Lord O'Neill of Clackmannan
Main Page: Lord O'Neill of Clackmannan (Labour - Life peer)Energy Bill
Lord O'Neill of Clackmannan Excerpts
Lord O'Neill of Clackmannan
My Lords, in his meandering tour d’horizon, the noble Lord, Lord Jenkin, said that the only approach he had had in support of this amendment was from the renewables lobby. I have certain misgivings about renewables, as I stated at Second Reading, but there is a degree of oversimplicity in the approach that a number of people have taken towards this amendment. The blanket opposition to almost all kinds of targets that we have just heard from the noble Lord, Lord Howell, is symptomatic of this condition.
This amendment does not suggest that the target will require nuclear power stations to be built tomorrow. Some of us would like them to be built today—yesterday, in fact—but that is not a possibility. But there are a number of small and medium-sized projects, about which there is probably greater investor uncertainty because of their size and disparate character, which would take encouragement and reassurance from amendments of this kind. Rather than the somewhat cautious approach of the noble Lord, Lord Stephen, I think that the dates suggested by the noble Lord, Lord Oxburgh, are more realistic.
We are grateful to the noble Lord, Lord Stephen, for his insight into how coalitions work. Certainly, as far as decarbonisation is concerned, it seems that the bus has set off on the way to Damascus. What some of us want is for it to arrive there. One of the sure signs that it would be at least within the environs of that city would be if we were to get acceptance of this amendment and an early possible date. There are dangers in targets at times but on this occasion this is a nudge—not a massive shove—in the right direction. It would be a very significant amendment if it were carried on Report—I know that none of these amendments is going to be pushed to a vote at this stage.
In summary, we are not considering all forms of generation and all projects as being triggered by an amendment of this kind. We are saying that a number of small-scale investments would be given a significant push if there were to be appropriate targets within a reasonable timescale. These amendments meet both those objectives. We could remove a degree of uncertainty. I do not think that we are going to get security of supply from these targets today, or a massive degree of decarbonisation, but we will get some. If we get a bit more security of supply, perhaps we will get a degree of affordability.
A lot of pious nonsense is spoken about affordability and security of supply. For the fuel poor, there is no security of supply because they cannot afford to pay for it. They self-disconnect and do not use it—they have to make very difficult choices. We need far more radical measures than this modest amendment to try to secure objectives of that character. However, for the purposes of the moment, this is an appropriate and sensible amendment to start the passage of the Bill in this House. If we were to get a broad spread of consensus at this stage, we could hopefully look to going into the Chamber and securing the kind of majority that a modest amendment of this character merits and deserves.
Lord Deben
My Lords, it gives me some concern to disagree with both my former Secretary of State—for whom I was a loyal and, I hope, reasonably efficient PPS—and my former Permanent Secretary, both of whom have spoken against this amendment. I always find these discussions difficult, because people move to extremes, and I hope that your Lordships will not mind me suggesting that there have been some examples of that today. The reason why the climate change committee advised that there should be such an interim target is that, by law, we are charged with ensuring that we meet the statutory target of reducing our emissions by 80% from 1990 by 2050. That is a statutory provision.
At the moment, we face a situation in which business has certainty up to 2020 and has it again in 2050. I declare an interest as a chairman of the climate change committee and, although I do not have business interests in the areas that we are talking about, I have had them in the past. The reality is that business needs to feel that there is a continuing mood, so that if it invests now it will be secure at least from government vacillation. No business can be assured of everything else—all kinds of things can happen in these circumstances—but the one thing that makes this very difficult is the natural fact of government intervention. My noble friend talked about the interventionist nature of the Bill. The real problem with the subject that we are dealing with is that it is necessary to have some intervention. The argument is in large part about how much.
As to whether industry needs this, we had the powerful suggestion from my noble friend Lord Jenkin that industry did not want it except for the renewables. I have a list here of 50 major companies, including Scottish and Southern, EDF, Alstom, Doosan, Mitsubishi, Siemens—I could go on—all of which have specifically asked for this because they are concerned not only about their own investment but about the supply chain. We are pressing this not because of climate change but in order to get the benefit of what the UK is doing because of climate change. If you do not do this, all the money that we are going to spend—£7.5 billion—between now and 2020 in order to begin the decarbonisation of our electricity supply is imperilled, in the sense that the businesses that should grow and produce will not come here if they feel that there is no certainty beyond that. My noble friend Lord Jenkin said that it was all very difficult and we ought to put it off. My problem with that is that climate change does not wait until we find it convenient to meet the problems. Every year we put it off, the cost is greater and the problem is bigger. We have to take that into account when making these decisions.
We also have to recognise a serious new factor, which is the reverse of what used to be true. It used to be thought that Britain was in the vanguard. We had this wonderful Bill and we were doing all this, and other people were not. Anyone who looks at the GLOBE International report, produced with the London School of Economics—and I declare an interest as the president of GLOBE—will see that over the last year some 30 countries are now embarking on serious investment in this area. So we are now competing with other countries that are also seeking this investment.
The problem for the British Government is that, however much they talk about these issues, around these tables today are others who keep on saying, “Well, it is not going to be like that”. Every newspaper throughout the rest of the world repeats the comments of the climate change dismissers, who are always suggesting that just around the corner all this nonsense will stop and we will go back to business as usual.
The trouble with that is that people will go to countries to invest where that is not the case and where Governments have given long-term assurances. We need therefore to take this fact seriously for the British economy and for the green jobs that we have sought to create. This is why I think that the Government have been mistaken in doing this and why I have some sympathy with this proposal, although of course I have no inside knowledge of the kind produced by the noble Lord, Lord Stephen, as to what may have led to this decision.
Then we have the question of the cost to the consumer. When the newspapers see a rapidly rising cost of energy, they do two things. First, they want an easy answer as to why that is happening, particularly one that they think they might be able to affect. Secondly, they will not think ahead as to whether this is going to go on and what we do as far as the future is concerned.
I suggest to your Lordships that the biggest problem of the cost is actually the basic cost. It is true that gas prices have risen—that is much the biggest amount. The additional cost to the average family in Britain at the moment from our green measures is £60 a year. It will rise to £100 a year in 2020. If we do what is suggested and set a carbon-intensity target, the bills for the average consumer—as far as we can do this work; we have to rely on the best evidence that we have—will between 2020 and 2030 have risen by £20 more than they would have done. After that, of course, because electricity will have been decarbonised, private energy costs will fall significantly.
We ought to keep this in some sort of proportion, rather than blaming all the rises on the fact that we have what is actually a limited cost. That cost is, in my view, a cost of insurance. I am sorry to repeat it—I have said it before because I think it is important—but there is not a Member of your Lordships’ House who does not insure his home against fire. Yet there is a 99.8% chance of that house not burning down. That insurance costs £140 a year. That is more than twice what we are charging as a nation for people to protect themselves in the future.
The insurance cost that we are talking about is sensible and it insures us against three things: it insures us against dangerous climate change; it helps to ensure our energy sovereignty; and it insures us against rising gas prices. Some people believe that gas prices will not rise. The international energy body certainly thinks that they will rise. I certainly would not like to bet my future, or my children’s future, on the idea that gas prices are going to fall. That does not seem sensible to me. Replacing our present dependency with a portfolio of mechanisms by which we produce our energy is an essential insurance against that, because energy is so crucial, as my noble friend Lord Jenkin has said.
I end with a reminder to your Lordships. The noble Lord who is a former Secretary of State for Energy said that he had had a great plan for nuclear power, and what a great thing it would have been if it had gone through. He did not get it because people were not prepared at the time to face realities, needs and long-term decisions. He is now asking us, on the basis of that experience, to repeat the mistake. He is asking us again to say that this is not the right moment and that we must not rush into things and make these decisions because, for one reason or another, we should wait.
I say to the noble Lord, Lord Turnbull, that we have not impaled ourselves. We have taken on a necessary and absolutely essential burden. It is the burden of this generation ensuring a future for the next. The sense of urgency is there because, if we do not do it but put it off, we will always put it off. That is the lesson of our failure to invest in nuclear power when we should have and it is why the noble Lord’s speech should have been the other way round. He should have said that we should learn from that disaster and do now what we need to do. The pace does not seem rushed to the public; it seems very reasonable.
Viscount Ridley
My Lords, I, too, rise to oppose the amendment moved by the noble Lord, Lord Oxburgh—although I greatly appreciate some of the points that he has made—and, to some extent, to echo what the noble Lord, Lord Dixon-Smith, said. We have heard a lot about the importance of jobs, prosperity and giving certainty to companies—usually ones with Japanese and Scandinavian names, I notice. In response to the noble Lord, Lord Deben, I would say that we do not build power stations for the people who work in them and run them, we build them for the people who use the electricity that comes from them.
Last week, we heard that the Government have decided on a strike price for offshore wind of £155 per megawatt hour. A few years ago, the Government said they had the ambition of getting this down to £100 per megawatt hour. That now seems to have been abandoned, as the number has come down, with inflation taken into account, to only £135 in 2015, I think it is. These are extremely high numbers—three times the going rate for energy at the moment. What will happen to the people in the chemical, cement, steel, aluminium and heavy engineering industries? We know the answer to that. There is an industrial renaissance going on in the United States—a huge resurgence of manufacturing industry—because of shale gas and the effect it has had on energy prices.
Lord O'Neill of Clackmannan
The industries the noble Viscount has cited are wholly dependent on baseload generation. However, he is talking about interruptible generation. He is talking about two different sources. The industries will not be dependent on interruptible generation because they will require continuous baseload generation, 24/7, to conduct their industrial activities.
Viscount Ridley
My Lords, in the United States, shale gas has displaced coal. I should, by the way, declare my interest in coal even though, once again, I am speaking against it and in favour of its greatest competitor, gas. There has been a massive displacement of coal by shale gas, which brings me on to the next point. The effect of displacing coal with shale gas in the United States has been to cause the fastest drop in CO2 emissions of any western country. They are down to the levels they were at 30 years ago and down to the per capita levels they were at 50 years ago. These are extraordinary achievements and suggest that we have, in shale gas, a technology for short-term reduction in carbon dioxide emissions—not all the way down to 50 grams or anything like that but a good chunk of the way—that could be achieved and combined with affordability. The counterfactual to building a huge amount of offshore wind capacity and other industries is to allow the development of gas in this country. We know that the numbers would be much lower in terms of the cost to the consumer—it would be much more feasible and much more affordable. To throw away the flexibility of going for that possibility would be a potential mistake.
Baroness Maddock
My Lords, this amendment is in my name and that of my noble friend Lord Teverson. I, too, welcome this decarbonisation section of the Bill. I strongly support the comments of my noble friend Lord Stephen. I also need to declare interests, as I did at Second Reading. I am president of the microgeneration group of the Micropower Council. I am also the vice-president of National Energy Action. In my Second Reading speech I mentioned the fact that we deal with fuel poverty, and that this was one of the issues I wished to deal with during this Bill: hence the amendment.
The other amendment that deals with this is Amendment 23. Both the noble Baroness and myself, in moving these amendments, have tried to find somewhere in the Bill where we can hang fuel poverty, so that we can get the Minister to show some recognition that it will affect people in fuel poverty and that we still need to do things to address that.
In this section, Clause 2 sets out the matters that must be taken into account in setting or amending a decarbonisation target range. Clause 2(2)(e) refers to social circumstances, in particular the likely impact on fuel poverty. My amendment seeks to link this to the aims of the Warm Homes and Energy Conservation Act 2000. The purpose of the amendment is to ensure that there is recognition of the scale of the impacts of the Bill on fuel-poor households, both now and in future Parliaments, and to facilitate the introduction of suitable, ambitious, mitigating policies.
I have probably strayed slightly into another section of the Bill, but it is difficult not to do so on this issue. Electricity market reform and the introduction of the carbon floor price will impose new and as yet unknown costs on low-income and vulnerable households. The noble Lords, Lord Deben and Lord Jenkin, in their earlier comments, tried to put some figures on what they thought might happen to bills as a result of some of the measures here, but we can only estimate what the effects will be. The Warm Front programme, which provided public funding for heating and insulation measures, to help fuel-poor households, came to an end in March this year, and its replacement, the warm home discount, is paid for by all energy consumers, including low-income households, some of which cannot benefit from the scheme. Interestingly, Scotland, Wales and Northern Ireland have continued, and in some cases expanded, their tax-funded energy schemes to help fuel-poor households.
With help for fuel-poor households falling, and the proposals in the Bill and elsewhere, there is little sign of bills reducing between now and 2016, the date by which fuel poverty should have been eradicated as far as is reasonably practicable. The consumer will almost certainly pay more in the short to medium term, but the Government are committed to meeting other relevant binding commitments, in particular the current aims of the Warm Homes and Energy Conservation Act 2000.
This is really a probing amendment to see where the Government think they can assist those in fuel poverty while at the same time introducing the measures in the Bill. I hope that the Minister will acknowledge the impact of proposals in this Bill on low-income and vulnerable households, and will indicate how some of the effects can be mitigated, particularly by prioritising the energy efficiency standards of fuel-poor households, and of course by keeping the Bill in line with other legislative commitments. I hope that the Minister will recognise that the Committee on Climate Change highlighted this need just last week in its fifth progress report to government.
This is a short intervention that I hope will give the Minister the opportunity to tell us how the Government view vulnerable customers, and how this Bill will affect people in fuel poverty. It may be that we will look rather more carefully at this on Report, depending on what the Minister has to say in reply. I beg to move.
Lord O'Neill of Clackmannan
I rise to support my fellow vice-president of National Energy Action. I should perhaps have mentioned that before, because I touched on fuel poverty in a previous intervention and did not declare my interest.
It is important that this issue is brought to the attention of Ministers at this stage, because I think that it is fair to say that the Green Deal has not been a great success so far. It may well be transformed over the summer, but, as far as improving the quality of energy-inefficient households is concerned, it has yet to make the impact that some of us were not sure about but others had perhaps undue faith in. None the less, it is at the moment the only government-led initiative on energy efficiency and it ought to have an impact on those households where the quality of the fabric of the house is a major contributor to what we call fuel poverty. Fuel poverty is currently defined as households in which more than 10% of the income is accounted for by energy prices. This may be subject to redefinition in the next few months, but, even if the definition were radically changed, I do not think that fuel poverty would disappear before 2016.
Much has quite correctly been made of the fact that all households will be paying for a lot of the green measures being taken. These green measures fall on electricity consumption. At the moment, some 8 million of the 26 million or 27 million households in the United Kingdom do not have gas. That means that, for the purposes of heating, they are dependent in the main either on electricity or on oil. They therefore pay a disproportionate amount of their energy costs in supporting these so-called green measures. We should give notice to the Minister that this will be a recurring theme, because households that are outwith the gas grid are disadvantaged at the moment. Those households are doubly disadvantaged because they have to pay what seems to be a disproportionate amount of money as far as electricity is concerned. This has been mitigated somewhat. At one time, there was an almost poll tax-style arrangement whereby every household paid the same amount; it is now going to be measured on consumption of units of electricity, so that is a slight improvement. However, there is a long way to go on this.
Those of us who are not antagonistic to this legislation—we may be in the Opposition, but we realise that many aspects of it are necessary for a variety of reasons—will nevertheless not look idly or sympathetically at it if it fails to address a number of glaring examples of bureaucratic mistakes and unintended consequences. We spoke earlier today about the need for investment. There will be a series of leitmotifs at the back of this legislation. One of those will be the disadvantage to which certain types of household are put, through no fault of their own, as a result of having to pay a disproportionate amount of money to fund a lot of the green initiatives involved in this legislation. Sometimes, such disadvantages are a consequence of previous legislation, but we need to keep this at the forefront of our minds.
I realise that, at this stage at least, this is a probing amendment. Aneurin Bevan once said that silent pain evokes no response. We have to remain mindful of the fact that a number of households in this country are suffering a great deal because of energy prices that have been rising, which are likely to rise even more and which, at present, we are not confident will get the kind of mitigation that we had hoped would come from the Green Deal because of the low take-up and the almost total indifference to it of the private landlord. Of all the disadvantaged groups, those in privately rented accommodation seem to get the roughest end of every stick directed at them.
Lord Turnbull
My Lords, I beg to move Amendment 18, which is related to Amendment 19. I expect the noble Viscount, Lord Ridley, will speak to the other amendments in this group, which I also support. Climate change can be thought of at three levels. First, level 1: do you accept the orthodox view of the relationship between CO2 and temperature? Secondly, level 2: do you accept what we are told about the impact of any given temperature increase on the planet? Thirdly, level 3: supposing you accept levels 1 and 2, do you believe that the right set of responses is being proposed in the right order? In other words you can buy in completely, as I think the noble Lord, Lord Jenkin, does, to levels 1 and 2 but remain largely a level 3 sceptic, which is where I started. Levels 1 and 2 are really about Second Reading things, which we probably have discussed enough, so we will concentrate on the responses in the Bill.
These amendments highlight two concerns about these policy responses. The first is the pronounced unilateralism of the UK’s approach, based on a statutory duty to reduce carbon intensity of economy, which is equivalent to reducing CO2 per unit of GDP by more than 90% in just over 40 years. The second is the issue in the amendment in the name of the noble Viscount, Lord Ridley, as to whether some of technologies are all that they are claimed to be in terms of cost CO2 per tonne abated.
Six years ago during the passage of the Climate Change Bill, I expressed some concerns about the Government’s approach. I said:
“First, the target set for 2050 appears to be largely unconditional and unilateral. The UK will commit itself to this target irrespective of the performance of other nations. The reality, however, is that our own contribution by 2050 is unlikely to be crucial, so we are”—
relying—
“on the exemplary effect: in other words, we cannot carry conviction in international debate if we do not carry our full share of the burden. There is genuine validity in this, but we should not be naïve and rely on it too heavily. If we fail to persuade other nations, we could be left in 40 years’ time having paid heavily to decarbonise … and still incurring the costs of rebuilding our sea defences and water resources. The Bill should therefore contain a duty to work actively internationally for more demanding targets”.—[Official Report, 27/11/07; col. 1156.]
To be fair, Her Majesty’s Government worked actively for an international agreement with demanding targets but the landscape has changed because their efforts were unsuccessful. The Kyoto accord has expired and has not been replaced. Negotiations continue but a global agreement is looking more and more forlorn. In my view, China and India will never agree to binding limits on their emissions while they have hundreds of millions of their citizens yet to be lifted put of poverty. Although China aims to reduce the carbon intensity of its output, its growth is so fast that its emissions will continue to rise for many years, as was made clear by its negotiator at Doha. Between them, India and China are planning some 800 new coal stations. Without these two countries, the US will never join, although it is doing very well at reducing its emissions on its own. Canada has opted out of this process and Russia, which signed up last time, will not join a second time.
Even among those which did sign up, the sound of backtracking is becoming a roar as economic realities begin to bite and the case for such rapid adjustment is questioned. Subsidies for renewables are being cut back sharply in Germany and Spain. Germany has held up new targets on vehicle emissions and the EU specifically declined the opportunity to shore up the failing ETS.
Fortunately, the penny has begun to drop in some parts of the coalition. In 2011, in his Autumn Statement, the Chancellor of the Exchequer said:
“We are not going to save the planet by shutting down our steel mills, aluminium smelters and paper manufacturers. All we will be doing is exporting valuable jobs”—
out of Britain, and that,
“we should not price British businesses out of the world economy. If we burden them with … social and environmental goals, however worthy in their own right, not only will we not achieve those goals, but the businesses will fail, jobs will be lost, and our country will be poorer”.—[Official Report, Commons, 29/11/11; col. 807.]
I could not put it better myself.
In his 2012 Budget the Chancellor said:
“I will always be alert to the costs that we are asking families and businesses to bear”.—[Official Report, Commons, 21/3/12; col. 798.]
One can detect some backtracking here in the UK, such as reining in overgenerous feed-in tariffs and the refusal to set a 2030 target, which we have just discussed—although the Liberal Democrat end of the pushmi-pullyu is still driving on regardless.
Perhaps the best example—after the noble Lord, Lord Jenkin—of the level 3 sceptic is Professor Dieter Helm. In an article last October headed “UK Energy Bill is Fiasco in the Making,” he wrote:
“The result is that the government instead is picking its chosen ‘winners’ amongst the low carbon technologies, in part driven by the EU Renewables Directive. This has resulted in some of the most expensive technologies being picked first, notably offshore wind and roof top solar. Not only does this result in far higher bills than are necessary to British customers, but it makes almost no difference to global warming”.
In March this year DECC produced a paper on the extra costs of energy and climate change policies, which I commend to you. The table on page 53 shows that a large user, who consumes some gas and some electricity, faces additional costs of 21% to 48% by 2030. If other countries do not follow similar policies with the same zeal, the results will be very damaging for the UK. The purpose of this amendment is to address the unilateralist problem explicitly so that we can put an end to this attention-seeking and self-harming behaviour. In the matters to be taken into account in Clause 2(2), I suggest that the vague,
“circumstances at European and international level”,
be replaced by a reference to the extent to which competitors really are reducing carbon emissions.
The next amendment would require the Secretary of State to report on what he has discovered on all these “take into account” items before moving on to lay a decarbonisation order. These issues will not go away and I look forward to the Minister responding to them and explaining how we can have information that would enable us to judge our true relative position.
Lord O'Neill of Clackmannan
For the convenience of the Committee, would the noble Lord tell us for how much longer we will go on this evening? I was under the impression that we would finish at 7.30 pm, but we also had a target number of clauses to reach. The target is still some distance away and we are now well past 7.30 pm. Could we have some indication of what is happening?
Lord Gardiner of Kimble
My Lords, that is the estimated rising time and we agreed with the opposition Whip that we would continue with this last group because we are behind schedule in terms of the clause target. This is the last group that the Committee will consider today.