Draft Electricity and Gas (Energy Company Obligation) (amendment) Order 2017

Crispin Blunt Excerpts

Wednesday 22nd March 2017 General Committees

[Crispin Blunt (Reigate) (Con)]

My apologies to colleagues for imposing on their time in wanting to make a contribution. I am deeply grateful for the opportunity to be invited to serve on the statutory instrument Committee, diverting me from my normal duties as Chair of the Foreign Affairs Committee.

This takes me back to the responsibilities I had 15 years ago when I was the shadow Minister for Energy. I am sad to say that the order we are considering this morning is exactly the consequence of failing to win the 2005 general election, as we would have had the opportunity to put in place the policy I had written when I was shadow Energy Minister. The order is exactly the consequence of the kind of micro-managing detail one gets into if there is no overarching energy policy designed to deliver environmental obligations.

I looked very closely at the whole issue of issuing trading certificates around the creation of carbon dioxide in the atmosphere and how that might work with the European Union scheme. That was the area of greatest difficulty, so I take this opportunity to say to the Minister that I very much hope he will examine the implications of Brexit for our returning to a proper trading certificates scheme around carbon dioxide and the other greenhouse gases being put into our atmosphere and around the wholesalers of all fuel, whether that is the transport sector, the domestic sector or the electricity generation sector. That could be a far more effective and economically efficient way of delivering the environmental obligations we have entered into by international agreement.

Until I listened to the speech of the hon. Member for Southampton, Test, I was minded to oppose the measure, but he has given me some encouragement that within the order is some reduction in the overall burden of detail that he criticised. However, from his work on micro-generation I know that we share views on how the provision of energy in our society can be considerably improved by such things as micro-generation. This order is not the place to put obligations on the energy companies to achieve certain social targets within a framework that means the overall delivery of our energy targets and environmental targets becomes economically inefficient. It points to the kind of policy failures outlined by the hon. Gentleman.

If we had an overall strategy that set the framework for the market in which we are going to operate for greenhouse gases we are going to put into the atmosphere, that framework should constrain the market, allowing the generation of electricity, heat and power in our homes and the consumption of fuel in our cars and the transport sector, but making everything subject to an overall environmental policy envelope. Measures such as this, which have an extraordinary level of detail and requirements on the energy companies and others to deliver the Government’s policy, are going to run into the kind of trouble that the order is trying to ameliorate in some cases, but will probably make worse in others with all the details, given the law of unintended consequences.

If one looks into the detail, the explanatory notes state, as the Minister said in his remarks:

“Additionally, the Carbon Saving Community Obligation (CSCO) and its rural sub-obligation are brought to an end, as the other two obligations, CERO and Affordable Warmth, are more cost effective at achieving carbon reductions and tackling fuel poverty respectively.”

The notes say that the measures are being delivered for reasons of simplification. When we have got to a place with energy policy where Ministers tend to know best, one begins to understand the difficulty that officials find in creating, implementing and overseeing schemes. Ministers want to make choices about how they are going to deliver the overall target.

When we get to that place, we get the kind of disaster we have seen with the scheme that has got the First Minister of Northern Ireland into so much trouble. We get into that mess where everyone was encouraged to get into the market of building solar panels, and then the subsidy was cut halfway through. People had built a business to take advantage of a Government subsidy. There is no relationship between the Government subsidy and the overall policy effort and objective—to cut carbon emissions—so we have found an extremely expensive way of delivering reductions in carbon emissions. It would be much more effective to have overall emissions trading certificates for the generation of carbon dioxide and other greenhouse gases, which would drive coal-fired power stations out of business and create a proper relationship between the consumption of electricity by, say, electric cars and their overall impact on the generation of carbon emissions and global warming.

I hope that the Minister is looking fundamentally at the construction of our whole energy policy and whether it will achieve our policy objectives. There are some perfectly sound measures in the draft order on those objectives—relieving fuel poverty, getting better insulated homes and the rest—but is placing obligations on fuel suppliers and saying, “You’ve got to do this” really the right way to do things? If that is our policy objective, should we not, as the hon. Member for Southampton, Test said, put the responsibility on local authorities and be overt about what we are trying to do to take people out of fuel poverty directly as part of our social policy and benefits system? If we want to improve the quality of our housing stock, we should make that part of building regulations and give local authorities responsibility for addressing the housing stock in their areas.

We should not hide away our policy objective and its cost in an obligation on energy supply companies and try to do things at one remove, which would mean that we could not necessarily deliver that objective. If we hide away its cost and try to hide what is, in effect, taxation and benefit expenditure, we will find that an economically inefficient burden falls on the country, and I do not think that that would deliver the policy objective. Overall, that would mean that we could not really measure whether we were going to deliver the objectives we have signed up to or our global obligations to reduce carbon emissions and make a fair contribution to reducing the danger to our planet from global climate change.

I hope that those thoughts are of use to the Minister, who of course deserted the gang of Select Committee Chairs for the responsibility of ministerial office. He has an opportunity to make these decisions. I hope that he considers where our energy policy is and, given the years of micromanagement of our energy system and environmental objectives that he inherited, whether there is a better way of doing this than through these kinds of measures. One of the benefits of Brexit might just be that we are able to achieve our own carbon trading certificate scheme, which would mean that we could deliver our international obligations in an economically efficient way.

[Jesse Norman]

I thank both the hon. Member for Southampton, Test and my hon. Friend the Member for Reigate for their useful and interesting speeches. First, I shall pick up my hon. Friend’s comments about the general picture, then return to the shadow Minister’s specific comments about the draft order.

There are many reasons to bemoan the Conservatives’ failure to win the 2005 general election, but my hon. Friend gives a cogent personal reason—our energy policy might well have been very different and, in some respects, improved. Nevertheless, I take issue with a couple of things that he said. I do not think there has been any hiding away of costs. Whatever we think of the policy design, the costs are pretty explicit and public, and have been extensively debated and consulted on, so I do not think they are hidden.

[Crispin Blunt]

On that narrow point, are the subsidies provided by the Government to encourage the creation of wind farms all over the place an intelligent or economically efficient way of contributing to our climate reduction goals?

[Jesse Norman]

There are two points to make on that. First, the way to think about all these things is as part of a wider energy mix that is designed to solve the trilemma of security, affordability and decarbonisation. On the contribution of offshore wind, for example, it is true that there is some question as to its total cost when including intermittency. It is also true that, had it not been for the substantial Government investment in this area, we would not have the situation in which costs for this technology are falling faster and further than anyone would have anticipated.