Government Levies on Energy Bills
Debate between John Redwood and Tim Yeo
Mr Yeo
I thought that the Minister was a bit like Oscar Wilde, who could resist everything except temptation, but perhaps he will resist it on this matter. I understand why the floor price policy was introduced, but it does not cut greenhouse gas emissions by a single kilogram, and it raises the costs of British business. If the Treasury’s priority is to help Britain to become more competitive, it is slightly bizarre for it to insist on that policy. There are of course now widespread rumours that we will soon hear that the floor price for carbon will be frozen, instead of going ever upwards. If that is the case, the sooner that it is made clear, the better.
Mr John Redwood (Wokingham) (Con)
Given the mounting pressure generally from industry across Europe against very high energy prices, which forces investment outside Europe, does my hon. Friend think that the whole European framework on carbon is due for substantial amendment?
Mr Yeo
I cannot go down the route suggested by my right hon. Friend and remain within the scope of this debate, but I simply say that it is in everyone’s interest to make the European Union emissions trading system work more effectively. If it did, there might be no need for the floor price for carbon anyway. An EU-wide carbon price driven by a trading mechanism would at least be even-handed in its impact across the 28 countries of the EU, and it would not place a special burden on Britain in the way that the floor price for carbon currently does. I therefore urge the Minister to throw Britain’s full weight behind efforts being made to make the EU emissions trading system work more effectively.
In conclusion, I draw attention to my Committee’s recommendations about how the Department should report to Parliament on the cost of all schemes funded by the levy control framework. I hope the Minister agrees that accepting the recommendations would boost confidence in the Government’s readiness to seek value for money from levy control framework funds and to be transparent about decisions. As I have mentioned, the present system of renewable obligation certificates is pretty hard for most consumers to understand; feed-in tariffs, contracts for difference and the whole levy control framework should be easier for the public to comprehend. The establishment of the levy control framework was a positive and helpful development, but I am sure that my right hon. Friend recognises that exercising effective parliamentary scrutiny on how those very substantial sums of money will be spent is essential for public confidence. I commend my Committee’s report to the House.
Energy Bill
Debate between John Redwood and Tim Yeo
Mr Yeo
I agree with the hon. Lady and will develop that very point.
The element of perceived political risk is leading investors to seek higher returns from their investments in the UK energy market. Higher returns to investors mean higher prices for consumers. Amendment 11 directly addresses these issues. By itself, it would not immediately alter the low-carbon pathway on which the Government have already embarked, most notably in its acceptance of the fourth carbon budget. However, the prospect of the fourth carbon budget being watered down in next year’s review is simply another unwelcome uncertainty. The amendment would remove that uncertainty by requiring the Secretary of State to set, no later than 1 April 2014, a decarbonisation target for 2030 for electricity generation.
Mr John Redwood (Wokingham) (Con)
But will my hon. Friend concede that if we put up more wind farms, we would also have to build gas-fired power stations as back-up because the wind might not blow? That would be an awful lot dearer than just building the gas stations. How much is he planning to add to people’s electricity bills?
Mr Yeo
I recommend that my right hon. Friend look at the latest report from National Grid, which shows that the amount of back-up required for wind farms is extraordinarily low. More importantly, on the broader point about costs, I am sure he will be aware—because he takes a close interest in these matters—that nothing in the amendment would affect the cost of electricity between now and 2020 because the support for low-carbon technologies during that period is capped by the levy control framework. The amendment would have no impact on electricity prices for consumers for the next seven years.
I am sure that my right hon. Friend also takes a close interest in what electricity prices will be in the 2020s, and it is theoretically possible that approving this amendment could lead to higher prices during that period. That would depend heavily on an assumption about what gas prices will be doing in the 2020s, and I would not be confident about making such a forecast. If he is really concerned about the cost to consumers—a concern that I share—he should address his attention in the short term to the Treasury, which has imposed a minimum floor price for carbon. That will have the effect of raising electricity prices before 2020. It is an imposition that applies only in the United Kingdom and therefore puts us at a competitive disadvantage with the rest of the European Union. I hope he will join me in making continued representations to the Treasury to drop that policy.
As currently drafted, the Energy Bill gives the Secretary of State a power to set a decarbonisation target for 2030, but it does not compel him to do so. It also prevents him from exercising that power before 2016. Suggestions that the amendment would force him to set the target at 50 grams per kWh in 2030 are mistaken. It would merely require him to set it in accordance with advice received from the Committee on Climate Change. There is nothing in the amendment that would require him to set a particular figure. If the Committee were to recommend a figure higher than 50 grams per kWh, the Secretary of State would have to heed that advice. If he did not do so, he would have to explain why.
The Committee on Climate Change itself would not have a completely free hand in determining its advice to the Government. It would still have to take account of all the matters referred to in clause 2(2). I remind the House of five of those key points. The Committee would have to take account of
“scientific knowledge about climate change…technology relevant to the generation and storage of electricity…economic circumstances, and in particular the likely impact on the economy and the competitiveness of particular sectors of the economy…fiscal circumstances, and in particular the likely impact on…public borrowing”
and
“social circumstances, and in particular the likely impact on fuel poverty”.