in due course. I am happy to respond to the question from the hon. Member for Southampton, Test (Dr Whitehead). My colleague the Minister for Climate Change and Industry mentioned to the Business, Energy and Industrial Strategy Committee that that would be in the first quarter. I can do no better than echo his words.

As a Government, we remain committed to exploring all technologies that can support the process of decarbonisation, including carbon capture and storage. As has been recognised today, CCS has a wide range of potential applications in which it could contribute to the reduction of carbon in our environment. Those include not merely decarbonising heating and transport, but providing a pathway for low-carbon hydrogen and producing negative emissions when biomass is combined with CCS in power generation. CCS offers a wide array of potential strategic benefits. It has been rightly noted that it has the potential to help energy-intensive industries in this country to remain competitive.

I understand some of the concerns that were raised about the cancellation of the project last year. The project was absolutely not without benefits and, as the Committee recognised, there had been investments in front-end engineering and design. It was an ambitious scheme. Everyone in the Chamber believes that the Government should be ambitious in their expectations for climate change improvement and carbon reduction, so I think it is odd to criticise the Government’s ambition, when they have sought to be precisely that.

[Mr Philip Hollobone in the Chair]

The Government absolutely believe that CCS has a potential role in long-term decarbonisation, but it must be affordable. It is worth noting that we are not by any means the only country seeking to crack CCS from a cost perspective. Projects have been deployed, particularly in north America. However, the United States, Canada and Norway have all cancelled projects, so we are taking the time to look hard at CCS to see whether we can find a cost-effective pathway.

That does not mean we have not been investing in the meantime. As colleagues know, we have made a range of investments across the piece, including in Carbon Clean Solutions, which the hon. Member for Middlesbrough South and East Cleveland (Tom Blenkinsop) mentioned—I would be delighted to meet him when officials can set it up—and in storage appraisal projects in the Northern Irish seas and the Summit Power CCS project at Grangemouth.

The Government continue to be very active. We commission research and provide support for innovation, and we remain engaged and seek to continue working with and learning from others, such as the United States, Canada and Norway. The hon. Member for Coatbridge, Chryston and Bellshill mentioned the Toshiba CCS plant in Texas. Officials have already met the promoters of that scheme and are contemplating visiting it when it is up and running to learn more as part of our overall picture. We remain part of a series of international initiatives designed to understand CCS better, and to learn from and deploy it as effectively as possible.

Therefore, we have not closed the door, by any means. Indeed, Lord Oxburgh was asked to set up and lead his parliamentary advisory group—I very much recognise the contributions made by Members in the Chamber towards it—precisely because we have not closed the door to CCS but are looking to use it, if possible, affordably and effectively. I put on record my thanks to Lord Oxburgh and the group’s members for their work.

On the specific issues raised by colleagues in the debate, I was invited by the hon. Member for Coatbridge, Chryston and Bellshill, who opened in the debate, to consider CCS as part of the industrial strategy. As I hope has been understood, we absolutely are doing that and will continue to do so.

My hon. Friend the Member for Central Suffolk and North Ipswich (Dr Poulter), who is no longer in his place, asked whether we, as a country, would be affected by Brexit in this regard. I point out that, as a country, we are a signatory to the Paris agreement independently of the EU as well as through it, and it is therefore far from clear that Brexit will make a difference.

The hon. Member for Stockton North (Alex Cunningham) is right that we need to get the EU emissions trading system correct. My hon. Friend the Member for Waveney (Peter Aldous), in a very eloquent speech about the offshore potential for the UK continental shelf, said that we must be pioneers in CCS, but I slightly disagree with him on that point. There is an honourable place for us as an early mover, but not necessarily a first mover, in CCS. Such people often reap the benefits in technology and cost without taking a lot of the additional risks. That is a perfectly honourable position for this country to be in.

Hon. Members spoke about the Oxburgh report. I point out to the hon. Member for Aberdeen South (Callum McCaig) that even that report contemplates very substantial capital expenditure of potentially more than £1 billion and perhaps even £2 billion, as well as the CfD. The hon. Member for East Antrim (Sammy Wilson) asked who pays for these things. Well, that would be the cost, and the payment would be borne respectively by taxpayers and bill payers. The incentive structures would have to be determined in future discussion, but there would be a CfD, and the framework regulation is something that Lord Oxburgh properly discussed.

[Callum McCaig]

rose—

[Jesse Norman]

I am sorry, I cannot take interventions because I am really short of time, but I hope I have at least addressed the core point the hon. Gentleman made.

Let us be clear: the Committee on Climate Change seems to be contemplating a contribution on CCS from this country until 2030. No one can predict the future, so it is not clear that we are behind schedule from its point of view. However, it is very important to recognise that even the Oxburgh report is not just about a CfD, but about a potentially substantial capital cost, which would fall on taxpayers.

My colleague the hon. Member for Strangford (Jim Shannon) raised an issue about cost and effectiveness and was absolutely right. The hon. Member for Middlesbrough South and East Cleveland asked about the NAO report. I absolutely assure him that it has been given—and is being given—a lot of scrutiny within my Department.

Let me quickly wind up my remarks in the time that remains. The Government are actively interested in and engaged with the question of CCS. I very much thank hon. Friends and hon. Members for their wide-ranging contributions to a fascinating debate. This is not an easy issue to crack, but we are focused. The Government will set out our approach in due course and use the opportunity offered by the debate to further inform our thinking.