Oral Answers to Questions

Debate between Charles Hendry and Barry Gardiner

Thursday 8th March 2012 Commons Chamber

[Charles Hendry]

I am delighted to join my hon. Friend in supporting this particular scheme. It is exactly the sort of scheme that we want to see coming forward. It gives consumers greater buying power; it helps them to negotiate a better price; it is good for them and it is good for the market.

[Barry Gardiner (Brent North) (Lab)]

A reduction in energy costs is one way of addressing fuel poverty, but with rising world commodity prices it is unlikely to be seen in the future. The other way of addressing fuel poverty might be to make direct payments to the more vulnerable, but again, given the financial situation, that is highly unlikely. Therefore, energy efficiency is critical. Will the Government look at making energy efficiency measures compulsory and putting them in place across the board?

[Charles Hendry]

We have made enormous strides on this through the green deal. We have recognised that in the United Kingdom our gas prices are the lowest in the EU15 and our electricity prices are about the third lowest in the EU15, but the total bill is much higher because our homes and businesses are very energy inefficient. The green deal was the first comprehensive measure introduced by Government to address this and to be rolled out across the housing stock. I know that the hon. Gentleman welcomes the ambition that we are setting out, and we are determined to make this fundamental change.

--- Later in debate ---

[Charles Hendry]

I can give my hon. Friend an absolute assurance on this. We will not compromise on safety in any respect with regard to new nuclear power stations. That is an integral part of the national policy statements and the planning process. We have the most effective and toughest regulatory system anywhere in the world and one of the most highly regarded international inspectors is leading the process. We will not compromise on safety in those areas.

[Barry Gardiner (Brent North) (Lab)]

Green economic development will be the central focus of the United Nations conference in Rio in June. Given that, which Ministers will attend? Now that the Brazilian Government have changed the date to 15 June in deference to the Queen’s diamond jubilee, will the Prime Minister himself attend?

Oral Answers to Questions

Debate between Charles Hendry and Barry Gardiner

Thursday 26th January 2012 Commons Chamber

[Charles Hendry]

One of the most important aspects of a functioning energy market is transparency; people need to be clear about why their prices are changing and the factors that contribute towards that. The requirement for greater transparency and more information on bills is therefore a fundamental part of the reforms that we see coming through.

[Barry Gardiner (Brent North) (Lab)]

Does the Minister recognise that the insistence on the energy performance certificate at level 3 in order to qualify for the new solar PV fix will be anticompetitive in its practice? The industry has said that it may contribute to reducing employment in solar PV down to 8% of the current levels of employment, and yet it is not related to gas, which is used most for warming Britain’s homes.

[Charles Hendry]

I hope the hon. Gentleman would agree that it is important that if people are receiving a subsidy for electricity which is generated, they should have generally well insulated homes and they should not be wasting it—[Interruption.] But for many people it does help. That was a proposal that was put forward in the consultation process. We have had many responses to that. We are currently considering those with a view to making a final decision.

Electricity Market Reform

Debate between Charles Hendry and Barry Gardiner

Thursday 3rd November 2011 Westminster Hall

[Charles Hendry]

I know that you, Mr Havard, are capable of so many miracles and magical things that we thought that nothing was beyond your capabilities.

The hon. Member for Brent North (Barry Gardiner) made an interesting comparison to a Rubik’s cube, but I think of the issue as more of a complicated jigsaw. With a Rubik’s cube one makes a move and moves everything else out of place, whereas with a jigsaw, one gradually puts in place the elements that build up the whole picture. One has to do that in a structured and sensible way, because some parts are more complicated than others. Nevertheless, we are keen to take forward the challenge.

What we are about here is securing £110 billion of investment over this decade. The £200 billion includes investment in gas infrastructure, the wires and the pipes, but it is still an enormous investment. It is twice the rate of investment every year of this decade than has happened in the past decade. We need to recognise that the old market structure did not bring forward the necessary investment—it sweated assets to try to keep costs down—and could not price in the cost of carbon, which is one of the big issues that we have had to address. Therefore, I do not see market reform as being about subsidising nuclear, but about how we make all forms of low carbon feasible, affordable and economically attractive.

The Chair of the Select Committee on Energy and Climate Change, my hon. Friend the Member for South Suffolk (Mr Yeo), asked a number of questions when introducing the debate—it was like a bullet train going through the energy terrain. A comprehensive range of issues and questions were raised. He asked how much investment we have seen in the past year. Just in the renewables sector, in six weeks between 1 September and early October, we saw £800 million of new investment, offering nearly 2,000 new jobs, and we expect that to pick up. However, he has had to accept that much of the investment is lumpy—a nuclear power station needs £5 billion or £6 billion of investment, and an offshore wind farm needs billions of pounds of investment. Therefore, there will not be a straightforward progression to 2020, but we will have big steps up over time. We are quite clear that without the measures we are putting in place, it will not be achievable.

My hon. Friend also asked why we had not gone for a target such as 50 grams per kilowatt-hour for the electricity sector by 2030. We will set out our formal response to the Energy and Climate Change Committee later in the year. We recognise, through the work that we have done, that there are a number of ways to reach our 2050 requirement, which is that we need to have reduced our carbon emissions by 80%. There is not just one way to do that, and we need to look at what is the best way. At the end of the day, we need to do it in a way that is cheapest for consumers. A common theme in this brief debate has been to ask how we deliver that in a way that will protect consumers, both industrial consumers and people in their own homes.

We have covered a number of measures regarding market reform, and I want to address each of them briefly. We have adopted a system of feed-in tariffs with contracts for difference, because we believe that that is the best way of getting the best deal for consumers and giving the greatest certainty to investors. By clawing back when the wholesale price is high and paying more when it is low, the system is more predictable, and it is easier to bring in investors from outside.

One of the things that Mr Atherton from Citi, who has been referred to, has not fully taken account of is that we are trying to take the system closer to a regulated rate of return. Many institutional investors, such as sovereign wealth funds around the world, are now looking at the opportunities to invest in the UK energy sector precisely because of the structure that is being put in place and the fact that we think that the CFD mechanism delivers the policy more securely than any other mechanism.

My hon. Friend the Member for South Suffolk asked us not to tinker with the policy as it progresses. The history of previous Energy Ministers suggests that I will most certainly be long gone by the time anyone gets a chance to tinker, but if I am still in the position at the time, I guarantee to him that the whole system is designed to stop tinkering. It is not just an agreement or Government policy, but a long-term contract that tells investors over 20, 30 and more years how much they will be paid for each unit of electricity generated by a certain technology. That means that we need to build a system that is as close to automatic as possible in order to recognise how the costs are coming down, so that new entrants coming in beyond a certain point understand how they will be remunerated in the process. The policy will also deliver investment, particularly in renewable energy, at a cost lower than that of the existing renewable obligation. As the policy supports all low-carbon technologies, it will make a greater contribution to our decarbonisation targets than is otherwise possible.

The discussions, particularly my hon. Friend’s remarks, also focused on the emissions performance standard. My intention with such a standard will be to give a long-term signal for what we believe is acceptable and to start to set out how that degression might take place when it is considered. Above all, it has to be a driver for investment. It is easy to set it in place in a way that kills off investment decisions. How we have done it, which is to say that it will not be reconsidered before 2015 and that investments happening before that will have perhaps 20 years of assured production on a certain emissions level, will strike the right balance.

I was intrigued by the comments my hon. Friend the Member for South Suffolk made in the earlier part of the debate. He sees the role for shale gas as having been underestimated. He said that we should be having much more shale gas and gas in general in the mix, with perhaps less energy from renewables, offset by the structure that he was calling for in the second part of the debate, which would be subject to an emissions performance standard. We will not get the investment that he wants to see in new gas generation if there is a much tighter emissions performance standard biting at an earlier stage on gas generation.

We have also said that the capacity mechanism should be part of this process, because we recognise that we need to know exactly how we will keep the lights on at all times of the year, as well as ensuring that there is back-up capacity and, critically, building in that demand-side response, to see whether we can find cleverer ways of dealing with this than building new power stations that will only be used for a small part of the year. If we can find ways of taking demand out of the system during times of particular demand, it will be a big gain for the consumer and save £1 billion on new plant. Clearly, whether that is a new plant or an old plant going for a few hours a day will depend on how that capacity mechanism is structured. We are determined, however, that that demand-side response element should be part of the structure as well.

The final element of the package is the carbon floor price. The carbon floor price is important for giving investors confidence. Currently, if one looks at the history of the European emissions trading scheme, it has been impossible to guess where it will be in a few months’ time, let alone in nine years’ time. The people who are making investment decisions that will not come to fruition until the end of the decade need greater clarity. Putting in place a carbon floor price is all part of that process.

The trajectory that we have taken is to show them that we are serious. If we had said, “Yes, there will be a carbon floor price, and it will be introduced by the next Government after the next election, at a level to be established,” nobody would have taken that seriously. The way in which that has been done shows a much greater commitment to giving the industry the clarity that is necessary. A measure of success in this will be whether we can bring new entrants into the market. Improved liquidity will be one of the benchmarks by which we can test whether market reform is working. Undoubtedly, we want to see more liquidity and more players. That is primarily the responsibility of Ofgem, and we know that Ofgem will look at this further if that proves to be necessary. The Government have said that they will act, if necessary, to address those structural barriers.

My final point is on fuel poverty and feed-in tariffs. One cannot, on the one hand, talk about concern for those suffering from higher fuel bills and, on the other, baulk at every measure that is designed to take pressure off their bills. The cost of solar technology has come down by around half since 2008. Degression was always built into it, from the very first brochure, signed off by the right hon. Member for Doncaster North (Edward Miliband), who is now the leader of the Labour party. He said that degression should be part of that process. As the prices have gone down much faster than anyone anticipated, it was right to do that. We know that a domestic installation can be done in a few weeks and had we not acted quickly—if it had been announced that it will come into place in the spring—there would have been a complete explosion in demand and installations, which would have completely destroyed the budget that has been set for this and led to the complete collapse of the industry, because anything after that would have been much more draconian.

[Barry Gardiner]

rose—

[Charles Hendry]

I fear that this is not an integral part of the debate on market reform and, while I want to respond to the hon. Member for Brent North, we owe it to the Chair of the Select Committee to give him time to come back.

I do not think that, on the one hand, someone can argue on fuel poverty that they want to take pressure off consumers while, on the other hand, opposing the decisions we take to help consumers, such as the billions of pounds taken off the feed-in tariff costs out to 2020. It is not possible to do both.

[Barry Gardiner]

Will the Minister give way?

[Charles Hendry]

I am not going to give way, because I want to give time to the Select Committee Chair. I have spoken for less time than the hon. Member for Brent North, so I hope that he will understand if I do not give way. I am grateful for the advice and input of the Select Committee, and I hope that we can put in place a structure that recognises the scale of the challenge, the need to decarbonise and the need to rebuild our energy infrastructure, while doing it at the lowest cost to consumers.

Climate Change Conference

Debate between Charles Hendry and Barry Gardiner

Thursday 18th November 2010 Westminster Hall

[Barry Gardiner]

So as not to mislead people, would the Minister care to correct the record? I think he meant 2°C, rather than 2%.

[Charles Hendry]

I did mean 2°C, and I am grateful to the hon. Gentleman for clarifying that for me. I am not sure what 2% would work out at, but 2°C is the figure we should be working to. I am grateful for that clarification and correction.

A legally binding global deal is the best way to secure a stable, transparent framework for action, build confidence for investors and reassurance for the developing world that developed countries will deliver their commitments, but as Copenhagen showed us, we must be realistic about when such a deal can be achieved. We all now recognise that expectations at last year’s Copenhagen conference became over-inflated. That is a point brought home by the hon. Member for Southampton, Test (Dr Whitehead), who speaks with such expertise on many of these matters. In reality, there was a lack of political will on the part of too many countries to reach a comprehensive deal. We need to win the argument that it is in countries’ political, economic and security interests to move towards low-carbon economies.

Although we will not agree a full legally binding treaty in Cancun, we can and must make solid progress. Cancun can set the stage for future negotiations and provide an essential stepping stone towards a legally binding agreement in the future. Our preferred outcome at Cancun would be to make solid progress on a package of issues that would benefit both developed and developing countries. That package could include bringing the emissions reductions offers countries have made since Copenhagen into the UNFCCC process; strengthening the measurement, reporting and verification arrangements, which will ensure progress on emissions is transparent; and establishing the structures for climate finance beyond 2012, including an international green fund for climate change.

Achieving even that will be challenging. All countries must be prepared to show flexibility in their positions to maximise the chances of success and progress. That is why the EU has signalled its willingness to sign up to a second commitment period of the Kyoto protocol, subject to certain conditions being met. But success does not depend solely what happens at the negotiating table. Given the challenges in securing a global deal, we must increase our support for practical action on the ground, in parallel with negotiations if we are to persuade other countries that taking ambitious action is in their economic and security interests. We must demonstrate the benefits of moving to a low-carbon economy domestically, and support others who are willing to do the same; encouraging them to deliver on their existing commitments to reduce emissions and go even further.

In that respect, I believe we have a strong record as a new Government in trying to achieve progress. We do believe in showing global leadership in the measures we are putting place to mitigate climate change. We have allocated £1 billion to the green investment bank, even in these difficult times, and made a commitment to come forward with additional funding. We are encouraging the most ambitious programme of energy efficiency improvements through the green deal, which will be the centrepiece of the energy Bill this winter.

We are providing £1 billion of investment to support the demonstration of carbon capture and storage technology—the most any Government anywhere in the world have allocated to a single project—thereby ensuring that the UK will continue to lead in that critical technology. The internationally renowned “2050 Pathways Analysis” helps us to consider some of the choices and trade-offs that we will face over the next 40 years if we are to move to a secure, low-carbon economy, and it allows us to explore the combinations of effort that will be needed to meet our emissions targets while matching energy supply and demand. We are taking action to switch from fossil fuels to cleaner and more sustainable green sources of energy by taking forward the renewable heat incentive, a world-leading scheme that provides long-term support for renewable heat technologies. There are also the feed-in tariffs to encourage microgeneration.

My hon. Friend the Member for Bristol North West mentioned the biomass facility that I was delighted to visit with her in her constituency. Another change that we have made will enable councils to generate their own electricity and sell it to the grid, freeing up a fantastic potential that has not been delivered in the past. My hon. Friend the Member for Stroud spoke about the critical use for technology in that area. British universities have global leading potential in the area. The genius of invention and innovation that is found in so many of our universities can provide fantastic opportunities to deal with the challenges we face. I am delighted that my hon. Friend, and many colleagues from all parties, are engaging with the Institute of Mechanical Engineers, because of the contribution that it can bring to the debate.

I shall now respond to some specific issues that have been raised. The hon. Member for Chippenham, and many others, raised the question of long-term financing. The United Kingdom is making a significant commitment to support action on the ground. The spending review provided £2.9 billion of international climate finance through the international climate fund. That will allow the UK to help developing countries to adapt to the impacts of climate change and move on to a low-carbon growth path. That fully funds the UK’s pledge to deliver £1.5 billion in fast-start finance between 2010 and 2012, including £300 million for reducing deforestation.

[Barry Gardiner]

Will the Minister clarify whether those funds included any element of the previously announced £750 million for the environmental transformation fund?

[Charles Hendry]

The £2.9 billion is new in that it is drawn from the rising aid budget. Part of the £1.5 billion to which I have referred relates to the fiscal years 2011-12 and 2012-13. That is included in the figure of £2.9 billion. Funding for years three and four of the spending review period represents a further commitment of resources for climate finance. The hon. Gentleman may like more detail on that, and I would be more than happy to correspond with him if any further clarification is necessary.

Such figures demonstrate the UK’s commitment to scaling-up climate finance to meet its fair share of the $100 billion of public and private international finance per year from 2020. We welcome the recent report from the UN Secretary-General’s advisory group on climate finance, which makes a number of recommendations on how to meet the $100 billion goal. We look to make good progress in implementing its recommendations.

We need things to happen now, and that is why we call for international bodies such as the United Nations framework convention on climate change, international financial institutions, the International Civil Aviation Organisation, the G20, and others, to take action in their areas on the back of the report, so that we can deliver progress at Cancun with a view to producing concrete proposals by the time of the climate change negotiations in South Africa next year. It is clear that public finance alone is not enough; we also need to mobilise private investment. That is why we have launched the capital markets climate initiative to help create the right commercial conditions to drive economic investment in emerging economies.

The fast-start programme has been mentioned. As I have said, the United Kingdom will provide £2.9 billion through the new international climate fund and the spending review to help developing countries to adapt to the impact of climate change and move to a low-carbon growth path. That fully funds the UK’s commitment to deliver £1.5 billion in fast-start finance between 2010 and 2012. My hon. Friend the Member for Richmond Park asked about the importance of bilateral agreement. We are absolutely clear that any action must be taken through bilateral and multilateral discussions. It will be a priority to deploy some of the finance to tackle deforestation.

The hon. Member for Brent North (Barry Gardiner) asked whether developed countries need to be clear about the finance they will provide to developing countries. We could not agree more about that, which is why we are pushing other countries to be transparent about how and where they are spending their fast-start finance. We support a Dutch-led website that allows countries to make information about their fast-start spends publicly available.

In his opening comments, the hon. Member for Chippenham asked about which AGF sources are a priority. He asked about the levy on aviation and shipping and the financial transaction tax. The report identifies a range of proposals on how to achieve the goal of £100 billion, and we now need to work with others to make that happen. The United Kingdom continues to work with the International Civil Aviation Organisation and the International Maritime Organisation to develop co-ordinated global solutions to tackle emissions from those sectors. Many questions need to be explored about whether proposals for a financial transaction tax offer a stable and efficient mechanism to raise revenue. Those are issues that the Government will take forward.

My hon. Friend the Member for Richmond Park asked about aviation, and we want to ensure that action to limit emissions from aviation is discussed at Cancun and in further negotiations next year. However, we must look at the potential perverse consequences that can sometimes emerge. It is clear that some freight is being brought by air into mainland Europe and then by lorry into the United Kingdom because of different levels of aviation tax in different countries. If we act unilaterally, we must be aware that the ingenuity of the business community will find ways around that, and it could be British consumers who end up paying without the important carbon savings being delivered.

My hon. Friend also asked whether the United Kingdom would support an end to World Bank lending to fossil fuel projects. As my right hon. Friend the Secretary of State for International Development said this morning, we will press the multilateral development banks to support a shift towards climate-smart lending across their portfolios. As part of that, the Government are reviewing the role of the multilateral development banks in energy lending. My hon. Friend the Member for Richmond Park has publicly asked the Department for International Development questions about that, and I am sure that the Secretary of State will be aware of the comments that he has made during this debate. He also asked whether we will press for reform on fossil fuel subsidies. We strongly support the G20 commitment to phase out inefficient fossil fuel subsidies. That commitment was restated at last week’s G20 summit, and I assure my hon. Friend that we will continue to raise the issue in our bilateral contact with counterparts in other countries.

We have covered many issues during the debate, but I will conclude with the extent to which there should be international agreement. We would all like to see the EU take an international leadership role in these debates, but we must also recognise that we have our own national perspectives to push forward. As a country with a strong Commonwealth link, we perhaps have a different perspective from that of other countries in the EU. Although we would all welcome greater EU co-ordination and a greater ability to speak with one voice on such matters, we also greatly value the ability of independent nations and Governments to speak on behalf of their own populations and the expertise that they bring to the debate.

The situation is not about us and China against the United States. This is a global issue and we must bring the United States with us. I am not sure that trying to bully the American business community will work. We must build bridges with the American people and the American Government to persuade them of the urgency of doing what needs to be done. We know that they are facing particularly difficult times, as are we. The work of international organisations such as GLOBE International plays an extremely important part, and in that respect I pay tribute to the work carried out by many hon. Members of this House. If we are to make progress, we must do so in a co-ordinated way.

My final point relates to forestry, and a couple of contributions have mentioned the programme on reducing emissions from deforestation and forest degradation in developing countries—REDD-plus. Our overarching goal is to maximise the contribution to global mitigation from forest and land management action in developing countries. We seek to achieve that by agreeing to strengthen the UNFCCC rules on counting emissions from forest management action towards the targets of developed countries. Those rules should incentivise action beyond business as usual and ensure environmental integrity, but avoid unfairly penalising countries that are practising sustainable forest management. We are also seeking an ambitious deal on reducing emissions from deforestation and forest degradation.

The Minister of State, Department of Energy and Climate Change, my hon. Friend the Member for Bexhill and Battle (Gregory Barker), who leads on these matters in the Department, is talking to some of his international counterparts at this moment, which is why I have been standing in for him and responding to the debate. I hope that I have been able to reassure my hon. Friends and the Opposition Members who spoke that this is a matter of profound importance to the Government and we are determined to continue to make progress.

Oral Answers to Questions

Debate between Charles Hendry and Barry Gardiner

Thursday 16th September 2010 Commons Chamber

[Charles Hendry]

We recognise that onshore wind is one critical element of the process. We set out in the 2050 pathways, which were mentioned earlier, a number of different options. Offshore wind is going to be critical, as is biomass. We want a range of renewable technologies to come forward to help us meet the 2020 targets, and the policies that we are putting in place are designed to drive forward investment in those sectors.

[Barry Gardiner (Brent North) (Lab)]

8. What representations he plans to make at the October 2010 Tianjin climate change conference for amendment of the UN proposals governing emissions from land use, land use change and forestry to ensure that the managed forest emissions of developed countries are properly accounted for.