Energy Bill [HL]

Debate between Lord Howell of Guildford and Lord Teverson

Tuesday 12th April 2016 Lords Chamber

[Lord Howell of Guildford]

The question is: why are we not using the flexibility in the Climate Change Act to amend it, to ease some of the obvious and immediate pressures that are making the problems of the steel industry—but not only the steel industry—so very difficult because we are too far out of line? Anxious as we are to create a good example, which I fully accept, we are too far out of line with our direct competitors. People are being hurt and jobs are being lost. Why are we not amending our own Climate Change Act now, as we are allowed to do, to meet the new conditions? Is this to be part of the strategy, which we clearly need and which we talked about earlier today, to recover our own commercial and viable steel industries? My simple question to the noble Lord, Lord Grantchester—it is a bit to my noble friend Lord Bourne and the Government, too—is: why are we not following the precepts and guidance of the Climate Change Act itself and meeting the obvious needs of industry at this moment in some towns and areas, where many people are being thrown out of work?

[Lord Teverson (LD)]

My Lords, I rise to speak to the amendment in the name of the noble Baroness, Lady Worthington. Perhaps I can reassure the noble Lord, Lord Howell, as she has, that this amendment does not specifically help the steel industry or, necessarily, the size of the budget from the Climate Change Act. I guess that an amendment back on Report would have been needed to do that. This amendment would make sure that we repatriate entirely the powers to create our own carbon budget. So in fact it is a step towards what the noble Lord, Lord Howell, would want. Ironically, when we debated the Climate Change Bill I raised this matter specifically a number of times, but unfortunately the Labour Government of the time did not want to hear about it. I do not think that they necessarily understood it themselves. However, we now need to make a change. This should not be a party- political issue at all. It is about making a budget something that we could set ourselves and measure against our national performance. That is what we are trying to do.

In a way, I regret that we are not debating the original amendment, perhaps understandably amended to exclude the fifth carbon budget, for the reasons that have been explained. When we are tackling climate change and trying to get everybody to help, it is really important to make measuring our carbon emissions transparent, straightforward and easy, so that they mean what most people would understand them to mean: that the carbon emissions we create within the boundaries of the United Kingdom from products, services and industry are what our carbon budget measures. At the moment, that is not the case: it is only so for about half of it. The rest of it just reflects the European Emissions Trading Scheme settlement.

I fully support this amendment and hope that the Government will accept it as a way forward. There is no party angle to it whatever. All it would do is ensure that our UK emissions count against our UK carbon budget under the Climate Change Act. It would make government policy on climate change simple, straight- forward and manageable.

Energy Bill [HL]

Debate between Lord Howell of Guildford and Lord Teverson

Wednesday 21st October 2015 Lords Chamber

[Lord Howell of Guildford]

My Lords, I congratulate the noble Baroness on the ingenuity of the proposals in this amendment; they are fascinating and make one think very hard, because these are hugely complex issues. Perhaps I may put two questions to her and perhaps also to my noble friend.

First, will this switch to this way of trying to achieve our carbon obligations and decarbonisation lead to cheaper power in the power sector? That must be an important question. We discussed earlier the problems in the power sector and the fact that pushing it too far and too fast may not necessarily help decarbonisation but will have to be paid for in lost jobs. That is bound to be on people’s minds when looking at this kind of amendment.

The second and even more obvious question is whether these arrangements will get the combined-cycle gas turbines built. At present speed, under the contracts for difference regime, and the capacity payments auction and so on, will they get them built in time? We are now entering a very worrying period, with a very low margin of safety in our electricity system—I believe that it will be down to 1.2 gigawatts. When I had some responsibility for these matters, years ago, it was 17 gigawatts. That gives noble Lords an idea of how far we have come down thanks to the rapid closure of many coal-fired stations and so on. Will this pattern lead to that result? These may be layman’s questions addressed to a very complex issue but I would be interested to know the answers. If the implication is the other way, we will have additional costs on power and get further out of line with our competitors. We always have to remember that in the Climate Change Act—behind which the noble Baroness was one of the founding figures and driving forces—there was the reservation that we should not get too far out of line with our competitors. In some areas, we clearly have done; we are out of line. In the steel industry, as we were saying earlier, we have energy charges that fall on at least parts of that industry at twice the level of charges in Germany and, in turn, are far higher than those throughout Europe. I saw one figure showing that they are 10 times the levels in China—which might account for our present woes in the steel industry. In examining this, can we please be guided on whether this will deliver the goods? That is my question.

[Lord Teverson (LD)]

My Lords, I particularly wish to speak to Amendment 78UA, to which I have added my name, but I will start with Amendment 78S, which is the decarbonisation debate. I was certainly very disappointed that the Minister confirmed—he was very clear, and I welcome clarity—that the Government will not take advantage of the opportunities opened to them under the previous Energy Act and declare a decarbonisation target. We have had a lot of discussion about the Conservative manifesto, and in fact the Minister referred to it in the context of saying why that would not happen. However, the words of the Conservative manifesto were completely clear. They suggest that a decarbonisation target would meet both the Government’s objectives. The manifesto says:

“We will cut emissions as cost-effectively as possible, and will not support additional distorting and expensive power sector targets”.

That is very clear.

The point about a decarbonisation target—exactly as the noble Baroness, Lady Worthington, said—is that it moves on from the distorting targets that we had for renewables in terms of decarbonising our energy sector. In fact, because it brings in proper mechanisms in terms of markets and all of that, it is actually less expensive. So, it seems that a decarbonisation target will not only help us very specifically meet our Climate Change Act targets—which the Conservative manifesto fully supports—but provide a route for those targets to be met with a non-distorting and less expensive method than we had under the renewable targets under the EU’s 2020 system and so on. This is therefore a very good and logical amendment. It is almost a vital amendment that the Government should be able to accept to fulfil their own manifesto commitments. I do not say that to make a clever lawyer’s argument; I say it because it is how I read it. It is in plain English in the manifesto.

I move on to Amendment 78UA, to which I have put my name. I pay credit to the noble Baroness, Lady Worthington, for the great role that she played in bringing the Climate Change Act into being. I played a much more modest role in those days on the Front Bench of the Liberal Democrats in opposition—strangely, we are back in opposition again; but there we are. I was going to mention the noble Lord, Lord Taylor of Holbeach, and the fantastic work that he did with me and the noble Lord, Lord Rooker. We helped to deliver, right across the House, together with the Cross Benches, the fantastic Climate Change Act. The noble Lord, Lord Taylor, did a great piece of work.

One of the things that I did then was to try to bring to the attention of the Bill team and Ministers the fact that although those carbon budgets were great, they excluded 50% of the country’s emissions because they took into account the EU ETS trading. So, in effect, government policy only controlled, or had an effect on, about 50% of UK emissions. The Bill team did not seem to understand this—albeit that at the time the department was not DECC but Defra—and nor did the Ministers particularly take an interest in it. I think that the trouble was that, once those in the Treasury understood it—at least, they certainly understood it well ahead of anybody else—they decided that they did not want this at all. Ironically, that was under a Labour Government. However, as the noble Baroness said, the Climate Change Act was a great thing.

Energy Bill [HL]

Debate between Lord Howell of Guildford and Lord Teverson

Wednesday 9th September 2015 Lords Chamber

[Lord Howell of Guildford]

My Lords, I take it that the noble Lord, Lord Oxburgh, is referring to the very interesting paper put forward by Professor Stuart Haszeldine and his colleagues about the financing and development of CCS. The noble Lord, Lord Oxburgh, is himself always at the forefront of new thinking and developments in this important area, and this is certainly a very interesting set of thoughts. Basically, the idea in the paper, as I understand it, is to spread the costs of further CCS development away from falling exclusively on the already burdened consumer and also to spread them through time. The argument is that, as we get to the end of the 2020s and into the 2030s, the real crunch and crisis over CO₂ will come and that the burning of coal particularly is going to become absolutely decisive in shaping future influence on climate change.

Furthermore, the noble Lord, Lord Oxburgh, is absolutely right about the centrality that he gives to the whole carbon capture and storage task. When one considers that 2,117 new coal plants are now being planned or built around the world, one begins to realise the enormity of the task to somehow ensure either that they are diverted or that the coal plants operate in ways that reduce carbon emissions. Carbon capture and storage clearly is the most satisfactory technical answer to that, although there are problems of cost, but there are of course much cleaner ways of burning coal, which both the Chinese and the Poles are urging, using very advanced technology built on the conventional platform but also supercritical boilers and other devices to ensure that much more energy emerges from a tonne of coal. That way, by definition, you get more energy or electricity out of a coal-fired station but save on the amount of emissions that would otherwise result. So there are other techniques as well, which are obviously decisive.

Most coal stations will be built in India, Indonesia and Turkey—mostly in Asia, although some in Europe. The whole attempt effectively to keep global warming to a 2 degrees centigrade rise will stand or fall on what happens to that vast number of new coal stations and the huge commitment to increased coal burn. It is the official policy of the Government of India that there must be a doubling of coal production and a very substantial increase in coal burning there, because the primary aim is the reduction of poverty and economic development. Unfortunately, given the economics of the present and near future, coal is much the cheapest way to produce the essential cheap power that developing nations of that size and with those challenges must have.

This is the problem. The noble Lord, Lord Oxburgh, and the noble Baroness, Lady Worthington, are absolutely right to call our attention to this, but the question left in my mind is how relevant it is to the extraction of oil and gas in the North Sea. If we are to carry forward experiments effectively, we need to develop the storage techniques that go hand-in-hand with carbon capture and storage. That is very important and there is a lot of work to be done on that.

I will strike a slightly diversionary note from what has been said in the debate so far. The aim here is maximum economic recovery. The aim is to cope with an industry which is shrinking very rapidly. On the front page of the Times this morning I read that 65,000 jobs are about to go in the industry. The industry is under very great pressure. As I understand it, our aim in the Bill and that of the OGA is to ensure that gas and oil are extracted economically, commercially and successfully in these shrinking conditions. We know that gas is considerably lower carbon when burnt than coal, so if we are trying to sequester our coal carbon emissions or move from coal to gas, it is more gas we want, not less. Everything needs to be done—as I understand the OGA is trying to do—to encourage the extraction at economic prices of gas from the North Sea that can then be burnt, thereby saving considerable carbon emissions. We need to copy the American example, where there has been a huge reduction in carbon emissions—at least on the production side; consumption is another story, of course—because they have switched from coal to gas as a result not of government policy but of the shale revolution.

I leave a question mark over the amendment as to whether it really applies as directly as some have suggested to the North Sea offshore operations. It is clearly vital that something is done to halt the massive increase in coal burn lying ahead. I think that 46% of the entire world’s electricity comes from coal, and that is probably rising, not falling. That is decisive, but whether at this stage the additional obligations in the Bill should be placed on this particular industry, which is struggling in desperately difficult conditions in both a geographic and an economic and commercial sense, I am not so sure. I end my comments with this question, although it may be that this is not quite the right place to think about this vital issue.

[Lord Teverson]

My Lords, I am a great disappointment to the noble Lord, Lord Oxburgh, because over the years, I have become a CCS sceptic in all sorts of ways. The reason for that is not because it is not necessary or a good way to move forward the decarbonisation agenda but because, exactly as he himself said—I have been talking about this for the nine years that I have been privileged to be a Member of this House—we have got a very short distance in terms of making it happen. Obviously there has been important progress, with projects in the formative pipeline at the moment, but one reason for that is that CCS is large scale, demonstration projects are very expensive and it stands aside from the fossil fuel-based industry that it is trying to help. The two are not directly tied up.

What I like about the amendment, and why I have put my name to it, is that it tries to find a number of ways through that puzzle. First, it says that CCS is important, and is a future technology. I really welcome the Government’s positive messages about this. From where I stand, the decarbonisation agenda seems to be rather on the back foot and going in the wrong direction, but in this important area I really welcome the Government’s positive mood music. But there are a couple of other things. One was referred to strongly and effectively by the noble Baroness, Lady Worthington. If there is greater stakeholdership of CCS by the fossil fuel industry, there is likely to be more push for there to be a real effect and for something to happen. It is also an ongoing basis on which this technology can be funded, rather than on the erratic one-off mega-subsidies and funding systems that we have at the moment.

For those reasons, this is a really positive suggestion and a way in which we can start to move forward. It is also in line with the philosophy, with which we all agree, that the polluter pays—or it is in that ballpark, if not absolutely perfectly. For that reason, I was very pleased to put my name to the amendment, as it helps to bring that forward. But as other noble Lords have said, clearly this is the start of an idea. That is why it is absolutely right that the amendment talks about a consultation process, rather than saying that it should happen. So I very much welcome this amendment and welcome the Government’s positive view towards CCS, and I hope that this can be seen as a way of moving this agenda forward more practically than we have achieved in the past.