Action on Climate Change and Decarbonisation

Debate between Chris Skidmore and Richard Fuller

Tuesday 5th July 2022 Commons Chamber

[Chris Skidmore (Kingswood) (Con)]

I thank the Backbench Business Committee for agreeing to the debate. Hon. Members across the parties have signed up to it, including a large number of Select Committee Chairs and chairs of all-party parliamentary groups. I speak as chair of the all-party group on the environment.

Our debate comes at an opportune moment: this is Net Zero Week, and last week was the third anniversary of my signing net zero by 2050 into law as Energy Minister. The UK was the first G7 country to do so. If I had been told at the time that by COP26 in Glasgow, 90% of the world’s surface would have signed up to a net zero target, I simply would not have believed it—but I probably would not have believed that we would have a global pandemic, that Afghanistan would cede to the Taliban or that Russia would invade Ukraine.

Given all the strong headwinds, the day-to-day political events and the crises of the past three years, it is worth reflecting on the longevity of the net zero target and on what needs to be done. We need to be resilient and sustainable to achieve our greatest challenge: a green industrial revolution, with a move from petrochemicals towards a new materials economy. The challenge is massive, but the UK has shown international leadership in signing up to net zero. We were able to pass it in this Chamber because of the Climate Change Act 2008, which was enacted by the then Labour Government with the Conservative party in opposition demonstrating cross-party support for upping the target.

We need to be in a place where our financial commitments are shadowing the commitments to net zero that all political parties have made. We do not have a financial mechanism in place as we do for our carbon budgets, so I think we need to be more innovative in how we look at our budgets. Today we are discussing estimates and the budgetary cycles for our net zero commitments; I will come on to the details in a moment. Until we move to a longer-term cross-party funding solution, however, I think we will struggle, because we will be endlessly discussing the detail rather than the broader strategic approach needed to deliver energy efficiency.

Before I go into the costs in pounds and pence—the billions of pounds that are being spent—I want to make sure that we do not fall into the trap of thinking of net zero as a sunk cost. Actually, every pound spent is an investment. Net zero is a net benefit to our economy, so when we talk about the money invested by the Government, let us not fall into the trap of thinking that somehow it is going down the drain.

[Richard Fuller]

I hate to pick my right hon. Friend up on this point, because he is much more knowledgeable than I am, but how can net zero be a net benefit to the economy unless achieving net zero comes with economic benefits? What would those benefits be?

[Chris Skidmore]

The economic benefit of net zero is a wholesale transformation in our industries, our manufacturing processes and the way we think about our world. The same debates would have been had over the introduction of the car, the introduction of electricity or the introduction of gas boilers to replace log burners in every house. Going through those wholesale transformations has led not only to new jobs, but to growth.

If there was one mistake in signing up to net zero, it was using the term “net zero”. We should have called it net zero growth, because it is not about eco-warriors or extremists committing themselves to decarbonisation; it is a pathway that shows us doubling our energy use by 2050. Committing to net zero is a manageable path that will ensure that our economy continues to grow.

[Richard Fuller]

I do not want to deflect my right hon. Friend too far from the debate, but let me just pin this down. The automobile added to growth because it got people from A to B quicker than a horse and cart. The move to net zero essentially means taking certain off-balance sheet, off-profit and loss statement costs and putting them on the balance sheet or on the P&L. It will therefore act as a brake on growth unless the United Kingdom can expand our revenue opportunities, do things at a lower overall cost or shift behaviour patterns so that we can do things more efficiently. That is the piece that is missing from what has so far been said by my right hon. Friend and by the Committee on Climate Change. Those things are there, but should we not be honest with the public that without them, net zero harms growth rather than enhancing it?

[Chris Skidmore]

My hon. Friend is entirely right about one aspect of this. He mentioned efficiency and productivity. Obviously the UK faces a huge productivity challenge. We are speaking in Parliament and discussing the importance of politicians to making this energy transition, but it is already happening even without us. Private companies across the UK, and indeed the world, are saying that they would want to go to net zero even if there were not a climate crisis, because they recognise the opportunities for productivity, for disruption, for achieving better efficiencies, and for thinking differently. That is what makes net zero so important: the wholesale transformation, into the 21st century, which recognises that we cannot be dependent on unsustainable fossil fuels that will ultimately run out.

The Russian war against Ukraine has demonstrated that we cannot be held hostage by petrostates for the future. We must do something about that, and I think current messaging means that far more people support net zero. This is the year when climate change and net zero went mainstream. I think that all politicians, particularly certain politicians on my side of the Chamber, are at risk of not being on the public side of the argument. They need to understand that this has to happen, not just for the sake of the climate, but for the benefit of our economy.

--- Later in debate ---

[Richard Fuller (North East Bedfordshire) (Con)]

It is a pleasure to follow my hon. friend and neighbour, the Member for Hitchin and Harpenden (Bim Afolami).

When Parliament agreed in June 2019 to achieve net zero by 2050, it was probably the most expensive, uncosted piece of legislation that has ever been passed by this country. It was a “Star Trek” piece of legislation, asking the country to boldly go where no one had gone before. These estimates start to frame how much the costs will be—costs for taxpayers, costs for individuals, and costs for business. As we look at those things, we need to be pragmatic and not dogmatic about achieving net zero. Too often we talk about the great opportunities of achieving net zero without really being honest about whether they are opportunities or just a shifting of resources, which, when it comes down to economics, has no net benefit at all.

As I was saying earlier, the contribution of net zero to this country’s growth is highly questionable. Essentially, we are taking a cost, which we ignored in the past, and saying that we now need to take it into account and eliminate it as a cost in our production. Growth does not arise from that. Growth arises when we can do the same thing for a lower cost—through productivity improvements. Growth can arise when we increase the revenues, particularly for our own country. That could be achieved through import substitution, or it could be achieved through the creation of new green technologies that we can export to other countries. However, it is not guaranteed just because we have passed a piece of legislation that says, “Let’s all achieve net zero by 2015.” It can be achieved by changing the ways that we do things into ways that are more productive. Finally, it can be achieved by reducing the costs of uncertainty, the most obvious of which when it comes to energy is hedging.

None of those things is guaranteed. As has been said, children and schools are enthusiastic about this, but that is because they are taught about net zero and because, quite naturally, young people have an interest in all things natural, such as the environment, diversity and the planet. Ultimately, though, the costs are what will matter in terms of whether and how we can achieve that ideological and scientifically justifiable goal.

From my point of view, the most important thing for us as a country is that we need to work with the pace of innovation and be cautious about trying to exceed the costs of innovation. That is because when we try to move more quickly for a policy goal, ahead of the way that innovation is enabling us to get there, it means additional cost burdens on households and on taxpayers.

In the estimates, it will be interesting to hear from the Minister about the extent to which he appreciates those goals and the extent to which the Government are trying to increase the pace of innovation. I am talking not just about providing subsidies and support for people to change the way they do things, but about the way the Government are providing incentives for innovation to move at a faster pace.

[Chris Skidmore]

The Government also need to set a number of targets for the production of hydrogen and for the capture of carbon dioxide as part of their 2030 plans and the net zero strategy Build Back Better. Talking to HyNet North West, it is clear that it believes that it can go further, and it wants to call on the Government to double its opportunities to capture carbon dioxide. It wants to increase the current allocation of hydrogen from 1 GW to 2 GW. It would also like to see a doubling of the megatonnes of carbon dioxide captured per annum.

Does my hon. Friend believe that the Government should give HyNet, which says that it has the companies ready to go, the opportunity to double the amount of hydrogen and double the amount of carbon dioxide that it can capture now, because it believes that it can do it? I agree with my hon. Friend that we should follow the innovation.

[Richard Fuller]

I appreciate my hon. Friend’s example of innovation, which could assist.

I wish to focus now on the particular issue of decarbonising home heating. We heard from my right hon. Friend the Member for Ludlow (Philip Dunne) in his opening speech that that is essentially a £20,000 cost for a household when it is combined with insulation. He quite rightly made the point that that is beyond almost every household. I think the hon. Member for Bristol North West (Darren Jones), the Chair of the Select Committee, also noted that it is beyond the expectation of the ability of households to pay for it.

We also know that the economies of scale when it comes to technologies for decarbonising home heat are challenging, because the technology is already established and therefore the production economies of scale are likely to be less than in other areas, and because a large part of the costs are in the service delivery, which is people. People efficiencies are harder to capture than production efficiencies.

Not only is the up-front cost high for everyone, but it means that, without Government action and direction, we would end up with certain households doing it that might not necessarily be those that make most sense for achieving our goal. I say this as a Conservative who believes in free choice, but if we want to achieve that goal, we have to own up to the fact that relying on individual choices by individual households to achieve the decarbonisation of home heating will mean that the overall cost to society of achieving that goal will be substantially greater than going through a process that has at least a very significant part of a community-based initiative.

Again, my right hon. Friend the Member for Ludlow was right to point to the issue of social housing. I am eager to see us move forward; we have a Bill coming and I think there is an opportunity to look at neighbourhood plans, which are about planning for our local communities. Maybe there is an opportunity there to put forward some of the suggestions for community decarbonisation of home heating. I hope that hon. Members who are interested in that will let me know, because I am thinking of tabling an amendment that would make that part of the way that we ask local communities, through the planning process, to start thinking about how they achieve the decarbonising of home heat on a community basis.

I must also urge the Government to come forward and say how they will harness patient capital to solve the economic equation of decarbonising home heat. The equation is that there is a big up-front cost and then the benefits accrue slowly each year, ideally through lower heating bills and certainly through less exposure to the volatility of carbon-based fuels. What are the Government going to do to structure a programme that can attract patient capital to do that? That is the sort of financial profile that pension funds invest in all the time.

Neighbourhood plans, a community-led approach and attracting patient capital into those community programmes seem to me to be one way in the estimates to try to get an approach to net zero, if I may coin a rather cheap phrase, at net profit to the British economy. Achieving net zero at net profit is a way to get a pragmatic answer to the idealistic but uncosted goals that this Parliament put in train in 2019.