Fossil Fuels: Business

Lord Callanan Excerpts

Thursday 19th November 2020 Lords Chamber

[The Lord Bishop of Salisbury]

To ask Her Majesty’s Government, further to the report by the Transition Pathway Initiative Management Quality and Carbon Performance of Energy Companies: September 2020, published on 7 October, what steps they plan to take to encourage fossil fuel intensive businesses to accelerate their move to net zero carbon emissions.

[The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Callanan) (Con)]

My Lords, the Government have schemes worth nearly £2 billion operating or in development to support our vital energy-intensive industries to decarbonise. These schemes include the industrial energy transformation fund to help companies to reduce their fuel bills and transition to low-carbon technologies, and the industrial decarbonisation challenge to support industry with the development of low-carbon technologies in industrial clusters.

[The Lord Bishop of Salisbury]

I thank the Minister for his Answer. There have been some welcome and notable commitments, particularly by European oil and gas companies, but overall, the sector is not moving fast enough to align with the Paris agreement. How does the Minister see the Government supporting companies to move faster and have consistent standards for reporting all emissions from scopes 1, 2 and 3 so companies demonstrate alignment clearly in their reporting? I commend to the Minister the work of the Institutional Investors Group on Climate Change working with TPI to establish a net-zero standard. It would be marvellous if the Government supported these endeavours in the context of their presidency of COP.

[Lord Callanan (Con)]

First, we welcome commitments from any company setting out its net-zero plans. We note the important and notable commitments from the oil and gas sector from the likes of Shell and BP. I endorse the right reverend Prelate’s comments about COP and the other matter he mentioned.

[Lord Sarfraz (Con)]

My Lords, significant investment will be required by energy-intensive industries moving to net zero. Will the Minister advise the House on efforts being made downstream to ensure that these businesses remain competitive in price-sensitive international markets where the competition might not play by the same rules?

[Lord Callanan (Con)]

The noble Lord makes a very good point. We recognise that currently the costs of decarbonisation technologies are very high in many industries and many businesses are unable to pass on the increased costs of decarbonisation to consumers. That is why we are working very closely with industry and addressing this is one of the key aims of our industrial decarbonisation strategy.

[Baroness Young of Old Scone (Lab) [V]]

My Lords, I declare an interest as a pensioner of the Environment Agency pension fund, which co-chairs the transition pathway initiative. The TPI report shows that no oil and gas company can yet claim to be aligned with the Paris agreement. Does the Minister agree that accelerating the phase out of petrol and diesel cars in the UK will do little to impact the global oil and gas market in which UK-based multinational oil and gas companies operate? Will he tell the House what real leverage there is in the Prime Minister’s 10-point plan on these global companies to drive faster and better delivery by the aim of Paris in their global operations?

[Lord Callanan (Con)]

In the transition, the North Sea will remain a strategic asset for the UK providing high-quality jobs. We are working closely with the sector to support its transition. The noble Baroness will get more details in the upcoming energy White Paper and the North Sea transition deal.

[Baroness Sheehan (LD) [V]]

My Lords, according to the UK extractive industries transparency initiative, between 2015 and 2017, the Treasury gave more money to oil companies than it took from them in taxes—quite shocking. Is it still the Government’s policy to extract every last drop from the North Sea, no matter what the cost to our economy and to the future of our planet?

[Lord Callanan (Con)]

As I just said in answer to a previous questioner, the North Sea is vital to our economy and the transition. We will work closely with those companies, and already have some world-leading commitments from many on how they are taking forward the decarbonisation agenda.

[Lord Grantchester (Lab)]

My Lords, now in its fourth year of monitoring, the Transition Pathway Initiative reports that companies make progress rather slowly and that only 18% are aligned with even the benchmark of below 2 degrees. It has also reported that climate science dictates that the pathway matters, not just the endpoint. Can the Minister explain why, in the scatter-gun 10-point environment plan, there is no mention of the oil and gas sector deal promised in the Conservative Party manifesto? It is meaningless without another of the missing strategy frameworks—the heat strategy.

--- Later in debate ---

[Lord Callanan (Con)]

I referred to the North Sea strategy deal in my previous answer. The noble Lord will have to be patient until it comes out, but we are publishing a number of these strategy documents over the next 11 months before the COP in Glasgow next year.

[Lord Bourne of Aberystwyth (Con) [V]]

My Lords, I very much welcome the Government’s 10-point green industrial revolution. What are we doing to lever private finance and what are the timescales for carbon capture and storage projects, specifically regarding Port Talbot, Teesside and Grangemouth?

[Lord Callanan (Con)]

My noble friend makes an extremely good point: we want to be a world leader in carbon capture usage and storage technologies. He will have noted the announcement of an extra £200 million to add to the £800 million already committed in the plan, for a total of £1 billion in this world-leading technology.

[Lord Ravensdale (CB) [V]]

My Lords, I declare my interests as in the register. I very much welcome the Government’s ambition for London to become the global centre of green finance and the announcement by the Task Force on Climate-related Financial Disclosures last week. Have the Government considered legislating to mandate financial institutions to align portfolios to net zero, as a way to incentivise fossil-fuel-intensive businesses to accelerate their moves towards this goal?

[Lord Callanan (Con)]

As the noble Lord referenced in his question, we are mandating climate information in financial disclosures. We welcome other commitments from the many banks and financial institutions that are already joining us on the path to net zero.

[Lord Browne of Ladyton (Lab) [V]]

My Lords, as the right reverend Prelate and other noble Lords have pointed out, this report shows that most energy companies are not on track. This means that, to an extent, we will be dependent on fossil fuels for energy beyond 2050. Robust plans for that are essential. What is the Government’s best estimate of the scale of the emissions challenge that this continuing dependency will create? As we heard, yesterday the Prime Minister unveiled a strategy to establish four carbon capture and storage clusters. If they operate at maximum capacity, will they meet a significant proportion of that challenge?

[Lord Callanan (Con)]

They will contribute to that challenge, but we need a number of different technologies and methods to meet our legally binding commitment to net zero. The noble Lord is right in that respect, and the 10-point plan is a useful contribution towards that objective.

[Lord Teverson (LD)]

My Lords, energy-intensive industries can only go so far in getting energy efficiency right. There is therefore a risk of carbon leakage from these organisations offshoring elsewhere in the world, which does nothing for global climate change. Are the Government considering a carbon border tax, as some of our European friends are, to make sure that that offshoring does not happen?

[Lord Callanan (Con)]

The noble Lord is right to highlight the difficulties of potential carbon leakage. There are many problems with a carbon border tax, of which the noble Lord will be aware—difficulties with the WTO, et cetera—but I leave announcements on taxes to the Chancellor.

[The Earl of Caithness (Con)]

My Lords, I welcome the 10-point plan that the Prime Minister announced yesterday, but ask my noble friend what discussions he has had with industry, particularly the producers of electric cars, to ensure that batteries, given their diversity, are fully recyclable throughout the country. We should not take away one problem just to replace it with another.

[Lord Callanan (Con)]

My noble friend is right to highlight the problem of recycling batteries. We are investigating the environmental opportunities of a transition to zero-emission vehicles, and are keen to encourage a circular economy in these vehicles, particularly for batteries. We are supporting the innovation infra- structure and regulatory environment required to create a proper battery recycling scheme.

[The Deputy Speaker (The Earl of Kinnoull) (Non-Afl)]

My Lords, all the supplementary questions have been asked and answered. We therefore move to the fourth Oral Question.