Energy: Climate Change

Duke of Montrose Excerpts

Tuesday 2nd November 2010 Lords Chamber

[The Duke of Montrose]

My Lords, today we have a chance to debate two vitally linked issues. An advantage when considering the energy element of policy is that the area can be reviewed and considered statistically and scientifically. Recently, the International Energy Agency estimated that global energy use will triple by 2050. A potential consequence of this is that the energy that we need to buy may become scarcer and even more expensive. Many noble Lords have spoken about the technology of new generating capacity. The noble Lord, Lord Haworth, touched on the question of our existing generating capacity that is becoming increasingly antique. Somewhere in the region of 12 gigawatts that comes from coal and oil-fired generating plants will become obsolete by 2015. Nine out of 10 of our nuclear plants are due to be decommissioned by 2023.

As we heard, the challenge of constructing a policy around the other element, which is climate change, is that the science and statistics move into a much more speculative field. How do we predict from historical and current records how an increase in greenhouse gases will affect the climate in which we live? One element that concerns me is that we are told that currently about half the CO₂ that is emitted into the atmosphere is reabsorbed by the oceans, presumably producing a balance between the CO₂ in the atmosphere and that in the oceans. It would seem that one of the inevitabilities of an increase of CO₂ in the atmosphere, let alone an increase in temperature, is an increased amount of absorption, and because of that an increase in the acidity of the oceans. This throws up a great many worrying aspects before we even consider whether it will have an effect on changing the climate. My noble friend Lord Lawson was curtailed in his remarks on what he foresees for the world, but that was one element that he did not touch on.

Noble Lords will be aware that consideration that international action might be needed to address this issue led to the 1997 Kyoto Protocol, which contained definitions of a batch of greenhouse gases. Most Governments, including our own, signed up eventually. Following this, the most obvious approach to a remedy, which most countries grabbed hold of, was to increase the production of energy from renewable resources. In the UK, as we have heard from various noble Lords, we now have renewables obligation certificates, the climate change levy and the EU Emissions Trading Scheme, and we are also beginning on the carbon reduction commitment. The trouble, as noble Lords such as my noble friend Lady Noakes pointed out, is that these all add to the cost of our energy. A paper from Civitas that I saw recently reckons that they will add anything from 33 per cent to 43 per cent to our energy bills. I ask the Minister to analyse where we stand in relation to the costs imposed on other countries. If we thought that we should just go on using energy in our traditional profligate manner, this would be a very severe imposition. A number of our competitors are tied to similar schemes, but the other challenge that it gives us is to use our energy even more efficiently than our competitors, if the market that they are working in does not have those charges.

The key purpose of the Kyoto Protocol was to tie countries to a certifiable reduction in their gas emissions by 2012. It envisaged that many countries would meet their targets through national measures, as we have attempted to do. The recently published The Hartwell Paper from Oxford characterises this approach as trying to convince the world that the industrial revolution was sinful and that we must therefore atone, and it says that humanity is unlikely to find this an attractive form of motivation. At a global level, such an interpretation is possible, but that is not where the proposals in Kyoto stopped. First, by linking nations and thereby individual industries into a market mechanism, it added the most fundamental motivation that economics can provide. It added a financial incentive to the simple attraction of a more efficient use of energy through a system of emissions trading. Along with that, it offered two other instruments, in the form of the clean development mechanism and joint implementation, which incentivised countries in the developing world to consider reducing emissions without tying down their future industrial development to actual quotas.

In the event, as noble Lords will be aware, the biggest greenhouse gas-emitting nation in the world— the US—refused to ratify the Kyoto protocol, but the signs are that this is changing. The noble Lord, Lord Giddens, might be interested to know that there are a growing number of state-led initiatives in the US—he mentioned one—which culminated last Friday when the California Air Resources Board published the final draft of a market-based system to cut the state’s emissions to 1990 levels by 2020. As the saying goes, where California leads, perhaps the rest of the US will follow.

In the rest of the world generally, the mechanisms provided by Kyoto did receive implementation. In accordance with the United Nations Framework Convention on Climate Change principle of “common but differentiated responsibilities”, the developing nations, which happen to include three of the world’s larger economies, were not obliged to take on emissions reduction targets during the Kyoto period. They were, however, granted the right to participate in the clean development mechanism and they were encouraged to reduce emissions through payments for certified emissions reductions. My noble friend Lord Teverson and the noble Lord, Lord Hunt, were praising China for its energy-saving activities; as things stand, according to the UN framework convention, China has registered projects that will reduce emissions by 239 million tonnes of CO₂ equivalent per annum. The figure for India is 44 million tonnes per annum. These efforts are not insignificant and in themselves are equivalent to half the UK’s annual emissions. Of course, this is not an excuse for us to do nothing but it is already 30 per cent greater than the reduction that we are committed to achieve by 2020.

This is not just an issue involving the developing countries. As my noble friend on the Front Bench has done this afternoon, my right honourable friend in another place, in his speech on the comprehensive spending review, made clear his purpose for,

“Britain to be a leader of the new green economy”. —[Official Report, Commons, 20/10/10; col. 962.]

By the efforts of the UK enterprise and financial sector, London is now the foremost world centre for trading within a global carbon market. The value of this market in 2009 was reported to be $144 billion, and it is capable of earning valuable finance for the UK.

Given that there was failure to reach any kind of replacement agreement at Copenhagen in December 2009, there is every chance that the architecture for these promising international markets could lapse. Further, since Copenhagen, speculation about the future of this market has been rising and there are signs that the enterprise and enthusiasm are beginning to drain away.

It was most reassuring this afternoon to hear my noble friend state the Government’s commitment to look for a framework for a solid carbon price. Can the Minister tell the House whether one of the Government’s priorities at Cancun will be to put in place some successor to those market mechanisms? Further, will the Government push to ensure that Cancun provides an immediate message to stakeholders in this market that private sector financial and entrepreneurial resources will be further harnessed under any post-Kyoto agreement? The stance taken by Her Majesty’s Government will be critical for injecting some much-needed confidence into those who participate and for continuing to ensure that the UK remains at the forefront of global carbon markets.

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[The Duke of Montrose]

My Lords, an enormous amount of questions have been put to my noble friend. Will he write to noble Lords with the answer to any point he may not have covered?

[Lord Marland]

My Lords, I thank my noble friend the Duke of Montrose, but I have answered a lot of questions. However, if any are unanswered that I can answer, as I pointed out earlier, I will answer them. However, I do not see the point when we are about to have a considerable lock-in on the energy Bill and various debates, which will provide answers to these questions. However, if noble Lords feel that their questions have not been adequately answered in this exhaustive debate, I shall be happy to write to them.