Energy Bill

Lord Deben Excerpts

Monday 28th October 2013 Lords Chamber

[Lord Deben (Con)]

My Lords, we should start by recognising that the latest report of the IPCC is very clear. It is the product of the world’s most distinguished scientists and is looked at by the Governments of the world. The report is clearer than it has ever been that climate change is happening and that it is largely being caused by humankind. That is the summation. We could go through it and pick out the bits we want in order to make our particular point, saying that the position is worse or better than it seems. The truth is that the likely increase in temperature will be within a range of between 1.5 and 4 degrees centigrade, which is almost precisely the figure that the very first IPCC report put forward. There is a continuity, and that continuity now seems to be more certain.

These are, of course, carbon equivalents. In addition to that, there are the concerns related to other climate-changing effects—not least the fact that we now know that clouds amplify rather than diminish the effects of climate change, unhappily for those who used to put forward the argument that they were the future. We also know there is a severe likelihood of melting permafrost having a serious effect, in addition to methane. All these are in addition. We do not know by how much, but we do know that they are adding to rather than subtracting from, climate change.

The one thing we have to accept is that most of those skilled in this matter are warning us that climate change is a real danger. That puts those who disagree into difficulty because what they are asking us to do is to bet on them against those skilled in climatology and the like. They are asking that we should accept their interpretation against that of the IPCC. They may be right—I am not for one moment suggesting that they might not be—but it would be the foolish father of a family, a foolish government or a foolish company that bet the future not on the majority view of scientists, but on the relatively small minority of those who disagree. Therefore I am not surprised that more and more governments around the world are taking this view, as the GLOBE report—I declare an interest as its president—by the London School of Economics shows. They recognise that it is not possible to ignore climate change and still maintain their duty of care.

For that reason, I welcome the Government’s Energy Bill. As the Committee on Climate Change will serve any Government to do their job properly, and in speaking as its chairman I speak independently, I remind the House that the Government have already committed £7.6 billion in order to achieve what we need to achieve by 2020. In many ways, what the Government have done has been remarkable. The question is therefore whether the Committee on Climate Change is right in suggesting that a carbon intensity target for 2030 is a sensible way forward. I put it to the House that it is, for several clear reasons.

The first reason is that, having spent that £7.6 billion, if there is a cliff at the end of 2020 so that people do not realise how we intend to deal with things later, we will not get the investment we need and, in particular, we will not get the supply chain investment that is crucial for securing the jobs which should come from a green economy. This is not a climate-change reason at all; it is a business reason. As somebody who comes from the business world, it seems clear to me. The letter in today’s Financial Times, if that is a popular read at the moment, shows a large number of business people who are making that point. It is certainly true that most of those who are concerned with the industries we are talking about see it clearly.

The second reason it is so important is that statements made by prominent people unfortunately appear to have caused some to fear that we will not keep to our direct trajectory. I am not one of those; I am absolutely sure that we will. My noble friend Lady Verma, her team and the entire Government have made it clear that we have a statutory requirement to deliver by 2050 an 80% reduction in emissions, and that we will do that. I am therefore in no way concerned about this, but a lot of businesses are. I had a phone call over the weekend from a distinguished individual to ask whether I was sure that we are still going to do these things. If he as a man of considerable ability and an investor thought that, I can understand perfectly well why so many others do. So the second reason is to ensure that clarity.

The third reason is that we need a non-prescriptive mechanism. I served my noble friend Lord Jenkin for a long time as his parliamentary private secretary; I acknowledge and admire him enormously. He is right to put his finger on whether we need this in these circumstances, first, because of the concern about the European Union renewables target. I admit that when this Government came to power I tried to get them to go back on the decision of the previous Government to sign up to a renewables target, because I thought that it covered far too great an area. That was a mistake. It was a misunderstanding of the difference between energy and electricity and should not have been agreed to. However, we have it, and all the pressures will be to have a bigger renewables target. If I may for one moment lapse into party politics, I do not think that that is a very Conservative way forward. I do not think that you should choose winners in that way. It is one thing that worries me a bit about nuclear energy, because you have to if you are going to have it at all. That is why I am in favour of this non-prescriptive target. It merely gives the level of decarbonisation that we will need in 2030 in order to reach the 2050 target. Of course, those who do not believe in any of this will be opposed to it, and therefore it would be wrong of me to detail each of the differences that I have with those who have spoken. In case anyone should need to know them, I will make sure that the reasons why the interpretations of the documents are not right are available to the whole House, and why the noble Lord, Lord May, is correct.

The fourth reason why it is important to have this target is that it is the only thing that is consonant and consistent with what the Government are seeking to get in Europe. In other words, if we have this target, it is possible for the Government to say, “We prefer this target over a target for renewables”. Surely that is better for Britain, better for science, better for the future, and better for price. Furthermore, at the moment we are negotiating for a level of ambition in Europe that can be met only if we have such a target, so this fits in with the Government’s demands.

I have two further things to say. First, the Government have, as you would expect, put forward arguments against this amendment. I hope my noble friend will not mind me saying that one of them does not actually stand up. It is that, somehow or other, we cannot make this decision until we know what is happening in the European Union. The Committee on Climate Change took this argument very seriously. It spent a great deal of time looking at it and concluded that, whatever possible likely scenario happens in the European Union— unless it goes backwards—this particular proposal fits. Therefore, I do not think that we need to be concerned about that.

I come to my second point. If climate change is dangerous, and all the evidence shows that it is, what is the insurance worth? Everybody in this House has fire insurance costing around £140 or £150 a year. We all know that it is 99% likely that our house will not burn down, but for the 1%, we pay the premium because it is too frightening not to. We have something here that is 95% likely, and the cost we are charging this year is £60. By 2020, it will be £100. If we have the carbon intensity target, to that £100 will be added £20 a year. This is based on the most detailed and precise research. Frankly, the figures that have been quoted elsewhere are not true. They come from bodies like the TaxPayers’ Alliance, who want to have a big figure in order to frighten people. I do not think that that is helpful. You have sensible people on both sides—sensible people who think this is not the right way forward and sensible people who think it is the right way forward. However, let us not try to frighten anyone with figures that are not true.

If we want the jobs here, we need this amendment. If we want to reassure the country and the world that we are serious and that they can place their confidence and their business here, we need this target. If we want to keep ourselves in line in order that we do not end up with an impossible task later on, we need this target. Above all, what is the downside? Actually, the Government know that they have to reach this target. All they are doing is putting into legislation now—and getting so much for it—what they know they have to do. Surely the House should support the amendment on an all-party basis and make sure that this good Bill becomes a better one.

--- Later in debate ---

[Lord Broers (CB)]

My Lords, I wish to speak in support of this amendment. I recognise that the noble Lord, Lord Jenkin, is applying it mainly to the capacity issue. I wish to address a very specific, simple point with respect to the operation of contracts for difference. In order to attract investment, this Bill allows—almost encourages—electricity suppliers to pass on to consumers the difference between the strike price and the reference price should the strike price exceed the reference price. However, there is nothing in the Bill to ensure that the suppliers return money to consumers should the reference price exceed the strike price. This might well be the case should the price of gas continue to rise, as several noble Lords, including my noble friend Lord Oxburgh, have suggested it may.

The Minister kindly discussed this with me and said it was the Government’s position that intervention was unnecessary as the market should ensure that suppliers reduce their charges in order to remain competitive. I am not fully convinced of this and favour a specific requirement that suppliers should return what might be described as a windfall profit to consumers if the reference price exceeds the strike price. The noble Lord’s amendment at least requires the Secretary of State to have regard to the desirability of promoting effective competition wherever appropriate. In this case, it would surely be appropriate. How else can we protect the consumer?

[Lord Deben]

My Lords, I very much like the thrust of this amendment and I hope the Government will take it seriously. I would like it to have included the issue of how one generates more competition. Interestingly, at least half of Germany’s renewable energy is generated by municipalities, co-operatives and individuals. That means that there is very widespread support for renewables, leading to some real competition. That is why the big boys are increasingly angry about renewables—they are bringing the price down and they are serious competition.

My concern is that it is difficult to see, as the Government have admitted, the sort of competition among the six that we would expect. I notice that the Opposition are now seeking to make significant changes on this, but one must admit some of the things that have gone wrong are the very changes they made last time. I think there is a certain cross-party understanding that things are not as they ought to be. The Prime Minister, I understand, has said he wants the six to become 60, and I notice that the Minister for Energy wants 600. That is certainly much closer to what I would like because this is a way in which the public as a whole could have a greater say in the way electricity is produced and would be more supportive of a much more competitive market.