Climate Change Act 2008 (2050 Target Amendment) Order 2019

Lord Lilley Excerpts

Wednesday 26th June 2019 Lords Chamber

[Lord Deben]

I did not say what the noble Lord said; I said that on each occasion we have had a target—of 60%, 80% and now 100%—the estimates of the Global Warming Policy Foundation have been wrong. I have looked very carefully at the foundation’s website; we have checked everything it says, and in each case it is not right about the figures.

As for the BEIS figures or the Chancellor’s figures, I merely say that we have spent many months producing the best figure that can be produced. I have still to understand the basis, in science or economics, of any other figure produced. I have discovered that those Global Warming Policy Foundation figures that I have been able to discern are much less accurate than those we were asked for, spent months producing and have given to the Government. I suggest that we stick to the proven figures rather than those which fit other people’s views.

[Lord Lilley (Con)]

Before my noble friend sits down, has he read the document in my hand? It states that the cumulative cost of the Climate Change Act up to 2030 would be £3 billion. The document was produced and published by the Global Warming Policy Foundation, written by me and drawn entirely from the Government’s published figures, which my noble friend’s committee has never refuted, rebutted or criticised.

[Lord Deben]

I would hate to refute, rebut and criticise my friend at so late a point in my speech, but he has only just returned from asking a question that included all those points while admitting that he had not actually read the Committee on Climate Change report.

[Lord Lilley]

I have.

[Lord Deben]

He may have read it now, but he asked prejudiced questions about it when he had not even read the documents. As far as I can discover, no member of the Global Warming Policy Foundation has ever been to any of the presentations we have made of these documents. I really wish they would have an argument with us on the facts.

--- Later in debate ---

[Baroness Brown of Cambridge (CB)]

My Lords, I offer the Minister my strongest support for the order.

I remind the House that we are being asked to sign up to a new target, not a new cost. I want to dispel a few misconceptions. The Committee on Climate Change identified the range of costs needed to meet the net zero target as between 1% and 2% of GDP. Those costs are not costs to the Exchequer. Yes, there will be a role for public funding in some areas, such as to avoid a competitiveness impact on the UK manufacturing industry, but the vast majority of the changes will, and should, be delivered through private investment.

I declare an interest as vice-chair of the Committee on Climate Change. In our report, we compare resource cost estimates to GDP to give a sense of scale. It does not follow that the estimates have an impact on GDP. The impact on GDP could easily be positive, as we shift away from using imported fossil fuels, for example, or as we develop newer industries that will boost our productivity and growth as an early supplier of new, low-carbon technologies globally. We need to be very careful in how we think about the numbers.

However, as many noble Lords have indicated, and as the CCC said in its net zero report, changing the target is just the first step and, in many ways, is the easy part. The real challenge will be the swift ramp-up in policy that needs to follow. I have had the honour of being the sector champion for the offshore wind sector deal as part of the Government’s industrial strategy. As the Minister is aware, a major renewable energy conference is under way in London; I believe that he spoke at it today. The conference is exciting; for example, it shows the impact of our investment in offshore wind on UK jobs and companies.

Will the Minister consider a swift and simple indication of the Government’s policy intent to deliver this new net zero target? A simple indication of intent would be removing the six-gigawatt cap for the next round of CfD auctions while offering no additional funding. The offshore wind industry is ready to respond to such an indication. This would be a win-win. It would show the Government’s intention to act swiftly; it would help to create more jobs; and it would deliver more zero-carbon electricity at no additional cost to the Exchequer or the consumer.

[Lord Lilley]

My Lords, I declare a non-pecuniary interest as a director of the Global Warming Policy Foundation.

We are debating the consequences of a departing pledge by the outgoing Prime Minister; it is probably the most expensive leaving present in history. Harold Macmillan said that when both Front Benches are united, they are almost invariably wrong. It is in that context that I rise, with some trepidation, to show that at least some scrutiny is going on. Macmillan’s point was that, where both sides agree, you do not get proper scrutiny and the normal adversarial approach of our Houses of Parliament does not apply—that is, we do not look with enough rigour at what is going on. That is particularly true if, as was the case in the House of Commons, this House eschews any serious consideration of cost on the grounds that the higher the cost, the better—almost—because it shows how virtuous we will be. That was certainly the attitude during the passage of the original Act in 2008.

My principal plea is for a proper impact assessment of the order. I say that with some feeling: I came to this issue because in 2008, when the then Climate Change Bill was before the House, I went to get a copy of the impact assessment and was told by the Vote Office that I was the only person who did. I was the only person who read it and raised the issue of cost throughout the Bill’s proceedings. That is why impact assessments are important. I read the impact assessment and discovered that, at that stage—when the target in the draft Bill was a 60% reduction in emissions—it showed that the potential costs were twice the maximum benefits. If the costs of something exceed the benefits, you do not do it. That does not mean that the target was wrong; it means that you look for more cost-effective ways of achieving that target. But we did not; we ignored it. We ploughed ahead anyway—and went further: we raised the target from 60% to 80%. One would normally expect that to increase the cost disproportionately, because the things you have not done would be costlier than the things you would do to meet the lower target, and the benefits would rise less than proportionately, because you would get the greatest benefits from the early reductions in global warming and fewer benefits from any incremental reductions.

After we passed the Act, the Government did produce an impact assessment—under much goading from me. Sure enough, it showed that the cost of meeting the target was going to double, but it also found that the benefits were going to increase tenfold. They found £1 trillion of benefits previously overlooked and ignored by the people who had produced the original impact assessment. That must surely raise a feeling of unreality in the minds of people considering this. If you can conjure £1 trillion of benefits out of nowhere, we really are dealing in extraordinary detachment from reality and normal accounting.

I want to see a proper impact assessment this time, even if we did not get one originally and the one we eventually got lacked credibility.

[Lord Rooker]

In this rewriting of history we are listening to, we need to remember that when the noble Lord talks about receiving the Bill, he was in the Commons. The Bill had undergone four to five months of scrutiny in this place, where it started life. I moved the Second Reading in November 2007. Therefore, all the scrutiny that took place here and all the questions that I and other Ministers were subject to were continually worked on by our officials. We could not answer all the questions to start with, and it was inevitable that changes would be made after it reached the Commons and went on the statute book. I reject entirely the rewriting of history; it is as though the noble Lord suddenly discovered something when the Commons was scrutinising the Bill. It was this place that did the scrutiny on the Bill before it even got to the Commons. I think we spent twice as long on it as the House of Commons.

[Lord Lilley]

I am sorry; I obviously have not made my point clear. An impact assessment was produced before the Bill went through either House, and a second was produced after it had been enacted by both Houses. Those two things differed in the dramatic way I have described. I asked my research assistant to go through the entire proceedings of both Houses; he could find no serious scrutiny of the cost either way, but if the noble Lord recalls otherwise, naturally I will change my assessment and realise that he missed something.

My opposition has always been based on the economics of what we previously committed ourselves to, and my concerns today relate to the economics. I recall that when the Third Reading of the 2008 Act finally took place, I and the four others who had decided to vote against it—just as a matter of principle on the economics —retired to the Smoking Room to drown our sorrows and noticed as we did that it was then, in October, snowing outside. I went back to remind the House that we were passing a measure in the belief that the world was getting warmer when it was snowing in London in October for the first time in 74 years.

[Baroness Worthington]

My Lords—

[Lord Lilley]

I was immediately interrupted by people saying, “But surely you realise that extreme cold is a symptom of global warming”. Is that what the noble Baroness was going to say?

[Baroness Worthington]

I have two points. There is a great difference between weather and climate change, which the noble Lord would, I hope, have understood if he has read any of the reports on this topic. Secondly, the Act commits us to no costs, because it merely has a target and enabling powers. Each individual policy then enacted to reach those targets will have an impact assessment that has a full cost-benefit analysis. The noble Lord was absolutely wrong to oppose this Act on the basis of cost, because it is a target-setting measure with enabling powers. Is the noble Lord aware of that? Could he also comment on the fact that people have repeatedly said that the Act commits us to following EU targets on renewable energy? This is another falsehood; the Act says nothing about the need to do anything through any particular technology. Does he acknowledge that?

[Lord Lilley]

Yes. That is not a point I have made, but I acknowledge that the noble Baroness is right to rebuke whoever did make it. I am not opposing this measure; I am demanding an impact assessment, one that covers the aggregate. The Minister’s response is that we will get a cost-benefit analysis of individual measures, as the noble Baroness referred to. I just think we ought to know what the rough total is, as assessed by the Treasury. I am not alone in this; I call in aid my noble friend Lord Deben. He rightly said that I should have read the CCC report in its entirety, rather than just the summary, before I asked my question. Now that I have read it in its entirety—I did so without losing the will to live at any point—I know that it calls for a full impact assessment by Her Majesty’s Treasury. I am endorsing that call.

[Lord Deben]

As it was me who was asked the question, I remind my noble friend that what we said was that the Treasury should look at the distribution of the cost to make sure it was fairly spread. That is a different thing from what my noble friend is asking for.

[Lord Lilley]

My recollection is the words, “look at the cost, and in particular the distribution”, which seems sensible. I endorse both aspects of my noble friend’s appeal to the Treasury.

[Viscount Ridley]

Does my noble friend agree that the Secondary Legislation Scrutiny Committee report on this order says:

“It would have been helpful for the Department to provide a summary of the work that is underway to assess the significant costs and wider impacts of the transition, to inform Parliament’s scrutiny of the instrument”?

[Lord Lilley]

Absolutely. That is what we ought to do in this House: look closely at these things. That does not mean to say we reject them. Unless we know the cost of this measure, which is potentially enormously costly, we are really buying a pig in a poke. I hope the House will focus on that point: should we go ahead and pass this without an impact assessment, or should we at least demand that the Treasury comes forward with such an impact assessment and a distributional assessment as soon as possible?

That distributional assessment is important, because these measures tend to fall disproportionately on low-income households. We have seen that in any country where the cost of climate change measures has come into political contention, those on modest incomes have tended to vote against them. We saw it in Australia and Canada; we have seen the gilets jaunes in France. We should beware and be aware that we are imposing large costs on ordinary households, and we should not go ahead and do that lightly and without knowledge of the figures.

[Lord Ravensdale (CB)]

My Lords, I declare my interests as an engineer working in the energy industry.

I welcome the Government’s commitment to net zero carbon emissions by 2050. However, as noble Lords have already said, this target will involve significant technical challenges. I want to introduce a different slant to the debate today by talking about some of the technical challenges that will be need to be met, the key areas of uncertainty and the options for mitigating them. A comprehensive review of how this target will be met is critical and I hope to see more detail of this in the forthcoming energy White Paper.

The key risk areas we need to consider within the scope of the amendment are on-demand power generation and hydrogen. It is widely accepted that a 100% renewables power generation system is impracticable barring any unforeseen technical advances. This is partly due to the technological limitations of energy storage and the implications of grid stability with a variable power supply. A large amount of on-demand power will be required to counter the variability of renewables and there are two options for that at a high level—gas turbines with carbon capture and storage, or nuclear.

Gas turbines with carbon capture and storage are an attractive option to meet our commitments, but there are several uncertainties with large-scale carbon capture and storage. One uncertainty is the capture rates that are feasible with the technology—whether it can capture the amount of carbon that we need it to—and another is that the economic viability of the technology is still unknown. If capture rates are lower or the technology is more expensive than anticipated, alternatives will have to be sought to large-scale use of carbon capture and storage. It is critical that there is a pilot project from the Government to consider scaling up this technology and the viability of it in more detail.

The concerns are well known about the economic viability of nuclear compared with renewables. It is worth noting that the costs of large nuclear are currently less than the existing offshore wind capacity that has been built. However, the future offshore wind capacity will be cheaper than current large nuclear. It is difficult to make the comparison between nuclear and renewables because of the different characteristics of these technologies in terms of costs.

It is critical that the industry responds to the cost challenge set out in the nuclear sector deal and brings down the costs of nuclear from the £90 per megawatt hour we have seen with Hinkley to around £60 per megawatt hour. Given the doubts over whether large nuclear can deliver, we need to focus on several things to meet that cost challenge: first, small modular reactors, as a fallback and to complement large nuclear, are critical; and, secondly, advanced nuclear technology.

How will these technologies solve the cost issue with nuclear? The first way is through modularisation, which is inherent in small modular reactor design and is already used in other high safety integrity industries such as shipping and air transport. We need to look at moving the production of reactor modules to factories off-site to reduce the cost of reactor technology and to bring down the capital costs of nuclear plants. Secondly, with advanced nuclear, there are several designs out there which are passively safe, simpler and of a much higher thermal efficiency than existing plants and will help in that regard.

Government investment is required to see these promising designs through to fruition and to get them off the ground. On the point made by the noble Lord, Lord Deben, on what happened with offshore wind, we can replicate that with nuclear and use it to bring down the cost of the technology and help us meet our 2050 targets.

Hydrogen also has a key role to play in a net zero economy, whether through heating buildings, energy storage or fuel for heavy vehicles. However, there are many uncertainties about the best means of producing, distributing and storing hydrogen. For example, as has been pointed out by other noble Lords, the preferred means of production—steam methane reforming—will involve large-scale carbon capture and storage and the issues with that that I have pointed out.

Can the Minister say how the Government intend to de-risk these key areas of uncertainty—hydrogen, carbon capture and storage and nuclear—to ensure that the UK can meet the 2050 target as planned? The timing for large investments could not be more fortuitous in many ways, with the Government able to borrow for 50 years at less than 1.5%.