Energy Bill [HL]

Lord Oxburgh Excerpts

Wednesday 9th September 2015 Lords Chamber

Moved by

[Lord Oxburgh]

34A: After Clause 58, insert the following new Clause—
“Carbon capture and storage
Within one year of the coming into force of this Act, the Government shall undertake a consultation on measures requiring extractors and importers of petroleum to contribute to the development of carbon capture and storage.”

[Lord Oxburgh (CB)]

My Lords, Amendment 34A seeks to impose certain open discussion on the possibility of imposing on importers or extractors of fossil fuels certain obligations with respect to managing the emissions associated with them. To backtrack for a moment, we are building up towards the Conference of the Parties in Paris later this year. One cannot avoid the feeling that there is something in the air, including President Obama’s initiatives on climate change in the United States, the new undertakings offered by China and the letter from half a dozen major oil companies to the United Nations urging for a high carbon price in order to manage global emissions. There is a general recognition that, unless something changes, business as usual will mean an inexorable march towards a 4-degree world. I do not think that anyone really wants that.

There is no single silver bullet to avoiding this but, having said that, I do not think that there is any credible solution to the problem of global emissions that does not involve carbon capture and storage. The Minister has already made reference to that. Despite the Government having made a continuing and substantial effort, one of the difficulties with CCS is that progress has been glacially slow. The discussion about carbon capture and storage has now been going on for more than 10 years. Perhaps I may remind the House that that was the time from the beginning of the space race to putting a man on the moon. What we are talking about is not space technology, but something much more readily tractable. It is a matter of getting the will and the institutions to get something done in time.

There are various reasons why we have not made progress. It was expected that the Emissions Trading Scheme would be successful, but it has failed to achieve a sufficiently high carbon price to promote carbon capture and storage and to drive substantial change. One of the problems is that many parties—I do not mean in the political sense, but the many interest groups and stakeholders—support carbon capture and storage but none can make the business case for urgent action or commit substantial resources, whether they be coal companies, oil and gas companies, electricity generating companies or cement companies. All have an interest in carbon capture and storage, but it is not the specific responsibility of any of them. In that sense, CCS is an orphan technology. It has numerous well-meaning aunts and uncles, but no parents who will really acknowledge it. Therefore, there is no one to take driving and fundamental responsibility for pushing it forward.

The amendment provides an opportunity to discuss a proposal that has its origins primarily in the universities of Edinburgh and Oxford, but which has support from a number of others. For those who might want to look at this proposal, which I have to say is immature in a number of ways, it can be found on the website of Scottish Carbon Capture and Storage in its third working paper for 2015. I am told that that reference is now in place. The amendment, which I will describe in a minute, would provide carbon capture and storage with very clear parents with a very strong interest in ensuring that the offspring thrived. Basically, what is proposed is a regulatory requirement,

“on producers and importers of fossil fuels to sequester, or pay for the sequestration of, a small but rising fraction of the carbon content of the fossil fuels they extract or import into the United Kingdom”.

This would be a major change in the way that CCS activity is supported. It would involve no call on the public purse. The call would be on the purses of the importers or extractors. Carbon capture and storage would be driven by what is exclusively a market mechanism. That is how the attention of these major corporations would be very securely obtained. They would find a way to do this as efficiently as possible.

This mechanism is relatively easy to implement. It would attack a number of problems that are currently major stalling blocks for carbon capture and storage. One of the big problems is how you get the infrastructure in place in the North Sea: who will take responsibility for it? If CO₂ is captured on land, who will pay for a pipeline or for the storage? It would be absolutely clear who had to do this if this way of supporting CCS was introduced. We would find that the major corporations that operate in the North Sea would simply continue the kinds of co-operation that they have at present to make joint use and maintenance of pipelines et cetera where that is appropriate.

As this kind of mechanism is phased in, the other carbon levies, of which there are several, could be phased out. Nothing desperately urgent is proposed but these things could be merged. Costs are obviously important. The estimate of the groups in Edinburgh and Oxford is that if a mechanism like this were introduced gradually, at the very first stage there would be, for example, some tiny fraction of a penny increase on the cost of petrol. Rising over 10 years as the fraction of emissions for which the companies were responsible increased, it could go up to 2p, but it is not big and could be introduced gradually. The big point to bear in mind is that we could do carbon capture and storage for all our CO₂, even on the more extravagant estimates, for a tiny fraction of the change in value which we have seen in the oil and gas markets. We are talking about something very small here by comparison with the fluctuations which we have seen over the last 12 months.

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[Lord Oxburgh]

My Lords, I thank all noble Lords who have participated in our lively and interesting set of exchanges, which are too numerous to answer all in detail. However, the noble Lord, Lord Howell, asked about the implications for the North Sea. I probably did not make my submission too clearly, but one of the reasons that CCS is creeping along glacially is that no one can make a business case and there is no investor confidence. A regulation of this kind would plan a clear way forward for industry and CCS would become much more investable for the private sector—and there would be much less dependence on government.

The noble Lord, Lord Teverson, commented on the large scale and expensive nature of CCS. We do not really know what it costs. We know what the operation in Canada has cost, and it is a lot of money. However, there is a hockey stick curve for all these things; they are expensive at first but prices come down. All new technologies and new ways in which to capture carbon would be explored and invigorated with a clear drive from government, and there would be responsibility on companies to find a cheap way of doing this.

The noble Viscount, Lord Ridley, made a number of points, including on the carbon floor price. I am indeed worried about the delay. He commented on the overseas implications. I agree that among the things that we would have to tease out would be the implications for the UK of doing this by itself. What would be the implications for our position more widely? Might we be able to persuade other EU countries to come in on this? For a lot of people, this kind of approach is a no-brainer; it is the obvious, “polluter pays” way forward. I say to the noble Viscount that I never believe the figures on climate projections. He will have noted that, although I mentioned 4 degrees, I did not say when. What is beyond doubt is the direction of change, and cutting down our emissions and putting them out of the way as quickly as possible is a sensible precaution to take.

I thank the Minister for his words.

[Baroness Worthington]

I should like to respond to one question about how this matter relates to the Bill and the North Sea. I want to offer this fact to Members of the Committee: over its time, the North Sea has produced 42 billion barrels of oil. It has been of great benefit to us as a country; however, those barrels have contributed 18 billion tonnes of CO₂ to the atmosphere. There is a definite link to not only the North Sea’s inevitable economic benefits for us but the environmental consequences of that. I should also say, for information, that buying CO₂ commercially as a feedstock at the moment costs £100. We must be able to sort something out whereby the producers of CO₂ and those who buy it at £100 can be brought closer together, so we can begin to see the development of an industry in getting CO₂ safely out of the atmosphere.

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[Lord Oxburgh]

I thank the noble Baroness for her intervention and remind myself that I should have thanked her for her support of the amendment. There are few people in the House, if anyone, whose knowledge of the industry is as deep and authoritative as hers. I beg leave to withdraw the amendment.

Amendment 34A withdrawn.